On March 20, 2022 GenScript Biotech, the world’s leading biotech company, reported its annual results as of December 31, 2021 (Press release, GenScript, MAR 20, 2022, View Source [SID1234610393]).
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"2021 is a pivotal year for GenScript. Our continuous investments in innovation and optimization of current business portfolio over the past few years lead to encouraging results.", said Dr. Patrick Liu, Rotating CEO of GenScript. "In the life science segment, we are pushing forward our business through automation and industrial-scale production. In the emerging gene and cell therapy CDMO segment, GenScript ProBio achieved explosive revenue growth thanks to strategic investment, advanced platforms and high quality standards. Bestzyme reached breakeven, which is made possible by business optimization and product innovation. With continued investment in synthetic biology, Bestzyme will further unfold its potential in the future. In early 2022, our subsidiary Legend Biotech, an innovative cell therapy company, together with our partner J&J, successfully commercialized CarvyktiTM, which is a monumental event for the cell therapy industry and demonstrates innovation capabilities of China’s biopharmaceutical industry. Looking ahead, GenScript Group will continue investment in innovation capabilities to address challenges in the fields of gene and cell therapy and synthetic biology. We will stay committed to our mission to "make people and nature healthier through biotechnology" by accelerating innovation in the biotech industry, and continuously create value for our shareholders."
Results Analysis of the Four Business Segments
Life-science services and products
During the Reporting Period, revenue from life-science services and products was approximately US$315.8 million, representing an increase of 26.4% as compared with approximately US$249.8 million for the year ended December 31, 2020. During the Reporting Period, the gross profit was approximately US$183.3 million, representing an increase of 10.8% as compared with approximately US$165.4 million for the year ended December 31, 2020. During the Reporting Period, the operating profit of life-science services and products was approximately US$91.6 million, representing an increase of 6.5% from approximately US$86.0 million for the same period in 2020.
The growth of revenue and gross profit was mainly attributable to the (i) expanded capacity and productivity, (ii) successful commercial operation that focused on the novel products such as oligo synthesis and cPass services and kit, (iii) successful development of key accounts, and (iv) the improvement of online commercial platform and tools to attract new customers. The decrease in gross profit margin was primarily attributable to the (i) significant decrease of exchange rate of USD against RMB as compared to 2020 which caused an increase of converted cost as the majority of production cost occurred in Mainland China, (ii) increased freight and duty costs, and (iii) change of product portfolio strategy. The increase in operating profit was primarily attributable to the improved capacity utilization and operational efficiency, and was partially offset by increased investment in research and development.
Biologics development services
During the Reporting Period, revenue from biologics development services was approximately US$81.4 million, representing an increase of 101.5% as compared with approximately US$40.4 million for the year ended December 31, 2020. During the Reporting Period, the gross profit was approximately US$25.6 million, representing an increase of 158.6% as compared with approximately US$9.9 million for the year ended December 31, 2020. Total backlog for biologics development services increased by 108.4% from US$94.7 million as at December 31, 2020 to US$197.4 million as at December 31, 2021. The gross profit margin increased from 24.5% for the same period in 2020 to 31.4% this year. During the Reporting Period, the operating loss of biologics development services was approximately US$4.5 million, whilst the operating loss was approximately US$7.6 million for the same period in 2020.
The increase in revenue was primarily attributable to the (i) accumulated biologics development track records and expanded global customer base, (ii) expanded capacity and productivity of pre-clinical and clinical development, (iii) shorter delivery time for antibody and protein drug development, and (iv) significant increase in plasmid revenue from the boosting GCT market, including mRNA related applications. The increase in gross profit was primarily attributable to the (i) increased revenue, (ii) production cost reduction and quality improvement, and (iii) improved capacity utilization. The operating loss was primarily attributable to the (i) investment in selling and distribution, and (ii) investment in research and development activities.
Industrial synthetic biology products
During the Reporting Period, revenue from industrial synthetic biology products was approximately US$38.6 million, representing an increase of 33.6% as compared with approximately US$28.9 million for the year ended December 31, 2020. During the Reporting Period, the gross profit was approximately US$11.3 million, representing an increase of 31.4% as compared with US$8.6 million for the year ended December 31, 2020. During the Reporting Period, the industrial synthetic biology products segment has achieved operating break-even this Year, whilst the operating loss was approximately US$3.0 million for the same period in 2020.
The increase in revenue and gross profit was primarily attributable to the (i) launch of innovative products, (ii) increased penetration into big industrial customers, and (iii) business development in overseas markets. The gross profit margin remained stable during the Reporting Period.
Cell therapy
During the Reporting Period, revenue from cell therapy was approximately US$89.8 million, representing an increase of 18.6% as compared with approximately US$75.7 million for the year ended December 31, 2020. During the Reporting Period, gross profit was approximately US$89.8 million, representing an increase of 18.6% as compared with approximately US$75.7 million for the year ended December 31, 2020. During the Reporting Period, the operating loss of cell therapy was approximately US$373.9 million, whilst the operating loss was approximately US$233.4 million for the same period in 2020.
The increase in both revenue and gross profit was primarily attributable to additional milestones achieved in 2020 and 2021, and thus further recognition of contract revenue from the collaboration with Janssen on developing cilta-cel. The operating loss was primarily attributable to the (i) investment in clinical trials, higher patients enrollment and more pipelines, (ii) cost for commercial preparation activities for the launch of cilta-cel, and (iii) expansion of administrative functions.
Revenue
In 2021, the Group recorded revenue of approximately US$511.1 million, representing an increase of 30.8% from approximately US$390.8 million in 2020. This was primarily attributable to (i) the continued increase of non-cell therapy products and services from major strategic customers and new competitive services and products, and (ii) the increase of contract revenue derived from Legend’s collaboration with Janssen with new milestones achieved.
Gross Profit
In 2021, the Group’s gross profit increased 18.6% to approximately US$303.5 million from approximately US$255.9 million in 2020. The increase in gross profit was primarily attributable to the (i) rapid growth of revenue, and (ii) operational efficiency improvement. The increase in gross profit was partially offset by unfavorable exchange rate fluctuation and increased shipping costs.
Selling and distribution expenses
The selling and distribution expenses increased by 56.6% to approximately US$168.0 million in 2021 from approximately US$107.3 million in 2020. This was mainly attributable to the (i) recruiting of more experienced personnel and improved incentive packages to enhance the business development capability, and (ii) increased marketing and advertising expenses, primarily attributable to the global expansion of our business, including Legend’s collaboration with Janssen.
Administrative expenses
The administrative expenses increased by 48.9% to approximately US$134.5 million in 2021 from approximately US$90.3 million in 2020. This was mainly caused by (i) reinforcing key administrative functions such as information technology, supply chain and legal to support the Group’s overall business expansion and ensure compliance with certain updated requirements, (ii) one-time consultation expenses and other costs related to the Investigation, and (iii) the CARVYKTI application and the Follow-on Public Offering of Legend.
Research and development expenses
The research and development expenses increased by 36.1% to approximately US$358.4 million in 2021 from approximately US$263.4 million in 2020. This was mainly due to the (i) increase in clinical trial expenses and preclinical study costs in the cell therapy segment, (ii) investment in new research and development projects to strengthen our competitiveness in the GCT market and related supply chain, (iii) investment in development projects that improved our production efficiency, and (iv) increase in compensation package including equity-settled share-based compensation expense for research and development personnel.