(Bloomberg) -- WuXi Biologics Cayman Inc. extended its decline, headed for a record two-day loss of more than 30%, as it resumed trading following a trading halt in the wake of business update that sparked a sharp selloff.
The stock dropped as much as 12% Tuesday as several brokerages cut their ratings on WuXi Bio, one of China’s leading drug contract research and manufacturing companies. It tumbled 24% Monday after flagging that the drop-out of Covid-related sales and a slowdown in biotech funding would pressure its growth through June.
At least five firms downgraded the shares, including Bocom International Holdings Co., while Goldman Sachs Group Inc. and others lowered price targets and earnings estimates for WuXi Bio following the announcement. Analysts cited concerns over the challenging macro environment, flagging investor confidence in a sustained funding recovery, and how long it may take to deliver major new contracts.
Read: WuXi Biologics Plunges 24% as Covid Boost, Biotech Boom Fade
The shares were halted Monday morning after the sharp drop, pending an announcement from the company. WuXi Bio — which has supplied ingredients for AstraZeneca Plc’s Covid-19 vaccine — reiterated that it expects a “positive turnaround” in the second half of 2024.
“Investors generally anticipated a guidance revision, given the challenging macro environment and peers have cut forecasts as well, but the magnitude of guidance cut and timing for the revision still came as surprise,” Goldman Sachs analyst Ziyi Chen wrote in a note.
The stock is down more than 50% so far this year as the company’s sales and earnings growth have slowed. It’s now trading at less than 19 times forward earnings estimates, compared with the three-year average of 65 times.
“While the current valuation is not demanding, we think the inflection — full recovery of contract research organization (CRO) demand, driven by biotech funding rebound — will take time,” Daiwa analyst Wilfred Yuen wrote in a note.
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