On August 31, 2022 GenScript Biotech, the world’s leading biotech company, reported its annual results as of June 30, 2022 (Press release, GenScript, AUG 31, 2022, View Source [SID1234618841]).
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"In the first half of 2022, GenScript Group has delivered satisfactory results across all business segments," said Dr. Patrick Liu, Rotating CEO of GenScript. "Our life science business reported steady growth while focusing on R&D innovation and leveraging superior technology platforms to get into emerging fields. Thanks to excellent market capabilities and track record, ProBio’s macromolecular CDMO and GCT CDMO business maintained strong momentum. In the future, ProBio will focus on medium-sized and large pharma and biotech customers and add value to our service projects. By improving product mix, Bestzyme improved its profitability. Bestzyme will optimize its enzyme product portfolio and industrial-grade manufacturing capability, and capture new opportunities in the synthetic biology field. Legend and its partner Janssen successfully commercialized Carvykti. As Legend moves cilta-cel into earlier line clinical trials, Carvykti will benefit more patients worldwide. 2022 marks the 20th anniversary of GenScript. GenScript has developed a diversified business portfolio over years. GenScript will stay committed to the corporate culture and mission to "make people and nature healthier through biotechnology" and create value for our shareholders and investors."
Results Analysis of the Four Business Segments
As the Group has reallocated back office administrative expenses into each business segment following the establishment of Probio legal entities in the second half of 2021, segment operating profit is not directly comparable to the same period in 2021.
Life-science Services and Products
During the Reporting Period, revenue of life-science services and products amounted to approximately US$176.0 million, representing an increase of 15.8% over the same period in 2021. The gross profit was approximately US$99.8 million during the Reporting Period, representing an increase of 8.8% as compared with approximately US$91.7 million for the same period in 2021. The gross profit margin decreased from 60.3% for the same period in 2021 to 56.7% this Reporting Period. The operating profit of life-science services and products during the Reporting Period was approximately US$26.0 million.
The increase in revenue was mainly attributable to the (i) continued growth in molecular biology, protein and antibody business, (ii) successful commercialisation of innovative platforms such as sgRNA, and partially offset by (iii) the decrease in sales in COVID-19 related products and the negative impact on sales due to pandemics in Shanghai, China. Production efficiency gains contributed positively to gross profit margin while (i) loss from overseas production during the initial capacity ramp-up, (ii) increased freight and duty costs, and (iii) decreased price and volume of COVID-19 related products all had negative impacts on gross profit margin. The operating profit was positively impacted by growth in revenue and gross profit while negatively impacted by (i) increased expenses brought by operation and depreciation of overseas production capacity, and (ii) increment in labor costs brought by research and development.
Biologics Development Services
During the Reporting Period, revenue of biologics development services amounted to approximately US$62.7 million, representing an increase of 99.0% over the same period in 2021. Total backlog for biologics development services reached US$228.0 million as at June 30, 2022. The gross profit was approximately US$16.2 million during the Reporting Period, representing an increase of 62.0% as compared with approximately US$10.0 million for the same period in 2021. Adjusted gross profit was US$23.9 million during the Reporting Period, representing an increase of 125.5% over the same period in 2021. Adjusted gross profit margin expanded from 33.7% for the same period in 2021 to 38.1% this Reporting Period. Adjusted operating profit during the Reporting Period was approximately US$3.2 million.
The growth of revenue was mainly attributable to the (i) significant increase of customer projects from overseas business, (ii) expanded capacity and productivity of pre-clinical and clinical development, and(iii) shorter delivery time for antibody discovery and process development. The adjusted gross profit and adjusted operating profit were positively impacted by higher capacity utilization and production efficiency gains.
Industrial Synthetic Biology Products
During the Reporting Period, revenue of industrial synthetic biology products amounted to approximately US$16.8 million, representing a decrease of 6.7% over the same period in 2021. The gross profit was approximately US$7.2 million, representing an increase of 41.2% as compared with approximately US$5.1 million for the same period in 2021. The gross profit margin increased from 28.3% for the same period in 2021 to 42.9% this Reporting Period. The operating profit of industrial synthetic biology products was approximately US$0.4 million during the Reporting Period, whilst the operating loss was approximately US$0.7 million for the same period in 2021.
The decrease in revenue was mainly due to the (i) active pruning of low or negative profit products, (ii) the feed industry in China downturn which led to reduction of use of feed enzymes, and (iii) the situation in Ukraine and Russia which caused the decrease of orders in Eastern Europe. The increase in both gross profit and operating profit was primarily attribute to the (i) adjustment of product portfolio and enhancement of the promotion of high-margin products, (ii) improvement of production process and workflow, and (iii) profit from the license of patents.
Cell Therapy
During the Reporting Period, revenue of cell therapy amounted to approximately US$57.1 million, representing an increase of 68.4% over the same period in 2021. The gross profit was approximately US$52.1 million during the Reporting Period, representing an increase of 53.7% as compared with approximately US$33.9 million for the same period in 2021. The operating loss of cell therapy was approximately US$180.1 million during the Reporting Period, whilst the operating loss was US$168.9 million for the same period in 2021.
The increase in both revenue and gross profit was primarily attributable to the additional milestones achieved in 2021 and 2022, and thus the further recognition of contract revenue from collaboration with Janssen on developing cilta-cel. The operating loss was primarily attributable to the (i) investment in clinical trials resulting from 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
During the Reporting Period, the Group recorded revenue of approximately US$304.7 million, representing an increase of 32.7% from approximately US$229.6 million for the same period in 2021. This is mainly attributable to (i) the continued increase of non-cell therapy products and services from major strategic customers and new competitive services and products, especially in biologics development services, and (ii) the increase of contract revenue derived from Legend’s collaboration with Janssen with new milestones achieved.
Gross profit
During the Reporting Period, the Group’s gross profit increased by 26.6% to approximately US$175.5 million from approximately US$138.6 million for the same period in 2021. This is mainly attributable to the (i) rapid growth of revenue, and (ii) operational efficiency improvement.
The increase in gross profit was partially offset by (i) increased share-based compensation expenses to production teams, particularly in biologics development services, and (ii) increased shipping cost. Adjusted gross profit increased by 31.4% over the same period in 2021.
Selling and distribution expenses
During the Reporting Period, the Group’s selling and distribution expenses increased by 49.1% to approximately US$86.9 million from approximately US$58.3 million for the same period in 2021. This increase is mainly driven by (i) more investment on talent with recruiting experienced personnel with competitive packages, (ii) increased expenses, primarily attributable to the global expansion of our business, and (iii) increased marketing expenses related to Legend’s collaboration with Janssen. Adjusted selling and distribution expenses increased 45.3% over the same period in 2021.
Administrative expenses
During the Reporting Period, the Group’s administrative expenses increased by 41.4% to approximately US$79.6 million from approximately US$56.3 million for the same period in 2021. This is mainly attributable to (i) more investment on talent with recruiting experienced personnel with competitive package and share-based compensation expenses for all business segments, and (ii) the reinforcement of some key administrative functions to support the Group’s overall business expansion and compliance. Adjusted administrative expenses increased 31.0% over the same period in 2021.
Research and development expenses
During the Reporting Period, the research and development expenses kept stable and increased by 1.3% to approximately US$177.4 million from approximately US$175.1 million for the same period in 2021. This is mainly attributable to (i) the continuous investment in talents with competitive package and share-based compensation expenses, and (ii) continuous investment in new products and services, which will significantly strengthen our competitiveness. Adjusted research and development expenses decreased by 1.4% over the same period in 2021.