In 2024, WuXi Bio demonstrated steady growth despite challenges in its non-XDC business, achieving a 9.6% YoY revenue increase, driven by strong XDC expansion and North American market gains. While market competition impacted non-XDC revenue, the company continued to optimise its global operations, securing new projects and enhancing its production capabilities. Strategic investments in biologics and XDC facilities, alongside planned capacity expansions, position WuXi for future growth. With a robust PPQ pipeline and a focus on innovation, the company remains optimistic about its 2025 outlook, projecting double-digit revenue growth. However, risks such as geopolitical tensions and market uncertainties persist. Maintain HOLD.
Key Factors for Rating
Steady growth amid pressure on non-XDC business. In 2024, WuXi Biologics achieved 9.6% YoY revenue growth and 13.1% growth in non-COVID revenue, reaching RMB18.7bn. However, the non-XDC (biologics) segment faced challenges, with revenue declining 2.6% YoY and attri.NP decreasing 1.3% YoY. Specifically, revenue from late-stage clinical development and commercial production dropped 3.2%, while the European and Chinese markets declined by 15.9% and 9.7%, respectively. In contrast, the XDC business showed strong momentum, with revenue doubling YoY to RMB3.9bn, now contributing 21% of total revenue. Revenue from the top five clients fell 10% YoY, reducing their share of total revenue from 36% to 29%, while revenue from the top ten clients increased slightly by 1.7% YoY, though their share declined from 45% to 42%. Notably, the North American market performed well, growing 32.5% YoY and increasing its share of total revenue to 57% (up from 47% in 2023). Meanwhile, WuXi Bio’s total backlog declined from US$20.6bn in 2023 to US$18.5bn in 2024, with the service backlog shrinking 21.6% YoY to US$10.5bn, primarily due to the conclusion of US$3bn in COVID and vaccine projects.
Market competition and order structure adjustments. The decline in non- XDC revenue was dragged by intensifying competition in the global biopharmaceutical market, stricter regulatory reviews in the US and Europe, and business adjustments by key clients. Despite these challenges, WuXi added 151 new projects in 2024, bringing its total ongoing projects to 817, including 87 in late-stage clinical development and commercial production. However, growth in these late-stage projects was below market expectations, rising just 3.9% YoY. WuXi Bio also secured 20 external projects in 2024, of which 13 were in late- stage. The company continued optimising its global capacity, with its Ireland facility receiving GMP certification and successfully completing several 16,000L PPQs. The facility demonstrated single-use costs comparable to stainless steel, positioning it as a key growth driver moving forward.
Optimising global layout and driving new modality growth. WuXi Bio remains focused on expanding in ADCs and bispecific antibodies, strengthening collaborations with Merck and GSK, etc. The company is also enhancing its global production footprint, considering to relocate 120,000L planned capacity from China to Singapore. In 2024, CAPEX reached RMB3.9bn, primarily directed toward expanding biologics and XDC facilities in Singapore and XDC facilities in China. For 2025, WuXi plans to increase CAPEX to RMB6.0bn. WuXi Bio expects strong growth in commercial production and innovative drug development, supported by a robust pipeline of PPQs. The company projects a 50% increase in PPQs in 2025, many of which are expected to transition into commercialised projects within 1-2 years. This will support WuXi Bio’s forecasted 12%-15% total revenue growth and 17%-20% growth excluding Ireland’s vaccine revenue in 2025.
Key Risks for Rating
1) Geopolitical tensions; 2) biotech financing constraints; 3) intensified competition; and 4) higher-than-expected backlog cancellations.
Valuation
Following the earnings results, we have revised up our earnings forecasts by 9% and 6% for 2025E and 2026E, reflecting the company’s stronger-than-expected revenue growth and margin improvements. Our DCF model (WACC 12.8%, terminal growth 3.0%) derived a new TP of HK$23. Maintain HOLD on risks such as geopolitical tensions and market competition.