(Yicai) June 9 -- WuXi AppTec’s stock price tumbled after the United States Department of Defense added the Chinese biotechnology firm to its list of companies with alleged ties to China’s military.

After sinking by as much as 8 percent this morning to its lowest level since March 23, WuXi AppTec [SHA: 603259] closed down 2.6 percent at CN93.48 (USD13.80) a share. Following yesterday’s selloff, the broader Shanghai market ended 1.3 percent higher. Shares of affiliate WuXi Biologics Cayman [HKG: 2269] recovered from a 6 percent drop to close 1.5 percent lower at HKD29.94 (USD3.82) each in Hong Kong.

The US DOD yesterday added WuXi AppTech and a number of other Chinese businesses to its “Chinese military companies” list in accordance with Section 1260H of the National Defense Authorisation Act for Fiscal Year 2021.

The DOD said WuXi AppTech is “indirectly owned by the State-Owned Assets Supervision Administration Commission of the State Council and is indirectly affiliated with the State Administration of Science, Technology, and Industry for National Defense and the People’s Liberation Army.”

WuXi AppTech has notified the DOD that it has mistakenly included the Shanghai-based company on the list, it said in a statement today, adding that the firm will take immediate measures to challenge and correct this wrong decision.

WuXi AppTec does not meet the statutory criteria for being designated as one of the “Chinese military companies.” It is neither owned by, controlled by, nor affiliated with any Chinese military or government entities, provides no services to the Chinese military, and has no connection to China’s defense industrial base or civil-military integration programs, the firm pointed out.

A DOD update to the Section 1260H list in February also briefly included WuXi AppTec. The company was removed from the list the following day without any explanation.

Entities on the Section 1260H list are prohibited from doing business with the DOD, so the immediate direct impact on WuXi AppTec will be limited. But under to the US Biosecure Act passed at the end of last year, any biotech firm on the list is automatically considered a candidate for the List of Biotechnology Companies of Concern.

Entities on the BCC list, as well as US pharmaceutical firms that have business ties with them, are prohibited from doing business with federal agencies. The long-term goal of the Biosecure Act is to remove Chinese companies on the list from the global drug research and development chain.

WuXi AppTec provides global pharmaceutical companies with entire-chain drug development services, from discovery to clinical development and commercial production. Income from US clients climbed 34 percent to CNY31.3 billion (USD4.6 billion) last year, accounting for 72 percent of the firm’s total revenue, according to its annual financial report.

Alibaba Group Holding, Baidu, and Nio -- three other well-know Chinese companies -- also issued statements around noon today, expressing bewilderment at the DOD including them on the Section 1260H list. They said they have no equity ties nor business links whatsoever to the Chinese military.

Editor: Futura Costaglione