It's not a matter of passing through without knowing how difficult it is.

Looking back at 2024, the global biomedical industry is struggling under the double clash of geopolitical games and cyclical adjustments in the industry. The “Biosafety Act” proposed by the US Congress is like a sword hanging over the top, causing continuous disruptions to the global supply chain of new drugs; at the same time, the decline in demand for COVID-19 and the explosive growth in demand for research and development of new molecules have further exacerbated the structural imbalance in industry demand. In this environment, Yao Ming Kangde (603259.SH, 02359) demonstrated its strategic strength and operational resilience as a CXO leader with a 2024 questionnaire that “says it can be done”.

“Do what you say”, the management ability and execution efficiency behind precise guidance

In 2024, the entire industry felt as expressed by CRL, an established CXO company. This recession was completely different from the previous one. The last time was after the economic crisis, when we experienced difficulties in the 11th and 12th years. The market environment at that time was completely different from what it is now. And Yao Ming Kant compounded geopolitical disturbances. Faced with such an unstable and uncertain external environment, revenue for the full year of 2024 was 39.24 billion yuan, up 5.2% year on year before COVID-19 commercialization projects; adjusted non-IFRS net profit was 10.58 billion yuan, and adjusted net interest rate reached a record high of 27%; and free cash flow reached a new high of 7.98 billion yuan. It is worth noting that in the fourth quarter, the company's revenue and adjusted profit hit new highs in a single quarter, verifying the cyclical ability of leading CXO companies. It is worth mentioning that the company's performance growth is in line with the performance guidelines set by the company at the beginning of the year, showing the company's “do what you say” style.

While showing excellent cycle management capabilities, Yao Ming Kangde also showed the capital market its unique value creation philosophy — not only to seize explosive growth during the boom period, but also to maintain the quality of operations during the de-bubble phase of the industry. From 2020 to 2023, driven by COVID-19 commercialization demand, Yao Ming Kangde's revenue jumped from 16.5 billion yuan to 40.3 billion yuan, achieving a three-year compound growth rate of 34.7%. As non-recurring demand faded, the company relied on multi-pole growth engines and lean operations to successfully stabilize the company's revenue scale at around 40 billion. However, this management ability was transformed into high-quality financial results. After absorbing the impact of COVID-related business in 2024, the company received nearly 8 billion yuan of free cash flow, and the cumulative free cash flow from 2020 to 2024 exceeded 13.6 billion yuan. Provide sufficient ammunition for a global layout.

Supported by strong free cash flow, the company built production capacity on a global scale, rapidly increased its own peptide production capacity to 0.1 million liters, and gave back to shareholders through a combination of 2.8 billion yuan dividend+1 billion yuan repurchase, creating a virtuous cycle of “capital investment - value creation - benefit sharing”. This kind of financial resilience is what motivates companies to get through the cycle.

What supports the company's performance is the company's on-hand orders and high global customer stickiness. According to the Zhitong Finance App, by the end of 2024, the company's on-hand orders will exceed 49 billion yuan, and this portion of the on-hand orders will be converted into the company's revenue one after another.

In terms of customer base, Pharmacom Kangde has maintained a high level of customer stickiness over the past few years. In particular, in the extremely complex environment of 2024, based on the triple advantage of quality, speed and cost, Yao Ming Kangde has stabilized global customer stickiness, and the global customer situation has not changed. By the end of 2024, the company maintained a scale of 5000+ customers, added 500+ new customers, and added 1000+ biotech companies worldwide every year, covering the top 20 global pharmaceutical companies (revenue contribution increased 24.1% year on year).

One of the key factors in maintaining the resilience of Yakming Kangde's performance in the cold winter is the CRDMO integrated platform. According to the Zhitong Finance App, based on deep insight into the industry cycle and the ability to make flexible adjustments, Yao Ming Kangde established its unique CRDMO business model early on. Based on the closed-loop ecosystem of the entire CRDMO industry chain, the company has built a three-level growth engine of “front-end diversion - China-Taiwan collaboration - back-end delivery”.

CRDMO ecosystem, from traffic entry to value

The core competitiveness of Yao Ming Kangde's unique CRDMO platform lies in its unique value amplification mechanism.

As drug development progresses to the post-clinical stage, service complexity and order size increase exponentially — from gram level demand in the early clinical phase to tonnage production in the commercial stage, the value of a single project can jump thousands of times.

According to data from the 2024 report, of the 0.46 million compounds delivered by the company through the drug discovery (R) process, 1,187 new molecules were added to the development (D) and production (M) processes, of which 366 molecules were converted from the R end to the D end. In particular, in phase III clinical trials and commercialization stages, Pharmacovigant currently supports 152 commercialization and phase III projects, of which 25 will be added in 2024. In contrast to this, the FDA approved a total of 50 new drugs in 2024, which means that even without a new external order, PharmacomingKangde can use its CRDMO platform to select compounds that satisfy commercialization and create stable results.

More importantly, this closed loop model of “self-development and self-production” completely changed the logic of capacity utilization. Unlike traditional CDMO companies' passive model of “building capacity first and then looking for orders”, Pharmaceutical Kangde relies on the continuous flow of front-end R&D to ensure that its production capacity is always running at a high load. The data shows that since 2018, R-side orders have only doubled, but D&M orders have surged 12 times. This synergy of “R&D drives production” is reshaping the CXO industry's value creation paradigm.

A large amount of compound reserves has become a reassurance pill for Pharmacovigant's performance in the reverse cycle. By the end of 2024, the company had 2,865 pre-clinical and first-phase clinical compound projects, which also provided a strong guarantee for the company's subsequent performance.

In recent years, Kangde Pharmaceutical has also been deeply involved in the development of new molecules. Currently, the entire biomedical industry is making molecules more and more complex with the development of technology. For example, in today's popular sugar reduction and weight loss circuit, the two most popular drugs currently being sold are all polypeptide drugs, and their molecular weight is several hundred times larger than traditional small molecules. The more complex the molecular structure, the higher the technical threshold, the more complex the process, and the greater the demand for outsourcing.

In 2024, the number of global small molecule and polypeptide GLP-1 clinical stage drug candidates increased from 62 to 85, an increase of 37%; while the number of GLP-1 in the Pharmaceutical Kangde pipeline increased from 13 to 20, an increase of 54%, far exceeding the average growth rate of the industry. It also accounts for 23.5% of all GLP-1 drugs in the world.

In terms of production capacity, currently, Pharmacom Kangde can be used to support the production capacity of peptide solid-phase synthesis reactors, which has reached 0.041 million liters, and will further exceed 0.1 million liters in 2025. In 2024, revenue from the novel molecule business (TIDES), represented by peptides and oligonucleotides, reached 5.8 billion yuan, a strong year-on-year increase of 70.1%. By the end of 2024, TIDES's on-hand orders increased 103.9% year over year, the number of TIDES D&M service customers increased 15% year over year, and the number of service molecules increased 22% year over year. We are also confident that this growth rate will continue in the future.

In terms of production capacity layout, the company is also implementing a global layout, promoting the construction of bases in the US and Singapore, combining the characteristics of localization and globalization of biotechnology to strengthen regional service capabilities and avoid supply chain risks.

epilogue

Yao Ming Kangde's 2024 questionnaire confirms its core ability to “cross the cycle” — relying on the technical depth and scale effects of the CRDMO entire industry chain platform, it continues to release innovative service levels through precise strategic focus and efficient execution.

2025 will continue to be a challenging year. Although investment and financing in the field of innovative pharmaceuticals shows signs of recovery, it has yet to enter the acceleration zone; US President Trump's inauguration has brought many uncertainties to global development, including pharmaceutical research. However, the trend in the innovative drug industry will not change, and high-quality CXO companies will continue to be strong.

For 2025, Pharmaceuticals Kangde's performance guidelines are very positive. It is expected that revenue from continuing operations will return to double-digit growth, with a year-on-year increase of 10%-15%, and the company's overall revenue will also break the 40 billion mark, reaching 41.5-43 billion.

In 2024, Yao Ming Kangde achieved the performance guidelines at the beginning of the year. Under the dual narrative of “steady growth+shareholder return” in 2025, Yao Ming Kangde is even more worth looking forward to.