On March 18, 2024 WuXi AppTec (stock code: 603259.SH / 2359.HK), a global company that provides a broad portfolio of R&D and manufacturing services that enable companies in the pharmaceutical and life sciences industry, reported its financial results for the year ending December 31, 2023 ("Reporting Period") (Press release, WuXi AppTec, MAR 18, 2024, View Source [SID1234641241]):
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Revenue grew 2.5% year-over-year to RMB40,341 million; excluding COVID-19 commercial projects, revenue grew by 25.6%.
Adjusted non-IFRS gross profit increased 11.2% year-over-year to RMB16,938 million. Adjusted non-IFRS gross profit margin improved 3.3pts to 42.0%. The Company continued to improve operating efficiency; adjusted non-IFRS net profit margin reached 26.9% due to FX impact and efficiency enhancement.
Net profit attributable to the owners of the Company[1] increased 9.0% year-over-year to RMB9,607 million; diluted EPS increased 14.9% year-over-year to RMB3.24. Adjusted non-IFRS net profit attributable to the owners of the Company increased 15.5% year-over-year to RMB10,855 million; adjusted diluted non-IFRS EPS increased by 15.7% year-over-year to RMB3.68.
Free cash flow continued to increase to RMB7,125 million. Due to FX impact and efficiency improvement, the Company’s operating cash flow grew by 23.6% year-over-year.
The Company’s Board of Directors has decided to maintain a 30% payout ratio, and distribute RMB ~9.8 cash dividend for every 10 shares (RMB 2.88 billion in total).
In 2023, we added over 1,200 new customers, and in total we served more than 6,000 active customers over the past 12 months. Demand from customers across regions globally continued to grow.
As of December 31, 2023, backlog grew 18% year-over-year excluding COVID-19 commercial projects, among which TIDES backlog grew significantly by 226% year-over-year.
Revenue from the top 20 global pharmaceutical companies maintained rapid growth and reached RMB16.11 billion in 2023, which grew 44% year-over-year excluding COVID-19 commercial projects.
The sustained and steady revenue growth is attributed to our unique fully integrated Contract Research, Development and Manufacturing Organization (CRDMO) platform. WuXi Chemistry’s D&M pipeline has maintained rapid growth, with a total of 1,255 new molecules added in 2023. By end of 2023, our D&M pipeline reached 3,201 molecules, among which 20 commercial and phase III projects were added during the year. Revenue from D&M services maintained strong growth. Excluding COVID-19 commercial projects, D&M services revenue grew by 55.1%.
As an enabler of innovation, a trusted partner and a contributor to the global pharmaceutical and life sciences industry, the Company is committed to environmental protection and sustainability. We committed to the Science Based Targets initiative (SBTi) in December 2023. We received an "AA" rating from MSCI for the third consecutive year, an "A-" rating in CDP Climate Change for the second consecutive year, and an "A-" rating in CDP Water Security for the first time. In addition, we were upgraded to the "Silver" medal by EcoVadis. Our outstanding ESG performances have also been widely acknowledged by major global ESG rating agencies, including S&P Global, Sustainalytics, and FTSE Russell.
[1] Net profit attributable to the owners of the Company is prepared according to Accounting Standard for Business Enterprises of PRC. Due to the different accounting treatment of long-term equity investments under IFRS, Net profit attributable to the owners of the Company under IFRS was RMB10,690 million.
[2] In 2022 and 2023, WuXi AppTec had a fully-diluted weighted average share count of 2,954,165,418 and 2,949,887,619 ordinary shares, respectively.
2024 Outlook
Despite uncertainties in the external environment, revenue is expected to reach RMB 38.3-40.5 billion in 2024, and maintain positive growth of 2.7-8.6% excluding COVID-19 commercial projects. We will continue to improve operating efficiency. Adjusted non-IFRS net profit margin (NPM) in 2024 is expected to remain at a similar level as last year, taking into consideration of new capacity ramp-up and FX impact. With improved asset utilization and operating efficiency, free cash flow is expected to remain positive and reach RMB 4-5 billion in 2024, which will continuously cover the cash dividends and investments in talents, while global capacity is expected to be expanded as planned (with capex of RMB ~5 billion).
Management Comment
Dr. Ge Li, Chairman and CEO of WuXi AppTec, said, "We achieved an important milestone in 2023, with revenue surpassing RMB40 billion and adjusted non-IFRS net profit exceeding RMB10 billion for the first time. The Company’s unique CRDMO and CTDMO business models have enabled us to better meet the increasing quality demands from customers worldwide while continuing to drive business growth."
"As technology advancement and science innovations continue to emerge, global demand for life saving and innovative drugs continues to grow, along with customers’ demand for our enabling services. Nevertheless, the recent proposed legislation in the U.S. Congress would preemptively and unfairly designate our company without due process. As the proposed legislation remains subject to further review and changes, we continue to engage with relevant stakeholders to explore possible solutions and appeal for due process through a transparent consideration of the facts. WuXi AppTec has always been committed to ‘doing the right thing and doing it right.’ Our company has not been subject to any sanctions, and does not pose a national security risk to any country. Since its founding two decades ago, the value of WuXi AppTec has been to serve as an enabler to the pharmaceutical and life sciences industry. Today, we continue to do so as a trusted and valued service partner for our customers by constantly providing relevant capacity and capabilities required for new drug R&D and manufacturing."
"We are truly thankful for our customers’ long-term trust and support. We will further enhance our capacity and capabilities and continuously improve our operating efficiency, supporting our customers and partners in their endeavors to bring lifesaving medicines to patients around the world. Together, we can realize our vision that ‘every drug can be made and every disease can be treated’."
Business Performance by Segments
WuXi Chemistry: Integrated CRDMO Business Model Drives Steady Growth, with Continued Expansion in New Modalities (WuXi TIDES)
Revenue from WuXi Chemistry grew 1.1% year-over-year to RMB 29.17 billion; excluding COVID-19 commercial projects, revenue grew strongly by 36.1%. Adjusted non-IFRS gross profit margin improved 4.0pts year-over-year to 45.1%, mainly due to FX impact, while efficiency continued to improve.
Drug discovery services ("R") continued to generate downstream opportunities. In the past 12 months, we successfully synthesized and delivered more than 420,000 new compounds to customers, which grew 6% year-over-year. Through our "follow-the-customer" and "follow-the-molecule" strategies, we established trusted partnerships with our global customers, supporting the sustainable growth of our CRDMO business.
Development and manufacturing (D&M) services delivered strong growth.
i. In 2023, D&M services revenue declined 0.1% year-over-year to RMB21.62 billion; excluding COVID-19 commercial projects, D&M services revenue grew strongly by 55.1%.
ii. In 2023, we added 1,255 new molecules to our D&M pipeline. By end of 2023, our D&M pipeline reached 3,201 molecules, including 61 commercial projects, 66 in phase III, 326 in phase II and 2,748 in phase I and pre-clinical stages, among which 20 commercial and phase III projects were added during the year.
iii. We commenced operations at the new Taixing API manufacturing site in January 2024, preparing for future business growth.
Specifically, TIDES business (mainly oligo and peptides) continued to expand.
i. In 2023, TIDES revenue grew strongly by 64.4% year-over-year to RMB3.41 billion. By end of 2023, backlog of TIDES grew significantly by 226% year-over-year.
ii. In 2023, the number of TIDES D&M customers increased 36% year-over-year to 140, and the number of TIDES molecules increased 41% year-over-year to 267.
iii. We completed capacity expansion in Changzhou and Taixing. The expanded workshops commenced operations in January 2024, with the total reactor volume of solid phase peptide synthesizers increasing to 32,000L.
WuXi Testing: Drug Safety Evaluation Service & SMO Maintain Leadership Position and Drive Steady Growth
Revenue from WuXi Testing grew 14.4% year-over-year to RMB6.54 billion. Adjusted non-IFRS gross profit margin improved 1.9pts year-over-year to 38.6%, mainly due to FX impact, while efficiency continued to improve.
Revenue from lab testing services grew 15.3% year-over-year to RMB4.78 billion. Among which, revenue from drug safety evaluation services grew 27.3% year-over-year. We maintained our industry-leading position in the Asia-Pacific region. The 55,000m2 new facilities in Qidong and Suzhou ramped up smoothly. In 2023, additional 20,000m2 facilities were GLP-qualified.
Revenue from clinical CRO & SMO (Site Management Organization) grew 11.8% year-over-year to RMB1.76 billion.
i. SMO revenue grew 26.1% year-over-year, maintaining an industry leading position in China. In 2023, SMO supported 54 new drug approvals for customers.
ii. Clinical CRO enabled our customers to obtain 21 IND approvals and submit 5 NDA filings.
WuXi Biology: New Modalities Business Drives Growth; WuXi Biology Platform Continues to Generate Downstream Opportunities
Revenue from WuXi Biology grew 3.1% year-over-year to RMB2.55 billion. Adjusted non-IFRS gross profit margin improved 1.5pts year-over-year to 42.4%, thanks to FX impact.
The Company focused on improving capabilities related to new modalities. In 2023, WuXi Biology revenue from new modalities grew 26% year-over-year, contributing 27.5% of WuXi Biology revenue.
The comprehensive early discovery screening platform integrates multi-technologies (HTS, DEL, ASMS, FBDD, CADD etc.) and analysis capabilities of multi-dimensional databases, which can provide extensive and in-depth services to customers. In 2023, it continued to generate downstream opportunities and contributed more than 20% of the Company’s new customers.
WuXi ATU: CTDMO Business Model Drives Growth
Revenue from WuXi ATU grew 0.1% year-over-year to RMB1.31 billion. Adjusted non-IFRS gross profit margin declined 3.7pts year-over-year to (9.6)%, mainly due to the revenue decline from high-margin projects and under-utilization of capacity.
The Company focused on improving our CTDMO integrated enabling platform and strengthening capabilities and capacities. By end of 2023, we provided development, testing and manufacturing services to 64 projects, including 1 commercial project, 5 Phase III projects (1 project in BLA review stage, and 2 projects in BLA preparation stage), 9 Phase II projects and 49 pre-clinical and Phase I projects. In February 2024, the 2nd commercial product obtained approval.
In 2023, we supported a customer to file BLA for plasmid and Lenti-viral Vector (LVV) used in a CAR-T product and passed China’s Center for Food and Drug Inspection (CFDI) LVV on-site inspection. Our customer’s product obtained approval in November 2023. In addition, we supported a customer to complete the BLA filing for the world’s first innovative Tumor Infiltrating Lymphocyte (TIL)-based therapy, and our facilities in Philadelphia (U.S.) successfully passed FDA pre-license inspection (PLI). Our customer’s product obtained approval in February 2024. In June 2023, we signed an LVV manufacturing contract used in a commercial CAR-T product. With the process performance qualification now in progress, it is expected to start manufacturing in the first half of 2024. Moreover, we are preparing for the BLA filing for the manufacture of a blockbuster commercial CAR-T product, which is expected to complete process performance qualification in the first half of 2024 and is expected to file pre-approval submission (PAS) to the FDA in the second half of 2024.
WuXi DDSU: the First Year to Receive New Drug Application (NDA) Approval of New Drugs Developed for Customers; Breakthrough to Receive the First Royalty Income
Revenue from WuXi DDSU declined 25.1% year-over-year to RMB0.73 billion due to business transitions. Adjusted non-IFRS gross profit margin improved 6.3pts year-over-year to 36.5%, mainly due to favorable project mix.
In 2023, 3 new drugs developed for our customers obtained National Medical Products Administration (NMPA) approvals, including 2 for COVID-19 infection treatments and 1 for tumor treatment. We continued to receive the royalty income of the approved new drugs from customers. Moreover, 2 new drug candidates are in the NDA review stage.
In November 2023, for the first time, we supported a customer to reach a licensing agreement with one of the top 10 global pharmaceutical companies in the field of oncology.
In 2023, we supported customers to file INDs for 18 drug candidates and obtain 25 Clinical Trial Approvals (CTAs). Cumulatively, we have submitted 190 new chemical entity IND filings and obtained 169 CTAs for customers, among which 3 projects have obtained NDA approvals, 2 projects are in the NDA review stage, 4 projects are in Phase III, 32 projects are in Phase II, and 73 projects are in Phase I, covering multiple therapeutic areas.
This release provides a summary of the results and is not intended to be a comprehensive report. For additional information, please refer to the WuXi AppTec 2023 Annual Results Presentation and 2023 Annual Report disclosed on the Company’s official website, as well as the 2023 Annual Report and other 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 trading Company shares.
Net Profit Attributable to the Owners of the Company is prepared under Accounting Standard for Business Enterprises of PRC ("People’s Republic of China Financial Reporting Standards"), in currency of RMB. Besides, all other financial information disclosed in this press release is prepared based on International Financial Reporting Standards (IFRS), in currency of RMB.
The 2023 Annual Report of the Company has been audited.
2023 Results by Segments
Unit: RMB million
Segment
Revenue
Change
Adjusted non-IFRS
Gross Profit
Change
Adjusted non-IFRS
Gross Profit Margin
WuXi Chemistry
29,171.49
1.1 %
13,167.70
10.8 %
45.1 %
WuXi Testing
6,539.67
14.4 %
2,526.62
20.3 %
38.6 %
WuXi Biology
2,552.55
3.1 %
1,082.25
6.8 %
42.4 %
WuXi ATU
1,309.60
0.1 %
(125.11)
Note1
(9.6) %
WuXi DDSU
726.45
(25.1) %
265.33
(9.5) %
36.5 %
Others
41.05
22.1 %
20.99
33.6 %
51.1 %
Total
40,340.81
2.5 %
16,937.79
11.2 %
42.0 %
Notes: 1. Adjusted non-IFRS gross profit of WuXi ATU was RMB(125.11) million in 2023, compared to RMB(76.69) million in 2022, a decline of RMB48.42 million.
2. Any sum of the data above that is inconsistent with the total is due to rounding.
Consolidated Statement of Profit or Loss[3] – Prepared under IFRS
RMB Million
Year Ended
December 31,
2023
Year Ended
December 31,
2022
Year-over-Year
Change
Revenue
40,340.8
39,354.8
2.5 %
Cost of services
(23,968.3)
(24,848.3)
(3.5) %
Gross profit
16,372.5
14,506.5
12.9 %
Other income
962.5
644.3
49.4 %
Other gains and losses
1,350.3
1,211.7
11.4 %
Impairment losses under expected credit
losses ("ECL") model, net of reversal
(240.9)
(117.3)
105.4 %
Impairment losses of non-financial assets
(67.4)
–
N/A
Impairment losses of goodwill
(49.6)
(131.3)
(62.2) %
Selling and marketing expenses
(701.0)
(731.6)
(4.2) %
Administrative expenses
(2,994.9)
(2,943.8)
1.7 %
Research and development expenses
(1,440.6)
(1,614.0)
(10.7) %
Operating Profit
13,190.7
10,824.6
21.9 %
Share of results of associates
(35.1)
(52.5)
(33.2) %
Share of results of joint ventures
(32.5)
6.3
N/A
Finance costs
(193.6)
(159.8)
21.1 %
Profit before tax
12,929.6
10,618.5
21.8 %
Income tax expense
(2,131.7)
(1,715.9)
24.2 %
Profit for the year
10,797.9
8,902.6
21.3 %
Profit for the year attributable to:
Owners of the Company
10,690.2
8,813.7
21.3 %
Non-controlling interests
107.7
88.9
21.2 %
10,797.9
8,902.6
21.3 %
Weighted average number of ordinary shares
for calculating EPS(express in shares)
– Basic
2,934,188,474
2,931,932,166
0.1 %
– Diluted
2,949,887,619
2,954,165,418
(0.1) %
Earnings per share attributable to ordinary
shareholders of the Company (expressed in
RMB per share)
– Basic
3.64
3.01
20.9 %
– Diluted
3.61
2.82
28.0 %
[3] If the sum of the data below is inconsistent with the total, it is caused by rounding
Consolidated Statement of Financial Position[4] – Prepared under IFRS
RMB Million
December 31,
December 31,
2023
2022
Non-current Assets
Property, plant and equipment
25,844.4
23,444.9
Right-of-use assets
2,348.3
1,857.5
Goodwill
1,820.9
1,822.1
Other intangible assets
906.7
926.3
Interests in associates
2,180.4
1,135.7
Interests in joint ventures
35.2
67.3
Deferred tax assets
366.7
492.1
Financial assets at fair value through profit or
loss ("FVTPL")
8,626.0
8,954.3
Other non-current assets
105.8
1,054.9
Biological assets
1,012.5
938.0
43,246.9
40,693.1
Current Assets
Inventories
2,886.1
3,952.6
Contract costs
695.6
678.8
Biological assets
1,154.6
1,037.3
Amounts due from related parties
86.7
123.0
Trade and other receivables
9,372.7
7,590.4
Contract assets
1,234.4
1,048.2
Income tax recoverable
17.5
16.0
Financial assets at FVTPL
11.0
2.0
Derivative financial instruments
414.0
135.6
Other current assets
785.8
1,427.8
Pledged bank deposits
1.6
1.8
Term deposits with initial term of over three
months
3,761.4
–
Bank balances and cash
10,001.0
7,983.9
30,422.5
23,997.2
Total Assets
73,669.3
64,690.3
[4] If the sum of the data below is inconsistent with the total, it is caused by rounding.
Consolidated Statement of Financial Position (continued)[5] – Prepared under IFRS
RMB Million
December 31,
December 31,
2023
2022
Current Liabilities
Trade and other payables
7,333.5
7,253.4
Amounts due to related parties
11.5
14.5
Derivative financial instruments
501.9
115.4
Contract liabilities
1,955.4
2,496.6
Bank borrowings
3,721.6
3,874.1
Lease liabilities
240.5
205.3
Income tax payables
991.9
517.8
Other current liabilities
–
22.1
14,756.3
14,499.4
Non-current Liabilities
Bank borrowings
687.0
279.1
Deferred tax liabilities
530.1
440.5
Deferred income
1,079.9
910.9
Lease liabilities
1,098.6
983.8
Convertible bonds-debt component
–
502.0
Convertible bonds-embedded derivative
component
–
147.9
Other long-term liabilities
–
0.1
3,395.6
3,264.3
Total Liabilities
18,151.9
17,763.7
Net Assets
55,517.4
46,926.7
Capital and Reserves
Share capital
2,968.8
2,960.5
Reserves
52,153.6
43,629.4
Equity attributable to the owners of the
Company
55,122.5
46,590.0
Non-controlling interests
395.0
336.7
Total Equity
55,517.4
46,926.7
[5] If the sum of the data below is inconsistent with the total, it is caused by rounding.
Adjusted Non-IFRS Net Profit Attributable to the Owners of the Company[6]
RMB Million
Year Ended
December 31,
2023
Year Ended
December 31,
2022
Year-over-Year
Change
Net Profit Attributable to the Owners of the
Company under PRC
9,606.7
8,813.7
9.0 %
GAAP difference[7]
1,083.4
–
N/A
Net Profit Attributable to the Owners of the
Company under IFRS
10,690.2
8,813.7
21.3 %
Add:
Share-based compensation expenses
622.0
684.2
(9.1) %
Issuance expenses of convertible bonds
0.3
1.7
(81.4) %
Fair value gains from derivative
component of convertible bonds
(40.2)
(508.6)
(92.1) %
Foreign exchange related losses
294.4
136.1
116.3 %
Amortization of acquired intangible
assets from merge and acquisition
57.9
56.7
2.2 %
Non-financial assets impairment and
disposal losses
129.1
131.3
(1.7) %
Talent incentive and retention expenses
funded by cash donation from
shareholders
151.5
69.7
117.3 %
Non-IFRS Net Profit attributable to the
owners of the Company
11,905.2
9,384.7
26.9 %
Add:
Realized and unrealized (gains)/losses
from venture capital investments
(1,083.0)
20.8
N/A
Realized and unrealized share of
losses/(gains) from joint ventures
32.5
(6.3)
N/A
Adjusted non-IFRS net profit attributable to
the owners of the Company
10,854.6
9,399.3
15.5 %
[6] If the sum of the data below is inconsistent with the total, it is caused by rounding.
[7] Due to the different accounting treatment of long-term equity investments under IFRS, it occurs GAAP difference of RMB1,083.4 million.