On August 19, 2019 WuXi Biologics (Cayman) Inc. ("WuXi Biologics" or "the Group," stock code: 2269.HK), a leading global open-access biologics technology platform company offering end-to-end solutions for biologics discovery, development and manufacturing, reported its unaudited interim results for the six months ended June 30, 2019 (Press release, WuXi Biologics, AUG 19, 2019, View Source [SID1234538867]).
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First-Half 2019 Financial Highlights
Strong revenue growth of 52.4% y-o-y to RMB1,607.1 million.
Gross profit increased by 61.8% y-o-y to RMB671.0 million, with gross profit margin up 250 basis points to 41.8% mainly due to (i) strong business growth with the increase of number of integrated projects; (ii) the improved operational efficiency of the Group, in particular, the fast ramp-up of MFG3; and (iii) more milestone payments received.
Net profit and adjusted net profit grew 80.1% and 75.8% y-o-y to RMB449.5 million and RMB521.5 million, respectively.
Net profit margin and adjusted net profit margin were 28.0% and 32.4%, respectively, both up 430 basis points y-o-y, due to strong growth in revenue, solid cost control and business operation efficiency enhancement, and more milestone payments.
Diluted EPS increased by 78.9% from RMB0.19 to RMB0.34.
Adjusted diluted EPS increased by 69.6% from RMB0.23 to RMB0.39.
First-Half 2019 Operational Highlights
The number of ongoing integrated projects increased from 187 as of June 30, 2018, to 224 as of June 30, 2019, with late-phase projects increasing from 10 to 15.
Total backlog grew significantly from US$3,639 million as of December 31, 2018 to US$4,630 million as of June 30, 2019. Our potential upcoming milestone backlog surged from US$2,006 million as of December 31, 2018 to US$2,894 million as of June 30, 2019, mainly driven by signing more WuXiBodyTM projects.
WuXi Vaccines signed letter of intent (LOI) for a 20-year vaccine manufacturing contract valued over US$3 billion with a global vaccine leader, demonstrating our technical strength, global premier quality, and transferable skills from biologics to vaccines.
WuXiBodyTM continued to be widely adopted by global and domestic customers, signed 8 licensing agreements with 5 partners in 1H 2019, which will potentially contribute more milestone and royalty revenues.
The Group successfully completed the first FDA routine GMP inspection, which demonstrates continuous commitment and strong expertise in meeting global compliance requirements.
Our manufacturing facility expansion is on track. MFG4, the first facility in China to use 4,000L disposable bioreactor and DP4, the first robotic sterile filling facility for biologics in China are both GMP released in July.
The Group continued to attract and retain talents and build one of the largest biologics development teams globally, while our retention rate is higher than 95%, significantly higher than the industry average.
WuXi Biologics continues the strong growth trend. The number of integrated projects and backlog kept expanding meanwhile our vaccine business made great progress only one year after its launch. All our global manufacturing capacity expansion is on track, laying a solid foundation to meet strong demands in the future. In addition, we estimate that our total employee number will reach around 5,600 by the end of 2019. The Group’s innovative proprietary technology platforms led the industry innovation trend, better enabled our partners and further enhanced the Group’s mission of accelerating and transforming biologics discovery, development and manufacturing.
Robust Revenue Growth Continued, Gross Margin and Net Profit Margin Expanded
In 1H 2019, WuXi Biologics continued to deliver robust revenue growth of 52.4% y-o-y to RMB1,607.1 million, further demonstrating the successful implementation of our "Follow-the-Molecule" strategy. Our net profit and adjusted net profit grew 80.1% and 75.8% y-o-y to RMB449.5 million and RMB521.5 million, respectively. Meanwhile the gross margin, net profit margin, and adjusted net profit margin all expanded substantially and achieved record-highs. Our innovative technology platforms have been endorsed by the industry, and started to contribute more milestone revenue, which have improved the margins in this period.
The Group continued to gain more market share and win trust from customers. The number of ongoing integrated projects increased to 224 as of June 30, 2019, with late-phase projects increasing to 15. The backlog surged to US$4,630 million as of June 30, 2019 with potential upcoming milestone backlog surging to US$2,894 million as of June 30, 2019, demonstrating our technology platforms are adopted by more customers and will contribute more future revenue.
Reinforce Technology Innovation, WuXiBodyTM Widely Adopted by Customers
As the Group continues to reinforce its efforts in technology innovation, the R&D expenses have reached 6.8% of the total revenue in 1H 2019. WuXi Biologics is leveraging innovative technologies to optimize the entire spectrum of services offered to global biologics industry. The Group expects the strong momentum to continue, driven by the growing expenditures in R&D for biologics worldwide, as it expands its customer base and increases revenue from each integrated project as well as milestone and royalty fees.
Since the launch of WuXiBodyTM, this platform has been quickly adopted by global and domestic partners with 5 new partners and 8 projects in 1H 2019. The Group has showed its capability in expediting bispecific development and cost reduction by successfully entering into multiple strategic collaborations. The WuXiBodyTM platform will be another growth driver which contributes more milestone payments and future royalties as well as adds more integrated projects into our pipeline of "Follow-the-Molecule" strategy.
WuXi Vaccines Made Great Progress, A New Growth Engine to Drive Sustained High Growth
WuXi Vaccines, a joint venture of WuXi Biologics and Shanghai Hile Bio-Pharmaceutical, has entered into a strategic partnership via a letter of intent (LOI) with a global vaccine leader. It is estimated that the value of this 20-year manufacturing contract will be over US$3 billion. The contract is targeted to be finalized by this year with substantial revenue contribution in 2022.
This marked a huge milestone for the Group’s vaccine business which started only within one year. This partnership with a global vaccine leader, as the first of its kind in the industry, is a further testimony to the technical strengths and premier quality demonstrated by WuXi Biologics. The vaccine CDMO market, seeing huge opportunities globally and domestically as China’s regulatory reforms tightened amid increasing public awareness, is expected to be another driver of the Group’s business growth going forward.
Global Manufacturing Capacity Expansion on Track, A Demonstration of "WuXi Bio Speed"
The Group is seizing the opportunity of the booming global biologics market and has announced global manufacturing facility expansion plan since last year. The total capacity will exceed 280,000L by 2022, which will provide a robust and premier global supply chain to support the strong demands from the industry. To capture the next wave of biologics, the Group has also announced to expand construction of a new integrated biologics conjugation solution center for ADCs, which will further enhance the technical capabilities and manufacturing capacities in the fast-growing bioconjugation field.
All the Group’s construction projects are on track, demonstrating the "WuXi Bio Speed". The Ireland site will be GMP ready in 2021 and support the demands from European and US markets. Furthermore, MFG4 and DP4 are both GMP released in July. It took only 13 months for MFG4 and 12 months for DP4 from completing design to GMP-release of the facility, further demonstrating "WuXi Bio Speed".
Completed First FDA Routine GMP Inspection, Another Demonstration of "WuXi Bio Quality"
In 1H 2019, the Group has also successfully completed a seven-day FDA surveillance inspection for the production of Trogarzo, the first routine GMP inspection since product approval. The completion of the inspection further endorses WuXi Biologics’ proven quality system and solid reputation as a leading global biomanufacturing player, demonstrating that "WuXi Bio Quality" has reached the highest international quality standard.
Dr. Chris Chen, CEO of WuXi Biologics, said, "We are excited about the extraordinary performance achieved in 1H 2019. WuXi Biologics continued to gain more market share from the booming biologics outsourcing market due to our advanced technology platforms, premier quality system and excellent track record. We are delighted to see that the number of integrated projects and total backlog have both increased substantially, showcasing the success of ‘Follow-the-Molecule’ strategy and providing clear visibility for our future growth. We also keep exploring new business opportunities as the vaccine business has made great progress and WuXiBodyTM platform has been widely adopted by the industry. Through these new growth engines, the Group will engage more in the global biologics innovation and enable more strategic partners."
Dr. Chris Chen, further commented, "As a global leading enabling platform, WuXi Biologics continues to shorten the timeline from DNA to IND, expedites product development at record speed. We have sufficient capacity to start any project within 4 weeks. Besides, our expanding global footprints are all on track and the ‘Global Dual Sourcing within WuXi Bio’ strategy will ensure our partners’ commercial product supply as well as securing more commercial manufacturing contracts for the Group. We already have 58 first-in-class projects in pipeline, demonstrating our strong capabilities to enable global innovative partners. With the cutting-edge platforms, we strive to enable partners worldwide and we have seen exceptional growth from three major regions, especially the U.S., our largest market, which maintained high growth despite geopolitical uncertainties. Our EU market has sustained over 185% CAGR growth over the past five years. Throughout 1H 2019, we drove a superior business execution. Looking ahead, we are confident that the strong growth momentum will continue and solidify our leading position."
Dr. Ge Li, Chairman of WuXi Biologics, concluded: "The booming biologics industry is full of opportunities and we are well prepared for it. We will continue to accelerate and transform biologics industry and provide a robust global supply chain with premium quality. The ecosystem we are building will enable our customers and partners to discover, develop and manufacture more drugs to benefit patients worldwide."
2019 Interim Results
The Group’s revenue increased by 52.4% y-o-y to RMB1,607.1 million in 1H 2019. The major revenue growth drivers were: (i) enhancement of core competitiveness contributing to more market share and steady growth in the number of integrated projects; (ii) the Group’s innovative proprietary technology platforms have been more adopted in the industry and; (iii) the success of "Follow-the-Molecule" strategy.
Gross Profit increased by 61.8% to RMB671.0 million in 1H 2019. The Group’s gross profit margin increased from 39.3% in the first half of 2018 to 41.8% of same period this year. The improvement was driven by the following factors: (i) the Group’s strong business growth, along with the rapid increase in its number of integrated projects; (ii) the improved operational efficiency, in particular, the fast ramp-up of MFG3; (iii) more milestone payments received.
During the Reporting Period, Net Profit surged by 80.1% y-o-y to RMB449.5 million in 1H 2019, higher than 78% announced in Positive Profit Alert announcement, with net profit margin up 430 basis points to 28.0% in 1H 2019. The significant increase in net profit margin was primarily attributable to (i) steady increase in the number of integrated projects and as a result, strong growth in revenue; (ii) solid cost control and business operation efficiency enhancement.
Adjusted Net Profit, by excluding the impact of: (i) foreign exchange gains or losses; (ii) share-based compensation, our adjusted net profit increased by 75.8% y-o-y to RMB521.5 million in 1H 2019, and adjusted net profit margin went up 430 basis points from 28.1% in the first half of 2018 to 32.4% of same period this year.
Basic and Diluted EPS were RMB 0.37 and RMB 0.34, respectively. Diluted EPS increased by 78.9% y-o-y.
Adjusted Diluted EPS increased by 69.6% y-o-y to RMB 0.39.