WuXi AppTec Aktie

Good morning, everyone, for those who are based in China and Hong Kong; and good evening for those based in the U.S. This is the 2025 WuXi AppTec results call. My name is Laurence Tam. I'm a China health care analyst at Morgan Stanley. We're honored today to have the full team from WuXi AppTec to present the 2025 results in English.

The format of the call will be 2 parts. First, I'll let management go through their prepared remarks. You can refer to the slides on the webcast. And then the second part will be a Q&A session. [Operator Instructions].

With that, let me now pass it on to the Head of IR at WuXi AppTec, Ms. Tang Ruijia, to introduce management and to start the prepared remarks.

I'll pass it on to you, Ruijia.

Okay. Thank you, Laurence. Welcome, everyone, to WuXi AppTec's 2025 Annual Results Conference Call. We released our financial results last night and have posted the latest on our company website. During today's call, we will make forward-looking statements. Although we believe that our predictions are reasonable, future events are uncertain, and our forward-looking statements may turn out to be incorrect. Accordingly, you are strongly cautioned that the reliance on any forward-looking statements involves known and unknown risks and uncertainties.

In addition, to supplement the company's consolidated financial statements presented in accordance with IFRS, we provide adjusted IFRS financial data. We believe the adjusted financial measures are useful for understanding and assessing our core business performance, and we believe that investors may benefit from referring to these adjusted financial measures by eliminating the impact of certain unusual and nonrecurring items that are not indicative of the performance of our core business. However, these adjusted measures are not intended to be considered in isolation or as a substitute for the financial information under IFRS. All IP rights and other rights pertaining to the information and materials presented are owned by WuXi AppTec. Audio recording, video recording or disclosure of such materials by any means without the prior consent of WuXi AppTec is prohibited.

This call does not intend to provide a complete statement of relevant matters. For relevant information, please refer to the company's disclosure documents and information on Shanghai Stock Exchange, Hong Kong Stock Exchange and the company's website. As usual, in today's call, there will be a Q&A session after our presentation. Please kindly share with us your name and institution before asking questions. With that, please allow me to introduce our Co-CEO, Dr. Minzhang Chen, to present our 2025 annual results. Minzhang, please?

Thanks, Ruijia. Good morning, and good evening. Thank you for joining our 2025 annual earnings call. We will begin on Slide #5. In 2025, WuXi AppTec beat full year guidance and achieved record performance in both revenue and profit. Total revenue achieved RMB 45.46 billion. Notably, revenue from continuing operations grew 21.4% year-over-year to reach RMB 43.42 billion. Our adjusted non-IFRS net profit grew 41.3% year-over-year to RMB 14.96 billion with non-IFRS net profit margin further improved 5.9 percentage points year-over-year to 32.9%.

Next slide, please. The company remains focused on enhancing our core capabilities and capacity to better meet customer demand. With continuous capacity expansion by end of 2025, our backlog for continuing operations reached RMB 58 billion, growing 28.8% year-over-year. This does not include business operations we sold or discontinued such as clinical research services.

Next slide, please. Slide 7 shows our diversified revenue streams of continuing operations. Based on customer headquarters, revenue generated from U.S. market grew 34.3% year-over-year. Japan, Korea and other regions grew 4.1%. Europe and China saw some decline, mainly due to fluctuations in project delivery timing. This diversified revenue structure reflects our global footprint and capabilities to enable health care innovations. We believe it will continue to underpin the stability and the resilience of our performance.

Slide 8, please. So as an enabler of innovation and a trusted partner and contributor to the global pharmaceutical and life science industry, the company continues to drive sustainability, embrace initiatives with sustained recognition by leading global ratings. In 2025, we achieved our first MSCI AAA and CDP Climate Change A Rating, maintained CDP Water Security A, and EcoVadis Gold rating, and were included in the S&P Global Sustainability Yearbook for the fourth consecutive year. And meanwhile, our near-term greenhouse gas emissions reduction targets have been successfully validated by SBTi. As a committed UNGC participant and PSCI supplier partner, we actively embrace global initiatives and are dedicated to integrating sustainability into our business strategy and operations.

Next slide, please. For over 2 decades, WuXi AppTec has remained steadfast in our commitment to safeguarding customers' IP and adhering to the highest standards for quality and compliance. In 2025, we completed 741 quality audits and inspections from global customers, regulatory authorities and independent third parties as well as 60 information security audits by global customers. This means, on average, we welcome 3 quality audits per day and over 1 information security audit per week, all with no critical findings. Currently, 20 of our main sites are ISO and IEC 27001 Certified, covering all main sites in China. IP is a lifeline for both our company and our customers. We uphold integrity as our foundation and enforce a zero tolerance policy against any infringement. This is our core value and our highest responsibility and commitment to our customers.

Now let's move on to the segment performance. So please turn to Page 9. WuXi Chemistry's CRDMO business model drives continuous growth. In 2025, WuXi Chemistry revenue grew 25.5% year-over-year to RMB 36.47 billion, benefiting from continued process optimization and enhanced capacity efficiency driven by the growth of late-stage clinical and commercial projects. Our adjusted non-IFRS gross profit margin steadily improved 5.9 percentage points year-over-year, reaching 52.3%. Our Small Molecule Drug Discovery (R) business continues to generate downstream opportunities. In 2025, we have successfully synthesized and delivered over 420,000 new compounds to our customers. Meanwhile, 310 molecules were converted from R to D in 2022 (sic) [ 2025 ].

As we continue to strengthen the capabilities of our integrated CRDMO platform, we consistently enhance the internal conversion of molecules at different stages. Our Small Molecule D&M business remains strong, and the Small Molecule CDMO pipeline continued to expand. In 2025, Small Molecule D&M business revenue grew 11.4% year-over-year to RMB 19.92 billion. Meanwhile, the company continued to build small molecule capacity. In 2025, our Changzhou, Taixing and Jinshan API sites all successfully passed FDA on-site inspections with no single observation. By year-end, total reactor volume of small molecule APIs reached over 4,000 cubic meters.

WuXi TIDES, our New Modalities business, sustained rapid growth. With the sequential ramp-up of new capacity released in 2024 and 2025, TIDES' revenue almost doubled to reach RMB 11.37 billion in 2025. As of year-end, TIDES' backlog grew 20.2% year-over-year. TIDES' D&M customers increased 25% year-over-year and its number of molecules increased 45% year-over-year. In September 2025, we completed Taixing peptide capacity construction ahead of schedule. The company's total reactor volume of Solid Phase Peptide Synthesizers has reached over 100,000 liters.

Next page, please. So driven by Following the Molecule and Win the Molecule strategies, WuXi Chemistry's Small Molecule CRDMO pipeline efficiently converts and captures high-quality molecules and delivering sustained business growth. This reflects our customers' strong trust in our technical capabilities, our service efficiency and our quality system. In R stage, we delivered more than 420,000 new compounds in 2025, representing a significant scale. At the same time, the complexity of these molecules continue to increase, demonstrating the sustained demand from early-stage R&D customers for high-quality services. Building on this strong foundation, we continue to enhance the synergy between our R and D capabilities by strengthening the conversion of molecules from R to D. The new compounds synthesized in R stage serve as a continuous funnel, driving downstream demand for our D&M services.

Moving to the D&M stage, we added 839 molecules to our pipeline in 2025 with 310 of them converted from R to D. As of year-end, our Small Molecule D&M pipeline reached 3,452 molecules, including 53 (sic) [ 83 ] commercial projects, 91 in Phase III, 377 in Phase II and 2,901 in Phase I and preclinical. Notably, commercial and Phase III projects increased by 22. As our late-stage pipeline grows, the complexity and the quality of molecules continue to grow. This deepens our collaboration with customers and lays a solid foundation for sustained long-term growth.

Next page, please. Our TIDES business has maintained rapid growth over the past few years. So in 2025, TIDES' revenue grew a strong 96% year-over-year to reach RMB 11.37 billion, nearly double. We have been continuously enhancing our capabilities and capacity to better meet customer demand.

Now I will hand over to our Co-CEO, Dr. Steve Yang, to talk about WuXi Testing and WuXi Biology. Steve, please.

Thanks, Minzhang. Please turn to Slide #14. In 2025, WuXi Testing revenue returned to positive growth, increasing 4.7% year-over-year to RMB 4.04 billion, of which revenue from drug safety evaluation service grew 4.6% year-over-year, maintained its leadership position in Asia Pacific. Adjusted non-IFRS gross profit margin declined year-over-year as the impact of market pricing were gradually reflected in revenue through backlog conversion. However, with our differentiated capabilities and enhanced operation management, margins continue to improve sequentially quarter-over-quarter. We actively enable customers in global licensing deals, supporting nearly 40% of the successful out-licensing projects from Chinese customers since 2022.

Our new modality business continued to expand with revenue contributions exceeding 30% in 2025, maintaining a leading position in multiple areas. Meanwhile, we continue to advance automation. Our DMPK team launched a proprietary all-in-one compound identification software solution, improved efficiency by 80% (sic) [ 83% ] in spectral interpretation and metabolite identification for nucleic acids and peptide test articles. Finally, in 2025, our Suzhou and Shanghai facilities successfully passed multiple regulatory inspections by FDA, by OECD, NMPA and PMDA. This underscores the high quality of our GLP operations and our quality systems.

Let's turn to Slide #15, please. WuXi Biology follows the science, strategically builds differentiated capabilities in emerging areas, and we actively expand our global customer outreach. This allows us to efficiently generate downstream opportunities for our CRDMO model, continuously contributing more than 20% of our new customers. We efficiently enable global customers through our integrated in vitro and in vivo drug discovery capabilities for biology, the cross-regional collaboration, end-to-end point in emerging areas.

WuXi Biology revenue resumed positive growth in 2025, growing 5.2% year-over-year to RMB 2.68 billion. The adjusted non-IFRS gross profit margin was 36.9%, down 1.9 percentage point, reflecting market pricing dynamics. We closely follow market conditions with a flexible pricing strategy, maximize our value in generating downstream opportunities. Our revenue growth was driven by advancement in our comprehensive in vitro screening platform and enhanced in vivo pharmacology capabilities. Our non-oncology in vivo business maintained a competitive edge, serving as a key growth contributor to WuXi Biology. Our new modality business continued the momentum with the revenue contribution exceeding 30% in 2025, supported by rapid new customer expansion in multiple areas.

Now I would like to turn the call to our CFO, Florence, to discuss our financial performance. Florence, please?

Thank you, Steve. Let's turn to Slide 17. We would like to recap on the company's financials. In 2025, we beat our full year guidance and achieved record high performance in revenue, profit and cash flow, all aspects. Thanks to the visibility provided by our CRDMO business model, we proactively planned our capacity and capabilities. As new capacity ramped up efficiently quarter-over-quarter, we timely supported the growing demand from late-stage clinical and commercial projects. Meanwhile, we continued to drive quality growth, strengthen our technological expertise and improve operational efficiency.

In 2025, our adjusted non-IFRS gross profit reached RMB 21.89 billion. Adjusted non-IFRS gross profit margin expanded to 48.2%, up 6.6 percentage points year-over-year. Adjusted non-IFRS net profit grew 41.3% to RMB 14.96 billion. Correspondingly, adjusted non-IFRS net profit margin improved by 5.9 percentage points to reach 32.9%. Net profit after deducting nonrecurring items grew 32.6% to RMB 13.24 billion and net profit attributable to the owners of the company surged 102.6% (sic) [ 105.2% ] to RMB 19.15 billion (sic) [ RMB 19.19 billion ]. Building on our robust business growth, we sharpened our focus on the CRDMO core business and continue to enhance our investment management capabilities. This resulted in pretax investment gains exceeding RMB 8 billion in 2025. further boosting our net profit attributable to the owners of the company. Consequently, our diluted earnings per share reached RMB 6.61 (sic) [ RMB 6.63 ], more than doubling year-over-year.

Please turn to Slide 18. With sustained business growth, particularly the rapid increase in late-stage clinical and commercial projects, combined with enhanced operational efficiency and financial management, our 2025 adjusted operating cash flow reached a record high of RMB 16.67 billion, growing 39.1% year-over-year. This fully demonstrates the sustainable momentum driven by our high-quality molecules and projects. We continue to actively advance our global capacity expansion as planned with CapEx payment of RMB 5.54 billion in 2025.

Now I'd like to hand over to Minzhang to share the company outlook. Minzhang, please.

Okay. Please turn to Slide 20. Okay. We remain focused on our unique integrated CRDMO core business, accelerating the growth of our global capabilities and capacity. We provide highly efficient and exceptional services to our customers, benefiting patients worldwide and driving long-term growth. We will also drive the O in our CRDMO model operations. By driving optimized management and operations, we aim to continuously improve, improving efficiency and strengthen organizational resilience to navigate dynamic market conditions.

With customers' ongoing demand for enabling services, our CRDMO business model and management execution, the company is confident to sustain rapid business growth. We expect total revenue to reach RMB 51.3 billion to RMB 53 billion in 2026, with continuing operations revenue growing 18% to 22% year-over-year. By continuously driving quality growth, realizing scale efficiency and enhancing operational excellence, while proactively managing new capacity ramp-up and exchange rate challenges, we are confident in maintaining a stable and resilient adjusted non-IFRS net profit margin in 2026. Finally, CapEx for 2026 is expected to reach RMB 6.5 billion to RMB 7.5 billion. Along with business growth and efficiency improvements, we expect adjusted free cash flow to reach RMB 10.5 billion to RMB 11.5 billion.

Next page, please. While accelerating the growth of our global capacity and capabilities, we remain committed to rewarding shareholders and actively upholding the company's value. The Board proposes a cash dividend distribution plan totaling a record RMB 5.7 billion in 2026. Specifically, we plan to maintain the 30% annual cash dividend payout ratio, expecting to distribute 2025 dividend of RMB 4.71 billion, while continuing our interim dividend plan of RMB 1 billion in 2026.

To continuously attract and retain top talent, we proposed the 2026 H-share incentive Trust plan. Under this plan, no more than HKD 1.5 billion worth of H-shares will be granted if 2026 revenue reaches RMB 51.3 billion. An additional HKD 1 billion worth of H-shares will be granted if revenue reaches RMB 53.0 billion or above. This aims to strengthen management resilience and align our team for long-term shared growth. Importantly, all underlying H-shares will be purchased in the open market at prevailing market prices with no dilution to existing shareholders.

Thanks for your attention, and we are now open for questions.

Thanks a lot, Minzhang Chen, Steve Yang, Florence and also Ruijia. We will now enter the Q&A session. [Operator Instructions] So let me start off with the first question.

First of all, let me congratulate management on a fantastic 2025 and a very positive 2026 guidance. Obviously, this year, there's a lot of uncertainty in the markets and also, we have experienced a lot of volatility. Despite that, the company delivered a very positive 2025 and a continuing operations revenue growth range expected for 2026 of 18% to 22%, which means that the midpoint is 20% growth in 2026 for continuing operations, which gives investors a lot of visibility.

One of the key concerns this year from investors for the CXO industry is the exchange rate. Year-to-date, the U.S. dollar has depreciated against the RMB. So the first question is, in the context of this renewed guidance, how does management think about the impact of currency exchange? And what is your outlook or guidance for each of the 3 business units?

Yes, thanks. We do consider the FX movement and the challenges. So I also would like to appreciate everyone who recognize, even with not only the FX, but with all the complexity and the volatility in the macro environment we are navigating, every company is navigating today, we still provide a very clear and narrow guidance range of our total revenue, which is only about like 3% of our top line, at the beginning of the year, which is pretty consistent with our historical practice. Basically, that reflects the strong visibility in our CRDMO business model and our confidence in our execution capabilities, same as the management capabilities on the FX movement as well.

Thanks a lot, Ruijia. So the second question is a little bit on geopolitics. Obviously, the situation in the Middle East has escalated in recent weeks, and investors are worried about the rise in oil prices and the impact on raw material costs. Your margins improved significantly last year. And this year, the guidance is that margins would be stable. How would you think about the impact of geopolitics and oil prices on your margins going forward?

Yes, I will comment on the cost fluctuations that could be impacted. So first of all, our global operations are running smoothly as usual, okay? We acknowledge there are potential risk to certain upstream raw material costs, but it takes time to transmit through the broader supply chain. We haven't seen any direct or quantifiable impact on our operations or cost, but we will closely monitor the situation and the market dynamics as everyone did. We have mature and diversified procurement network in place in past 25 years. On top of that, we are constantly optimizing our manufacturing process, driving operational efficiency, which helps us focus on the certainty of meeting the customer demands in need and remain committed to deliver exceptional services.

Thanks, Florence. So we get to sell-side and investor questions now. So I will first start with 2 questions from Goldman Sachs, Chen Ziyi. So his first question is the company continued to be highly committed to TIDES' CapEx. So he would like to understand a bit more on the pipeline behind the CapEx budget beyond injectable peptides, which has been a key driver in the past 3 years? And what would be the next key modalities that could potentially be the new focus, for example, siRNA, antisense oligos, oral peptides or any new modalities that biopharma is thinking about at the early stages?

Well, so right now, there are many modalities. It's a combination. So there is no single modality that can replace all. So we have small molecules, we have peptides, and we have oligos, and we have all kinds of conjugates. But currently, the demand for peptides itself is so high, so we continue to build the capacity and to meet the market demand for the peptides. At the same time, we're also seeing oligonucleotide is growing. And although the market is still small, but we see that there are many, many molecules in the pipeline, and also it's going from rare disease now to a very broad to general disease. So the growth will be fast.

And also small molecule. Now the molecules became more and more complex. So to manufacture, in large scale, very complex molecules, needed very technical capabilities as well as manufacturing capacities to meet the market demand. So we are doing all this.

Thanks, Dr. Chen. So Ziyi's next question is there's been some debate on what will be the impact of pharma's announced big CapEx on building internal capacity, particularly in the U.S.? What is WuXi AppTec's view on that? Have you sensed any change on client outsourcing strategy in the past 6 to 12 months?

Yes. So in the pharmaceutical industry, historically, all the API drug products are manufactured internally. And then some of the work is done by the CMO, CDMO. And so this has a long history. So it's nothing new that the large pharma is also manufactured internally, nothing new. But we just committed continuously to improve our capabilities and to invest in capacities and provide the best service and meet the customer needs.

Thanks, Dr. Chen. So the next few questions are coming from Michael Luo of CLSA. His first question is, can WuXi AppTec give us some color on the current utilization rate of the company's 4,000 cubic meter small molecule API capacity? And also, do you still have any plan to expand capacity in this area this year?

Yes. Our current capacity is highly utilized. And we have the -- well, because we don't really talk about the capacity for the -- we are building the capacity for small molecules, but actually, we have the land and we continuously build the small molecule capacities to meet the demand. So we grow double digit, over 11% last year, to almost RMB 20 billion for the Small Molecule D&M. So that means a lot of capacity. And this year, we expect accelerated growing from the Small Molecule D&M. So there will be more capacity. So we continue to build new capacity for small molecules. And if you go to our Taixing site, we have the land and we continue to build the new plants all the time.

And his next question is, beyond obesity and diabetes-related projects, can management highlight any pipeline products or areas that may become meaningful contributors to revenue growth in the next 3 to 5 years?

Yes. So our business model is a CRDMO business model. So we have a very broad pipeline. So for example, currently, our D&M pipeline for small molecules, we have more than 3,000 molecules. And so, as a funnel, we continuously have the project moving to the late phase and the commercial projects. And many of those projects are very high-quality molecules. Clearly, GLP-1 right now has the most demand in terms of volume. But also, we have quite a few very promising high-quality molecules into the late phase and the commercial stage. For example, the PCSK9 molecule, autoimmune molecule, pain, neuroscience.

So we have a number of that. Just the number I gave in the Investor Day last year, 2024, the Drug Hunter named top 10 molecules, and we work on 8 of them. Again, just a few days ago, they published 2025 top 10 molecules, and we work on 7 of them; and the best-selling small molecules, the top 10, we work on 4 of them. So we work on many of the high quality as big large volume molecules. But of course, right now, GLP-1 is still the #1, no doubt about that.

Thank you. His next question is, can management share how you're thinking about CapEx allocation this year, in particular, which business areas or capacity building are likely to be the key focus going forward?

Yes. I think the CapEx spending really reflects our business model and our global expansion strategy. So a majority of our CapEx spending will be put on the CDMO capacity expansion, because our business generates more and more downstream D&M projects. And also, we're accelerating our global expansion in U.S., Europe and also the Middle East in future. But at the same time, we are also expanding the capacity for both small molecule and new modalities in China as well.

Okay. Thank you, Florence. His last question is, given the recent volatility in the Middle East, has the company's strategic approach to the region changed in any way? And also which types of business or operations, if any, do you see as potentially suitable for the Middle East over time?

Yes, our global capacity and capability building is our long-term strategy. Clearly, that will continue. And we have announced a memorandum of understanding with government agencies with Saudi Arabia late last year. And our strategic initiatives in Saudi Arabia continue to proceed. We are engaging with relevant stakeholders and develop tactical plans for the next step. So that continue. Our CRDMO business model and our globalization of our capacity and capability is really the key to our continued growth, and we will continue to build the global capacities.

In terms of what suitable area in Saudi Arabia, we are going through a deep dive with the advisory of local strategic advisory firms to understand local regulatory requirement and what are the suitable capabilities we should localize. Based on our preliminary feedback, clearly, there are lots of opportunities. We will likely start in the discovery space and then gradually expand to other part of our global platform.

Thanks, Dr. Yang. Next, we have 3 questions coming from CICC's Wanhua. First question is, what is the current capacity utilization rate of the company's solid phase peptide capacity, which now exceeds 100,000 liters? What level of utilization does the company expect to reach in 2026? Are there any plans for further capacity expansion?

Yes. The peptide capacity currently is highly used. So as a result, actually, we just started 2 new TIDES buildings, so for both peptide and oligo, we just started 2 TIDES building construction in our Taixing site. In the meantime, we also built a new plant in Singapore for TIDES. So in short, yes, our capacity is highly utilized right now, and we are building new capacities to meet the growing demand.

Thank you, Dr. Chen. Her second question is, what is the progress of U.S. and Singapore sites? And is it currently in line with expectations? How will these new facilities coordinate with the company's domestic capacity? And has there been any change to the expected time line for commencing operations?

Both projects are on time, on schedule and on budget. So our U.S. plant, which is in Middletown, Delaware, is for drug products. So it will have both oral solid dosage and injectables once completely operational. So hope Q4 this year, we're going to start the operation of the oral solid dosage, and a year later, Q4 next year, we're going to start the injectable business. Yes, this is the U.S. plant side. For the Singapore side, it's also on schedule and on budget, and the first plant will be operational next year, '27, and that is for API. So this way, then we will have a dual supply chain for the customers, so they can either get made in China or made outside China, which is in Singapore, for API. On the drug product, U.S. side is mainly for the U.S., North American market customers. And we also have a drug product facility in Switzerland, which is mainly for the European market.

Thanks, Dr. Chen. Her last question is, the company has seen a significant increase in inventory. Is this mainly related to stocking for large orders? When are the corresponding orders for these inventories expected to be recognized as revenue?

Yes. I think this truly reflects our business model of our CRDMO business. Our inventory is being built based on the orders in hand. At the same time, as we have the capabilities to capture the high-quality molecules, which is more complex and takes longer manufacturing process, so that's why the inventory growth is higher than the revenue growth. I think that's a further validation of the high-quality growth trajectory of our business.

Thanks, Florence. So next, we'll go back to Ziyi Chen from Goldman Sachs. He has a question on AI. So in the past 2 months, U.S. CRO company share prices have been hit hard by concerns on AI and how it could pose competitive pressure on pricing or volume for lab services and clinical services. What is WuXi AppTec's view on the impact of AI, particularly on its Testing and Biology segments?

So first of all, our Biology and Testing business remain robust, both in terms of the return to positive growth, as we reported, and also our outlook for 2026. We actually believe AI in combination with human intelligence could be a huge enabler, not only for our industry, but specifically for our company, and help us to increase efficiency, at the same time, increase our ability to anticipate and forecast the future in terms of customer needs and in terms of capacity utilization. This is an area we have invested heavily in terms of our ability to using operational data to make our animal room scheduling, study scheduling, reactor cleaning as well as other aspects of work become more efficient. The example we cited during the presentation on spectral resolution and interpretation for our DMPK team is a good sign. That situation is obviously very different from as we have seen in other sectors such as in enterprise software.

Secondly, we do believe our wet lab capabilities to generate massive data and with high quality and consistency is actually very important for companies who are interested to build a new model and algorithms to increase their prediction capabilities. And we had opportunity to work with many leading companies in this space. And so while they may have models that have the potential to generate new hypothesis, at this stage most of those models require high-quality data, and we are uniquely positioned to provide those data. So this is actually a driver to more business for our Biology and Testing business.

And finally, we believe, for our CRDMO model, with more advancement in ability to unlock either target space or come with new hypothesis to design molecules, it will only accelerate the flow of new ideas into project start, and that will ultimately benefit the funnel, the CRDMO funnel, in a world where research and discovery become even more globalized and decentralized.

Thanks, Dr. Yang. So now we have 2 questions coming from Chen Chen of UBS. First, U.S. FDA has announced that it plans to drop the standard requirement of 2 Phase III or pivotal trials. Instead, the FDA's default position will be for Phase III trial for drug approvals. Do you think that it would accelerate drug approvals and benefit your new orders growth?

I will start and then invite Minzhang for additional comments. So first of all, any regulatory streamlined process will benefit from patients. Secondly, any acceleration in clinical development potentially will drive more demand and more timely demand for drug substance and drug product to supply clinical trial. And if that shortens clinical development time frame, it will help actually accelerate the commercialization drive. So we think all of those initiatives that shorten the time to patients will be beneficial for our CRDMO model. Minzhang, any additional comments?

No, I think that's well said.

Thank you, Dr. Yang, Dr. Chen. So her next question is, one of your biggest clients announced a 10-year plan to invest USD 3 billion in expanding its oral dosage supply chain in China, focusing on oral GLP-1 manufacturing. And one of your peers, a CDMO, has received part of this investment, actually USD 200 million initially. Do you think you can also benefit from this multinational investment in China and to what extent?

Well, so we all know that GLP-1 drugs, no matter it's peptide or small molecule, has a huge demand and so this announcement, this investment just further proved that, yes, the demand is very high for the molecule. So because the demand is very high, and we are the major player in this field, so we believe we will benefit from the opportunities. I don't want to comment on the specific partnership or collaborations, but -- so the USD 3 billion investment, right now it's only USD 200 million, so we have to spend the rest.

Thanks, Dr. Chen. So the next question comes from Huang Yang of JPMorgan. What is WuXi AppTec's positioning in oral small molecule GLP-1 CDMO business?

Well, we had a double-digit growth last year, and we are accelerating the growth for the small molecule this year. And part of the contribution of this growth is from the GLP-1 small molecule.

Okay. And his next question is, it seems that Small Molecule D&M business will have better growth in 2026 versus 2025. What would be the main drivers for that?

Well, it's just demand, high demand, because the drug will be approved this year, I believe.

Okay. Next, we have 2 questions coming from an investor from Franklin Templeton. "Hi, this is Harry from Franklin Templeton. Congrats on the robust performance. So firstly, what is the revenue breakdown? What is the mix do you see? And how do you see the geographical mix changing? Growth, obviously, is very strong in the U.S., while Europe and China are showing some recovery." So let's first address this question.

Florence, do you want to comment on the mix?

Okay. Yes. I think because we follow the customer, follow the molecule, and follow the science. So the geographic revenue growth really demonstrates where the innovation comes from, where's the customer need, our capabilities and the capacities. We do see the strong growth from across all the regions, and we believe that we can better deliver and execute in 2026.

Thanks, Florence. Yes, we see the PO growth across all the regions for 2025. So we believe that's growth for all the regions in 2026, but particularly the growth was strong last year in U.S. So that's why the percentage of the other regions relatively becomes smaller, but we expect the growth for all regions this year. And the small decline in China and Europe last year was mainly due to the delivery schedule of some large projects, but the growth momentum is there.

Yes. I think that's basically proof we have very good position everywhere. And we continue to see the strong growth in U.S., in China, and Europe and all the other regions.

Okay. And his next question is on the TIDES business. How do you see sustainability of its growth?

Yes. So the largest product that we are making, the demand will continue to grow in the next many years by market forecast. So the demand will continue to grow. We also are working on quite a few late phase, very promising projects, which potentially could be big products as well. One more step back, we are a CRDMO, so we have a very big pipeline, not only in small molecules, but also in peptides and also in oligonucleotides. We have a pipeline and that pipeline continues to funnel the projects into the late phase and commercial projects. And that's where our sustained long-term growth comes from.

Okay. And on oligonucleotides, what is WuXi AppTec's differentiation from the other oligo CDMOs or manufacturers?

Yes. So like all other modalities like peptides small molecule, if you can find a place that has quality, speed, cost, technical capability and the capacity, you tell me. So I think it's the same. So we put all this together, and I think that's our unique advantage.

And his last question is, can you give us some color on the general time line that it takes for a new facility to be built and to contribute in a meaningful way to earnings?

So in China, we can do that in less than 12 months from start to fully operational.

So we have 2 questions next coming from Nomura's Zhang Jialin. So firstly, what is the range for the TIDES business gross margin? Do we calculate over 60%, is this about the right range? And how should we think about the margin trend for TIDES?

Well, I don't believe we disclose the margin for TIDES. Florence, can you answer that?

Yes. We don't disclose the specific margin. But I think the margin naturally reflects our capabilities, the capacities and the value creation to the customers.

Okay. His next question is, how is the current Middle East situation or conflict impacting the company's investment view in Saudi Arabia in the midterm?

As I already mentioned earlier, we don't see any near-term disturbance changing our long-term strategy. Our long-term strategy is strengthen CRDMO model, build global capacity wherever there is a customer need. And we're continually engaging with stakeholders in Saudi Arabia and proceed with evaluation of different localization options. Those continue to proceed based on our plan.

Thanks, Dr. Yang. So next, we'll go to Citi's John Yung. You initially guided continuing operations revenue to grow 10% to 15% for 2025, and you delivered 21% plus. Now the same guidance for 2026 is a range of 18% to 22%. Should we also expect this guidance to be prudent and that you are confident to beat it?

Rather than calling our guidance prudent, I would view it as responsible to the market, right? And I appreciate you track our records. We are navigating a lot of the complex and volatile macro environments today, but we do have the confidence to execute the guidance we provide to the market. Of course, we will closely monitor and give the updated time line to all the investors if we see any different situation.

Thank you, Florence. So next, we'll go back to Ziyi Chen's question. So 2026 guidance has been very clear and exciting. He would like to understand the growth sustainability a bit more. What is the reasonable growth expectation beyond 2026, when the TIDES business will be slowing down given the large base and key product cycles. What could be the key growth driver beyond 2026?

I think we have the confidence to keep the sustainable growth. And basically, we follow the molecules, and the CRDMO model really gives us the confidence. We will continuously capture the high-quality molecules and follow the science. And we do have the capabilities and capacities to better serve our customers.

Okay. And going back to Nomura's Zhang Jialin, he has a follow-up question. Can management help us understand the competitive landscape of siRNA CRO space and the growth outlook? How much will it contribute to the current TIDES segment?

Yes. So there are many players out there that have provided the CDMO service on the oligonucleotides, specifically, I think siRNA. And also siRNA has a very large percentage in our pipeline as well. Like I said, we continue to focus on the service we provide, and we continue to focus on both the quality service, the capacity, the speed and the competitive cost. So I think with our unique advantage, we just focus on providing the best service and win the competition in the end, just like we do in every modality in our business.

So next, we have an investor question. WuXi AppTec has RMB 42-plus billion of backlog expected to be converted in 2026, but you're guiding for RMB 51.3 billion to RMB 53 billion of total revenue. So that means roughly an extra RMB 9 billion to RMB 11 billion will need to come from new orders signed and delivered within the year. In the current environment, with trade policy uncertainty, how confident are you in that year booking assumption? And has Q1 2026 order activity remained consistent with that trajectory?

Yes. I think you're right. You noticed. Actually, in our total backlog, it is expected to convert -- like 70% of our total backlog is expected to convert into the revenue in 2026, which is within the next 12 months. I think our ability to convert orders into revenue with speed and efficiency actually reflects our strong execution capabilities across our whole organization. And if you compare with the historical number, actually the percentage is significantly improved, which also demonstrates we have more and more late-stage clinical and commercial projects on hand. That really enhances the near-term visibilities and the certainty of our growth trajectory. As I mentioned, with all the efforts we are making, we do have the confidence to deliver our guidance. And of course, we always try to beat it, right? So I don't see there is any big concern about the new orders coming in the conversion.

Okay. Great. Thanks, Florence. So last question, let me wrap up by touching a bit on geopolitics. We haven't really talked about the 1260H list from the U.S. Pentagon. Obviously, it was released shortly in February and then withdrawn within like an hour. And a lot of investors looked at that list and saw WuXi AppTec being on there together with a lot of big Chinese companies. Does the company have anything to say on that? Obviously, Sino-U.S. relations were moving in a positive direction in the months prior to that with obviously, the BIOSECURE bill not naming the WuXi companies. What is the company's view on relations between the 2?

Yes, I'll take that question. So as you mentioned that we have seen that in February the list was put on and withdrawn. So at this time, the final 1260H list for 2026 has not been officially published. And there's no definitive timetable at this time as to when this is going to publish, no one actually knows, and we won't make any prediction or speculations for the timing of the U.S. government's actions. At the same time, they are very confident that WuXi AppTec shall not be included in the 1260H list. We are a publicly traded company listed in Hong Kong and Shanghai with a transparent corporate governance. The company is not owned or controlled by any government or affiliated with any government or military organization. So at this moment, the company will continue to monitor the situation and take all necessary actions to correct any misinformation and clarify any misunderstandings.

And in terms of BIOSECURE Act, you mentioned that -- we all know that the bill was passed as part of the NDAA at the end of last year. Since then, there's no recent development on the implementation. So we'll continue to monitor.

Thank you very much. So we're coming up to the time limit. So let me pass it back to management to do concluding remarks.

All right. Thank you all for joining today's earnings call. So 2025 is the 25th anniversary of WuXi AppTec. So for the past 25 years, WuXi AppTec has been dedicated to lowering the barriers to R&D and advancing health care innovation worldwide. Entering 2026 with a sharpened focus on our core CRDMO strategy, we are accelerating the growth of our global capabilities and capacities, further improving production and operational efficiency and delivering greater value for customers and shareholders. Staying true to our founding aspiration, we will remain committed to doing the right thing and do it right, enabling our partners to deliver life-saving therapies to patients in need and advancing our vision that every drug can be made and every disease can be treated. Thank you all.

Thank you very much to WuXi AppTec's management and the IR team. This will conclude the presentation. Thank you all for joining.

Thank you.

Thank you.

Thank you.

Bye.

Good morning, everyone. I'm Yang Huang, China Healthcare analyst of JPMorgan based in Hong Kong. Welcome to the third day of our JPMorgan Healthcare Conference. This morning's session is going to be kicked off by WuXi AppTec, and we have WuXi AppTec Co-CEO, Dr. Minzhang Chen, who is going to give us a presentation. Dr. Chen?

All right. Thank you, Yang. Good morning, everyone. Happy New Year. I'm glad to be here first today to kick off the day. I hope our presentation can provide you with some valuable insights. So I would like to start by sharing the background and highlights of our company. And afterwards, our full management team will be happy to address any questions you may have.

As usual, today's presentation includes some forward-looking statements. We just released our 2025 positive profit alert this week with preliminary estimates of revenue and profit. The final results for 2025 will be disclosed in our annual report on March 24. We will also provide our formal guidance for 2026 at that time.

The Healthcare industry is both inspiring and exciting, driven by continuous technology advancement and science innovations that improve human health and the longevity. However, the industry also faces significant challenges, long development cycles, costs -- high cost and low success rate and numerous unmet clinical needs. Biotech companies race against time to advance the drug pipeline, striving to outpace competitors and achieve value creation milestones. Large pharma companies continue to bolster their pipelines through M&As, licensing deals or by enhancing internal R&D efficiency. So to address those challenges, we were founded to be an integrated enabling platform, guided by our vision that every drug can be made and every disease can be treated.

We provide our global customers, both biotech and large pharma with one of the highest quality, fastest speed and the most cost-effective solutions to help them significantly improve efficiency and accelerate the drug development process. This has been our consistent commitment for the past 25 years putting customers at the top of our priorities. Every capability we build and every solution we deliver has been driven by one mission, enabling innovation and bring breakthrough treatment to patients worldwide. So during this stage at the JPMorgan conference, we've had the privilege of meeting many customers, partners and investors. Our role goes beyond providing efficient and high-quality services to innovative drug companies. We also enable our customers to create sustainable equity value thereby attracting a broader spectrum of investors. So this flywheel, not only spurs groundbreaking technology advancements and a new drug innovation, but also propels the sustainable growth of the entire ecosystem.

So our integrated platform supports every stage of the new drug R&D cycle, from early-stage drug discovery, preclinical and clinical development, all the way to commercial manufacturing. This unique end-to-end CRDMO platform with seamless collaboration of our 3 focused core business segments, so WuXi Biology, WuXi Chemistry and WuXi Testing are constantly delivering value to our customers and supporting their efforts to turn scientific discoveries into real-world therapies.

As a trusted partner, we are privileged to work alongside nearly 6,000 partners across more than 30 countries over the past year. As a leading global CRDMO company, we expanded our total reactor volume for small molecule APIs to over 4 million liters by the end of 2025 and increased our Solid Phase Peptide Synthesizer capacity to more than 100,000 liters. Our small molecule CDMO pipeline continues to grow now to over 3,400 molecules from preclinical to commercial stage. Building on this momentum, we achieved strong growth in 2025 and set new records in revenue, profit and backlog. Our total revenue reached RMB 45.5 billion, with continuing operations growing 21.4% year-over-year. Our adjusted non-IFRS net profit reached RMB 15 billion, resulting in a net profit margin of 32.9%. So a 5.9 percentage point improvement year-over-year. With backlog exceeding RMB 55 billion, we are well positioned to support the company's sustainable future growth.

Our global network of more than 20 R&D and manufacturing sites, spans from Asia, Europe to North America. We continue to enhance our capabilities and expand global CRDMO capacities to support long-term customer demand, our future growth. So our unique CRDMO business model starts with our integrated research platform, enabling customers to advance innovation from early drug discovery through preclinical and R&D stage. As a key contributor to the industry, this early-stage enabling platform has supported more than 9,000 customers over the past 15 years. We have also been continuously working with the top 20 global pharmas for the same period, thanks to the trust from the large pharmas.

Notably as a key entry point to our CRDMO ecosystem, this integrated research platform has contributed nearly 65% of the company's new customers and successfully delivered more than 430,000 compound -- new compounds to customers over the past 12 months. This not only helps generate the flow and opportunities for our downstream operations, but also creates synergies across business segments to nearly 30% of our R&D projects are jointly supported by our one-stop solutions to accelerate time lines and drive project delivery. Meanwhile, we have continued to invest in emerging technologies over the past decades and build the capabilities at the forefront of innovation. This enables us to develop industry insights and be well prepared whenever our customers need us.

So this page demonstrates our unique CRDMO model with the final chart of WuXi Chemistry's small molecule pipeline. As we as we just suggested in the research or our stage, so we successfully synthesized and delivered more than 430,000 new compounds to our customers over the past 12 months. The complexity of these compounds also continue to increase.

In the development and manufacturing, D&M stage, by Q3 2025, our small molecule CDMO pipeline reached over 3,400 molecules from preclinical to commercial stage with 621 molecules newly added in the first 3 quarter of 2025. We are currently supporting 16% of the global clinical stage small molecule new drugs. So every 1 out of 6 global clinical stage molecules -- 1 out of 6 we support. As we enhance the capabilities of our integrated platform, we constantly improve the internal conversion of molecules across the CRDMO value chain. For example, among the 621 newly added molecules to our D&M pipeline, 250 molecules originated from our platform.

Actually, a majority of our 80 commercial drugs was a result of internal conversion, thanks to our unique CRDMO model. So the CRDMO model is very simple to follow the molecule, follow the customer and follow the science. This allows our pipeline to efficiently advance and convert the molecules from early discovery into clinical and commercial phases, capturing high-quality molecules as they progress.

So if you look at our Phase III and the commercial pipeline, the number of molecules has grown from 107 to 167 in the past few years. That's a 56% increase. Concurrently, the revenue from these molecules has surged by more than 150%. This considerable growth in revenue reflects the increased complexity and the quality of the molecules that we support as well as the expanded scope and strengthen the partnership with our customers. It serves as a fundamental driver for our sustained future growth.

So here are some additional perspectives to demonstrate how we timely address unmet needs for patients. And as a result, the quality of our pipeline. In 2025, FDA approved 30 small molecule new drugs and we actively supported 8 of them, so representing a 27% share. Over the past 5 years, we have supported 21% of small molecule new drugs approved by FDA during that period of time. So every 1 out of 5 FDA-approved drugs that we support.

So GLP-1 is another field that I'm sure many of you are familiar with. We are deeply involved in this sector, and our GLP-1 pipeline growth is outpacing the industry. At present, we are supporting 24 GLP-1 drugs. Of this 24, 15 are small molecule and peptide new drugs in Phase II and Phase III clinical trials positioning us to secure a 25% market share. Specifically, at the global clinical stage, we support 11 out of 56 peptide drugs and 12 out of 36 small molecule drugs. Also, additionally, we support 1 out of 7 commercial drugs currently on the market.

So leveraging the insights gained during the early stage research, our CRDMO model enables us to quickly identify and seize the opportunities in emerging new modalities like oligo and peptide. With strengthened capabilities and fast-growing capacity, our TIDES business has consistently delivered strong growth in recent years. So we expect TIDES revenue to grow another 90% plus in 2025. So our total capacity of solid phase peptide synthesizer has now exceeded 100,000 liters, and this expansion completed ahead of schedule in September 2025, positions us well to meet growing customer demand.

So as a result, the company has continuously delivered sustained growth in both revenue and profit achieving over 20% CAGR in revenue and over 30% CAGR in adjusted net profit in recent years. In 2025, we raised our full year guidance twice, yet again, we beat expectations and set a new record. Our continuing operations revenue grew 21.4% year-over-year with total revenue now reaching RMB 45.5 billion. Our adjusted non-IFRS net profit reached RMB 15 billion, growing 41.3% year-over-year, resulting in a net profit margin of 32.9%. That's a 5.9 percentage point improvement year-over-year. This clearly underscores the company's financial resilience throughout the cycles.

Our continued business growth, efficient operations and enhanced financial management have enabled us to generate sustained free cash flow. This strong cash generation allows us to continue investing in capabilities, capacities and talents. At the same time, also returning value to shareholders. In 2025, we expect CapEx to remain in the range of RMB 5.5 billion to RMB 6 billion. In addition, with such strong business and profit growth, we expect free cash flow to hit another new record.

As our CRDMO model evolves, we continue to improve our profitability. Our earnings per share have increased almost tenfold since we went IPO. While continuously investing in our capabilities and capacity, the company remains committed to rewarding shareholders. In 2025, the company has implemented nearly RMB 7 billion in cash dividends, share repurchases and cancellations, representing more than 70% of the company's net profit in 2024. Over the past 7 years, the cumulative amount of dividends and the share buybacks has exceeded RMB 20 billion, which is over 40% of our cumulative net profit since IPO. With faith in our CRDMO model to foster long-term growth and profitability, we are confident in our ability to continue delivering value and generating returns for our shareholders.

So as an enabler of innovation and a trusted partner, we actively promote sustainability. In 2025, we achieved the highest AAA rating from MSCI for the first time and improved to CDP climate change A rating. In addition, we maintained our CDP water security A rating and EcoVadis Gold rating. Our near-term emissions reduction targets have been validated by SBTi. Our credibility has been widely recognized by global authority ratings and initiatives, including UNGC, PSCI, S&P Global and many others. We continuously drive and execute ESG initiatives in every aspect of our business strategy and operations.

So most importantly, we remain steadfast in our unwavering commitment to protecting customer IP and adhering to the highest quality and compliance standards. In 2025, we successfully completed 740 quality audits and inspections conducted by global customers and the regulatory agencies as well as 60 customer information security audits. So this equates to an average of over 2 quality audits per day and more than 1 information security audit per week, always 100% pass rate and 0 critical findings.

20 of our main operating sites have been certified under the global standard of ISO/IEC 27001 information security management system. So IP is the lifeline of both our company and our customers. Our approach to IP protection is deeply rooted in our founding principles of integrity, adherence to global quality standards and the commitment to world-class security. So if we enforce a zero-tolerance policy towards any form of infringement, this has been the core value of WuXi AppTec since our founding.

We recently celebrated our 25th anniversary. The journey over the past 25 years have been extremely rewarding, and we are fully confident in steering the next 25 years with our unique CRDMO model and operational excellence.

Central to our strategy is no doubt the focus on our CRDMO core business to deliver exceptional services to customers and benefit patients worldwide. To support this, we will relentlessly enhance our global capabilities and capacity to meet the long-term customer demand and drive innovation that prepares our industry forward. With our unique CRDMO model to closely follow the science and develop in-depth industry insights, we are better positioned to capture new molecule opportunities that will fuel our future growth. At the same time, we will maintain organizational agility and continuously improve operational excellence to consistently deliver superior efficiency and quality. We believe these efforts will ensure sustained resilience in our profitability and cash flow through all times, enabling value creation and consistent investment in our business growth, talents and rewarding shareholders.

So this concludes my presentation. Thank you for your time. And now we're happy to take your questions.

Thank you, Dr. Chen. And joined on the stage, we also have co-CEO, Dr. Yang; and CFO, Ms. Shi on stage. So quickly, if you have questions, you can raise your hand. And we also can accept questions from all our audience. I think you have to submit your questions through the app digital book. And if you have question, just raise your hand. Otherwise, I will start asking a few questions.

Okay. Maybe -- yes, please.

[indiscernible]

Yes, yes, sure. I think the question you're asking is about the number of audits, right? We try to understand, is that number consistently high every year or just...

[indiscernible]

Just particularly high in the recent years?

So the 2025 -- the number of 2025 is a record high because the business keep growing, but this is normal. So that's a large number of quality audits. But every year -- but as the business grow, and we have more and more projects, more and more customers, that will be more and more quality audits. So we average 2 audits every day. But actually, each audit last like 3 to 5 days. So that's a large amount of audits, which is representing the growing business.

Yes, question over there.

So my question is on the TIDES business. We have significantly increased our capacities last year. So if you could help us understand what does the utilization stands at? And one question on TIDES again is that what do we manufacture here? Is it the entire API or we are manufacturing intermediates there?

So the first question is about the capacity. So our capacity is highly used for the TIDES business -- for the peptide solid phase synthesizer. We built it because of the demand. And also, we do both. We do both. We do intermediate as well as API for peptide.

Any plans to increase these capacities over the next few years?

Plan to increase...

Peptide capacity.

Capacities, yes, actually, we're going to invest more this year 2026 and continue to increase the capacity, so as our pipeline continues to grow.

Is there a target for peptide capacity increase?

We're in the planning stage right now, yes. But definitely, we will build one new plant this year.

Questions there?

I'm a big supporter of the company. I think manufacturing, doing -- all in China, just fine. However, last year, the -- under the Biden administration, the FDA Commissioner actually made a statement. He said he didn't like Chinese companies doing this. He thought it was not keeping profitability in America. Do you get any pushback? I don't think you do. But are you getting pushback these days on doing anything in China for American Pharma?

I'm sorry, can you repeat?

Yes, if I may. So this audience question is because of the U.S. government's policy, have we received any pushback of doing things in China.

Well, that's a very -- actually, it sounds very simple, but a very complex question. But if you look at our business, '24 and '25, especially the past 2 years, we still grow very strongly, both '24 and '25. We just have a record growth in '25. So from the business result, you can see that the business is growing very strongly.

I just want to add, on a quarter-by-quarter basis, we do disclose the business growth by region. And while we are still preparing for the full year formal result. As of the third quarter and the last few quarters, the U.S. remained a growth region and actually one of our highest growth region overall. So it is a direct demonstration. First of all, the customers in the United States continue to use our service and our service capacity capabilities remain in high demand.

Okay. So -- maybe it's my time to ask questions. And my first question to the management is -- management already disclosed profit alerts, that's record high revenue, record high adjusted nonprofit. So can you give us some kind of color? What is the main driver for the outstanding financial performance for 2025?

Yes. I think a couple of reasons. One is definitely the demand for the GLP-1. Clearly, it's high and our execution. So we were able to meet that demand. So that is one factor. And if you take the GLP-1 out and the rest of the business also grow strongly. So both factors give this result.

And so looking forward this year or even kind of medium to long term, so what can we expect for kind of the next stage?

Yes. So for -- so for 2026, we will give guidance during the annual report, which is March 24, we will give the official guidance at that time. But I can tell you, '26 will be at least similar as '25.

In term of growth.

Yes.

What about margin?

CFO, please.

Yes, I think everyone is pretty inspired by our continuous growth and the profit improvement. I think the main drivers for the profit improvement and pretty resilient on the profit margin expansion is because one is the unique CRDMO model, which allow us to keep growing the top line, which really give us the benefit from the scale benefits. And we continue to invest in capabilities, capacities. And we continue to make a lot of efforts to optimize our manufacturing process. So keep increasing the utilization of the capacity and also the operational efficiencies.

And at the same time, I think you also noticed the -- we refocused on the CRDMO by divesting some business, which also allow us to expansion the bottom line margin. So I think all these efforts will be continued. So I think the growth of the bottom line will be continuously pretty aligned with the top line.

Okay. Great. Yes. We look forward to more data in March. And a related question is now we have seen China kind of currency RMB seem to be appreciating. And since we disclosed our numbers in RMB. And we have a lot of business in overseas market. So how does this kind of foreign currency fluctuation is going to affect our kind of reporting line?

Yes. I think this year has some impact, but I think people not really feel that in our final -- the number we just reported. I think which thanks to all the drivers I just mentioned, so which allow us to have the capabilities to mitigate not only FX, a lot of other uncertainties -- external uncertainties to make sure. I think in the last -- the past 25 years, we just celebrate our 25 years anniversary. You can see our growth. Our margin sustainability is pretty resilient, which allow us to mitigate a lot of the other uncertainties.

Great.

But of course, we will continuously monitor that. This is out of control for every company, not only us, right? And also we expand globally for our capabilities and capacities. So those expenditures is not in RMB. So that's a kind of a partial natural hedge as well.

Understood. And I also want to get some more understanding about capital allocation. When you talk about -- management to talk about in 2025 in total RMB 6.9 billion return to shareholders in terms of dividends, in terms of share buyback. What can we expect if we look forward to this year and even longer term?

Yes. I think to maintain our sustainable growth, it's very important to allow us to keep invest capabilities and the capacities. So -- and at the same time, I think people is also very, very important for our company. They are our core assets as well. We would like to keep -- retain our top talent to make sure they are be together with the company and with all the shareholders to drive the company continued growth. And at the same time, if you look at our past 5 years since our IPO, our dividend policy is pretty consistent. And since last year, 2025, we also introduced the interim dividend payment. I think it's also quite welcomed by all the shareholders as well. But of course, every year, we will propose the details to our AGM shareholders meeting. And hopefully, we will have the detailed plan at that time will be the end of April. That's the current plan. And hopefully, every shareholders will continuously support us and allow us to grow the company together.

Yes, yes, of course. Do we have any questions from audience? Yes. Okay. So my next question is more kind of a macro-related question about biotech funding, because I think a consistent kind of theme from his conference presented by quite a few other CXO companies, seem to be the biotech funding suggests there's a better recovery. And have we seen such recovery in terms of our interaction with smaller biotech companies and how do we think such funding recovery will help our kind of -- actually early-stage business moving forward?

Yes. So for -- so Minzhang already said, first of all, our early-stage business providing an integrated capability across chemistry, biology and preclinical science. We have seen a rebound, particularly rebound of the biotech sector. Now the rebound and the demand we see do vary region by region. But overall, the trend is very healthy. If we compare the second half of the last year versus the first half of last year. So there is a clear momentum. And obviously, within the early stage, there is discovery and the preclinical and they rebound magnitude and dynamics are slightly different, but overall, it's a positive trend.

Okay. Great. Great to hear. And I think another important theme of the conference is the application of AI in Healthcare. And I also want to understand how management think about how AI is used could drive or how to impact the overall CDMO industry?

Maybe Steve start...

Yes. Well, I think AI is very exciting. I will probably address your question on the broader question that including AI and other digitalization tools, we is an enabler. So we're always excited about the new technology that could enable serve customers better. And we see digitization, automation are tremendously enabling internally to increasing efficiency, shorten cycle time, while maintaining speed, maintain high quality. And the specific use case we have seen is not only on the manufacturing side, we're using digital tools to actually schedule reactions. And then in preclinical science, we are widely using digitization tools, software, hardware to actually managing our workflow and scheduling animal/human studies. And then in early stage, we have also using AI to assist some experiments, including helping customers to design proteins and so on and so forth.

Fundamentally, we don't believe AI will replace what the human's creativity. So we envision it's HI, which is human intelligence plus AI. And then we benefit of a strong combination of those skills and the deliveries and also the accumulated data, operation data allow us to learn from the past.

Okay great. And -- maybe time for one last question. Any questions from audience?

[indiscernible]

Maybe -- I'll repeat the question, or you want to ask yourself?

Yes. Where are you seeing the biotech rebound in your portfolio besides peptides? And where else are you building capacity besides peptides anywhere or mostly focusing on peptides?

Well, we expanded in peptide, of course, and oligonucleotide and also small molecule. That's basically the synthetic modalities that we focus on and we all see the continued growing demand.

Okay. I guess that's a wrap. And thank you for joining this first session, and hope you have a good day going ahead.

Thank you.

Good morning. Good evening, everyone. Welcome to the second half earnings call for WuXi AppTec, the leading CDMO in China. My name is Laurence Tam, China healthcare analyst at Morgan Stanley.

First, I want to congratulate management for another strong quarter. This represents 2 consecutive quarters of beating consensus estimates. The company also reported a substantial rise in backlog driven by its chemistry and in particular, its TIDES business.

Investors may have noticed from the company's PPT that AppTec raised its full year revenue growth guidance by 2 to 3 percentage points to a range of 13% to 17% full year revenue growth.

With that, let me introduce AppTec's management team, who will be presenting today. First, we have Mr. Minzhang Chen, Co-CEO; and Mr. Steve Yang, Co-CEO; Ms. Florence Shi, CFO; Mr. Howard Wu, General Counsel; Ms. Min Han, the Board Secretary; and Mr. Ruijia Tang, IR Director.

Now let me turn it over to Ruijia. Please, Ruijia.

Okay. Thank you, Laurence, and thank you to all the investors and analysts for joining today's earnings call. We're sharing our 2025 interim results presentation, which you can also find on our website.

During today's call, we will make forward-looking statements. Although we believe that our predictions are reasonable, future events are uncertain, and our forward-looking statements may turn out to be incorrect. Accordingly, you are strongly cautioned that reliance on any forward-looking statements involve known and unknown risks and uncertainties.

In addition, to supplement the company's consolidated financial statements presented in accordance with IFRS, we provide adjusted non-IFRS financial data. We believe the adjusted financial measures are useful for understanding and assessing our core business performance, and we believe that investors may benefit from referring to these adjusted financial measures by eliminating the impact of certain unusual or/and nonrecurring items that are not indicative of the performance of our core business. However, these adjusted measures are not intended to be considered in isolation or as a substitute for the financial information under IFRS. All IP rights and other rights pertaining to the information and materials presented are owned by WuXi AppTec.

Audio recording, video recording and disclosure of such materials by any means without the prior consent of WuXi AppTec is prohibited. This call does not intend to provide a complete statement of relevant matters. For relevant information, please refer to the company's disclosure, documents and information on the Shanghai Stock Exchange, Stock Exchange of Hong Kong and company's website.

In today's call, there will be a Q&A session after our presentation. Please kindly share with us your name and institution before asking questions.

With that, please allow me to introduce our Co-CEO, Dr. Minzhang Chen, to present our 2025 interim results. Minzhang, please.

Thanks, Ruijia. Good morning, and good evening, everyone. Thank you for joining our first half 2025 earnings call. We will begin on Slide #5.

In the second quarter and the first half of 2025, our revenue and profit achieved strong growth. For the first half, the company's total revenue achieved RMB 20.80 billion, of which the revenue from continuing operations grew 24.2% year-over-year to RMB 20.4 billion (sic) [ 20.4% ]. The adjusted non-IFRS net profit grew 44.4% year-over-year to RMB 6.31 billion, with non-IFRS net profit margin further improved to 30.4%. Our first half revenue and net profit both reached record highs for the same period.

Next slide, please. The company remains focused on enhancing our core capabilities, expanding capacity to better meet customer needs with the continuous capacity expansion by the end of June, we achieved a record backlog for continuing operations of RMB 56.69 billion, growing 37.2% year-over-year.

Next slide. Slide 7 shows our revenue streams of continuing operations from customers worldwide. Revenue by region is based on the country or region where our customers' parent company is based, of which revenue generated from the U.S. companies grew 38.4% year-over-year; revenue from European companies grew 9.2% year-over-year; and the revenue from Japan, Korea and other regions grew 7.6% year-over-year. And the China experienced some decline. This diversified revenue streams demonstrate our capabilities to enable global healthcare innovations, which will also ensure the stability and the resilience of our financial performance.

Next slide. As an enabler of innovation and a trusted partner and the contributor to the global pharmaceutical and life science industry, the company actively advanced sustainability and has been extensively recognized by global rating agencies. The company has achieved the highest AAA rating from MSCI for the first time, which is the first Asia-listed company in the life science industry to reach this milestone. In addition, the company's near-term emissions reduction targets have been validated by SBTi, which marks an important milestone in the company's journey towards sustainability. Our accomplishments have also been acknowledged by major global rating agencies, including Ecovadis, CDP, UNGC, Sustainalytics and the FTSE4Good. As we continue to advance our sustainability strategy, we embrace our commitment to the social responsibility -- to social responsibilities.

Okay, now let's move on to the segment performance and the please turn to Page10. WuXi Chemistry's CRDMO business model drives continuous growth. In the first half, WuXi Chemistry revenue grew 33.5% year-over-year to RMB 16.3 billion, with continued optimization of production process and improvement in capacity efficiency driven by the growth of late-stage clinical and commercial projects.

Our first half adjusted non-IFRS gross profit margin improved 5.2 percentage points year-over-year to 49%. Our Small Molecule Drug Discovery, R business continues to generate downstream opportunities. In the past 12 months, we have successfully synthesized and delivered over 440,000 new compounds to customers. Meanwhile, 158 molecules were converted from R to D in the first half. As we continue to strengthen the capabilities of our integrated CRDMO platform, we constantly enhance the internal conversion of molecules at different stages.

Our small molecule D&M business remains strong, and a small molecule CDMO pipeline continue to expand. In the first half, small molecule D&M business revenue grew 17.5% year-over-year to RMB 8.68 billion. Meanwhile, the company continued to build small molecule capacity. In March, both our Changzhou and Taixing API manufacturing sites successfully passed FDA on-site inspections with no single observation. The total reactor volume of small molecule manufacturing capacity will exceed 4 million liters by end of this year.

WuXi TIDES, our new modality business, sustained rapid growth. With the ramping up of new capacity released sequentially each quarter last year, WuXi TIDES achieved RMB 5.03 billion revenue in the first half, representing a strong growth of 141%, 121.6% year-over-year. By the end of June, TIDES' backlog grew 48.8% year-on-year. The number of TIDES D&M customers increased 12% year-over-year, while the numbers of TIDES D&M molecules increased 16% year-over-year. We continue to build peptide capacity in Taixing. The total volume of solid-phase peptide synthesizers will exceed 100,000 liters by end of this year.

Next page, please. Driven by Follow the Molecule and the Win the Molecule strategies, WuXi Chemistry's small molecule CRDMO pipeline efficiently converts and captures high-quality molecules, delivering sustainable growth. This is also a testimony to our customers' full confidence in our technical capabilities, service efficiency and quality system. In our stage, over the past 12 months, we have delivered more than 440,000 new compounds, very significant in its scale. At the same time, the complexity of this compound continue to increase, demonstrating the ongoing demand from early-stage R&D customers for high-quality services.

We continue to enhance the synergy between R and the D, strengthening the conversion of molecules from R to D phase and the new compound synthesized in the R stage continue to generate opportunities for our small molecule D&M services.

In D&M stage, we added 412 molecules to our pipeline in the first half, including 158 molecules converted from R to D. Currently, our small molecule D&M pipeline has exceeded 3,400 molecules, including 76 commercial products, 84 in Phase III, 368 in Phase II and 2,081 in Phase I and the preclinical.

In the commercial and Phase III stages, we added 8 projects in the first half. As these late-stage pipelines grow, the complexity and the quality of the molecules we support continue to improve, and our collaboration with customers is deepening. Together, these factors will drive sustained business growth in the future.

Now I will hand over to co-CEO, Dr. Steve Yang to talk about WuXi Testing and WuXi Biology. Steve, please?

Thank you, Minzhang. Please turn to Slide #12. WuXi Testing revenue slightly declined to RMB 2.69 billion in the first half of the year. In the second quarter, our lab testing revenue reached RMB 1 billion, growing 5.5% year-over-year and 13.2% quarter-over-quarter, of which drug safety evaluation services revenue grew 3.4% year-over-year and 10.2% quarter-over-quarter. For the first half, revenue of the lab testing services reached RMB 1.89 billion, almost flat year-over-year. Due to market impact, the first half adjusted non-IFRS gross profit margin declined as pricing gradually reflected in revenue, along with backlog conversion. Drug safety evaluation services revenue were down 2.2% year-over-year, maintaining an industry-leading position in Asia Pacific.

We are committed to actively enable customers' global licensing effort. In particular, we have supported approximately 40% of successful out-licensing deals from Chinese biotech companies since 2012. New modality business continued to develop while we maintain our leadership position in areas, including nucleic acid, conjugate and MRI and multi-specific antibodies and peptides.

During the first half, the Suzhou facility has successfully passed 4 consecutive FDA on-site inspections. Revenue generated from clinical CRO and SMO business were down 4.7% year-over-year to RMB 0.8 billion in the first half due to market pricing impact. The SMO business revenue grew 1.5% year-over-year, maintained our industry-leading position in China. In the first half, our clinical CRO business enabled customers to obtain 12 IND approvals and the submission for 2 IND filings -- 2 NDA filings. Our SMO business supported 61 new drug approvals for customers. SMO team has supported 317 new drug approvals in total over the past decade, maintained significant advantages in multiple therapeutic areas.

Let's turn to Slide 13, please. WuXi Biology followed the science and continued to strengthen the drug discovery capabilities in emerging areas. We generate downstream opportunities for our CRDMO model by continuously contributing more than 20% of new customers. Through platform integration and cross-regional collaboration and comprehensive service transformation, we'll enable our customers in drug discovery across the wide range of modalities and therapeutic areas.

WuXi Biology revenue reached RMB 1.25 billion in the first half of the year, a year-over-year increase of 7.1%. Due to market pricing impact, the first half adjusted non-IFRS gross profit margin was down 0.7 points to 36.4%. We accelerate the advancement of our in vitro integrated screening technology offering and in vivo pharmacology capabilities, driving continued rapid year-over-year revenue growth. The constantly improved competitive advantage in therapeutic areas beyond oncology has laid a solid foundation for sustainable growth throughout the year. Our new modality drug discovery services continue to perform well, contributed to more than 30% of our WuXi Biology's total revenue.

Now I would like to turn the call to our CFO, Florence Shi, to discuss our financial performance. Florence, please?

Thank you, Steve. Let's turn to Slide 15. We are going to recap on the company's financials as the best second quarter and the first half in our history. We delivered robust more than double-digit growth in both revenue and profit. This was driven by the gradual release of new production capacity since the second quarter of last year, which timely supported the growing demand from late-stage clinical and commercial projects.

Meanwhile, the company consistently developed and leveraged new technologies and capabilities, optimized production process and improved production and operating efficiency. In the first half, our adjusted non-IFRS gross profit reached RMB 9.26 billion with the adjusted non-IFRS gross profit margin further expanded from 41.6% in 2024 to now 44.5%.

Our adjusted non-IFRS net profit reached RMB 6.31 billion, with the adjusted non-IFRS net profit margin further improved from 27% in 2024 to now 30.4%. The net profit after deducting nonrecurring items was RMB 5.58 billion, growing 26.5% year-on-year. The growth rate was lower than that of adjusted non-IFRS net profit mainly due to the impact of exchange rate fluctuations on the book value of U.S. dollar-denominated net assets across different quarters.

Our net profit attributable to the owners of the company was RMB 8.56 billion, marking an increase of 101.9% year-over-year. This included an investment income of RMB 3.2 billion from the partial sale of shares in an associated company. Hence, this growth rate outpaced that of our adjusted non-IFRS net profit.

We continue to enhance our management capabilities and resilience, which has enabled us to achieve strong performance in first half despite external uncertainties. Moreover, following multiple share repurchases and cancellations, our diluted earnings per share reached RMB 2.99, growing 106.2% year-over-year. Building on profit growth, this helped to further enhance our earnings per share performance.

Please turn to Slide #16. With the continued business growth, particularly the rapid growth in late-stage clinical and commercial projects, combined with the company's improved operating efficiency and financial management capabilities, our first half operating cash flow achieved RMB 7.07 billion, growing 49.1% year-over-year. Again, this fully demonstrates the sustainable business growth momentum brought by our high-quality molecules and the projects.

We continue to accelerate global capacity expansion as planned with CapEx reaching RMB 2.1 billion in the first half. As construction progress, CapEx spending will continue to increase in the following quarters, and we maintain our full year CapEx forecast at RMB 7 billion to RMB 8 billion.

Now I would like to hand over to Minzhang to share the company outlook. Minzhang, please.

Please turn to Slide 18. As we are facing a very dynamic and complex global macro environment with many uncertainties, this sets even higher standards for the management team. The company will continue to focus on the CRDMO business model with an emphasis on the O for operations. As we continue to focus on our unique integrated CRDMO core business, we are accelerating the global expansion and the capacity building, leveraging our customers' ongoing demand for enabling services.

We provide highly efficient and exceptional services benefiting patients worldwide and driving long-term growth. At the same time, the company is promoting lean management and operations, continuously improving production and operational efficiency and making every effort to reduce the potential impact of external uncertainties.

With confidence in customers' ongoing demand for enabling services, our CRDMO business model and the management execution, the company has raised the full year guidance despite external uncertainties. We expect continuing operations revenue to resume double-digit growth in 2025 with its year-over-year growth rate raised to 13% to 17%, up from the prior 10% to 15%. Correspondingly, the company expects full year total revenue of RMB 42.5 billion to RMB 43.5 billion, up from the prior RMB 41.5 billion to RMB 43 billion.

As we focus on the core CRDMO business and the continuously improved production and operating efficiency, the company is confident and expect to further improve the adjusted non-IFRS net profit margin in 2025. As we are accelerating our global expansion and the capacity construction, CapEx is expected to reach RMB 7 billion to RMB 8 billion in 2025. And together with business growth and efficiency improvement, free cash flow is expected to increase from RMB 4 billion to RMB 5 billion to RMB 5 billion to RMB 6 billion. The company will closely monitor the changes and the developments in the global macro environment, and we'll communicate any changes in a timely manner.

Next page, please. While continuously enhancing our capacity and capabilities, the company remains committed to rewarding shareholders and actively upholding the company's value. In the first half of 2025, the company distributed a total of RMB 3.84 billion in cash dividends, including RMB 2.83 billion for the 2024 annual cash dividend and RMB 1.01 billion for the 2025 special cash dividend. Meanwhile, the company also completed the repurchase and cancellation of RMB 1 billion worth of A-shares in the first half.

An additional previously announced RMB 1 billion worth of A-share repurchase and cancellation plan is currently being executed with approximately RMB 0.5 billion worth of A-shares repurchased as of now. Moreover, the company's Board of Directors approved WuXi AppTec's first interim dividend plan, distributing RMB 3.5 cash dividend for every 10 shares to shareholders, which is approximately RMB 1 billion in total. The cash dividends, together with the share repurchases and cancellations mentioned above, will amount to nearly RMB 7 billion in total, which accounts for more than 70% of the company's net profit attributable to the owners of the company in 2024.

In times of uncertainties and challenges, our continued business growth relies heavily on our management team with strong capabilities and determinations. The company will continue to retain top talent and further enhance the resilience of business operations under management. In the first half, the company has completed the acquisition of HKD 2.5 billion worth of H-share for the purpose of the 2025 H-share Incentive Trust Plan.

According to the plan approved by the Annual General Meeting, upon achieving RMB 42 billion revenue, no more than HKD 1.5 billion worth of H-shares will be granted. And upon reaching RMB 43 billion revenue and above, a total of HKD 2.5 billion worth of H-shares will be granted. This aims to continuously attract and retain top talent, strengthen the collective capabilities of management team and enhance the resilience of the company's business operations and management. With this, there will be no dilution to existing shareholders.

Thanks for your attention, and we'll now open for questions.

Thanks, Dr. Chen. This is Laurence from MS. So let me just go over the format for Q&A. [Operator Instructions] We have lots of questions, so I apologize if we can't get to all of them.

First, let me ask 2 questions. My first question is AppTec's second quarter revenue and earnings both vastly exceeded expectations. What are the key drivers for that? And have you noticed customers front-loading their orders due to worries about tariffs? So that's my first question.

My second question is the company raised its full year guidance. What are some considerations for that? And if revenue growth in the first half was over 20%, this higher guidance would imply a single-digit revenue growth for the second half. So is there room for higher growth in the second half? So that's my second question.

Let me first answer one by one, okay. So first of all, I appreciate you recognize that our first half outperformed the performance. But I think this outperform the first half performance was not driven by any like customer request to accelerate shipments because of the tariff concerns. It purely reflects our high efficient execution, not only on the project deliveries, but also on our new capacity validation. And the ramp-up schedule is smoother and quicker than what we expected. So that's why this operational momentum led us to raise full year guidance, even there is still a lot of uncertainty -- external uncertainties in the second half.

And your second question is about the second half performance, right? So actually, if you observed, since second quarter last year, we went through a very quick capacity ramp-up phase, which results in a sequential growth of nearly 30% in the second half of last year compared to the second half of first year. This is a really a historical high sequential growth. However, today, our capacity is approaching full utilization in the first half of this year and the validation of new capacity will require some time. So even with this limited capacity expansion, we still guide and expect business revenue in the second half to achieve near double-digit growth both sequentially and year-on-year.

Also, as a reminder, discontinued operations contributed around like RMB 800 million revenue last -- second half of last year. These divestitures have already been fully completed. So there will be no further contributions from discontinued operations going forward. So I also recommend all the investors to focus on our continuous business operations growth momentum. Hopefully, that answers your questions.

Yes. So now let's move on to investors from other sell-side analysts and investors.

So first, let me ask 2 questions from Ziyi Chen of Goldman Sachs. So Ziyi wanted to know, firstly, in the first quarter, management mentioned new order growth was around 25%. And based on his calculation, second order new order -- second quarter new order growth would look slower. Is that the case? If yes, how should we interpret it? So the first question is on backlog.

And the second question is, excluding TIDES, which still saw a very robust growth, the rest of the small molecules business in D&M grew only 20% plus in the second quarter. What has been the key driver? And is there any color on what has been the contribution from oral GLP-1 products?

I will take the first question, and Minzhang can take the second question. So actually, there is some U.S. dollar depreciation in first half. So if we exclude foreign exchange impact, actually, our new orders signed in Q2 still increased by, promptly, like 12% year-over-year. Sequentially, compared with first quarter, our new order intake actually grew over -- close to 35% compared to first quarter. So I think it's still a very strong growth momentum on our new order intake.

All right. I will comment on the small molecule revenue growth in D&M. So we have a very strong and big pipeline, CRDMO pipeline, as I mentioned in the presentation. So we have -- currently, we have over 200 late phase and commercial projects. So many of the projects, especially in commercial project, contributed to revenue growth.

Of course, the oral GLP, GLP-1 small molecule is a key driver in the Q2 and the first half small molecule D&M revenue.

Okay. Great. So the next question will come from Michael Luo of CLSA. So let me ask these questions one by one. So his first question is, how should we think about the margin improvement in the second half? Should we assume that second half adjusted non-IFRS net profit margin would be similar to the first half?

Yes. I think if you look at our first half margin contribution, I think our large late-stage and commercial order actually significantly improved the equipment utilization and the production yields. So we've increased the proportion of large late stage and commercial order delivery, it will further expand our margin.

And also at the same time, as I mentioned, we complete some divestiture of discontinued business. Those businesses, if you look at the historical margin, they are loss-making business. So the divestiture will also expand our margin as well. But I also want to remind everyone, we also need to manage a very large, new capacity ramping up progress. But I have the confidence our team always have the very excellent execution. But at the same time, we are keeping watching out the uncertainty of the U.S. dollar depreciation trend.

Okay. And his second question is on top of GLP-1 or TIDES, is there any other potential blockbuster CMO project in AppTec's portfolio that we could expect in the future? So any color would be very helpful.

Okay. Yes, this -- as I mentioned again, we have -- yes, we have quite a few actually. Very -- the projects with great potential, for example, PCSK9, for example, pain medicines, for example, the autoimmune program. So we do have quite a few, very promising, big potential projects in the pipeline.

But go back to -- I mentioned earlier, we have a very -- we have a unique CRDMO business model, and we have a strong pipeline. So this CRDMO business model allows a lot of molecules convert internally from our R to D to M. So this allows us to be involved in all those projects at a very early stage and work with many of our customers on the pipelines.

So this -- no matter what will be the next big product, we have a very good chance we will be involved very early and has an opportunity to working on it. So I think, yes, in short, yes, we have those big potential molecules in the pipeline. But this actually is a result of our unique CRDMO business model. Thank you.

And his last question is, although global biotech funding in the first half was weak, a few U.S. clinical CROs mentioned in their second quarter earnings call that they have seen a marginal demand recovery from their biotech clients in the second quarter. How should we think about the early-stage projects demand in the second quarter versus the first quarter and second half outlook on early-stage demand?

Yes. We also noticed those increase from the clinical CROs. Now they are usually representing clinical stage business, our early stages in discovery and the lab-based service. So the short answer is our early-stage service from discovery and preclinical are still in a stabilized patent. We haven't seen a sharp increase. That being said, because of our differentiated capability in new modality in many of the high-demand therapeutic area, we still have robust demand and new orders.

We do notice that the funding situation overall, based on third-party public source, remain challenging. So we anticipate that this period of uncertainty on early-stage biotech funding will continue for some period of time. That being said, we believe we continue to maintain a strong market position regarding those attracting the continued interest of biotech companies overseas.

Okay. Great. So our next question comes from Chen Chen of UBS. The question is China biopharma out-licensing is currently hot and trending up. Are there any cases that your China customers out-licensed a drug candidate and the overseas partner continues to ask the CRDMO for ex-China markets? And do you think that this China BD momentum could benefit you in the longer term?

The short answer is yes, yes, it has benefited us now in the near term and the short term, and it has benefited us in the past. As I mentioned earlier, for the last 3 years, we have enabled 40% of such collaborations. And this demonstrated our differentiated capability and also high quality and those high quality are clearly recognized by the multinational pharmaceutical companies that -- and oversee companies that license those products as they are -- as part of their due diligence, they think high-quality preclinical and discovery data is essential for their due diligence efforts.

For your question, Laurence, going forward, we anticipate those trends will continue, and that will attract more and more China-based biotech companies and customers elsewhere to use our service. It will also help us convert overseas customers that otherwise haven't tried our preclinical testing service or discovery service in the past and then give them another chance, a different perspective to get to know our platform. Some have done that and are very pleased to see what they have experienced, and they are now actually start working with us.

And finally, we do anticipate those strong demand, not only benefit from our discovery service and the preclinical service, some of those products are actually manufactured in our CRDMO platform on Minzhang's team. As those products continue running global clinical trials, moving along the pipeline, they will also drive demand for our CRDMO D&M business, first in development and hopefully, in manufacturing in late stage, even commercialization.

Great. So our next questions come from CMBI, Mr. Huang Benchen. His first question is on the impact of tariffs. Do we see any changes in customer behavior in placing orders to AppTec and other China-based CDMO companies?

We haven't seen the significant changes because the tariff is still a systematic challenge in the current global trading environment, and it's moving pieces, right? And also the global pharmaceutical supply chain is highly complex. So as an enabling service provider, our shipping destination determined by our clients, global footprints, the customers, they are responsible for clearance and tax reporting by the customers. So our focus still remains on delivering the high quality in enabling services.

In this evolving and uncertain external environment, we prioritize the certainty of client demand for our enabling services. Our sustainable growth from the competitive advantages of our uniquely integrated CRDMO business model as well as our capabilities in quality, speed and efficiency, not just from the price competition alone.

Okay. And his second question is, can you talk about the reasons why the U.S. regional growth outpaced other regions? The out-licensing deals from Chinese companies contribute to the growth in the U.S. market.

Maybe I will start on the second half of your question. The out-licensing deals originated from Chinese biotech companies. First of all, those Chinese biotech companies use our service, they were booked as revenues from China. So the short answer, it doesn't.

And secondly, many of the work they work with us happens. There is a phasing element. Those work done in discovery and preclinical done certainly sometime before they have clinical data and announcing out-licensing. So there isn't a direct, within the quarter or within a short time difference, conversion.

And to answer your question, the strong driver of the business growth in the United States, driven by our CRDMO business is U.S. customers, particularly large multinational customers. Obviously, Minzhang can elaborate more, that as he has already nicely demonstrated in his presentation.

I guess, the major -- like I said, right now, the major contribution to the revenue growth is from late-phase and commercial projects and the few high potential projects that I mentioned earlier, in addition to the GLP-1 small molecule, they are all from multinational companies that are headquartered in the U.S. So that's why the U.S. region has a strong growth in revenue in CRDMO business.

Great. And the next question comes from Citigroup's Zoe Bian. What is your latest TIDES' revenue growth guidance in 2025? And is there any color on 2026?

Yes. We think we had a strong revenue growth from TIDES for the past 2 years. And we think this year will be somewhere -- growth will be somewhere 80%. And we will give you the growth -- the guidance for the growth next year at a later time, yes.

Okay. That's very positive. So the next question comes from David Shang of Jefferies. He would like to know your CapEx in 2026 and TIDES' business capacity expansion plan in 2026.

Let me just comment on the TIDES CapEx expansion plan. So most of the TIDES expansion plan actually will be completed this year, 2025. So we will focus on the process validation and the ramping up and start using the new facility next year 2026.

In addition to that, all our current capacity for the TIDES is in China. So we are actually in the process of building a new plant, a TIDES new plant in Singapore as part of our Singapore manufacturing site. Yes, Florence, please.

Yes. Company-wise, as Minzhang just mentioned, not only the TIDES capacity expansion, our company also look for the overall more global footprints and the CapEx expansions. So with the new capacity planning and also the current capacity expansion approaching to the late stage of construction, I believe the CapEx spending will be gradually increased year-over-year. But the exact number, we will give to the investors along with our annual outlook early next year because that depends on the order schedule planning and also the payment schedule finalized this year.

Okay. The next question comes from Megan Zona of Boston Partners. Our competitors of the testing business discounting prices to win share? And what is driving the pricing impact?

Our competitors for testing business obviously have a different market segment. Those overseas, which is a significant part of our business, have also been more aggressive in pricing. But we believe that we still have highly differentiated capabilities, and we continue to maintain not only competitive pricing, but maintain good margin.

Now for China domestic market, you may have heard of word called [ evolution ] where there has been a very fierce price competition and discounting. We realize and recognize and also communicate to our customers that premium high-quality service does require substantial investment in people, facility and the quality system. So we have maintained a very competitive but still premium pricing to demonstrate our differentiation.

So the impact on our margin, which particularly result in those price competition from 2024 was reflected in our gross profit margin decline. We have adjusted our strategy to stabilize that and anticipating that they will gradually recover in the next period.

Great. Thanks. So the next question will come from Wanhua Wu at CICC. So he has 3 questions. The first is, reasons for the increase in gross profit margin and future expectations and room for improvement.

I think everyone noticed the gross margin is mainly driven by our CDMO late stage and commercial large orders. With the increased proportion of this order delivery, I believe the margin expansion momentum will be there. And at the same time, for the bottom line, we also have the divested business, which is a loss-making business. So second half, these businesses' revenue won't be there anymore. So that helped us to improve the overall company's bottom line as well.

But at the same time, I think we are still working very hard to manage the new capacity ramping up. Of course, I have the confidence to our operation team and also I think the -- another uncertainty is about the U.S. dollar depreciation trend. So we need to continuously monitor that one.

Great. And second question is what is the impact of exchange rate fluctuations? And how should we expect overall gross profit margins?

I think the expectation, I just give to everyone just now. For FX, it's very hard to do the forecast, right? That's the uncertainty. Every company should watch out very closely. But if you just look at the first half performance, the [ MOR ] rate, I mean the average U.S. dollar RMB FX rate is pretty close first half versus last first half. So there is not much impact from the FX benefit or loss for the first half performance.

Second half, I think currently, the FX between U.S. dollar and RMB still fluctuates between the reasonable range like 7.1 to 7.2. If it's still in the reasonable range, and we have the high confidence to deliver our performance. Of course, if we see any unreasonable or very significant dynamics changes, we will keep -- report to the investors if there's any big changes.

Okay. And his last question is considering your raised cash flow guidance, what is the future repurchase and capital allocation plan?

Yes, I think we keep evaluating the most optimal capital deployment, right? Normally, we look through the 3 dimensions. One is our global footprint capacity to meet expanding customer needs, how much we need to expand for our CapEx. And at the same time to maintain the sustainable growth, we need to keep attract and retain the critical talents. And also the shareholder returns is also very important for us. So if I walk you through our capital deployment first half this year, that demonstrates our strategy evaluating from these 3 dimensions.

You will notice that we have already completed RMB 3.8 billion cash dividend distribution in first half, which is actually much earlier than the previous years. RMB 1 billion A-share repurchase and cancellation has already been completed. Another round of RMB 1 billion A-share repurchase has already completed in halfway. Yesterday, Board also approved our first RMB 1 billion interim cash dividend. We repurchased HKD 2.5 billion shares from the secondary open market, which is not going to dilute any investors' interest for our 2025 ESOP program.

If you add them all together, we spent more than RMB 9 billion in total to return shareholders, retain our critical talent, while we also expect to spend RMB 7 billion to RMB 8 billion for CapEx payment this year to accelerate our global capacity expansion. So I hope everyone appreciates the efforts from the company.

Our next question comes from Daniel Yen of GSAM. His question is, can management break down the different components of TIDES' growth. So basically, customer numbers grew by 12%; molecule numbers, up 16%. So what were the other moving parts?

Okay. So I don't know exactly the question, but I'll try to answer. So we have the TIDES business. So we mainly have a 4-part -- 2 big part: one is oligo business; other one is peptide business. The oligo we have from discovery all the way to development manufacturing, same as peptide discovery and development. So we experienced the strong growth in all these sections in TIDES business. But of course, for the development, peptide -- is part of a DNA of peptide, which we are working on GLP-1 product, which has the strongest growth. And it's also major revenue -- contribute the major revenue to the TIDES business. But all other sections all have strong growth as well.

Great. So our last question is from [indiscernible] at Kochi Management. Can you give a little bit perspective on what is happening in the China biopharma market today? Activity seems to be very robust. What has changed in 2025, leading to this heightened activity?

Well, let me try to give a little bit of micro view. So first of all, we have seen, like everyone else, continued increasing very robust demand for out-licensing transactions and collaboration announced between Chinese biopharma, pharma and biotech with global Western-based biotech and pharma companies. That demonstrated the quality of the research and the authenticity of the data and most important, the differentiation of those products. And those has been very positive for the sector in terms of both the sentiment equally important on the upfront cash payment and potential milestone payment.

Secondly, we have noticed certainly a strong interest in capital markets, particularly from Hong Kong Stock Exchange with many biotech companies eager for potential raising capital through the Hong Kong market. And that -- and elsewhere. And that is also promising for the sector because as long as they have more and more capital, that will fuel continued demand for our service and service for the sector.

And finally, from macro environment and the policy, there has been some encouraging signs from policies regarding reimbursement and -- at a macro level. And those are still in the early stage, but at least the government recognized the importance of the sector and there are at least various announcements or signals of a support policy for the sector. The ecosystem is quite vibrant and with lots of buzz and also, again, driven particularly by the strong interest on global collaboration.

Great. Thank you very much. With that, let me turn it over to management for closing remarks.

All right. Thank you all for joining today's earnings call. The company will continue to focus on our unique CRDMO business model, enhancing our core capability, expanding capacity and improving operating efficiency. This enables us to provide higher efficient and exceptional services to our global customers, better supporting them in bringing innovative therapies to patients around the world. This, as a result, will drive the company's long-term growth and create sustained value for our shareholders. Thank you all.

Thank you.

Thank you.

Thanks, everyone.

Thank you.