China’s pharma contractors rally as US supply chain pressures face industry resistance

In the face of Washington's efforts to reduce reliance on Chinese supply chains for pharmaceuticals, Chinese pharmaceutical contractors are demonstrating financial resilience. Investors remain bullish on these companies, despite the government's recent measures to curb Beijing's rise as a global pharmaceutical supplier.

WuXi AppTec, Asia's largest provider of contract pharmaceutical research, saw its shares rise by 3% on Monday, reaching a new high of HK$203.40. Genscript Biotech, the world's largest gene synthesis service provider, experienced a 4.8% increase, reaching HK$26.08. Genscript reported a remarkable 203% year-on-year surge in adjusted net profit for the six months ending June 30, reaching US$62.52 million. This growth was fueled by increasing demand for integrated gene-to-protein solutions tied to AI-driven drug discovery.

The company has raised its full-year guidance for its life science service segment, which includes DNA, RNA, and peptide synthesis tools, as well as protein production services, to a range of 25 to 30% for the entire year. This segment contributes the majority of the company's revenue. CFO Phil Zhou indicated that AI-driven drug discovery orders were expected to double during the second half of the year and would remain strong in the coming years.

Revenue for the period increased by 27.3% year-on-year to approximately US$404.22 million, with North America accounting for about 50% of the total. Genscript Biotech, founded in the US in 2002, established a research and manufacturing centre in Nanjing, Jiangsu province, China, in 2004. The company boasts sales teams across North America, Europe, China, Japan, and various locations in the Asia-Pacific region.

The company anticipates that the surge in biotech funding in the US and Europe since 2025, coupled with growing collaboration between Chinese biotech firms and multinational pharmaceutical giants, will support growth this year.

However, Genscript Biotech cautioned that escalating US-China tariffs and trade sanctions could potentially dampen demand for its cross-border services. To mitigate this risk, the company is diversifying its global service capabilities. In 2024 and 2025, US lawmakers questioned the FBI about any potential influence the Communist Party might have had over the company's operations. GenScript denied any formal action or finding tied specifically to the company.

While both companies faced scrutiny from Washington, tensions remained high, with the Pentagon adding WuXi AppTec to its 2026 Section 1260H list of alleged "Chinese military companies" in August. WuXi AppTec successfully sued the US Defence Department, temporarily blocking enforcement of the designation. The company's interim net profit for 2026 grew by 33.7% to US$1.64 billion, compared to a year earlier.

WuXi AppTec's CEO, Tony Ren, stated that banning the company would be challenging without causing severe supply chain disruptions that could jeopardize patient access to essential medicines.