Wuxi Bio reported 1H24 revenue of RMB8.57bn, up 1.0% YoY, and adjusted attributable net income of RMB2.25bn, down 20.7% YoY. 1H24 revenue and adjusted attributable net income accounted for 47.9% and 44.5% of our full-year forecasts, moderately higher than the historical levels. If excluding COVID revenue, total revenue in 1H24 would increase by 7.7% YoY, while revenue from late-stage and CMO projects would grow by 11.7% YoY. The company added 61 integrated projects in 1H24, a figure only surpassed by that of 1H22 in its history. Total backlog was maintained stable at US$20.11bn as of end-1H24 with backlog within three years growing by 4% YoY. Despite the geopolitical uncertainties and the bumpy recovery of global biotech funding, management has reaffirmed its full- year guidance for 2024, expecting high-single-digit growth in both revenue and adjusted attributable net income.
Robust demand from overseas customers. In 1H24, WuXi Bio added 61 integrated projects, including 52 in preclinical and 5 in Ph1/2 stages, indicating a recovery in customer demand for early clinical and preclinical biologics development. Additionally, the company signed 3 Ph3 projects and 1 commercial stage project through its "win-the-molecule" strategy in 1H24, followed by additional 4 late-stage clinical and commercial projects with a MNC client in July. These project signings underscore the continued confidence global customers have in WuXi Bio's service capabilities and quality, despite the geopolitical uncertainties. Meanwhile, revenue from North America grew 27.5% YoY in 1H24, contributing 58.4% of the total revenue, with most of the growth driven by demand from the US customers.
The bioconjugate business emerged as a significant growth driver. Thanks to the robust demand from global customers, revenue of WuXi XDC grew by 68% YoY in 1H24, with its adjusted net profit surging by 147% YoY. In 1H24, WuXi XDC added 26 integrated projects, bringing the total number of ongoing integrated projects in the pipeline to 151, which included 12 Ph3 projects and 9 PPQ projects. The backlog of XDC business increased by 105% to US$842mn, with new orders growing at a similar pace. WuXi XDC is expanding facilities in both Singapore and WuXi city to accommodate the rising customer demand.
Geopolitical uncertainties persist, but so far have limited impact on operations. Following the proposal of the Biosecure Act in early 2024, only one project indicated an intention to transfer out, underpinning the trust that global customers place in the company. We think WuXi Bio's expanding global CRDMO network will help to retain its customers.
Maintain BUY. To reflect the lasting geopolitical uncertainties, we cut our TP from HK$18.32 to HK$13.58, based on a 10-year DCF model with WACC of 10.95% and terminal growth of 2.0%. We forecast WuXi Bio's revenue to grow by +4.9%/ +11.7%/ +12.7% YoY and attributable adj. net income to increase by -4.1%/ +11.4%/ +12.5% YoY in 2024E/ 25E/ 26E, respectively.
