Shanghai, China-headquartered WuXi AppTec has won the initial round in its legal battle with the Department of Defense (DoD). A U.S. judge on Friday barred DoD from “enforcing, implementing, or otherwise giving effect” to DoD’s designation of WuXi AppTec as a “Chinese military company” under Section 1260H of the National Defense Authorization Act for Fiscal Year 2021.

“Congress created the Section 1260H list in part to warn others away from listees, and it has stacked serious consequences atop designation: a bar on Department contracts, limits on certain federal funds, and the necessary predicate for treatment as a ‘biotechnology company of concern’ under the BIOSECURE Act,” U.S. District Judge James Boasberg wrote in Friday’s decision.

In June, WuXi AppTec was added to the updated list of Chinese military companies maintained by DoD. Boasberg’s decision noted that WuXi AppTec’s customers and suppliers have subsequently “canceled contracts, terminated longstanding relationships, and moved their business to competitors.” The judge added that the company’s designation on DoD’s 1260H list is “inflicting harm on WuXi that later relief cannot repair.”

WuXi AppTec filed a June 11 legal complaint in the U.S. District Court for the District of Columbia, claiming DoD’s “unlawful” designation as a “national security threat” has “inflicted substantial reputational, commercial, and operational harm” to the contract research, development, and manufacturing organization (CRDMO).  

On June 29, WuXi AppTec filed a motion for preliminary injunction with the U.S. District Court for the District of Columbia seeking to enjoin the DoD from enforcing, implementing, or taking any other action pursuant to the 1260H list designation during the litigation process.

In Friday’s decision, Boasberg wrote that WuXi AppTec “has shown that each factor governing preliminary relief favors an injunction.” In addition, he said the CRDMO has established a likelihood that DoD’s designation “was arbitrary and capricious under the Administrative Procedure Act.”

In an emailed statement to Pharma Manufacturing, a WuXi AppTec spokesperson said the CRDMO welcomes the court’s decision to grant the preliminary injunction.

“This ruling relieves us from the immediate adverse consequences of the erroneous 1260H designation during the litigation process,” the spokesperson said. “We believe that the facts, as demonstrated in our court filings, will prevail after an objective and fair judicial review. In the meantime, our operations remain fully functional, and we remain focused on our commitment to serving our customers and the patients relying on the lifesaving and life-improving medicines they make.”

However, according to DoD, WuXi AppTec and other companies on the 1260H list satisfy the requirements to be designated as “Chinese military companies” engaged in providing commercial services, manufacturing, producing, or exporting, while operating directly or indirectly in the U.S.

DoD’s updated 1260H list claims WuXi AppTec is “indirectly owned” by China’s State-Owned Assets Supervision and Administration Commission of the State Council (SASAC), and “indirectly affiliated” with the People’s Liberation Army (PLA) and the State Administration of Science, Technology and Industry for National Defense (SASTIND).

WuXi AppTec strongly objects to those allegations.