The latest: Contract drugs services provider WuXi Biologics (Cayman) Inc. (2269.HK) announced on Monday its board of directors has approved a plan to buy back up to $300 million of the company’s shares in the open market.

Looking up: The company believes the proposed buyback and subsequent cancellation of repurchased shares will enhance the value of remaining shares, thereby improving shareholder returns. The buyback will also reduce a potentially dilutive effect on the company’s shareholdings from various employee equity incentive schemes.

Take Note: WuXi Biologics’ cash and cash equivalents were valued at 8.14 billion yuan at the end of June, down 27.9% from a year earlier. Spending some or all of the $300 million to buy back shares could cause its cash to fall further still.

Digging Deeper: Founded in 2010, WuXi Biologics is a subsidiary of WuXi AppTec (2359.HK), which was spun off and listed in Hong Kong in 2017, mainly engaged in contract drug research with operations in Shanghai, Wuxi and Suzhou. Its integrated contract research, development and manufacturing organization (CRDMO) model enables it to offer end-to-end R&D and production services for biologics, a broader spectrum of services than typical contract research organizations (CROs) or contract development and manufacturing organizations (CDMOs). Growing global demand for pharmaceutical R&D services has boosted the company’s revenue from overseas customers in recent years. Its total revenue and net profit last year were 10.29 billion yuan and 3.39 billion yuan, respectively, up 83.3% and 101% year-on-year.

Market Reaction: WuXi Biologics shares rose to close up 5.5% at HK$48.95 at the midday break on Monday. But they still trade at the lower end of their 52-week range.

Translation by Jony Ho

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