Early on the morning of December 4, WuXi Biologics updated its guidance to indicate that it expects lower revenue in 2023 due to fewer new projects and delays in regulatory approvalsThe new capacity has led to a decrease in the growth rate of utilization, resulting in a decline in profit in 2023. After the adjustment, WuXi Biologics' full-year 2023 revenue growth will decline from 30% to 10% growth, and net profit will decline by single digits year-on-year
As soon as the news came out, people in the industry were caught off guard. On December 4, WuXi Biologics' stock price plunged 23% and then was suspended from trading, according to the company's announcement, after the resumption of trading on the 5thWuXi Biologics fell another 845%
The sudden change in WuXi Biologics' performance has completely collapsed investors' trust.
In June this year, WuXi Biologics revealed at an investor open day event that in the first five months of this yearThere were only 25 new projects, lower than the previous year's level of 40 or 50 projectsThe company's stock price fell 17% on the same dayWhen the semi-annual report was released in September, it showed that there were 46 new projects in the first half of the year. WuXi Biologics Chairman Chen Zhisheng changed his tune at the ** communication meeting at the end of October, saying: "The target of 120 new projects set at the beginning of the year has not changed. "It has restored a lot of people's confidenceCelebrity public offering managers, including Zhang Kun and Gülen, have significantly increased their positions in WuXi Biologics in the third quarter
After a full day**, on the evening of December 4, WuXi Biologics issued an announcement that the Group's business operations and financial condition remained strong, and there were no major adverse changes in business operations and financial condition, which made things even more confusing.
At the beginning of this year, WuXi Biologics set a target of 30% growth in 2023 based on a hypothetical industry growth of 15%. However, due to the impact of biotechnology financing, the growth rate of the industry fell to single digits。Although the company has achieved 2 times the growth rate of the industry, the business performance may be less than expected.
In the overall downward cycle of the industry, WuXi Biologics, which is forging ahead, may indeed be unable to withstand the original expectations. That's what happened on December 4.
On the same day, Hong Kong stocks and A-share CXO sectors all responded**, Gloria Ying fell to the limit, Pharmaron was close to the fall limit, and WuXi AppTec fell nearly 7%.
Specifically, WuXi Biologics expects to reduce its drug development revenue forecast by 18%-20% due to the decline in new projects due to the slowdown in biotech financingPharmaceutical manufacturing revenue estimates have been lowered by 15%-18%. As WuXi Biologics had previously overstretched its expectations for 2023, the drug development business increased by 3%-5% year-on-year, while the drug manufacturing business decreased by 3%-6% year-on-year
According to WuXi Biologics' performance update, the company added 45 new projects in the second half of this year, which was less than expected, but basically the same as the 46 in the first half of the year. In the first half of the year, WuXi Biologics added 13 fewer projects than in 2022, but its revenue increased by 17% year-on-year8%。In the second half of the year, the new projects were also not as good as the same period last year, but the revenue expectations were no longer gaining momentum
Let's talk about drug production. CMO manufacturing has always been a major focus for WuXi Biologics, and although the profit margin of commercial manufacturing cooperation projects is not high, the revenue can reach dozens of times that of early-stage projects. According to the 2023 semi-annual report, WuXi Biologics' late-stage clinical development and commercial manufacturing projects combined with revenue of RMB3.6 billionIt accounts for more than 40% of the total revenue, and is the largest part of the revenue
However, in the information released on December 4, WuXi Biologics' CMO manufacturing business was also significantly reduced, the company said: mainly due to the lag in regulatory approvals, three blockbuster drugs from big pharmaceutical companies were delayed, affecting about $100 million in revenue.
Actually,Commercial production projects are relatively stable, a project can last for many years, and the impact of new projects will not be too large。And at the business exchange meeting on December 4, Chen Zhisheng mentioned that the number of drug production projects was 22, which was within the previously expected 21-23.
The significant decline in the amount of individual projects may be the main reason for the decline in WuXi Biologics' CMO business
The Health Knowledge Bureau inquired about the third quarter reports of leading CXO companies such as Kailaiying and Pharmaron and found that the performance growth rate of domestic mainstream CXO companies in the first half of the year was relatively stable, but in the third quarter, there were different degrees of year-on-year decline. The problems encountered by WuXi Biologics may be industry-specific.
Source丨WuXi Biologics' performance update.
WuXi Biologics' explanation of the "industry cycle" was not the mainstream voice before.
It is true that the entire CXO industry has entered a downturn due to the impact of biotech financing, but WuXi Biologics has avoided one point:The biologic drug in which it is located is relatively detached from the CXO megatrend
According to ** report, in August this year, WuXi Biologics Chairman Chen Zhisheng also talked eloquently at a forum: ".Our industry is not very directly linked to the economic cycle。WuXi Biologics has produced 22 marketed products, 20 of which are from overseas. ”
Moreover, WuXi Biologics itself advertised in its 2023 semi-annual report that this year is full of uncertainties for many industriesHowever, these impacts have not hindered the steady growth of the biopharmaceutical industry。In particular, there have been signs of recovery in related financing in the United States and Europe recently......Biologics outsourcing is expected to grow at a double-digit rate in the coming years.
The industry did not turn sharply in the second half of this year, but Samsung Biotech suddenly made a force.
In June this year, the news that Samsung Biotech had "rounded" Pfizer's biosimilar production work for a long time spread to China, triggering industry speculation that due to geopolitical influences, large U.S. pharmaceutical companies may be bypassing Chinese CROs.
Unlike WuXi Biologics, Samsung Biologics is positioned very clearly: it does not compete with the United States, Europe and Japan for CRO for new drug development, and does not compete with China and India for clinical SMOs, butFocus on the contract design and production of biosimilars, analogues and patented drugs
In July this year, Samsung Biotech announced its financial report:Revenue in the first half of the year increased by 56% year-on-year, reaching another record high。The third quarter report also performed well: single-quarter sales exceeded 1 trillion won, exceeding the previous market estimate of 9,780900 million won.
Pharmaceutical Biotech is also actively exploring internationalization, and the results update disclosed that the company will still invest in global production capacity to support future growth. A positive turnaround is expected in the second half of 2024, profits will increase by 30% in 2025.
Source丨WuXi Biologics' performance update.
I hope that the expectations of the industry leaders this time can be fulfilled.
Author丨Li Ao.
Edit |Jiang Yun Jia Ting.
Operations |Zhu Ying.
Source丨Visual China.
Disclaimer: Original content of the Health Knowledge Bureau, please do not do it without permission**