WuXi AppTec currently relies on U.S. customers for most of its revenue, so changes in the U.S. market will undoubtedly have a significant impact on the company's development and operations.
Punctuation financial researcher Lu Gong.
The circulation of a piece of news triggered the stock price of WuXi companies to collectively **.
Recently, there was news in the market that the United States intends to introduce a "biosecurity bill" to ensure that foreign biotechnology companies cannot access the funds of American taxpayers. The Biosafety Act, which is still in the draft stage, mentions CXO leader WuXi AppTec, so as soon as the news came out, the stock price of WuXi companies showed a downward trend across the board.
On January 26, 2024, WuXi Biologics (02269.)HK), WuXi XDC (02268.)HK), JW Therapeutics-B (02126.)HK) closed in the red. 00% and 534%。On the same day, Wuxi AppTec New Drug Development Co., Ltd. *** 603259SH) (hereinafter referred to as WuXi AppTec, 02359.)HK) A-shares and Hong Kong stocks also fell by 1000% and 1643%。
After the opening of trading on January 29, the WuXi sector continued to weaken. As of the day**, WuXi AppTec's A-share and Hong Kong stock prices fell another 1001% and 1060% to close at 59$36 shares and $57HK$75 shares.
In response to the above news, WuXi AppTec responded that "the draft bill has not yet taken effect and been enacted, and the subsequent legislative process requires the House of Representatives and the U.S. Senate to vote on their respective versions of the bill after review by relevant committees to form a final version." Therefore, the content of the draft bill remains to be considered and may be changed. The company is closely following the progress of the legislative process of this draft together with its consultants. ”
WuXi AppTec further stated, "The Company firmly believes that WuXi AppTec's business development will not pose a risk to the security of any country. The company has always complied with the laws and regulations of all countries in which it operates, including China and the United States, and has been a trusted partner to the global medical industry, providing drug development and manufacturing services to thousands of customers in the United States and around the world. In the future, the company will continue to serve customers and help patients around the world. ”
Half of the revenue comes from U.S. customers
As a company that provides new drug development and manufacturing services to global pharmaceutical, biotechnology and medical device companies, WuXi AppTec's main business includes five business segments: chemistry, testing, biology, cell and gene **CTDMO, and domestic new drug development services.
In recent years, WuXi AppTec's dependence on overseas markets, especially the U.S. market, has increased. According to the data, in 2021, WuXi AppTec**'s revenue from Chinese customers was 580.2 billion yuan, accounting for 2533%；*Revenue from customers in the U.S. was 1214.6 billion yuan, accounting for more than half of the company's total revenue for the year, accounting for 5303%；Combined with revenue from customers in Europe and other regions, the company's full-year** revenue in overseas markets totaled 1709.9 billion yuan, far exceeding the domestic market.
After entering 2022, WuXi AppTec's U.S. customers achieved significant revenue growth, increasing by 113% year-on-year to 2588.4 billion yuan, accounting for more than 60% of the company's total revenue in the current period, reaching 6577%。On the other hand, the company's revenue from Chinese customers in the same year also increased by 30% year-on-year to 752.6 billion yuan, but the proportion of the total revenue in the current period fell to less than 20%, 1912%。In the first half of 2023, WuXi AppTec's U.S. customers still account for more than 60% of revenue.
Prior to the above news, the United States was gradually showing signs of reducing its dependence on foreign markets. In September 2022, the United States announced a $2 billion National Biotechnology and Biomanufacturing Plan. In this plan, the United States intends to invest the aforementioned funds in biotechnology research and development to promote the local development of the pharmaceutical, agriculture, energy and other industries, so as to reduce dependence on foreign markets in related fields.
According to the analysis, WuXi AppTec currently relies on U.S. customers for most of its revenue, so changes in the U.S. market will undoubtedly have a significant impact on the company's development and operation, and the capital market's reaction to this is also reasonable.
If the above-mentioned bill is actually implemented, will it be the best option for WuXi AppTec to expand the domestic market in the future?
Punctuation financial researchers noticed that according to the financial report data, WuXi AppTec's revenue from old customers has remained high and continued to increase in recent years. In 2021, 2022 and the first half of 2023, the proportion of the company's original customer revenue will be: 00% and 9883%, which is already approaching 99%. It can be seen that at present, it is not easy for WuXi AppTec to develop new customers, whether in domestic or overseas markets.
In addition, in the first half of 2023, the domestic new drug R&D department is still the only business segment with a decline in revenue from WuXi AppTec, which decreased by 24% year-on-year9% to 3400 million yuan.
In this regard, WuXi AppTec is optimistic. The company said in its financial report, "As more and more customer drugs are launched, it is expected that the sales revenue share will reach a compound growth rate of more than 50% in the next ten years." ”
WuXi AppTec's revenue and share from U.S. customers in 2021, 2022 and the first half of 2023(100 million yuan) (%.)
Data**: Company earnings report.
Why did the stock price fall by more than 60%?
Punctuation financial researchers noticed that before the news of the "proposed introduction of a biosecurity bill by the United States", WuXi AppTec's stock price had generally fallen into a downward trend.
In May and December 2018, WuXi AppTec was listed on the Shanghai Stock Exchange and the Hong Kong Stock Exchange, respectively. Taking the performance of the A** market as an example, WuXi AppTec was a ** after listing, and the company's stock price continued to climb for more than three consecutive years, from 8 on the first day of listingThe low of $86 shares rose all the way to 171 on July 16, 202108 yuan stock high.
However, after hitting a high in July 2021, WuXi AppTec's share price turned downward. As of the afternoon of January 29, 2024**, the company's A-share price closed at 5936 yuan shares, compared to 17108 yuan stock high, has fallen 6530%。
Overall, WuXi AppTec's performance fundamentals may not be the most important reason for the company's stock price to decline.
From 2019 to 2022, the company's revenue has increased from 1287.2 billion yuan increased to 39.3 billion5.5 billion yuan, and the net profit attributable to the parent company increased by 185.5 billion yuan increased to 88$1.4 billion. Moreover, the year-on-year growth rate of both mentioned above has accelerated. During the same period, the company's gross profit margin declined overall, from 2019 to 2022, respectively. 1% and 369%。The decline in profitability may be one of the factors that concern the market about WuXi AppTec.
In addition, WuXi AppTec's continued decline in stock price may be related to the company's major shareholders successively**. In June and November 2022, WuXi AppTec issued two announcements on the shares of its major shareholder, and the company's A-share stock price appeared separately on the next trading day after the two announcements. 24% amplitude**.
On the investor interactive platform, some investors also questioned whether the major shareholders were optimistic about the company's prospects, the question said, "WuXi Biologics, a sister company, announced two consecutive buybacks last year and the repurchase amount was large. Why didn't WuXi AppTec buy back to give investors confidence, but continued to throw out the first plan, is there a situation where the company is not optimistic about the company's development prospects? ”
In response to the above questions, WuXi AppTec responded, "The company has held a general meeting of shareholders on January 5, 2024, and approved the "Proposal on Directly Repurchasing and Canceling the H Shares Involved in the 2023 H-Share Incentive Trust Plan from the Trustee", and will repurchase and cancel 1546750,000 shares, valued at approximately HK$1.3 billion. The company further stated, "The company is confident in its continued development and maintaining its leading position in the industry in the future." ** Decisions made by shareholders based on their own needs and plans. ”