On August 12, 2021 WuXi AppTec (stock code: 603259.SH / 2359.HK), a company that provides a broad portfolio of R&D and manufacturing services that enable companies in the pharmaceutical, biotech and medical device industries worldwide to advance discoveries and deliver groundbreaking treatments to patients, reported its financial results for the first half of 2021 (Reporting Period) (Press release, WuXi AppTec, AUG 12, 2021, View Source [SID1234586486]).
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This document serves purely as a summary and is not intended to provide a complete representation of the relevant matters. For further information, please refer to the 2021 interim report and relevant announcements published on the websites of the Shanghai Stock Exchange (www.sse.com.cn) and the Stock Exchange of Hong Kong (www.hkexnews.hk), and the designated media for dissemination of the relevant information. Investors are advised to exercise caution and be aware of the investment risks in dealing in the shares of the Company.
All financials disclosed in this press release are prepared based on International Financial Reporting Standards (IFRS), in currency of RMB.
The 2021 Interim Report of the Company has not been audited.
1H 2021 Financial Highlights
Revenue grew 45.7% year-over-year to RMB10,537 million. The strong revenue growth was mainly attributable to the Company’s continued focus on leveraging its unique integrated end-to-end platform to achieve synergy and strong growth across our business segments.
Our China-based laboratory services revenue grew 45.2% to RMB5,487 million.
Our CDMO services revenue grew 66.5% to RMB3,599 million.
Our U.S.-based laboratory services declined 15.7% to RMB659 million.
Our clinical research and other CRO services revenue grew 56.5% to RMB783 million.
IFRS gross profit increased 46.1% year-over-year to RMB3,884 million. Gross profit margin was 36.9%.[3]
Adjusted Non-IFRS gross profit increased 44.1% year-over-year to RMB4,102 million. Adjusted Non-IFRS gross margin was 38.9%.
EBITDA increased 51.6% year-over-year to RMB3,942 million.
Adjusted EBITDA increased 53.4% year-over-year to RMB3,649 million.
Net profit attributable to owners of the Company increased 55.8% year-over-year to RMB2,675 million. The strong net profit growth is mainly attributable to robust revenue growth, continuous improvements to the Company’s operating efficiencies and gains from our venture capital investment portfolio, partially offset by the fair value losses of RMB1,493 from derivative component of convertible bonds as a result of significant H-share price increase during the Reporting Period. In the first half of 2021, the net gain from venture and fund investments contributed RMB2,148 million, due primarily to fair market value gains post certain portfolio companies’ IPO and gains from the sale of shares of certain companies within our venture investment portfolio during the Reporting Period.
Adjusted non-IFRS net profit attributable to owners of the Company increased 67.8% year-over-year to RMB2,448 million.
Diluted EPS increased 46.8% year-over-year to RMB0.91, while adjusted diluted non-IFRS EPS increased by 58.5% year-over-year to RMB0.84.
[1] To better reflect the operation results and key performance, we adjusted the scope of Non-IFRS, and the comparative financial figures for the comparable periods have been adjusted to reflect this change.
[2] Half-year 2020 and 2021, we had a fully-diluted weighted average share count of 2,761,121,569 and 2,924,395,370 ordinary shares, respectively.
[3] If prepared under Accounting Standard for Business Enterprises of PRC, the gross profit grew 46.1% year-over-year to RMB3,897 million. Gross profit margin was 37.0%.
1H 2021 Business Highlights
In 1H 2021, we continued to grow our customer base by adding over 1,020 new customers, increasing our customer base to more than 5,220 active accounts. The demand for our services was very strong across our customer base. We continued to optimize cross-platform synergies and increased our presence globally, strengthening our unique competitive advantage as a fully integrated CRDMO (Contract Research Development and Manufacturing Organization) and a true one-stop service provider that is able to fulfill all our clients’ discovery, development and manufacturing service needs.
Revenue from international clients increased 45% to RMB8,035 million and revenue from China clients grew 48% to RMB2,501 million.
We continued to expand our customer base and retain existing clients. During the Reporting Period, revenue from existing clients grew 42% to RMB9,688 million and new clients contributed RMB849 million in revenue.
During the Reporting Period, revenue attributable to global "long-tail" and China clients grew 54% to RMB7,570 million; revenue from Top 20 global pharmaceutical companies grew 29%, up to RMB2,967 million in revenue.
Our unique positioning across the pharmaceutical development value-chain allowed us to "follow-the-molecule" and enhance synergies across our business segments. Clients using services from more than one of our business units contributed RMB8,631 million in revenue, growing 40% year-over-year.
China-based Laboratory Services: Growing demand from domestic and international markets
Our China-based laboratory segment has seen a significant uplift in market demand and overseas orders; revenue grew 45.2% year-over-year to RMB5,487 million. The segment remains a significant value-driver for our medium to long term business growth, enabling us to "follow-the-molecule" from the earliest stages of drug discovery to preclinical development.
We strengthened our research services and capabilities for new modalities, growing revenue in this area by 52% year-over-year in 1H 2021.
We continued to engage and increase new "long-tail" customers, adding 544 new clients in 1H 2021; "long-tail" customer revenue contributions reached a historical high of 65% in 2Q 2021.
Toxicology services achieved strong revenue growth of 85% year-over-year. We are the industry leader in China for drug safety assessment.
We leveraged our integrated WuXi AppTec Investigational New Drug (IND) program (WIND) to prepare and facilitate global regulatory submissions of IND packages, expediting the IND application process for many of our global and China customers. 81 WIND service packages were signed during 1H 2021 and the average revenue per WIND package ranges from USD1.1 million to 1.5 million.
Our success-based drug discovery service unit filed INDs for 7 new-chemical-entities and obtained 8 Clinical Trial Applications (CTA) for domestic customers. As of June 30, 2021, we have cumulatively submitted 126 new chemical entity IND filings with the NMPA and obtained 99 CTAs, with 2 projects in Phase III clinical trials, 12 projects in Phase II clinical trials, and 68 projects in Phase I clinical trials.
CDMO Services: Accelerated growth supported by increased capacity and capabilities
Revenue attributed to CDMO services grew 66.5% year-over-year to RMB 3,599 million. During the reporting period, our CDMO services provided process development, formulation development and manufacturing services for 1,413 small molecules, including 48 molecules in Phase III clinical trials and 32 molecules in commercial manufacturing. Our subsidiary WuXi STA supplies clients with quality drugs that meet global standards, empowering clients worldwide to enter global markets.
During 1H 2021, we added 341 new molecules into our CDMO pipeline. As of June 30, 2021, molecules in our CDMO pipeline account for 14.1% of the innovative chemical drugs in clinical stages globally, an increase from 11.5% at the end of 2019.
Among the 341 newly added molecules, we have provided our second full CMC integrated manufacturing services for HUTCHMED’s Savolitinib (MET inhibitor). We provide end-to-end manufacturing services for Savolitinib from API manufacturing to spray drying, tablet manufacturing and packaging. We believe this is another important testament to our full capabilities, from drug substance to drug product manufacturing for commercial products.
We also continued to expand our capabilities in developing new modalities for global clients. The number of compounds for oligo and peptide drug candidates in our pipeline increased 129% and the number of ADC clients increased by 57%. In June 2021, WuXi STA and WuXi Biologics formed WuXi XDC, a joint venture to provide integrated end-to-end CDMO services for ADC and other drug conjugate products.
Our Wuxi site began operations in May 2021, marking the company’s second site for integrated formulation development and drug product manufacturing.
WuXi STA also announced the construction of a new API and Drug Product manufacturing facility in Delaware, USA. The facility will be the second site for STA in the U.S. and its eighth manufacturing facility globally.
WuXi STA closed the acquisition of Bristol Myers Squibb’s commercial drug product production facility in Couvet, Switzerland end of July 2021. The Couvet site is STA’s first facility in Europe, expanding WuXi AppTec’s global presence with large scale capsule and tablet production capabilities.
U.S.-based Laboratory Services: Continued impact from COVID-19 pandemic, but expect to see recovery in 2H 2021
Our cell and gene therapies CTDMO services enabled customers globally. During the Reporting Period:
Our Philadelphia site provided services for 38 clinical stage projects, including 22 projects in Phase I clinical trials and 16 projects in Phase II/III clinical trials. Revenue decline year-over-year largely due to the impact of COVID-19 and subsequent delay or cancellation of certain late stage client projects.
We acquired OXGENE, an Oxford, U.K.-based company, in the first half of 2021 and are in the process of developing and promoting its cutting-edge TESSA technology (for greatly improved yield and manufacturability of AAV products) and XLenti (for lenti-viral vector production) to global clients.
We are signing more clients and cell and gene therapy projects, which will grow this segment of our business from 2H 2021 and beyond.
Our Medical Device Testing segment was negatively affected by the COVID-19 pandemic in the U.S. and the shifting of business mix of large medical device manufacturers in the U.S., and the delay of MDR. However, the new EU MDR (EU 2017/745) has been officially enforced starting May 26, 2021. Consequently, we expect the medical device testing business will gradually recover second half of 2021 and into next year.
Overall, we expect our U.S.-based Laboratory Services to recover in 2H 2021 and to further improve in 2022.
Clinical Research CRO/SMO Services: Strong growth in SMO and clinical CRO as the pandemic situation improved 1H 2021
Revenue attributed to clinical research CRO/SMO services achieved robust growth of 56.5% year-over-year to RMB783 million. Our clinical research services continued to enable customers in China and the U.S. during the Reporting Period:
In the first half of 2021, the clinical research CRO team provided services to 170+ projects for our clients in China and the U.S., completing registration trials for 3 products and enabling 5 ADC products to reach development milestones.
Our clinical CRO services unit continued to enhance cross-border clinical trial capabilities. In the first half of 2021, we began conducting clinical trials and enrolled the first patient in a Phase I trial in Australia for a China-based biotech client.
During the Reporting Period, our Chengdu site provided its inaugural first-in-human Phase I clinical trial for an innovative drug candidate and revenue generated from this Chengdu Phase I center grew 162% year-over-year.
Our SMO maintained its leadership position in China with around 4,000 staff in 147 cities, providing services for hundreds of clinical trials across about 960 hospitals. Team size increased 43% year-over-year, demonstrating continued strong market demand for our SMO services.
During the Reporting Period, SMO supported regulatory approval of 14 products in China, exhibiting a significant increase from 17 product approvals in total for all of 2020.
Continuous Improvements in ESG Performance
In the first half of 2021, while working to manage the long-term effects of the COVID-19 pandemic, we continued to improve our ESG performance to meet our sustainability goals and expectations. We aimed to reduce carbon emissions and enhance our business’ resilience to climate change. The intensity of our greenhouse gas emissions and energy consumption decreased by 6.5% and 6.9%, respectively. At the same time, we have sought to improve diversity and inclusion within our workplace and to make investments in our people. As a result, we have been awarded the "Most Attractive Employers for Medical Graduates in China" by Universum for the past three consecutive years. By the end of June 30, 2021, the number of female employees remained at 53% of our workforce. These efforts and practices are recognized by our investors and clients, as well as various ESG rating agencies. We remain committed to "doing the right thing and doing it right," and will focus on delivering our commitments to our customers, employees, investors, communities and the environment to operate in a sustainable way both today and in the future.
Management Comment
Dr. Ge Li, Chairman and CEO of WuXi AppTec, said, "During the Reporting Period, our revenue increased 45.7% over the prior year to RMB10,537 million and our adjusted non-IFRS net profit attributable to owners of the Company increased 67.8% year-over-year to RMB2,448 million. We are proud that over our more than twenty-year history, WuXi AppTec has earned a solid reputation due to our track record of continuously delivering stable and outstanding results for our stakeholders, and that trend has continued in 2021."
"Relentlessly focused on serving our customers better, we are making changes to the organization of our business segments starting from Q3 2021. We have integrated our capabilities to form three new business divisions– WuXi Chemistry, WuXi Biology, and WuXi Testing which now possess the end-to-end capabilities needed to provide integrated services to customers.
"Dr. Minzhang Chen was named as a Co-CEO and will lead the newly-formed WuXi Chemistry division, which now encompasses all chemistry services, including research, development and commercial manufacturing under one roof. This is our new business model that we have named CRDMO (Contract Research, Development and Manufacturing Organization). After this integration, WuXi Chemistry will have 10,190 research scientists, 3,741 API process development and formulation development scientists, and 4,036 manufacturing staff. It is the largest and most comprehensive chemistry services organization in the world with a workforce of 17,967 as of June 30, 2021."
"Dr. Steve Yang continues to serve as a Co-CEO and will lead our WuXi Testing and WuXi Biology divisions. WuXi Testing now integrates our preclinical testing services (DMPK, Toxicology, Bioanalytical) and clinical testing services (clinical CRO and SMO) to provide customers with seamless drug testing services from preclinical testing to clinical trials. WuXi Biology provides a full spectrum of biology-related discovery services from in-vitro and in-vivo biology, high throughput screening, DEL, and many other biology services."
Dr. Ge Li concluded, "We believe that these three new integrated business divisions plus the existing WuXi ATU and WuXi DDSU will allow WuXi AppTec to better serve our global customers. The fundamentals of our business and its future outlook both remain very strong. Looking ahead, we will further increase investment in our R&D services in both capacity and capabilities, particularly in new modalities. We are confident that this will better enable our customers to bring innovative medicines to patients in need – realizing our vision that ‘every drug can be made and every disease can be treated."