WuXi Biologics Reports Solid 2024 Interim Results

Revenue increased by 1.0% YoY to RMB8,574.2 million

Non-COVID revenue grew by 7.7% YoY, with non-COVID late-phase & commercial 

manufacturing YoY growth of 11.7%

Added 61 new integrated projects, including 4 from late-phase and commercial stage

Client's molecule recently acquired by MNC, highlighting a potential best-in-class CD3 asset utilizing three of our proprietary technology platforms

Total integrated projects of 742, one of the largest portfolios of complex biologics

Successful EMA inspections of 13 products and FDA inspections of 2 products in 1H24

The Group's revenue for the Reporting Period matches that of the first half of 2023, totaling RMB8,574.2 million, with a year-on-year (YoY) increase of 1.0%.  Excluding the COVID sales in the same period last year, the non-COVID revenue grew by 7.7%, and the non-COVID late-phase & commercial manufacturing revenue grew by 11.7% YoY. Key drivers supporting our base revenue growth include: (i) the successful execution of the Group's "Follow and Win the Molecule" strategies, combined with our leading technology platforms, best-in-industry timeline and excellent execution track records; (ii) an expanded spectrum of services offered to the biologics industry, including fast-growing technology platforms such as antibody-drug conjugates (ADCs) and bispecific & multi-specifics; (iii) robust growth in pre-IND revenue, which more than offset the impact of significant Discovery Services deals in 1H 2023; and (iv) the utilization of newly expanded capacities, including the ramp-up of manufacturing sites in Europe and the U.S.

IFRS gross profit was RMB3,350.0 million compared to RMB3,560.6 million in the same period last year. Adjusted gross profit was RMB3,811.2 million compared to RMB3,993.1 million in the same period last year. IFRS gross profit margin was 39.1% and adjusted gross profit margin was 44.4%. The decrease of gross profit margin was mainly due to the margin mix impact from the significant Discovery Services deals in 1H 2023, the slightly lower capacity utilization in China due to the COVID volume in the same period last year, the continued impact of the ramp-up of new manufacturing facilities in Ireland, Germany, and the U.S., all of which were partially offset by the efficiencies achieved from the WBS and other continuous improvement initiatives.

EBITDA was RMB2,805.9 million compared to RMB3,230.6 million in the same period last year. Adjusted EBITDA was RMB3,570.4 million compared to RMB3,818.3 million in the same period last year. EBITDA margin was 32.7% and adjusted EBITDA margin was 41.6%. 

IFRS net profit and net profit attributable to owners of the Company was RMB1,780.3 million and RMB1,499.1 million, respectively, representing a YoY decline of 23.9% and 33.9%. The decline was due to, among other factors, (i) an increase in selling, marketing and administrative expenses ("SG&A") as the Group continues to invest in its geographic footprint, (ii) an increase in SG&A for WuXi XDC Cayman Inc., a non-wholly owned subsidiary of the Company, as a standalone listed company on the Main Board of The Stock Exchange of Hong Kong Limited (stock code: 2268), and (iii) an unmaterialized foreign exchange translation loss as a result of the depreciation of Euro against RMB year-to-date.

Adjusted net profit was RMB2,544.8 million, down 13.0% YoY from a record-high base in 1H 2023.

Basic EPS and adjusted basic EPS were RMB0.37 and RMB0.55, respectively.

• Amid a dynamic geopolitical landscape, the Group added 61 new integrated projects in 1H 2024, demonstrating the Company's resilience and its ability to maintain growth. This, compared to 46 new projects added in 1H 2023, is one of our best 6-month periods for new project adds to date. Among the 61 newly added projects, 52 were from pre-IND, 5 from early-phase, 3 from late-phase, and 1 was from the commercial manufacturing phase. We believe that our robust business activities in the pre-IND stage signal early signs of a biotech funding recovery. During the Reporting Period, the Group continued to execute its "Win-the-Molecule" strategy, adding 9 post-IND projects, among which 4 are in the late-phase and commercial manufacturing stages. Since 2018, the Group has won 78 projects under the "Win-the-Molecule" initiative, with the winning formula centered on quality, speed, and advanced technological platforms. 

  
  

• The number of late-phase projects increased to 56, laying a strong foundation for future commercial manufacturing. The number of commercial manufacturing projects was 16, as we removed 8 COVID and 1 non-COVID dormant projects. The total number of integrated projects was 742, representing one of the largest portfolios of complex biologics, including bispecifics & multispecifics (123), ADCs (167), fusion proteins (76) and vaccines (23). Among the 123 bispecifics & multispecifics projects, WuXiBody^TM and SDArBody^TM accounted for nearly half, as both proprietary platforms continue to gain worldwide recognition. 

  
  

• As of June 30, 2024, total backlog reached US$20.1 billion, the same level as the first half of last year, including US$13.0 billion service backlog and US$7.1 billion upcoming potential milestone backlog. Backlog within 3 years exceeded US$3.6 billion, providing high visibility for near-term revenue opportunities. 

  
  

• The Group offers end-to-end CRDMO services through our global network. Our Ireland site is making great progress overall and is seeing significant commercial manufacturing demands from 2024 and onwards, with 2025 almost fully booked. MFG6.1 successfully completed its first PPQ campaign in 1H 2024, and MFG6.2 expansion is on track to be completed in the 4Q of 2024. MFG7 commenced commercial manufacturing, though there has been a slight delay in the ramp-up due to an operational issue during an engineering run. The site remains on track to reach its steady-state in 2026, serving a critical role in our "Global Dual Sourcing" network. For our Singapore site, construction work has commenced, initially to support XDC's operation readiness in 2026. Design-work for WuXi Biologics facilities is still ongoing. 

  
  

• The Group's unified and consistent quality system has been pivotal in driving our clients' success and remains one of our key competitive advantages. A total of 21 inspections from the EMA and FDA were completed, with a 100% success rate in passing pre-approval inspections (PAIs). In 1Q 2024, EMA inspection of 13 products was successfully completed. In 2Q 2024, FDA inspection of 2 products was successfully completed. 

  
  

• Our industry-leading technology platforms span from discovery to development and manufacturing. Examples of discovery technologies include WuXiBody^TM (for Bi-/Multi-specific antibody), T cell engager (TCE) platform, tumor associated antigens (TAA) mAb discovery, and single B cell technology. Examples of development technologies include WuXia^TM (cell line development), WuXiDAR4^TM (drug antibody ratio technology), and WuXiHigh^TM (customized formulation strategies for high concentration drug products). Examples of manufacturing technologies include WuXiUI^TM (ultra-intensified fed-batch manufacturing) and WuXiUP^TM (ultra-high productivity continuous processing). WuXiUI^TM is our next-gen manufacturing process that can increase titer by 3-6x with culture time comparable to traditional fed-batch processes, and is currently undergoing pilot runs. WuXiUP^TM can increase titer by 5-15x, and resolve various quality issues, making it an ideal technology for unstable molecules, molecules that clients wish to increase titer of significantly, or molecules experiencing quality issues. Recently, our client, Curon Biopharmaceutical's investigational B-cell depletion therapy CN201 was acquired by Merck & Co., Inc. CN201 utilizes 3 aforementioned proprietary technology platforms: WuXiBody^TM, TCE platform and WuXiUP^TM.

  
  

• Our people are key assets of WuXi Biologics. As of June 30, 2024, the Group's total staff comprised 12,435 employees, including approximately 4,200 scientists, and the total retention rate was approximately 94%. During 1H 2024, we announced the planned retirements of Dr. Weichang Zhou (former CTO), Mr. Peter Shen (CMO), and Dr. Jerry Xu (former CQO). We deeply appreciate their contributions to WuXi Biologics. The transition was seamless, with Dr. Sherry Gu (CTO), Dr. Wei Guo (Head of Global Manufacturing, effective August 2024), and Mr. Ing Hou Loh (Head of Global Quality) assuming these roles. With a deep bench of industry veterans who possess extensive domain expertise and proven leadership records, the Group is well-positioned to continue building a strong and sustainable organization for many decades to come.

  
  

• WBS (WuXi Biologics Business System) is our lean operation and management system launched in 2021. During 1H 2024, by implementing approximately 60 Kaizen projects and events, the Group delivered Gross Profit Margin enhancement of roughly 100 basis points, along with significant business growth, inventory reduction, labor hour savings, and quality improvements to combat operation headwinds. Additionally, ESG Kaizen projects contributed to the Group's ESG initiatives by achieving remarkable carbon emission reduction, material savings, waste reductions and more recycling, and water savings. We will continue to promote WBS as our lean culture to drive continuous improvements across all facets of our operations, to create better value for our clients, employees and partners. 

  
  

• The Group has incorporated ESG as an essential part of its sustainable growth strategy. The Group's ESG performance has been widely recognized by the industry and has been awarded an AAA rating from MSCI ESG Ratings, a Platinum Medal from EcoVadis, and was named an ESG Industry Top-Rated Company and an APAC Regional Top-Rated Company by Sustainalytics. In 2024, WuXi Biologics was included in S&P Global's Sustainability Yearbook 2024 with a Top 1% S&P Global Corporate Sustainability Assessment (CSA) ranking and was named an Industry Mover.

  
  

• The Group has always been committed to serving and contributing to the global healthcare community while adhering to the highest standards of regulatory compliance and operational excellence. The Group noted the introduction of the BIOSECURE Act in the U.S. Congress and subsequent amendments to it, including a proposed "grandfather" clause with transition period. The contents of the draft legislation remain subject to further review and modification as it moves through the legislative process and the legislative route also involves uncertainty. As a global biologics CRDMO platform, the Group does not have a human genomics business, nor does it collect human genomic data in any of its businesses around the world. The Group firmly believes that it has not, does not, and will not pose a security risk to the United States or any other countries. The Group will continue to closely monitor this process and remains committed to supporting its clients globally and to operating in accordance with the applicable laws and regulations of all jurisdictions where it has business operations.