HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Bottom-Up

<ul>
<li>In 24Q1, the innovative drug projects and medical device projects ranked top two in domestic investment and financing deals, but investment in the field of AI cooled down.</li>
<li>For biotech that located in China and only for China markets, it’s hard for them to generate good returns. It is recommended not to spend too much time on them.</li>
<li>As the US House Committee advances the BIOSECURE Act to restrict WuXi AppTec/WuXi Bio last week, we listed some points worth the attention at this stage.This is far from over.</li>
</ul>


In 24Q1, the innovative drug projects and medical device projects ranked top two in domestic investment and financing deals, but investment in the field of AI cooled down.
For biotech that located in China and only for China markets, it’s hard for them to generate good returns. It is recommended not to spend too much time on them.
As the US House Committee advances the BIOSECURE Act to restrict WuXi AppTec/WuXi Bio last week, we listed some points worth the attention at this stage.This is far from over.


China Healthcare Weekly (May.19)- Decoupling Deadline with WuXi,Biotech Classification,Deals Cooling

<ul>
<li>The growth of TIDES business slowed down, and revenue decreased QoQ despite increasing production capacity.As the main growth point of WuXi AppTec’s future performance, this is not a good signal.</li>
<li>Due to BIOSECURE Act, US companies have been negotiating with other contract manufacturers so as to reduce reliance on WuXi AppTec.Let’s see the situation of new orders in following quarters.</li>
<li>WuXi AppTec’s performance recovery is closely related to the pace of Fed's interest rate cuts. From the perspective of growth outlook/macro environment/geopolitical conflicts, WuXi AppTec is still in "dangerous period".</li>
</ul>


The growth of TIDES business slowed down, and revenue decreased QoQ despite increasing production capacity.As the main growth point of WuXi AppTec’s future performance, this is not a good signal.
Due to BIOSECURE Act, US companies have been negotiating with other contract manufacturers so as to reduce reliance on WuXi AppTec.Let’s see the situation of new orders in following quarters.
WuXi AppTec’s performance recovery is closely related to the pace of Fed's interest rate cuts. From the perspective of growth outlook/macro environment/geopolitical conflicts, WuXi AppTec is still in "dangerous period".


WuXi AppTec (2359.HK/603259.CH) - The Pain of 2024 Has Just Begun

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

<ul><li>WuXi AppTec reported 1Q24 revenue of RMB7,982mn, down 11.0% YoY, attributable recurring net profit of RMB2,034mn, up 7.3% YoY, and attributable adjusted non-IFRS net profit of RMB1,913mn, down 18.3% YoY.</li><li>1Q24 revenue / adjusted Non-IFRS net income accounted for 20.4%/ 16.8% of our 2024 fullyear estimates, both moderately lower than historical ranges.</li><li>Non-IFRS gross profit margin deteriorated by 2.3ppt to 38.7% while non-IFRS net profit margin decreased by 2.1ppt to 24.0% in 1Q24, due to the decline in CDMO revenue from COVID commercial projects, pricing erosion, ramp-ups of new facilities in its Testing and Biology segments, and escalating costs in its ATU segment. </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

WuXi AppTec reported 1Q24 revenue of RMB7,982mn, down 11.0% YoY, attributable recurring net profit of RMB2,034mn, up 7.3% YoY, and attributable adjusted non-IFRS net profit of RMB1,913mn, down 18.3% YoY.1Q24 revenue / adjusted Non-IFRS net income accounted for 20.4%/ 16.8% of our 2024 fullyear estimates, both moderately lower than historical ranges.Non-IFRS gross profit margin deteriorated by 2.3ppt to 38.7% while non-IFRS net profit margin decreased by 2.1ppt to 24.0% in 1Q24, due to the decline in CDMO revenue from COVID commercial projects, pricing erosion, ramp-ups of new facilities in its Testing and Biology segments, and escalating costs in its ATU segment. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

WuXi AppTec (603259 CH) - Steady 1Q Performance Amid Challenging Environment

<ul>
<li>WuXi AppTec’s 2023 results were disappointing. The decline in performance in 23H2 was quite severe. 2024 performance guidance could be meaningless because the biggest concern now is the geopolitical conflicts.</li>
<li>If the bill is passed, valuation logic would completely change - not based on DCF/PE, but on PB, market value falling below RMB100 billion. We cannot rule out another privatisation.</li>
<li>We hope that WuXi AppTec can prepare contingency plans for the worst-case scenario that may occur, rather than simply denying or mitigating the impact of BIOSECURE Act on the Company</li>
</ul>


WuXi AppTec’s 2023 results were disappointing. The decline in performance in 23H2 was quite severe. 2024 performance guidance could be meaningless because the biggest concern now is the geopolitical conflicts.
If the bill is passed, valuation logic would completely change - not based on DCF/PE, but on PB, market value falling below RMB100 billion. We cannot rule out another privatisation.
We hope that WuXi AppTec can prepare contingency plans for the worst-case scenario that may occur, rather than simply denying or mitigating the impact of BIOSECURE Act on the Company


WuXi AppTec (2359.HK/603259.CH) 2023 Results - Time to Prepare for the Worst

<ul><li>WuXi AppTec reported revenue of RMB40.3bn in 2023, up 2.5% YoY, attributable recurring net income of RMB9.7bn, up 16.8% YoY, and attributable adjusted non-IFRS net income of RMB10.9bn, up 15.5% YoY.</li><li>Revenue was inline with Bloomberg consensus while attributable adjusted non-IFRS net income beat the consensus by 6.3%.</li><li>Excluding revenue from the COVID-19 commercial project, the Company delivered impressive revenue growth of 25.6% YoY in 2023, despite the challenging environment in global CXO industry. </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

WuXi AppTec reported revenue of RMB40.3bn in 2023, up 2.5% YoY, attributable recurring net income of RMB9.7bn, up 16.8% YoY, and attributable adjusted non-IFRS net income of RMB10.9bn, up 15.5% YoY.Revenue was inline with Bloomberg consensus while attributable adjusted non-IFRS net income beat the consensus by 6.3%.Excluding revenue from the COVID-19 commercial project, the Company delivered impressive revenue growth of 25.6% YoY in 2023, despite the challenging environment in global CXO industry. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

WuXi AppTec (603259 CH) - Best Effort to Ensure Business Continuity

China

WuXi AppTec Co., Ltd. manufactures medical products. The Company produces biological agents, antibodies, biological diagnostic reagents, and other products. WuXi AppTec also provides biological analysis, technical study, and other services.

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WuXi AppTec (2359 HK)

China Healthcare Weekly (May.19)- Decoupling Deadline with WuXi,Biotech Classification,Deals Cooling

Investment/financing deals cooling in 24Q1. It's better not to spend too much time on Biotech that located in China and only for China...

Xinyao (Criss) Wang