On August 13, 2020 WuXi AppTec Co., Ltd. (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, reportedits reviewed financial results for the first half of 2020 (Reporting Period) (Press release, WuXi AppTec, AUG 13, 2020, View Source [SID1234563618]).
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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 2020 first half 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 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).
Second Quarter 2020 Financial Highlights
Revenue grew 29.4% YoY to RMB4,044 million. Our laboratories and manufacturing facilities in China resumed full operations and were met with an increased demand from overseas customers. Consequently, we achieved strong revenue growth in the second quarter, driven by robust demand, increase in capacity utilization and efficient operations.
– Our China-based laboratory services realized revenue of RMB2,060 million, representing a YoY growth of 31.5%.
– Our CDMO/CMO services realized revenue of RMB1,314 million, representing a YoY growth of 43.9%.
– Our U.S.-based laboratory services realized revenue of RMB394 million, representing a YoY growth of 0.7%.
– Our clinical research and other CRO services realized revenue of RMB271 million, representing a YoY growth of 7.4%.
IFRS gross profit grew 27.1% YoY to RMB1,562 million. Gross profit margin was 38.6%, lower than the 39.3% achieved in the same period last year[1], mainly because of: (1) the impact of COVID-19 on our U.S.-based laboratory services and clinical research services business, and (2) an increase in share-based compensation expenses.
Non-IFRS gross profit grew 31.6% YoY to RMB1,694 million. Non-IFRS gross profit margin was 41.6% compared to 40.9% for the same period in 2019 and increased significantly compared with First Quarter 2020, mainly because: (1) our China-based laboratory services and CDMO/CMO services segments resumed at full operating capacity and secured more projects from overseas customers, offsetting the impact of COVID-19 on our U.S.-based laboratory services and clinical research services; and (2) we continued to gain efficiency through increased capacity utilization and efficient operations.
EBITDA grew 79.6% YoY to RMB1,854 million.
Adjusted EBITDA grew 22.7% YoY to RMB1,415 million.
Net profit attributable to owners of the Company grew 111.0% YoY to RMB1,414 million. Fair value gain of our investment portfolio increased from RMB134 million in the second quarter of 2019 to RMB1,044 million in the same period this year.
Adjusted Non-IFRS net profit attributable to owners of the Company grew 43.1% YoY to RMB942 million. The growth rate significantly accelerated compared with that of First-Quarter 2020.
Diluted Non-IFRS EPS increased by 110.3% versus the same period last year and adjusted diluted Non-IFRS EPS increased by 46.4%.[2]
[1] If prepared under Accounting Standard for Business Enterprises of PRC, the gross profit grew 27.7% YoY to RMB1,570 million. Gross profit margin was 38.8%, lower than the 39.4% achieved in the same period last year.
[2] Three months ended June 30, 2019 and three months ended June 30, 2020, we had a fully-diluted weighted average share count of 2,284 million and 2,302 million ordinary shares, respectively.
First Half of 2020 Financial Highlights
Revenue grew 22.7% YoY to RMB7,231 million, attributable to the timely implementation of our Business Continuity Plan, as well as the strong growth of our China-based laboratory services and CDMO/CMO services in response to the increased demand from our overseas customers.
– Our China-based laboratory services realized revenue of RMB3,780 million, representing a YoY growth of 26.5%.
– Our CDMO/CMO services realized revenue of RMB2,162 million, representing a YoY growth of 25.8%.
– Our U.S.-based laboratory services realized revenue of RMB782 million, representing a YoY growth of 10.1%.
– Our clinical research and other CRO services realized revenue of RMB500 million, representing a YoY growth of 5.9%.
IFRS gross profit grew 16.4% YoY to RMB2,659 million. Gross profit margin was 36.8%, lower than the 38.7% achieved in the same period last year[3], mainly because of: (1) the impact of COVID-19 on our China-based laboratory services (Q1), U.S.-based laboratory services (Q2) and clinical research services (Q1 & Q2) business; and (2) an increase in share-based compensation expenses.
Non-IFRS gross profit grew 21.7% YoY to RMB2,918 million. Non-IFRS gross profit margin was 40.1%, compared to 40.4% during the same period in 2019. We implemented our Business Continuity Plan early on and were successful in mitigating the negative impact of COVID-19 on our business. Our Non-IFRS gross profit margin was largely in line with that of the First Half 2019.
EBITDA grew 47.9% YoY to RMB2,600 million.
Adjusted EBITDA grew 20.7% YoY to RMB2,450 million.
Net profit attributable to owners of the Company grew 62.5% YoY to RMB1,717 million. Fair value gain of our investment portfolio increased from RMB55 million loss in the first half of 2019 to RMB939 million gain in the same period this year.
Adjusted Non-IFRS net profit attributable to owners of the Company grew 28.9% YoY to RMB1,519 million.
Diluted IFRS EPS increased by 60.9% versus the same period last year and adjusted diluted Non-IFRS EPS increased by 29.4%.[4]
[3] If prepared under Accounting Standard for Business Enterprises of PRC, the gross profit grew 16.7% YoY to RMB2,668 million. Gross profit margin was 36.9%, lower than the 38.8% achieved in the same period last year.
[4] Six months ended June 30, 2019 and six months ended June 30, 2020, we had a fully-diluted weighted average share count of 2,284 million and 2,301 million ordinary shares, respectively.
First Half 2020 Business Highlights
During the reporting period, we added about 600 new customers, increasing our active customer count to more than 4,000. Our "long-tail" strategy and "Follow the Customer/Follow the Project/Follow the Molecule" business model continued to perform very well.
– Our global platform continued to enable innovation worldwide. During the reporting period, our overseas customers contributed RMB5,546 million revenue, representing a YoY growth of 22.3%. Our China customers contributed RMB1,686 million revenue, representing a YoY growth of 23.9%.
– We continued to expand our customer base and retain existing customers. During the reporting period, our existing customers contributed RMB6,831 million revenue, representing a YoY growth of 22.5%. Our newly added customers contributed RMB401 million revenue, representing a YoY growth of 26.7%.
– We continued to execute our "long-tail" strategy and increased our support to large global pharmaceutical companies. During the reporting period, our global "long-tail" customers and China-based customers contributed RMB4,926 million revenue, representing a YoY growth of 28.7%. The top 20 global pharmaceutical companies contributed RMB2,305 million revenue, representing a YoY growth of 11.6%.
-We continued to increase customer conversion and enhance synergies across our platform. During the reporting period, customers using services from more than one of our business units contributed RMB6,151 million revenue, representing a YoY growth of 31.8%.
In small molecule drug discovery services, leveraging our large-scale and experienced global small molecule chemical drug research and development teams, we continued to assist global customers in discovering pre-clinical drug candidates and patent applications, with multiple research papers published in leading scientific journals.
We anticipated the industry trend early on and empowered our global customers with cutting-edge technology. To highlight a few examples, we offered:
– New mechanism of actions (MOA): our PROTAC platform maintained strong momentum, enabling over 40 biotech customers and resulting in revenue growth of over 23%.
– New modalities: we further strengthened our oligonucleotide and peptide drug discovery and development capabilities in our China-based laboratory services, providing services to over 1,000 oligonucleotide and peptide projects, including library synthesis, custom synthesis, modification, route development, and kg scale non-GMP manufacturing.
With the comprehensive integration of our DNA-encoded library (DEL), protein production and structure-based drug design capabilities, our Target-to-Hit platform enabled over 300 customers globally, creating incremental business opportunities for our downstream business units.
In our success-based drug discovery service unit, we submitted IND filings for 13 new chemical entities (NCE) for our customers and obtained 9 CTAs. As of June 30, 2020, we have cumulatively submitted 98 NCE IND filings with the National Medical Products Administration (NMPA) for our customers and obtained 66 CTAs. As of June 30, 2020, there is 1 project in Phase III clinical trial, 8 projects in Phase II clinical trials, and 54 projects in Phase I clinical trials.
Our safety assessment services achieved very strong growth due to a surge in customer demand and increased capacity.
We leveraged our platform to prepare and facilitate submissions of our customers’ IND packages through our WuXi IND (WIND) service. During the reporting period, we signed 50 integrated WIND packages with our customers, helping many of our global and China-based customers submit their IND packages and obtain clinical trial approval from the U.S. Food and Drug Administration (FDA) under the Electronic Common Technical Document (eCTD) format.
We added over 260 new molecules into our small molecule CDMO/CMO services pipeline. In addition, our "Follow the Molecule" strategy resulted in 5 new commercial projects. We provided CDMO services to over 1,100 active projects, including 42 projects in Phase III clinical trials, and we provided commercial manufacturing services for 26 approved drugs. In serving China-based customers, we have 26 Marketing Authorization Holder (MAH) projects in progress, including 4 commercial projects.
Our cell and gene therapies CDMO services enabled customers globally. During the reporting period:
– Our laboratories and facilities in the U.S. provided services for 31 clinical stage projects, including 22 projects in Phase I clinical trials and 9 projects in Phase II/III clinical trials. In July 2020, we signed a late-phase manufacturing contract with a customer for its allogeneic cell therapy product, which is currently undergoing FDA priority review. As more of our customers enter late stage development in 2021, we expect our capacity utilization rate to further increase.
– Our laboratories and facilities in China added more customers and projects. In addition, we entered into a long-term partnership with our first customer for a commercial manufacturing project.
Our clinical research services continued to enable customers in China and the U.S. During the reporting period:
– Our clinical development team provided services to more than 130 projects for our clients in China and the U.S. and completed the registration trials for 5 products.
Our site management organization (SMO) team assisted in the market approval of 12 products for our customers, including the approval of a surgical implant for the treatment of glaucoma based on real world evidence in China.
First Half 2020 capabilities enhancement and capacities expansion:
– In January 2020, we started construction of a new drug product development and production facility at our CDMO subsidiary STA’s Wuxi site. This facility will not only improve the development and production capacity of solid dosages, but will also be capable of sterile drug product development, clinical trial material production and commercial scale manufacturing.
– Our high-potency active pharmaceutical ingredient (API) manufacturing facility, large-scale oligonucleotide API manufacturing facility and large-scale peptide API manufacturing facility in Changzhou, China began operations, supporting the process R&D and manufacture of small molecules, as well as oligonucleotide and peptide APIs from preclinical to commercial.
– Our Philadelphia cell and gene therapies facility expanded its service capabilities by offering a fully integrated adeno-associated virus (AAV) Vector Suspension Platform and a fully integrated Closed Process CAR-T Cell Therapy Platform, which will help our customers accelerate the timeline for cell and gene therapy development, manufacturing and release.
– Our Wuxi City cell therapy CDMO facility began operations, providing services to multiple customers. We launched our AAV adherent manufacturing platform and started to build an AAV Vector Suspension Platform in China.
– In July 2020, our newly-built Chengdu research and development center began operations.
Management Comment
Dr. Ge Li, Chairman and CEO of WuXi AppTec, said, "We achieved strong growth in the first half of 2020, in spite of the impact of COVID-19 on our China-based laboratory services in the first quarter, U.S.-based laboratory services in the second quarter, and clinical research services. Our revenue grew 22.7% year-over-year to RMB7,231 million and our adjusted Non-IFRS net profit grew 28.9% year-over-year to RMB1,519 million. Strong performance from our China-based laboratory services and CDMO/CMO services mitigated any challenges faced by our U.S.-based laboratory services and clinical research services."
"Our global enabling platform and ‘Follow the Customer/Follow the Project/Follow the Molecule’ strategy continued to perform very well. China-based laboratory services and CDMO/CMO services resumed full operations and achieved robust growth, attributable to increased business opportunities and improved utilization and efficiency. Our U.S.-based laboratory services, clinical research and other CRO services segments, although severely impacted by COVID-19, still realized revenue growth and our backlog continued to improve quarter-over-quarter. In regard to the Company’s financial position, in August 2020 we completed the placing of new H shares, receiving approximately HK$7.29 billion in net proceeds, providing the Company with a strong balance sheet for investments, business expansion and potential M&A."
Dr. Ge Li concluded, "2020 has been a year full of challenges and opportunities. We achieved solid growth in the first half of 2020 as a result of the combined efforts of all our employees and support from our customers globally. We are determined to navigate through the challenges posed by COVID-19 in partnership with our global customers, and are committed to working alongside our customers and partners in the global healthcare community to keep the R&D and manufacturing engine humming. The fundamentals of our business remain very strong and we expect to deliver a strong second half. Looking ahead, we will continue to focus on enabling our global partners and doing the right thing for patients in order to realize our vision that ‘every drug can be made and every disease can be treated.’"