By Sherry Qin

WuXi Biologics agreed to sell an overseas vaccine facility to Merck & Co. for half a billion dollars, a move that could strengthen the company's cash flow and margins as it navigates global uncertainties.

The Chinese contract drugmaker will sell its vaccine factory in Dundalk, Ireland, to U.S.-based Merck for about $500 million, it said in an exchange filing late Monday. The facility, with a net book value of about $487 million, is a 15,520-square-meter, three-story vaccine manufacturing plant with 200 employees. The deal is expected to be completed in the first half of 2025.

The sale will allow the company to realize its investment in the assets and focus on providing contract vaccine services from its sites in Suzhou, China, WuXi Biologics said in the filing. For Merck, the deal will help it better integrate vaccine production within its global manufacturing network, it said.

Hong Kong-listed shares of the Chinese contract drugmaker fell 3.9% in Tuesday afternoon trading, outpacing the benchmark Hang Seng Index's 1.9% decline.

WuXi Bio and sister company WuXi AppTec have come under scrutiny as tensions between the U.S. and China rise. The companies were included in the draft U.S. Biosecure Act that aims to bar federal contracts with the Beijing Genomics Institute and some Chinese biotechnology entities.

WuXi AppTec sold its cell and gene therapy unit to New York-based healthcare investor Altaris in late December, a deal some analysts said could alleviate U.S. security concerns.

However, WuXi Bio's management said its disposal is driven by the company's low return-on-investment projection rather than potential restrictions under the Biosecure Act, according to analysts who attended a call with the company.

The construction cost of the Irish vaccine facility reached $487 million, significantly above the $300 million planned investment, the company's management said.

"Streamlining a core business amid the current uncertain environment with more cash on hand would better prepare Wuxi Bio going forward in the current global economy," Nomura analyst Jialin Zhang said in a research note.

Citi analysts said they think the deal "has no negative financial impact and will improve Biologics' overall profitability."

Write to Sherry Qin at sherry.qin@wsj.com

(END) Dow Jones Newswires

January 07, 2025 01:19 ET (06:19 GMT)

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