Release Date: August 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- WuXi Biologics (Cayman) Inc (WXXWY, Financial) reported a 7.7% growth in non-COVID revenue for the first half of 2024, indicating solid performance despite challenging conditions.
- The company added 61 new projects, surpassing expectations and demonstrating strong project acquisition capabilities.
- WuXi Biologics (Cayman) Inc (WXXWY) maintained a high adjusted gross profit margin of 44.4%, positioning it as one of the leaders in the industry.
- The company has a robust pipeline with 281 first-in-class programs and 167 ADC programs, showcasing its strong market presence and technical expertise.
- WuXi Biologics (Cayman) Inc (WXXWY) has a strong balance sheet with RMB9.5 billion in cash, providing a solid foundation for future growth and expansion.
Negative Points
- The company's overall revenue was flat due to the absence of significant COVID-related revenue compared to the previous year.
- Adjusted net profit decreased by 13% due to timing issues with milestone revenue, highlighting potential volatility in financial performance.
- There was a decline in gross profit by 5.9%, attributed to lower discovery service deals and reduced plant utilization rates in China.
- The geopolitical environment, including the BIOSECURE Act, poses potential risks to WuXi Biologics (Cayman) Inc (WXXWY)'s operations and client relationships.
- The company faces challenges in ramping up new facilities in Ireland, Germany, and the US, which could impact profitability in the short term.
Q & A Highlights
Q: For the upcoming '26 blockbuster and potential blockbuster CMO projects, what percentage of manufacturing would typically be assigned to the primary supplier versus the secondary supplier? Also, regarding the biotech client considering transferring a project to third parties, is that project from the Win-the-Molecule or Follow-the-Molecule strategy? What is the cost and time involved in such a transfer?
A: The project in question is from the Win-the-Molecule strategy. Due to the BIOSECURE Act, one client is considering transferring a project, but this is the only one out of 742 assets. Typically, WuXi remains the primary supplier due to our execution excellence, with clients often sticking with us to avoid delays and quality issues. The transfer process can be costly and time-consuming for clients.
Q: Given the current share price, which seems undervalued, can we expect more share buybacks?
A: Yes, we will consider more share buybacks.
Q: How do the reported first-half results compare to your internal budgets, and what gives you confidence for the second half and full-year guidance?
A: The first-half results are in line with our internal budgets. We are confident about the second half due to the Curon-MSD deal, which will generate significant profit. We expect growth in R&D and manufacturing, maintaining or achieving double-digit growth in both top and bottom lines.
Q: With concerns about overcapacity in the CDMO industry, especially with biologics companies building capacities, do you foresee a decline in utilization rates? How do you view competitors' capacity expansions?
A: Our business model focuses on R&D, where we remain strong. While there is capacity expansion in the industry, WuXi's quality and execution set us apart. We believe the market will remain competitive, with a few major players capturing market share.
Q: Why does the company continue to expand aggressively despite uncertainties like the BIOSECURE Act? What caused the delay in the breakeven point for the Ireland facility?
A: We believe we can overcome geopolitical challenges and are committed to expanding our global footprint. The delay in Ireland's breakeven is due to tax issues, but we expect revenue to ramp up in 2025. Our mature sites in China achieve high margins, which cushion global operations.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
