WuXi Biologics forecasts revenue growth acceleration in 2025, supported by a growing project pipeline and contributions from PhIII/commercial projects. The company projects 5%-10% YoY revenue growth for 2024, driven primarily by XDC revenue, which is expected to grow over 85% YoY and accounting for over 19% of total revenue.
　　However, non-XDC revenue may decline in 2024, with growth estimated at -5% to +3% YoY. The company has added 151 new projects in 2024 and plans to complete 24 PPQs in 2025, with its Irish operations also expected to contribute to profitability in 2025. While partnerships with multinational pharmaceuticals, particularly in the US, have strengthened, the reliance on US clients may exacerbate geopolitical risks, given the fierce competition in the biologics CDMO market. The potential impact of the Biosecure Act is deferred to 2027 in our model.
　　Rolling forward our 10-year DCF model, we derive a new TP of HK$19.
　　Maintain HOLD.
　　Key Factors for Rating
　　Revenue growth led by XDC; non-XDC decline possible. WuXi Biologics anticipates revenue growth of 5%-10% YoY in 2024, driven largely by the XDC business, which is expected to grow over 85% YoY and accounting for over 19% of total revenue. However, the non-XDC segment may decline in 2024 with growth estimated between -5% and +3% YoY. The company expects accelerated growth in 2025 compared to 2024 as contributions from new projects and PhIII clinical/commercial project start to roll in.
　　Pipeline expansion and commercialisation efforts. The company added 151 new projects in 2024, up from 132 in FY23, including 61 in 1H24. By YE24, PhIII clinical stage projects increased to 66, while commercial stage projects rose to 21 (compared to 56 and 16, respectively, in 1H24). WuXi Bio plans to complete 24 PPQ runs in 2025, indicating imminent commercialisation.
　　Additionally, its Irish operations are expected to generate profits starting in 2025. In addition, the company’s R&D technology platform enabled seven global molecule discovery projects in 2024, securing milestone payments of c.US$140m, with potential total deal value reaching US$2.3bn.
　　Strengthened partnerships with US clients. c.68% of the company’s contracts are from multinational pharmaceutical giants, with over half of new projects signed in the US. The company has a total planned production capacity of 240,000L overseas and 250,000L domestically. While its nine-month GMP material delivery timeline in North America offers an operational edge over peers, the growing reliance on US clients increases geopolitical risks amid ongoing US-China tensions, given the fierce competition in the biologics CDMO market.
　　Key Risks for Rating
　　Downside risks: 1) Geopolitical tensions; 2) biotech financing constraints; 3) intensified competition; 4) higher-than-expected backlog cancellations.
　　Upside risks: 1) better-than-expected Biosecure Act legislative process; 2) stronger-than-expected demand recovery.
　　Valuation
　　The potential impact of the Biosecure Act is deferred to 2027 in our model.
　　Rolling forward the 10-year DCF model, we derive a new TP of HK$19. Maintain HOLD.