WuXi XDC has evolved into a leader in the global XDC outsourcing service industry. The Company provides “all-in-one” services in its facilities located in WuXi City, and is currently building manufacturing facilities in Singapore. The Company is actively expanding its project pipeline, with 19 projects in PhIII and 11 in the PPQ stage. Late-stage and commercial projects will serve as a solid foundation for sustained revenue growth in the coming years. We initiate coverage on WuXi XDC with a BUY rating and a TP of HK$74.0.
　　The booming global XDC market. The global ADC market is experiencing rapid growth, with China’s growth rate surpassing the global average. As the technology advances, the industry has gradually overcome multiple issues affecting the efficacy and safety profiles of ADC drugs, including reduced immunogenicity and enhanced specificity, better linkers stability in circulation, and improved ADC homogeneity. The global pharmaceutical industry is actively pushing the transformation from ADCs to XDCs with expanded therapeutic applications. The number of newly initiated clinical trials for XDCs worldwide surged from 83 in 2022 to 163 in 2024 (CAGR: 40% YoY). In 2024, 60% of new XDC trials in the world were initiated by Chinese companies. XDC-related licensing deals are booming worldwide, with China becoming an active out-licensing hub. In China, 7 of the Top 20 biologics licensing deals in history are XDC drugs, with all Top 3 being XDC-related projects.
　　A globally leading one-stop XDC service provider. WuXi XDC has evolved into a leader in the global XDC outsourcing service industry. WuXi XDC’s platform spans the entire XDC drug R&D process and covers all key components of XDC drug production. From 2021 to 2024, the Company’s total revenue increased sharply from RMB311mn to RMB4,052mn with a CAGR of 135%. The Company is actively expanding its project pipeline, with 19 projects in PhIII and 11 in PPQ stage. Late-stage and commercial projects will serve as a solid foundation for sustained revenue growth in the coming years. As of the end of 1H25, backlog reached US$1,329mn, up 58% YoY, on top of the strong growth of 82%/71% YoY in 2023/24.
　　Strong competency supported by capacity and technology. WuXi XDC provides “all-in-one” services in its facilities located in WuXi City, and is currently building manufacturing facilities in Singapore. In 2024, capex exceeded RMB1.5bn (+184% YoY), and the Company anticipated that to reach RMB1.56bn in 2025E. In response to the sustainable R&D demand coupled with the upcoming commercial production, WuXi XDC expects to commit over RMB7bn in capex from 2026 to 2029. Additionally, WuXi XDC stands at the forefront of the global wave of innovation by building globally competitive technology platforms, such as conjugation platform WuXiDARx, linker platform X-LinC, and payload platform WuXiTecan-1/ WuXiTecan-2.
　　Initiate at BUY. Our TP of HK$74.0 is based on a 10-year DCF model with WACC of 9.67% and terminal growth of 2.0%. We forecast WuXi XDC’s revenue to grow by 45.7%/ 35.7%/ 30.9% YoY and adjusted net income to increase by 40.0%/ 32.4%/ 30.8% YoY in 2025E/ 26E/ 27E, respectively.