WuXi Bio added 151 new projects in 2024, the highest number in its history. The Company is eligible to receive US$140mn near-term payments by enabling discovery services of 7 global projects in 2024. Overseas operation is progressing steadily with the Ireland site targeting breakeven in 2025. Management also reaffirmed its 2024 guidance, projecting 5-10% growth in both revenue and adjusted profit (before minorities), while expressing confidence that revenue growth will accelerate in 2025.
　　Surprisingly-good demand recovery lays a solid foundation for 2025.
　　Despite facing geopolitical disruptions in 2024, WuXi Bio achieved record- breaking 151 new project additions, with over half originating from the US.
　　Notably, 10 Ph3 projects and 3 commercial projects were transferred from external sources, also predominantly from the US. This better-than-expected growth in project numbers highlights WuXi Biologics’ strong global competitiveness and the sustained trust from its clients worldwide. The Company’s pipeline now includes 817 projects, strengthening a robust funnel effect that is reflected in the increasing number of PPQ (process performance qualification) projects. In 2024, WuXi Bio completed 77 PPQ projects, increasing 26% YoY, and expects this number to grow by 31% YoY to 101 projects in 2025. This strong momentum bodes well for future growth in the Company’s CMO revenue, in our view.
　　Lucrative milestone income driven by global-leading R&D capabilities.
　　WuXi Bio' unique CRDMO business model continues to empower early-stage R&D for client projects. By directly licensing projects to clients or through third-party out-licensing, the Company has secured substantial milestone payments. According to management, WuXi Bio enabled discovery services of 7 global projects in 2024, and is eligible for near-term payments of US$140mn (including milestone payments). As of the end of 2024, the Company had over 50 projects eligible for milestone payments and sales royalties. Given the high-profit margin nature of milestone payments, these revenues are expected to serve as a major profit driver, in our view.
　　Steady progress in overseas operations. As a cornerstone of WuXi Bio’s
　　global manufacturing network, the Ireland biologics facility demonstrated strong client demand trends in 2024. The site successfully completed multiple 16k-liter PPQ batch productions, supporting management’s target to achieve profitability in 2025. Additionally, the Company is constructing a new 36k-liter DS (drug substance) capacity facility in the US. WuXi Bio plans to expand its total DS capacity to 491k liters, with approximately 49% located overseas, aligning with its strategy of establishing a comprehensive global production network. To support this expansion, WuXi Bio will maintain annual capex of RMB5-6bn over the next 2-3 years.
　　Maintain BUY. To reflect the demand recovery, we raise our TP from HK$22.88 to HK$24.24, based on a 10-year DCF model with WACC of 9.64% and terminal growth of 2.0%. We forecast WuXi Bio’s revenue to grow by +7.1%/ +13.4%/ +15.6% YoY and attributable adj. net income to increase by +0.9%/ +13.0%/ +15.6% YoY in 2024E/ 25E/ 26E, respectively.