WuXi Biologics Aktie

Good morning, everyone, for those based in China and Hong Kong, and good evening to those -- sorry, good evening to those who are based in China and Hong Kong, and good morning to those who are based in the U.S. Welcome to the 2025 WuXi Bio Earnings Results for 2025. This call will be conducted in English. My name is Laurence Tam, China Healthcare Analyst at Morgan Stanley.

Tonight, we're honored to have the management team of WuXi Bio present to us their 2025 annual results. We have Dr. Chris Chen, who is the CEO of WuXi Bio; Mr. Tu Ming, CFO of WuXi Bio; Dr. Lina Fan, the Head of IR team; and Wallis Wu, also part of the WuXi Bio IR team.

The call will last for 1 hour and 15 minutes. There will be prepared remarks from management followed by a Q&A session. Investors can type their questions into the Zoom Q&A box at the bottom of the window, or you can e-mail me your questions at [email protected].

With that, I will pass it on to Chris to give us an overview of 2025 results.

Thank you, Laurence. It's great to give a global investor update for 2025. Yes. I think we believe we have a very unique business model called CRDMO. I think we're benefiting from all 3 exciting modalities of bi- and multispecifics, ADCs and traditional mAbs. So I think this combined exciting business model with all those 3 new modalities are delivering -- will deliver sustainable high growth for us.

So I will start with talking about annual results and then Tu Ming, our CFO, will talk about the financial review. I will then give an operational update. And then I always want to give global investors an update on our technology platforms and our WuXi Business System and ESG, and then I'll end with a summary and outlook for 2026.

For global investors, I think this slide should be very familiar. I've been using the same template for a while. I think I'm very excited to share with you that on this slide, almost every number is record high for the company, except the gross profit margin. As you know, during COVID, our utilization rate was very high. That's why our gross profit margin was record high. And now it's close to record high, but it's not the highest yet. But other than the gross profit margin, every other number is a record high.

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If you look at the number of integrated projects, we grew from 817 in 2024 to 945. And hopefully, next time when we report, we'll see more than 1,000 projects. We added a whopping 209 projects. I think this is a record high for the company. Our number of commercial projects also grew from 21 to 25. I always said the backlog is huge and it's very hard to grow. But this time, we actually see a very strong growth of the backlog as well, growing from $18.5 billion to $23.7 billion. We have a record high number of regulatory inspections. Still we are 100% success. Our target retention rate is still incredibly strong.

On the right side is the financials. You guys read from the news release already. I think I want to quickly highlight Revenue grew 16.7%. If you do -- continued operations is 25%. Adjusted EBITDA, 22.8% and adjusted net profit attributable to the owner of the company, 17.9%, right? I promised investors, we're going to improve our margin by about 100 bps every year for the next couple of years. And last year, we see a very strong 500 bps improvement in gross profit margin. As a result, our EBITDA margin and also net profit margin are both near record high. Our EPS grew very strongly at 48.8%.

This funnel, global investors are very familiar with already. I think I also shared with a global investor during JPMorgan conference. I think the 4 key numbers on the right side of the funnel really represent WuXi Bio. And based on this, you can actually see how strong our revenue growth will be, right?

We added a record 209 projects. We have 25 commercial programs. Our total funnel size is 945, and we have 74 programs in Phase III. Among the 209 projects added last year, about 2/3 of them are actually bispecific and ADCs. About half of them come from U.S. We also have 23 Win-the-Molecule projects, that's 11 plus 6 plus 6. Among the Win-the-Molecule project, also half of them are complex modalities. I think during the past 2 years, we have encountered quite some noise from the global geopolitics systems. But despite with all those noise, our funnel is very, very sticky. We lost about 4 projects during the past 2 years, these are [ only ] 4 projects transfer out.

On the right side, you see many, many projects terminated. These are actually terminated for cost, either program didn't work or our client decided not to proceed. They're not because WuXi Bio is not -- they're not because project transfer out of WuXi Bio. So on the right side, we actually only see 4 projects transfer out in the past 2 years. But on the left side, we see about 43 projects transferred in.

I use this ratio 10:1 to again show how sticky our business is. Again, despite all those noise in the past 2 years, we only lost 4 projects, and we won 43 projects. Interestingly, for the 4 projects we lost in the past 2 years, 2 of them may come back later this year. So I'll report next time when we actually sign them back.

So this gives you a summary of the number of projects we added. So before COVID, the number -- average number of projects added was about 60. During COVID, it becomes 100, 110. And then last year was again 209. This really shows our increased market share, global acceptance of WuXi Bio as a preferred partner and our strong track record of attracting more and more clients globally in U.S., in Europe, in China and in Asia, Japan and Korea.

Win-the-Molecule project has been very steady, about 20 projects a year. And then among them, some are early phase, some are late phase. So because over the past 7 years, we have won so many projects, every project are transferred in. Those are projects either completed at large pharma and transferred to us or completed at our peers and transferred to us. I think we have all those 100-plus projects are delivered successfully. We actually have 12 CMO projects already come from this Win-the-Molecule strategy. So now we are proven by our industry as a company who are most versatile, who are most -- who are able to receive anyone's process and make it work.

I think so we have worked with probably a dozen, more than a dozen different cell lines, different process, different media, and then we are able to make all the process work. So they are either ADCs or bispecifics or mAbs. I think this tech transfer in excellence really will drive our future revenue growth as well.

I mentioned tech-transfer-in, right? That basically means either large pharma or our competitor don't have enough capacity or fail to do the project and then it transfer to us. The other phenomenon in our industry is acquisition. When large pharma acquire biotech or when large biotech acquire an asset from China, if the program is already done at WuXi, what do they do? Do they transfer project to someone else? The answer is absolutely no. So for all the programs who are in the clinic, if the program is acquired either by a biotech company or by a large pharma company, they actually end up -- the projects stay at WuXi 100%. Beyond that, they actually -- because they know more about WuXi, because we are doing the project for them, they actually give us more projects. So over the past almost 7 years, we actually see 32 more assets coming to us because through the acquisition, clients get to know us better and they trust us and they give us more projects.

So again, all those slides basically show how sticky our business model is. So that's why I always said the funnel, if you look at the funnel, that's how the assurance I have for future revenue growth because the funnel is very sticky. Once the project get into the funnel, despite all the geopolitics, we lost 4 projects and then 2 of them may come back. And then we are talking about a total of about 900 projects in the funnel during the past 2 years.

I think in terms of revenue, we see a very strong growth in early phase, right, from R and early D or DNA to IND enabling. We see almost 32% growth. In terms of M, the PPQ and commercial, we see a 26% growth. In the middle, the program, who are in Phase I and Phase II, we see a decline. As I explained last time already, I think we've seen a similar trend last year, last time it's because quite a few very strong program, quite a few programs give us a lot of revenue in Phase II. Now we classify -- we moved them to Phase III because they are already in Phase III. Our client moved them to Phase III. As a result, we move them from Phase II to Phase III. That's why you see a very strong growth of Phase III and you see a decline of Phase II. So hopefully, this is only temporary, and we will see all 3 segments grow again.

If you look at it geographic-wise, we actually see China has been fairly stable and all other regions actually grow significantly. You see U.S. account for 58% of revenue. It's still growing 18% plus. Europe is 23% of revenue and growing almost 17%. So combining U.S. and Europe is actually more than 80% of revenue and is growing around 17% to 18%, right?

The highest growth actually went to Japan and Korea. We actually see almost 70% growth. So it's become now a very meaningful revenue. So a couple of years ago, it was only 1% to 2%. Now it's actually 6.5% of revenue, half of the China already, right? In China, we see a slight decline of revenue, but you have seen so many out-licensing deals. If you adjust the out-licensing deal of last year alone, you will see almost a flat year-over-year growth. If you put all the out-licensing deal in the past, added together, China, we will see a much stronger growth.

So overall, I think this -- we don't manage this. This is a result of our last year's operations, but you can see our revenue is very diversified in the U.S., Europe, 80% of the revenue. China and Japan, another 20% of revenue. And with -- other than China, every other region grows very well.

Investors are already very familiar with our backlog. I think I also -- I keep mentioning over the past couple of years, our backlog is already so big. It's very, very hard to grow. And when you look at from 2022 to 2024, it is true, the backlog barely grew, right, because it's so big. And now as we sign more and more large manufacturing projects, the backlog starts to grow as well. So we see a service revenue grow by $1 billion. We see milestone revenue grow by -- milestone backlog grow by about $4 billion, right? So I think this is a very healthy growth. And that again give us more confidence that we can deliver -- continuously to deliver high growth.

So our funnel is already -- have 945 assets. It almost mimic our industry. Among them, you see bi- and multispecific grow 30%. You see ADC project grow 30%. I think if you look at our portfolio, now complex modality is already more than half of the portfolio. And the more complex it is, the higher market share WuXi Biologics has because it's very hard to handle. We got a reputation to be able to handle a tough project in our industry.

So for traditional mAb, we may have more than a dozen competitors. But once we go to bispecific and ADCs, we're becoming a few -- only a few competitors. That's why we have a higher market share for those newer modalities. And that's the higher -- the complex modalities are also much more stickier. I'll explain later on, which is actually right in my next slide.

So as you know, so bispecific and multispecific are actually becoming very, very popular. We start to work on those projects back in almost 10 years ago. And so now, bispecific and multispecific actually is -- you can see strong growth in R, D and M. On the R side, our CD3 platform, now we have close to 20 royalty-bearing projects. On the D part, this is the largest portfolio globally. On the M part, we actually have 3 commercial projects. All of them hopefully have a multibillion dollar potential.

Bispecific is not -- developing bispecific actually on the CMC side. So development and manufacturing of bispecific is actually very, very hard. I want to give you one example, right? So if you use 1a/1b bispecifics, when you work on a cell line, you potentially get 1a/1b or you could get 2a or 2b or 2a/1b, 2b/1a. So if you don't do it well, you're going to get a mess. And how do you get the product you want from the mess is actually very, very complicated. So that's why for bispecifics, cell culture is very different, difficult. cell line is very difficult. You also need to purify the downstream. When you purify, you also lost the yield. And then what's key is that you need all the tools to look at it. So you need the analytics to look at it.

One analogy, what you're looking at for bispecific, when you look at the common company available tools, you're only looking at the tip of the iceberg. But the bottom, the iceberg under the sea, you need to use very high-power analytics. Not every company have this power and WuXi Biologics is actually the best at it. So you need to use a mass spec or very advanced tools to look at this.

We actually have a few cases where a large pharma acquired an asset and come to us. We actually found out the product -- the company they acquired claimed the product is pure with 95% purity. In our hands, when we use amplifying glass, to look at the iceberg, the company only see the tip of the iceberg, we actually see the bottom of it. It's actually only 70%, 65% pure. So that's how difficult it is for bispecifics. And because of that, when you have an issue, [ trouble shooting ] is also very, very difficult.

So I mentioned all those challenges of developing and manufacturing bispecifics. The message is bispecific is actually very, very sticky. Once the project come in, it's very hard for them to leave WuXi Biologics.

So with that, I'll hand over to our CFO, Ming, who will give you an update on the financials for 2025.

Thank you, Chris. So now I'm going to present our financial performance for the fiscal year 2025. This Slide 16 gives us the highlights of our financial performance last year. First, revenue, although there were still tariff and geopolitical uncertainties and also uneven paces of biotech funding recovery, our revenue continued to grow at an accelerated pace.

As you can see from the chart that our revenue reached RMB 21.8 billion, 16.7% increase over that in 2024. Sequentially, our revenue in the second half was about 18% higher than that in the first half. We're not just continuing our journey of solid growth over the past 5 years, but also transitioning into a phase of accelerated growth post-COVID.

Our revenue increase last year was driven by R, D, M, all 3 cylinders. In R, our research and discovery service segment, we were able to sustain the momentum from the second half of 2024, landing mega deals from our innovative platforms of bispecific, multispecific and ADC. Overall, upfront payments for our research services more than doubled last year and reached USD 150 million with potentially over 4 billion of the milestone income streams in the future years. We also have a full pipeline of new deals. So the momentum in R will continue into 2026 and also the foreseeable future.

On development side, with the tailwind of our biotech funding recovery throughout last year and also our share gain in the pre-IND space, we achieved revenue growth about 32% year-over-year, thanks to the 209 new projects we scored last year, among which 186 were in the pre-IND space. This is a new record, representing over 60% of the global presence.

Our process optimization and productivity improvement also enabled us to shorten our revenue conversion cycle from DNA to IND to about 6 to 9 months. The decline in our early phase revenue year-over-year, as Dr. Chen mentioned, is largely due to timing as 5 large-scale clinical manufacturing projects progressed from Phase II to Phase III, created a gap of about RMB 1 billion, which will be replenished by the projects from pre-IND phase over time.

On manufacturing side, with the successful execution of our Follow and Win-the-Molecule strategies, more and more projects were advancing through our funnel towards the later stages. Now we have 74 projects in Phase III and 25 at the commercial manufacturing stage. And the volume of these late-stage projects are ramping up steadily with the growth of our clients' drug sales. Overall, late phase and commercial manufacturing revenue grew over 26% year-over-year and now represented over 43% of our total portfolio during this reporting period.

From a modality perspective, bispecific, multispecific and ADC contributed half of our overall revenue in 2025. Moving over to gross profit, which increased about RMB 2.3 billion to over RMB 10 billion last year. The whopping 31% increase in gross profit also gave us 500 bps of gross margin expansion year-over-year.

The margin improvement was primarily attributed to the following factors. The first is a solid growth from R, the research sector, which gave us a positive mix impact as the upfront payments and the milestone income grew more than 2x during the reporting period. Margin rate for development sector extended 1 point, largely driven by the productivity improvement and also the higher margins delivered by the complexity of the modalities as bispecific and ADC now represent more than half of our pre-IND portfolio.

At the same time, the activity from late phase and the manufacturing sector continue to meet or exceed our expectations as the plant utilization rate in China continued to improve throughout 2025, and also our Dundalk, Ireland facility continued its ramp-up journey. The productivity improvement from WBS, our lean manufacturing implementation also gave us 150 bps of the margin lift. Lastly, SBC, our share-based compensation decreased to 200 million year-over-year as we continue to optimize our CMB structure, this gives us about 150 bps of the GP margin expansion.

Excluding share-based compensation, our adjusted gross profit margin stood at 48.8%, 340 bps improvement year-over-year, one of the leading positions in the global CDMO industry. Adjusted EBITDA, which is a proxy of our operating cash generation capabilities, increased about 22.8% to RMB 9.8 billion during the reporting period. This enabled us to have another phenomenal year from a free cash flow generation standpoint.

The adjusted EBITDA margin rate also expanded by about 230 bps to 45.1%, one of the highest in the global CDMO industry. Adjusted net profit is the IFRS-based net profit, excluding the impact of foreign exchange gain and loss, share-based compensation, fair value gain and loss from our investment portfolio or asset divestitures and some onetime restructuring charges. This is a proxy for our business profitability under continuous operations.

As you can see from the chart that our adjusted net profit increased 22% year-over-year to reach RMB 6.6 billion, 5.3 percentage points higher than the rate of the top line growth, which gave us a margin expansion of 130 bps to 30.2%. The adjusted net profit margin expansion was largely driven by the solid control in SG&A, partially offset by the tax expense increase year-over-year due to the Pillar 2, the adoption of the 15% minimum tax in Hong Kong, and also the onetime DTA, the deferred tax asset adjustment in Ireland in our 2024 baseline.

Next page, please. So this slide shows our profitability growth over the past 5 years, including IFRS-based net profit, net profit attributable to owners of the company, earnings per share and also adjusted earnings per share. You can see that all these financial metrics reached record high in 2025. As you can see that our IFRS-based net profit has grown at a CAGR of 27.6% during the past 5 years and exceeded RMB 5.7 billion in 2025. The RMB 1.8 billion of the 45% growth last year was primarily driven by the 31% increase of the IFRS gross profit, as we discussed earlier, and also the RMB 400 million of the net gain and loss from investment, divestiture and the foreign exchanges, partially offset by some onetime restructuring charges we took at the end of last year. These gains and also cash inflows from our investment and divestiture activities will give us more dry powder in the future for global capacity expansion, biotech incubating, M&A or share buybacks.

IFRS net profit attributable to the owners of the company grew by 46% last year, slightly higher than the IFRS-based net profit at both WuXi Bio and the subsidiary, WuXi XDC, grew at a similar pace. Hence, the financial impact of the minority interest pickup remains proportional to the net profit growth.

Basic earnings per share grew from RMB 0.82 to RMB 1.22 per share, 49% increase, 250 bps higher than the growth rate of IFRS net profit attributable to the owners of the company as we completed our 2-year USD 600 million share buyback program in the first half of last year. So our shares outstanding is smaller.

After we exclude share-based compensation, investment divestiture gain and losses, FX translation and onetime restructuring charges, our adjusted EPS stood at RMB 1.40 per share, approximately 20% increase year-over-year.

Next page, please. This slide gives us more details into our gross profit and cost components. In fiscal year 2025, our gross profit margin reached 46%, 500 bps expansion from the prior reporting period, a multiyear high post-COVID. Excluding the RMB 800 million of the share-based compensation, our adjusted gross profit margin was 48.8%, 340 bps improvement year-over-year. In the second half of last year, our adjusted gross profit margin reached 51.5%, another multiyear high post-COVID.

As we discussed earlier, the gross margin expansion was primarily attributed to the takeoff of the research and discovery services, which gave us about 1 point of the favorable mix impact from the upfront and milestone payments, which command 80-plus percent of the gross margin. We gained 150 bps of the margin expansion from WBS, our lean productivity implementation. The improved capacity expansion in China and also steady ramp-up in Europe also supported the margin growth. You can see the components of the cost elements in the stack bar below with roughly 17% in labor, 18% in material and 19% in overhead, which includes maintenance, utilities and also depreciation of the manufacturing facilities.

Labor component was about 2 to 3 percentage points lower than our historical average as we focus on labor productivity. Revenue generation per employee is a crucial KPI for all our business units. In 2025, our total number of employees only increased about 2%, while our revenue increased 16.7%. So the reduction of the share-based compensation expenses also contributed RMB 200 million to the overall labor cost reduction.

Material cost was down 1 point year-over-year, largely due to the material usage productivity improvement. The overhead cost as a component of revenue was down about 2 percentage points compared to the prior 2 reporting periods. There were several cross currents here. The first, as we expanded our global capacity from 156,000 liters at the beginning of 2023 to over 300,000 liters at the end of last year. The new capacity brought on more depreciation, utilities, maintenance and other fixed overhead.

However, as these capacities are ramping up, the revenue generated from the manufacturing sector were growing at 26% last year, a pace that's much faster than the increase of depreciation and other overhead expenses. Also during the last reporting period, as part of our ongoing initiatives to optimize our global manufacturing footprint to improve the return on assets, we divested our vaccine facilities in Ireland and also our DP facility in Germany. These divestitures also helped us to reduce the fixed overhead costs.

Next page, please. Page 19 here is about liquidity. At WuXi Biologics, we have a strong balance sheet and a solid cash position. As of the end of last year, we had RMB 15.7 billion cash on hand, sufficient funds to support our accelerated growth globally. Compared to the beginning of last year, the overall cash balances increased about RMB 5 billion, among which RMB 2.3 billion were generated from a free cash inflow from the operation cycle. RMB 4.1 billion cash was contributed by our asset optimization and divestiture activities, partially offset by RMB 1.7 billion of the debt reduction and also share buybacks.

We always have a conservative funding strategy. For our RMB 64 billion balance sheet, we only have about RMB 1 billion of debt, most of which are working capital facilities. And our gearing ratio, which is defined as the interest-bearing debt over equity is nearly 2%. At the same time, we have close to RMB 7 billion of the bank credit facilities to tap into if we need to.

Our CapEx spending last year was about RMB 3.7 billion, mainly for the capacity expansions in Singapore and also in the U.S. Subtracting working capital occupation and tax payments, our free cash inflow last year was a whopping RMB 2.3 billion, a new record in our history. This is the fourth year in a row for us to deliver positive free cash flow. With the acceleration of our capacity expansion in Singapore and the U.S. and also the RMB 1.5 billion carryover from last year, our estimated CapEx spending in 2026 will be about RMB 7.1 billion.

However, with our operating cash generation capabilities from business growth and also our focus on working capital management, we are committed to delivering another year with strong positive cash inflow in 2026.

Now I'm going to pass the baton back to Chris to share more insights into our business operations.

Yes. I want to give a global investment update on R, D and M. I already mentioned, bispecific is the highlight of this presentation. So we started investing traditional mAb or R on mAb 15 years ago. And 10 years ago, we started working on bispecific. In the past 5 years, we started working on ADC. So you'll see, I think this is a very successful story. We invested a couple of million dollars on the CD3 platform. So now the CD3 platform, the out-licensing of CD3 platform already generated in the past 5 years -- past couple of years, already generated $205 million of revenue and then at an 85% gross margin. So our partners, including companies like GSK, Merck and Vertex. So I think this is an incredible successful story.

So not only we -- this platform investment already generated more than RMB 200 million of revenue and very high profit, we also have RMB 5.2 billion potential milestone that can be achieved in the next couple of months -- couple of years. And then for every program using our CD3, we have a 2% to 10% royalties and average about 5%. And for all those projects, 100% of them -- 100% are going to our development. So that carries -- also carry into about $80 million downstream contract. I think this is a really very good example of how our business can really -- can help strong solidify the multi-dollar business model.

So that's the CD3 platform, I mentioned it's less than a dozen assets. Overall, we actually have 50 programs like this, right? So again, 15 years ago, we started working on mAbs with accumulated critical mAbs and then multispecific and then now ADCs. So all those royalty-bearing programs will help improve our margin profile in the years to come.

I think this is the first time we want to use one table to share with global investors our business model, our revenue stream is very different from traditional CMO. If the program started with us with R, if we are -- for this client, if we are seeing CRDMO, the economics of WuXi Bio is significantly stronger than any other business model, as you can see.

So I'm using an average biologics sales of $1 billion. Again, if we have a 5% royalty, that basically means every year for about 10 years' time frame, we'll get $50 million revenue from the sales royalty alone, right? And then that's the sales royalty from our R. And then if they manufacture with us, we waive the cell line royalty. But if they don't, we charge the cell line royalty.

So then you can look at different scenarios. The first scenario is 100% volume manufacturing with us, right? And we have $50 million revenue from the manufacturing. And we also have $50 million revenue from the sales royalty, and it's almost -- it's the same number. And with that, we are able to generate a net profit of $53 million for this program alone. I think that hopefully is 10 years, as I said earlier, right?

And even if the manufacturing volume is not 100% with us, it's 70%, our profit is actually $50 million. And even if all the manufacturing is done somewhere else, but if this is our R, our profit is actually $44 million.

If you go to the extreme to the right side, that's basically the CMO. If you're a pure CMO, with $50 million revenue, your profit is about $13 million, $13 million, right? So I think that really show how our business model is very different. So the CRDMO profitability is about 4x the traditional CMO profitability.

I want to even go to the extreme case. If we use our cell line, if we do not manufacture at all, we still have about $5 million cell line royalty and with $4 million profit. And that basically means if somebody else do the manufacturing, I don't do anything, but I have 30% of the profit of the CMO. That really -- I think this table, if you study this table, it really showcase how different our business model is. With the R, I can generate 3x to 4x more profit than the traditional CMO. With the D, even if we don't manufacture anything, we can generate 30% of net profit. And certainly, we want our M to be big. We want the M to grow as well. I think that's why this slide really showcase our strong business model and the strong -- a very unique business model, our CRDMO. So that's a very quick update on R.

On D, I think that's really the strength of the company. So, so far, we have delivered more than 786 INDs by end of last year. And last year, we delivered record high 156 INDs. And among the 38 projects were delivered at a 6 months time line. Just to give you context, most of our peers deliver project at 10 to 12 months time line. So we are almost twice as fast as our peers, as the competitors.

I was always joking with biotech CEO, I said, if we deliver a 6-month project for you and they pay you, you pay me $6 million to $8 million to deliver the IND. But I saved them 6 months. If their burn rate is $2 million a month, I save them $12 million, while they only pay me $6 million or $8 million. I think that's how WuXi can help the biotech community. That's why biotech companies prefer WuXi as a partner of choice, right?

So as a result of the recent growth, now we have already increased our capacity to handle 200 INDs a year and 20 product filings. So look, if you look at the bottom right chart, when we IPO-ed, we can only deliver 20 INDs a year. Last year, we delivered 156. This year, we delivered 180, a 9x increase in the past couple of years. I think that's an update on D.

On manufacturing, everyone know our manufacturing is excellent. We have a very strong track record. If you manufacture with us, it's almost a guarantee. If we said we'll deliver material to you by Christmas, we'll deliver material to you by Christmas, it's like buying insurance. That's our manufacturing. And one prerequisite or leading indicator of biomanufacturing, cumulative manufacturing, that PPQ. So that's a step. You said you'll do a PPQ, you file the FDA, and when FDA approved, you begin selling the product, right?

So on the left side, you see the PPQ growth. In 2019, we only have 6 projects. I think by end of this year, we have more than 137. I think this is based on the contract we signed as of today. Most likely this year, it will even be higher. If you look at 137, you may think this is a pure number. But for one -- for every successful PPQ, potentially for 20 years, that can generate for a reasonably -- for a reasonable biologic with $3 billion sales, 1 PPQ can generate a future potential of $3 billion in 20 years. So I assume $1 billion to $3 billion drug and the manufacturing, and if you look at 20 years, it's actually $3 billion potential.

So that's -- so I have 137 of them. And if you adjust for industry failure rate, if you adjust for someone else taking it home, adjust for all those variable, this 137 PPQ means cumulative revenue potential of $75 billion in 20 years. So on average, about $3.7 billion of revenue. That's how powerful this 137 is. $3.7 billion revenue, what does it mean? That means another WuXi Biologics 2025 revenue. So in this PPQ alone, you can actually see for the next 20 -- for 20 years, every year, we may have $3.7 billion of revenue. And that's how powerful it is, this PPQ number.

On the right side, you see before COVID, we do about only a couple of PPQs. And during COVID, we are getting into about 10 range. And now this year, we're getting into 30s, right? If you look at the blue and green color, that's a global client, mostly U.S. client. You see, we have 10 PPQ in 2014 (Sic) [ 2024 ], 20 in 2025 and 30 plus this year. Now again, 2 year 3x growth, 3x. That's really the number of PPQs we're doing.

So this -- all those bode well for our commercial manufacturing revenue down the road. I think what's the reason why companies love us, why they want us to do PPQ for them because as I mentioned earlier, our PPQ is 100% success. When they file the PPQ to the agency, we hope it's also 100% approval, 100% success in approval as well. And that's why global companies trust WuXi not only in the R&D phase, but also now more and more in manufacturing.

I think we -- Ming already mentioned that we have a WBS effort, and digital is another effort. Through WBS and digital, WuXi Biologics will continue to innovate, continue to improve our efficiency. You will see our efficiency improvement year-over-year.

So as the business grow, we are also investing more and more in the global. And we are investing in U.S., investing in Singapore. We finished investing in Ireland. We're also looking at Qatar. But now because of the war, we will reevaluate after the war. So Qatar right now is on hold. We will reevaluate after the war.

The U.S. investment is in mostly 2 locations. One is Cranbury, New Jersey, right, by Princeton. And we converted a small clinical facility into commercial facility because of demand. And we're building a much bigger commercial manufacturing facility in Worcester, Massachusetts. With all those facilities online, we can generate hundreds of million dollar revenue in the U.S.

I think every time when I meet investors, I really want to share with you what's exciting about WuXi Biologics on technology side. So we have a very strong execution track record. We have very high quality. We have faster speed. But we also have one of the best technology platforms. And I already mentioned over and over again, the bispecific platform, the CD3 platform, right?

And we also have a nanobody platform called SDArBody. But today, I want to highlight a few ADC-related technologies that WuXi Biologics are working with WuXi XDC to develop for the global community.

The first program is actually called WuXiDARx. This is a specific conjugation technology using a single chemistry. If you look at the global community, a lot of people are doing conjugating use a very sophisticated tool, a lot of very complex enzymes, very -- you have the engineered antibody to create a mutation for the antibody, and that will change the antibody properties as well. So we actually only use a single chemistry where we are able to do a site conjugation using a single chemistry. Not only this technology can be used for traditional ADC, we can actually use for dual payload ADC. We can put 4 payload 1 first and then put another 4 payload 2, or we can put on the right side, we can put 4 payload 1, 2 payload 2, 6 payload 1, 2 payload 2. So I think this gives a global community a lot of options on developing next-generation dual payload ADCs. We believe this will be a start of earning milestone and royalties for WuXi XDC.

Similarly, WuXi has developed a proprietary linker technology and also proprietary payload as well. I think between the conjugation and payload and linker and with all the WuXi's mAb, we can create next-generation ADCs for the global community. That's why I said 15 years ago, we started working on mAbs for the global community on R. And then 10 years ago, we started working on bispecifics and multispecifics. 5 years ago, we started working on ADCs. So we will see more and more milestone payment and the royalties, upfront payment, milestone royalties from the ADC technology as well. That's a new offering on R side.

On the D side, D is the workhorse of the company, more than 50% of the revenue come from D. The evolution of technology from D is also very, very obvious. 15 years ago, when the company started, we used what they call random integration technology. Random integration means because random is lower productivity. So 15 years ago, we have to look at 3,000 cells. It takes us 6 months. And in the end, we can produce 2 gram per liter. The technology we have right now, we just launched last September is called targeted integration. You may not know the details, but it doesn't matter. Look at the results. We only look at 1% of the cell comparing to 15 years ago, less than 30 cells with the time line reduced by more than half. Instead of 6 months, now it's 2.5 months, we get 4x more productivity.

So this technology can help our industry reduce the cost of goods by 30% with this technology. So we have -- this technology was only launched last September. Now we will have -- already have 50 projects using this. Our first IND filing with FDA in the next couple of months. Once FDA approves this, I think we're going to use it for every project from WuXi Biologics. Again, this will help our clients save 30% of the cost of goods eventually down the road. And I think this again shows how WuXi Biologics. We are working on -- we're innovating every step, trying to make the drug manufacturing process, the biologic manufacturing process more efficient, lower cost. I think this is really beneficial for the industry.

And with this technology, we can -- as I said earlier, last year, we delivered 38 INDs in 6 months. With this technology, we may be able to deliver 100 INDs in 6 months because every project will be saved by this amount in there. So again, I can make industry faster and faster and better and better, and the cost of goods cheaper and cheaper.

Another aspect of this technology is we will be using this technology to make a lot more biosimilars. Biosimilars, cost of goods is hugely important. As I said, with this technology, I can save the industry by 30%. Why not work on biosimilars. So we have already many, many biosimilar companies come to WuXi want to use this technology and eventually help them reduce cost of goods, help them improve the sales.

Now from the get-go, WuXi Biologics, our manufacturing platform is disposable. 10 years ago, the single disposal reactor is 2,000. Now we have -- go to 4,000, go to 5,000. And in our WuXi scale, it will be 6,000. So reactor getting bigger and bigger. But people are always challenging me. If I have a mega [indiscernible] faster, how can you do it? We have already proven 352 times, I can do it for you. As I mentioned, each reactor is getting bigger and bigger. We can also multiplex. The largest scale we run in China now is 16,000 liter scale. That's bigger than most of the stainless steel facility out there, right? Most of stainless steel tanks are 10,000, 12,000, even 15,000, but we can actually run 16,000 by multiplexing 4 or 4,000 reactors.

In Worcester, Massachusetts, or in Singapore, our single reactor is already 6,000. I can do 3, 6,000 become 18,000 liter reactors. But I think as I mentioned earlier, our cell line productivity is higher. So we may not need to go to large scale. But if I need to, I can do very large-scale manufacturing. The cost of goods is very comparable to traditional stainless steel. We have already proven this 352 times.

So as our industry move to more and more patient convenience, a new technology is needed, what we call high dose delivery. Traditionally, with a subcu injection, you can only do 1 ml. How do you pack more product into that 1 ml? It's called -- we use a technology called WuXiHigh. I can put as much as 240 mg of materials into that 1 ml. If you look at -- if you are interested in biologics, most of the biologics are 30, 50 mg per ml. So actually, I can pack 8x to 10x more into that 1 ml. That's why patients can do the injection themselves or nurse can do it in a few minutes instead of a few hours of IV, that's the WuXiHigh. This is also a technology that we collect milestone payment and potentially royalties from global community.

The other one is called hyaluronidase, it's an enzyme that can dissolve some tissue and have you get to a large volume, you can -- as big as 20 ml. I think this is a technology readily available in the industry, but now we are doing the biosimilar version of it. I think we already have many projects that's working on that.

So I think WuXi, from WuXi's perspective, I want to make sure we help our clients. Whatever they need, I have them for you. And that's the technology development that we have. So that's the 2 technology I want to highlight.

I think I already mentioned that WuXi Biologics business system is our way of continuous improvement. Every year, we look at how can we save costs there? How can we be more efficient in labor? How can we save materials? How can we save expenses? How can we optimize ESG? And how can we -- how can we increase our revenue? I think all those are the WuXi business system.

So last year, we did 400 projects -- more than 400 Kaizen projects. Overall, the business results is actually impressive, right? We achieved 150 bps improvement in margin. So I think this was a continuous effort. This is already year 5 of us implementing WBS. We'll continue to do that.

I'm also very proud of our ESG results. Every year, we now get the highest rating almost from every agency, top 1% on quite a few of them, AAA remain in rating agencies.

So I think that's the high-level summary that I wanted to share with the global community. I think in the end, I still want to share with you that I truly believe our business model is very unique. With the revenue -- with the royalty calculation slide that you can see our revenue model, our profit model is very different. Our business model is very different. R, D, M, we strongly believe R will lead to D, D will lead to M. Everything coming to our funnel will stay there, right? Almost everything will come to the funnel will stay there.

Our R is very unique, give us not only a very high-margin business, but also will lead to D and lead to M, right? I think for R, 15 years ago, working on mAbs, 10 years ago, working on bispecific. Now we're working on ADCs. So we are answering to the need of a global biotech community. Our D is the working horse of the company, right? We have delivered 38 projects at a record 6-month time line. This year, we'll probably deliver a lot more. We help companies save money by doing 100% success in delivering projects in the fastest manner. In M, I think we already have near a decade of large-scale manufacturing experience, right? We can really cater to the clients' need. And in our portfolio, now we counted many, many blockbusters, about more than 10 programs with $5 billion sales potential and more than 20 programs with $1 billion sales potential. So that will drive our M.

I shared this slide during the JPMorgan conference already. I think WuXi Biologics in the next couple of years will benefit from the 3 high-growth modalities. I already mentioned bi- and multispecific, right, we mentioned in the other -- previous slide. Bi- and multispecific grew actually 120% revenue for us last year. Now it's almost 20% of our group revenue. It is getting close to the 30% ADC contribute. There are 2 types of bispecifics. One is CD3 enabled and CD3, CD19, CD20, PSMA, CD19, CD20 or CD19 BCMA. All those programs could potentially generate -- each one of the drugs could be $5 billion, sometimes even $10 billion sales. Certainly, our industry is very, very -- chasing after the PD-1 VEGF. But there are many other dual model -- dual target bispecifics. So WuXi will benefit from all of those. Some of those are very high-volume multi-metric ton scale manufacturing, and WuXi will benefit.

And ADCs, I'm sure you have heard about from [indiscernible]. So it's 30% of revenue, and we have quite a few programs pending approval. And with all the emergency ADCs, the B7-H3, DLL3, ROR1, CLDN18.2, CLDN6. So tomorrow, if you hear good news on our bispecific or ADC, 50% chance WuXi Biology is behind them. 5 years from now, 70% chance, WuXi Biology is behind them. And that's how much contribution we made to the global community on bispecific and ADCs. We have been already working on that for 10 years. Now we have many programs that are getting to close to commercial stage. So the FcRn antibody, IGF-1R a antibody, CD19 antibody, C1 antibody, program for [indiscernible] disease, program for autoimmune, allergic reaction.

So again, in those portfolio, we can count on many programs will require multiple metric tons of manufacturing. That corresponds to $100 million, $200 million, $300 million of revenue for WuXi Biologics. And that's why I believe our business model, our business will continue to grow.

Oftentimes, investors ask me, what's your near-term potential? What's your margin look like in 2028, 2029, which is 2 to 3 years from now? I'm very happy actually, second half of last year, we already delivered the 2028, 2029 like margin profile. But if you see the second half of last year, our R is incredibly strong, our D is incredibly strong, our M are the strongest also in the past 5 years -- in the past 3 years. So that's why we are able to deliver a gross margin of about 48%, adjusted gross profit margin almost 52%, and adjusted net profit margin of 32%. And that's really the sort of the near-term margin potential of the company.

With that, I want to summarize 2025. Again, we have an incredible 2025. You see bispecific and multispecific growth. You see ADC growth, right? You continue to see us invest in new technology. I mentioned the cell line, the high concentrated formulation. So R, D and M all shined last year. And the momentum continues to shine. I think this 2026, momentum will continue to shine. We continue to see R, D and M, where R, CD3 even more proven. We signed 209 projects. Most of them will be translated into revenue in D this year. And I mentioned we have 10 programs with $5 billion potential with another 10 programs with at least $1 billion potential. So we have 20 blockbusters waiting for us to manufacture. And we have 35 PPQs based on the January data. And hopefully, by this time next year, we'll report to you actually more than 34 PPQ.

The business momentum in Q1 of this year continue to be very, very strong. So if you look inside, our business is growing very, very well. But outside, there are 2 war going on. We're not sure how Fed is going to do on interest rate. And also the RMB versus U.S. exchange rate give us some volatility. So because of that, we want to be conservative. So we want to guide a revenue growth of 13% to 17%, taking into account the RMB to U.S. dollar fluctuation, taking into account some potential challenges in biotech funding because of the war, because of the funding situation.

So I think this is still a decent growth. We certainly wanted to under promise, over deliver. I think that it will be another great year in 2026. Thank you.

Thank you very much, Dr. Chen and Mr. Tu for a wonderful presentation. And once again, congrats on a strong 2025. We will now move to the Q&A session. [Operator Instructions] So we have 2 questions coming from Alessandra David from the Ashmore Group in the U.S. So let me go one by one.

Chris, you sort of alluded to it on the guidance slide. But at the JPMorgan conference, you guided for soft acceleration year-on-year, and it was later confirmed to be 13% to 17% year-over-year. So can you comment on the reason for the change?

Yes. It's mostly currency, mostly the currency, right? Because I think because this year, because we have already seen very volatile RMB to U.S. dollar exchange. That's why I want to be conservative. We're baking quite some room for those.

And also the volatility in biotech funding, you mentioned, right?

Secondary.

That's secondary, yes.

So far, biotech funding has been strong. I mean we only saw 2 months of data, right? But like there's a lot of uncertainty this year in the macro backdrop. So we want to be conservative.

Okay. Thanks, Chris and Lina. And his second question is, there's a slowdown in China revenue or flat when you strip out the out-licensing deals. So can you comment on the onshore biotech funding environment?

Yes. I think overall, China, I think biotech funding may not be that strong, but there are a lot of deal activity and some IPO. So because of that, I think funding in China is okay. Funding in China so far is okay.

Next, we have two questions coming from [ Chris Tan, ] representing [ ZE's ] team at Goldman Sachs. Firstly, can you comment on the ramp, the capacity ramp in China versus overseas?

We don't -- because our manufacturing is already so big, we don't comment on a specific site. But overall, manufacturing utilization improved by a few percentage. That's why last year, margin was expanding. So that's why second half of last year, I mentioned margin is almost -- you can see this margin at 2028 because when every year, we improve our efficiency. Second half of last year is very evident.

Next, we have a question coming from Linda Xu at HSBC. With increasing proportion of new modalities and the progress of clinical trials and commercialization, could you give us the outlook of the IP-based revenue growth in this year and next year?

That's great. So I think the IP-based, sort of the upfront payment, milestone payment kind of income is actually very hard to predict. So that's why -- so last year, it was almost about 15% of profit as well. So I think as a rule of thumb, we want to guide you basically saying, we see a 30% CAGR, right? But last year, we see a very strong growth. It's almost like 50%. But overall, because it's so unpredictable, we still want to guide you on a 30% CAGR in 5 years. So this was still a very strong revenue and profit component. Any other question?

Okay. Next, we have a question coming from Vicki Tiu on the buy side. Can you comment on the contract pricing trend?

I think overall, I think the contract pricing is very stable. At the beginning of the year, we actually raised the price by about 5% to 10%. So because I think we see the global demand, I think for a CPI adjustment, it's actually very reasonable in our community.

Okay. So in line with inflation basically.

Yes.

Okay. Next, we have a question coming from Huang Yang at JPMorgan. Chris, you mentioned there are a number of M programs with peak sales potential of USD 5 billion. Can you let us know how long those drugs have been on the market? We would also like to get a sense of when we can see those drugs reach peak sales.

Yes. That's a great question. So, so far, we have -- among the 25, we see 2 of them. Among the 25 approved, we see 2 of them. But the other programs are still in Phase III. So they're not approved yet. But for 2 of them, 1 of them hopefully will be achieving $5 billion of sales very soon. The other one, hopefully in the next couple of years.

So that's our business model. Our business model basically, we work with the client and their program need to go from $1 sales to $1 billion to $5 billion. So it takes some time. That's -- so our business model is not as straightforward as straight CMO where you can do $50 million, $100 million revenue per project right away. I think that's our business. That's our business model.

We grow with our client. But the good thing is our revenue -- our M revenue will continue to grow, right? If you -- as a straight CMO, year after year, at some point, your revenue will decline. For us, our revenue, our M revenue for every program will increase and it will reach a peak and then will decline. So that cycle is actually 10, 15 years or even 15, 20 years. So we are at the beginning of that 15-, 20-year ramp-up. That's why I said our M revenue will continue to grow. But for the multiple $5 billion projects, 2 of them are already approved. One of them is already on the market a couple of years, one of them is only 2 years.

Okay. The next question comes from Hugh Sloan on the buy side. Would the company do more buybacks?

Yes, because we have a very strong cash situation. We are looking -- as you look at the CapEx, we are investing heavily. We are also doing more M&As. So you already see one M&A from XDC. So we're looking at all the options. And then buyback is certainly one of the ways to reward investors.

Okay. The next question comes from Zhang Jialin at Nomura. So what is the rate of the company retaining Chinese firms projects if they were out-licensed to MNCs? And what is the current market share based on your knowledge?

For the program, the Chinese company partnered with a global, Chinese company out licensed global. If they use CMO, we have 70% market share. And then every company who acquired the asset actually keep the project with us. So we have 100% retention of the program. So as I said in the earlier slide, so this is -- when I mentioned 90 program was acquired and then they add 30 program, that includes Chinese company program being acquired by a global company.

So instead of moving them away from WuXi, actually, they always -- so far, 100% project kept at WuXi. In the meantime, they actually give us more projects. So it's actually net even surplus. Not only there is no project transfer out of WuXi, instead, they actually give us more projects.

Okay. The next question comes from [ Jason Lai. ] There's been an increased focus on AI and how it could impact pharma R&D outsourcing as AI gets more advanced. What is your view on the impact of AI and if it could decrease pharma R&D outsourcing?

Yes. I think it's actually probably the other way around. So AI will make it more and more outsourcing, right? So our business model is very complex. So I want to explain R, D and M. For R, AI can make R more efficient. And if that's the case, if R is more efficient, that basically means there will be more and more D and M. So WuXi Biologics will benefit from that AI, right? Because again, if R is easier, every company can create 50 projects, who can handle that 50 new projects? Only WuXi Biologics has the capacity and bandwidth to handle that. So R, D and M will benefit from that.

On the R side, so far, I don't see a disruption of AI disrupting R yet. So our R will continue to benefit. But behind the scene, we actually use AI in every part of our business already. The reason we are so fast in D and M -- the reason we are so fast in D, the reason we are so good in M is because AI is already part of our process. And in R side, we already developed quite a few molecules with traditional technology cannot develop. Basically a wet lab, you cannot create a drug. But with AI, we're able to create the drug. But it's not from first principle. It's not from -- in silicon. It's basically, we use wet lab to create a molecule, not ideal, and we use AI to fine-tune the molecule, make it ideal.

Okay. So we're actually almost at the time limit now. So I will turn it back to Chris to do concluding remarks. Chris?

Yes. Thank you, Laurence. Again, right, if you look at 2025, like almost every metric is record high, revenue, profit, free cash flow. I think 2026, we hope to see similar. Everything will be record high. But the growth, we want to be confident we can deliver the revenue growth. That's why we factor in some variances of currency, of currency variability. That's why we give you a range of growth of 13% to 17%. But we hope we can do better than this. And thanks to the global investor support. Thank you.

Thanks again, Chris. This will conclude the call for WuXi Bio 2025 results. Thank you all.

Good morning, everyone. Welcome to this session. I'm Yang Huang, China health care analyst of JPMorgan based in Hong Kong.

Welcome to this session to be presented by WuXi Biologics. And the presenter will be WuXi Biologics' CEO, Dr. Chris Chen. Dr. Chen, we can get started.

Good morning. It's my time to report to you guys every year about the exciting progress of WuXi Biologics. So this year, we chose the title of A Scaled CRDMO Platform Delivering Sustainable High Growth. The scale at WuXi Biologics is incredible, and our business model, CRDMO, is very unique. And we want to make sure that we can deliver sustainable high growth.

I'm going to start with briefly talking about our business model, mostly give you guys a business update and strategic footprint expansion. I cannot come to this conference without showcasing our technology leadership and our ESG progress. And then I'll give you a summary and outlook.

Our business model is incredibly -- again, we said we are a scaled, integrated CRDMO model, basically a one-stop shop and with a huge scale. So our vision is every biologic can be made. We have delivered on that vision for the past 15 years. Every project that came to WuXi, we delivered. That's not an easy statement. Every biologic project that came to WuXi, we delivered. And that's why our mission -- our vision is every biologic can be made.

We said our mission is accelerating the discovery, development and manufacturing of biologics for global partners and global clients. We did that. And then last year, we launched our CRDMO+ strategy. We really want to continue to focus on our clients, continue the global expansion, continue to innovate with our technology and continue to be agile to make our clients the best partners of the work.

The enablers of our CRDMO strategy, we are very -- we are fully compliant with any global regulation. We have premier quality. Every BLA we filed gets approved. We are pushing into digital and WBS. WBS is our lean system, and we're proud of what we do.

As I mentioned, we are a scaled CRDMO platform. What's our scale? Look at every year, we can deliver 10 PCCs, 10 assets, for our partners to use. We can deliver 200 INDs. I cannot imagine any other company who can do 200 INDs a year, who can do 20 BLAs a year. We will do 200 INDs this year. As you guys have seen from the slide, we signed 209 projects last year.

So it's end-to-end, one-stop shop. So we started with, if you are an entrepreneur from Stanford University, we make the first milligram of protein for you, first gram, first kilogram, first metric ton. So as we scale manufacturing, our revenue grows exponentially as well. That's our business model.

We cover all the modalities you think of: monoclonal antibody, bispecific, antibody drug conjugate. Because the technology is our strength, the more complex the molecule is, the higher market share we are. That's why recently, for the past couple of years, ADC and bispecifics are about 2/3 of our portfolio. And they also continue to be the fastest-growing segment of our industry. So we benefit really from more complex modality.

So as a result, we won the 2025 Global Customer Value Leadership Award from Frost & Sullivan. So over the past 5 years, this week, everyone is very happy about M&A, right? Everyone is anticipating something big is going to happen. Over the past 5 years, 72 of WuXi Biologics clients was acquired, an average valuation of $1.4 billion. So because of our CMC work, we have helped 72 companies, 72 of my clients become acquired and become part of large pharma. And as a result, investors get rewarded with $100 billion of money.

So going to the right side, over the past couple of years, we have already filed 600 INDs, 600 INDs, over the past couple of years. This year alone, we're going to -- have filed 200. You see the acceleration. On the commercial side, we have 25 commercial projects, we have 74 Phase III programs. Our reliability is unheard of, go back to our vision, every biologic can be made. Our manufacturing success rate is almost 98%, 99%. So that's almost -- if you sign a contract with us, you almost like bought an insurance.

10 years ago, when I visited Boston Biotech, every CEO -- if you ask every CEO, 50% of them had a headache with biotech manufacturing. 50%. Half of them have -- if you're an investor, your portfolio company run into CMC issue, get a CRL from FDA. But now with WuXi Biologics' help, you don't have that headache. I think that's how reliable we are. And then on the regulatory side, as I said earlier, 100% of BLAs we filed get approved.

So really I want to give you an update on our business side. As I said, we are CRDMO. The R part is very unique. Again, if you are a professor here at Stanford, you come up with an idea for pancreatic cancer. Who can help you create that molecule? We can. Because we use our platform, we use our CD3 platform, we use the ADC technology, use our big library.

As a result of helping you get the molecule, we get 3% to 5% royalties. And if you couldn't -- if we use more technology, we can even get 5%, 8% royalties. And if we are lucky, we even get 10% royalties. So last year, the upfront payment and milestone payment from all those programs is actually a record high. And the biotech dollar we just generated from last year's contract alone reached $4 billion. Just CD3, as you know, our CD3 bispecific is a huge class, I believe is going to be more than 20 products approved. WuXi Biologics plays a key role in there.

Back in 2016, we started to invest in our own CD3 platform. We looked at everyone's CD3, we said, "That's not the best. That's not the best for the industry." We start investing in our own CD3 platform. We spent $10 million in 3 or 4 years. Now every year, we're getting $50 million to $100 million return, almost net profit. So that's almost already a 10x return.

Fast forward another 5 years or even 10 years, we may even get $1 billion of royalties from those programs. We have 20 programs that carry royalties, from regular 3% to 5% to as high as 10%. So again, 20 programs with 5% to 10% royalties, unbelievable. So this is an investment -- a couple of million dollar investment back in -- 10 years ago. Now it's generating $50 million to $100 million profit, and eventually will generate billions of dollars of profit. That's the beauty of WuXi Biologics are, and I think this is really exciting.

And again, if you have the program, back in 2018, we signed a program with CTTQ, and later with Curon/Merck, GSK, RD. RD just announced very exciting science -- I'm sorry, Candid. Candid just announced a very exciting program. And then Zai Lab. And then last Christmas with another major multinational companies. So those are the programs, again, hopefully, will generate hundreds of millions of dollars of revenue and profit this year, next year, and will generate hopefully $1 billion of revenue and profit 5, 10 years from now.

And those are the programs we're carrying royalties. We have a very exciting program from BioNTech, the B7-H3 antibody, Duality/BioNTech. We have a very exciting program from Merck, from GSK and from other large pharma who we cannot disclose. We have 50 programs like this, okay, 50 programs.

So those -- this -- the revenue and profit from this is already a significant part of our business today. Last year, we estimate about 20% of profit comes from this business. Although this is a very small revenue, but because they are pure profit, so it's a very small percentage of revenue, but it's already 20% of profit large year. The year before, it's 15%. Fast forward another 5 years, maybe about 25% of profit comes from royalties, milestones and upfront payment. That's why our margin will continue to lead the industry.

If you are an investor, this is famous, what we call golden funnel or diamond funnel, right? This funnel represents the more projects we're working on right now. It's unbelievable. Our funnel is getting close to 1,000 molecules. When I left Lilly and started this effort myself, my Lilly friend said, "It will be fantastic if you can work on 100 projects, 100 biologic programs." And then 15 years later, now we're close to 1,000 programs. And this tops any company's own portfolio.

Again, because we are a service business, every molecule in the funnel gives me money, gives me revenue and profit. So there is no scale issue. Right? No matter how much money you have on R&D, you have limits, you cannot develop 1,000 molecules. There's no limit. This could be 1,000, it could be 1,500, it could 2,000, it could be 5,000, if our industry has the need.

If AI can transform discovery, if someone can discover antibody in silico in a minute, I can develop them with -- they can give me 100 projects, I can develop them in a year. So we will be beneficiary of AI revolution in the next couple of years because we have the scale to deliver. We're delivering 200 INDs this year. Why not 300 in 5 years? Why not 400 in 5 years? There's no limit because every project contributes revenue and profit to us, right?

So if you look at this golden funnel, we have close to -- we have 945 programs. Last year alone, we added 209 projects. That's why I said, this year we'll probably deliver 200 INDs. We have 25 commercial programs, we have 74 Phase III programs.

So I always tell investors, when you look at WuXi Biologics, this is the only chart you need. You know we'll grow. You know our R is very good, you know our D is incredible, you know our M will give you a hockey stick growth, because of the funnel. As the program moves, that's the beauty of our CRDMO model, R will lead to D, D will lead to M. Even during BIOSECURE, our D to M conversion is more than 90%. Basically, clients -- once the project gets into the funnel, they don't leave. That's the stickiness of biologics. That's really our business model.

If you look at the funnel, one big -- one great thing is actually more than -- last year, we signed 209 projects, is record high. The year before was 150. When we IPO-ed 15 years ago, this was 20. So in about 10 years, the number of projects we signed increased by tenfold.

Among the 209 projects we signed last year, half of -- more than half of them come from U.S. More than half of them come from U.S. More than -- about 2/3 are the more complex modality, the most exciting modalities: bispecifics, multispecifics, the ADCs, right?

And then as I mentioned earlier, we also have 23 Win the Molecule programs. This is when my peers could not deliver, they actually come pick WuXi to help them resurrect or salvage the program. We have 23 programs like that. And among the 23, 6 of them are Phase III. So that basically means we'll help them do PPQ. Eventually, we'll be helping them do commercial manufacturing.

So this is unbelievable. Again, if you -- the only thing you need to remember about WuXi Biologics is this funnel. As the funnel grows, our growth will be there. Because as I said earlier, we deliver 100%. Every project coming to the funnel, we delivered. As a result, they stay in the funnel and they will go from R to D to M.

If you look at our portfolio, it's already -- because it's so big, they mimic our industry. So we have about 340 mAbs, we have 196 bispecific programs. Bispecifics is a relatively new modality, recently really become exciting. But we have almost 200 assets already. And then we have about 250 ADCs.

In our portfolio, we have almost 370 first-in-class programs. Again, go back to the concept of a Harvard professor come up with the idea on pancreatic cancer, we can help them deliver the first gram, first kilogram, hopefully, first metric ton.

In biologics, there are 3 most exciting modalities, and we are keen of all 3. Bispecifics and multispecifics, we have the largest portfolio, probably about more than -- globally, more than half of the bispecifics are within WuXi's portfolio. It's also the fastest-growing modality. It's also the highest-margin modality because we have R, D and M. But for CD3 platform, we carry royalties, milestones. For our D, it's more complex, so the pricing is good. And for M, we have, currently, we have 3 manufacturing projects. All of them hopefully can be mega-blockbusters.

So bispecifics is actually the fastest growing, most exciting, highest profit margin segment within all the WuXi Biologics' portfolio. It was not meaningful a couple of years ago. Last year, was already almost 20% of revenue. It's growing at a whopping 120%. So if you think about it, 2023 -- 2024 -- 2023, this is probably 4%, 5% of my business. 2024, become 10%. Last year, become almost 20%. And that's the fastest-growing segment.

As I mentioned, I already highlighted my CD3 platform, but the most exciting bispecific in this industry is happening at WuXi Biologics. You see the CD3xCD19, CD3xCD20, CD3xPMSA, CD3x19x20, BCMA. And that's one class. The other class is -- everyone is watching the PD-1 VEGF. We have multiple programs, PD-1/VEGF. We have DLL4/VEGF, EGRFxTDF-beta, 4-1BBxCLDN18.2.

So basically, if you read the news about a breakthrough of bispecific tomorrow, 70% chance WuXi Biologics is the CMC owner. And we'll benefit from this whole bispecific -- we will see next couple of years what the growth is going to be, but the past couple of years is very exciting. Again, go from 4% or 5% of revenue to 20% in 3 years, so a CAGR of almost 100%.

Because we spin off XDC, so everyone knows ADC, and they will be presenting this afternoon. But this is also a very exciting modality. We have 252 ADCs. We already have quite a few POC-validated mAbs. We have the HER2 ADC, TROP2 ADC, folate receptor ADC, Nectin-4 ADC, and a lot emerging. Again, it's probably very similar. Tomorrow, if you hear a breakthrough in ADC, 65% chance, 2/3 chance WuXi Biologics is behind that -- WuXi Biologics and WuXi XDC is behind that.

I said there are 3 most exciting segments of biologics. The other one is traditional mAb. mAb is not as exciting as it has once been. But because we have been working on this field for 10 years, now we have many programs that's getting to commercial stage that will give us incredible revenue: FcRn franchise, IGF1R. We have mAbs for autoimmune disease, for kidney disease, for allergy disease.

Yesterday, I'm with a client, he had the antibody for hair growth. Even for white hair, it grows back to dark. So I may need to produce 10 tonnes for that mAb for China alone, 10 metric tons. So initially, I was hoping for Alzheimer's, maybe actually the hair growth actually is better than Alzheimer's in terms of that modality. So for WuXi Biologics, we get to work with the most exciting partners globally. We have quite a few programs for kidney disease, for autoimmune disease, for pain and allergy, even for hair growth.

So that's why I think in summary, this slide, this is the most exciting part of WuXi Biologics. We will grow, we'll see even growth acceleration, because bispecifics is growing at a CAGR of almost 100% in the past couple of years. ADC, you see the XDC growth and continue to see strong growth fast forward. And on the mAb side, on the development side, it's growing on market because our size is so big. But on the manufacturing side, we'll see 30% to 50% CAGR in the next couple of years on revenue growth.

So I already highlighted multispecifics, bi and multispecifics, as really WuXi Biologics' most exciting platform. Because again, this is really such a good example, good manifesto of WuXi Biologics' business model. We have R, who generates hundreds of million dollars of revenue and profit this year. We have D, the largest portfolio. The D will carry into M. The M, we already have 3 exciting programs that's already -- 1 of them is already mega-blockbuster, 2 of them hopefully will become mega-blockbuster. So the M will generate hundreds of million-dollar revenue for us as well. And that's why I said -- so really, the multispecifics are really the most exciting part of WuXi Biologics' portfolio in the next couple of years.

So go back to our R, D, M. I already mentioned that every BLA we filed get approved, get accepted by U.S. FDA, EMA, by China, and that continues to be our track record. So it's almost like, there's a test, we always score 100 percentile in it. You can go to a website, search our peers, what their track record is. But so far, we are 100%.

So I mentioned very exciting R, very exciting D, and now the M part. A surrogate or a leading indicator of manufacturing growth or CMO growth is actually the number of PPQs. You see, our number of PPQs a couple of years ago was a single digit. During COVID, we benefited quite a lot from COVID mAbs, COVID vaccines. That's why in 2022, we had 22 COVID -- 22 PPQs. More than half of them are COVID programs. So if you take out the COVID program, it was about 10 programs in the past couple of years, and last year was 28. So go from an average of 10 to 30, so tripled the number of PPQs.

And then this, as of now, we have 34 scheduled. During this JPMorgan Conference, we'll probably sign another 3 or 4. At the end of this year, it will probably be much higher than this. So last year, it was about 28; this year, probably about 38 or even more. And then PPQ is a leading indicator of manufacturing growth. On the bottom we show you how PPQ is translating into product approval, translating into manufacturing revenue.

The nature of our business, most of our programs are new drugs. So they have a sales launch curve. So don't expect us to sign a PPQ today, $100 million revenue tomorrow. We will sign a PPQ today, we'll have $20 million, $50 million revenue in the next 2 years, but then we have to wait for FDA approval. And then we have to wait for sales launch. So from a PPQ to a peak sales probably require 6 years, and that's the patience, we have to wait.

So a lot of people are expecting -- a lot of investors keep asking, why cannot your M grow faster? Because we're working on new drugs, we have to allow themselves to peak. We have to allow the sales to grow. And that's why our revenue profile, M revenue profile, is there. M revenue is there, but it's going to grow faster than we expected, but we need some time. And that's the beauty of our business model, right?

So you'll see the M revenue will grow in a very fast fashion. Because 2025, as I said earlier, the number of PPQ already tripled to the average over the past couple of years. That basically means about 27, 28-ish of revenue will grow very, very fast.

Another factor is our PPQ success rate, 99%. We have done about 100 PPQs, we only have 1 of them had the issue. Our industry average, maybe 90%. That's a tremendous success factor. Again, that basically means if you want us to launch the product, we will help you launch the product on time. On time, with a 1% chance of failure, where our industry average is 10% chance of failure.

So as I mentioned earlier, most of our drugs are launching. Most of the commercial drugs are launching. So their revenue will need to ramp up. That's why we have close to 99 CMO projects, but our revenue is still relatively low comparing to our peers, because they're launching. And that's a good sign because it basically means our growth comes not only from number of projects, but also from project growth itself. So for example, for 1 program, we currently only have $30 million revenue. But in 5 years, we'll have $100 million of revenue. So that program will grow from $30 million to $100 million. In the meantime, we'll keep adding more and more programs into the funnel.

So as everyone knows, WuXi Biologics is a global company. We have a global footprint. We have a footprint in Ireland, in Germany, in U.S., in Singapore, and we just announced Qatar, right? So we are increasing our strategic investment in U.S. Our total investment in WuXi Biologics and WuXi XDC combined, our total investment in the U.S. will be about $1 billion. We want to provide an alternative supply chain in U.S. end-to-end, from the DNA to IND to BLA.

We are doing that in Singapore as well, an end-to-end supply chain. XDC was building a facility in Singapore, from piling the -- from piling the ground to mechanical ready, 15 months. It's unheard of. This is a project on time, on budget. So XDC will highlight this right now. We'll start generating revenue starting this year.

We are -- our drug product facility, this is a prefilled syringe, our bio facility will be ready next year. Our drug services facility will be ready. This is a large scale, 120,000-liter facility, for mAb, will be ready 2 years from now. So we're putting a lot of efforts in Singapore.

Our current effort is U.S. and Singapore. But we just launched a very exciting effort into Qatar. That's 6 countries we'll be operating in. We really think Qatar is probably the only country where we can replicate the execution and the profit margin of our China site, because it's such an attractive place. Before I went to Qatar, I didn't know much about the country other than World Cup, other than really the fascinating city. But once we get into Qatar, it's such a friendly business environment.

And we really wanted to make Qatar, make Doha, our future hub of biotech R, D and M. I envision we'll have thousands of employees in Doha by end of this decade. So Qatar is -- besides Ireland, besides U.S., Ireland, Germany, Singapore, China, Qatar is our sixth country. We'll have a significant capacity there. And you will see. Because we have very strong cash flow, we don't need any equity fundraising for the -- to support the project. Our own cash will be more than enough to support the project. So don't worry about any fundraising from WuXi Biologics.

As I mentioned earlier, technology is always a highlight of WuXi Bio. The reason we can deliver every project on time and on budget and the reason we can be much faster than our peers is because of technology. I want to highlight a few. The CD3 technology I already highlighted. The WuXiBody bispecific, we -- both technologies we invested back in 2016. Again, now you know, now it's a no-brain -- now everyone knows bispecific is important. But we kind of know bispecific is important 10 years ago. That's why we build the technology. That's why we can generate hundreds of million dollars of IP income from those technology already. And we have a multispecific platform, we have a single-domain platform, we have ADC platform.

Last September, we announced most exciting technology of WuXi Biologics' history. It's our new cell line. As you know, Wuxi Biologics' core core is based on cell, based on the cell. 15 years ago when I started with the company, we have to screen 10,000 cells. 15 years ago, it takes 9 months, 10,000 cells, get 2 grams per liter. Last month, 30 cells -- from 10,000 cells to 30 cells, from 9 months to 2 months, from 2 grams to 10 grams per liter.

So this is probably the best technology our industry can offer. And this is the only one in the service space we can offer. So we actually have companies who are willing to pay $100 million to license the technology. So this is going to be a game changer. For every program come to WuXi, we can get 10 grams per liter. So if every program is 10 grams per liter, then what's your bioreactor size? You only need a 5K reactor. 5K reactor already gives you 50 kilos.

It's incredible, this technology. But this is something -- again, this is something we start to cook back in 2019. We are very excited to stand here now, but the investment comes from 2019. If you think about 2019, we have what we call semi-targeted.

For those of you who are experts in biology, we found a spot. So typically, in our industry, you put a DNA mixed with a cell. The DNA -- you don't know where the DNA go into the cell. That's how you get a cell line. That's why you need to look at 10,000 cells to figure out which one is the highest producing. Over the past 5 years, we found a hotspot in cell genome. We know exactly where we want to go to. And we have the technology to deliver the DNA to that spot.

That's why every cell -- 10 years ago, because -- when you look at 10,000 cells, there are some 0, some 1, a few 2. But now every cell is 8 to 10 grams per liter. So technically, I don't need to pick. I just put a DNA together with the cell, take the cell, and that's your cell bank. That's why we can cut the time line from 6 months to 2 months, increase productivity from 2 grams to 10 grams per liter.

And this will transform our industry. Again, we can make -- because if it's 10 grams per liter, annual cost of biologics will be a few thousand dollars. If it's a recent -- for example, a PD-1. PD-1, the annual manufacturing cost of PD-1 using this technology is only a few thousand, $2,000, $3,000. We can make biologics really, really affordable.

I think because we pioneered the whole disposable manufacturing, a lot of investors, a lot of clients initially also doubt whether disposable works. If you have a 10-gram per liter, if you have disposable, now you know why it works. For WuXi Biologics, we planned this whole thing from the get-go, right? Because my 10-gram per liter times 5,000 to 6,000-liter reactor, I get 40 kilos. If you look at the first generation of Herceptin-Avastin, they were made in 20,000-liter reactor because the titer is only 1 gram per liter. So every bag, you get 20 kilos.

Now with my technology, everybody gets 40 kilo. I can double the throughput comparing to what the traditional industry output. And that's why my reactor scale is smaller. But if you have a grandfather cell line, if you have an old cell line, if you have a grandfather project, I can do it for you. Over the past couple of years, we have done 300 batches by multiplexing the reactor. One reactor is only 4K, but why don't we put 4 of them together? Become 16K. We did that in Ireland, we did that in China.

So I think with our capacity, we can actually deliver 30 metric tons. I mentioned earlier, a hair implant or hair growth antibody may need 10 metric tons. But I can build a 10 metric ton facility in China in 2 years. Now I can build it in Qatar in 2 years, in Singapore in 2 years.

So I think the manufacturing platform is super-rigid, is cost competitive. I think industry always have a debate, disposable, why disposable should be more expensive than stainless steel? We have a disposable manufacturing in the room. We've already proven with our 300 batch, there is no cost difference. Disposable, a single plastic bag is as effective cost-wise comparing to a stainless steel vessel, because your CapEx is lower, your footprint is smaller and you are more environmentally friendly.

So as our industry evolves, we see a lot of project go from IV to subcu. Even for oncology projects, patients want to do it at home. So as a result, we actually delivered all those technologies to enable, pay us to convert IV product into a subcu. We have done many projects already. So if you have -- I think if you have a drug that needs 4-hour IV infusion, patients have to stay in the hospital for 6 hours. Now with WuXi's help, we can convert it into a subcu you can administer at home, 2 minutes, 1 injection. All the technology we have enable that.

Drug product has been -- is also a core part of our business that's growing. We're already developing 500 formulations. We have a project, we can formulate the protein to 150, even 250 mg per ml. That's why with the -- if your dose is only 20 mg, we can be making it into 1 ml you can deliver at home instead of go to a hospital IV for 4 hours. Those are the technologies that we are developing. We have been helping global companies with that.

As our industry evolves, and this week you probably see AI companies everywhere, and AI is also part of the game for WuXi Bio. It's built into our platform. We want to be the world-leading digital CRDMO. I think we have a DaVinci Client Portal, so all the data, our client needs, you can access it from DaVinci. We have a BioFoundry, is our own system for documenting every data. Every piece of data is in the BioFoundry. We have -- manufacturing batch record electronic system to allow paperless manufacturing.

Really all those platforms are already in the works. And hopefully, by next year, we'll be launching all of those. So we're already launching piece by piece as of this year.

WuXi Biologics' vision of manufacturing is in 3 years, we don't need anyone in the plant. In 3 years, we don't need anyone in the plant. The plant runs by itself. It's fully automated, continuous processing. And that's why we're launching what we call PatroLab. This is a digital twin of our manufacturing facility. If you ever gets a chance to visit our Shanghai facility, you can already see it. We have it already running at a 50-liter scale. So it's a 50-liter reactor, but it continues to run. Every day, you get 10 grams per liter in there.

So you get -- it's a very small vessel, but every day you get 500 grams, and it keeps running in there. And then we have a digital twin that allows us to manufacture them. We use Raman to -- we don't even need to sample. We don't even need to sample. Because every data, the computer is monitoring it and helps us make decisions. So this is what we call our PatroLab. It's our own version of digital -- a digital version of a manufacturing facility.

We always are very proud of our ESG performance. But if you look at every metric, every metric, our ESG score is the highest -- one of the highest in the industry. That's something I'm -- really as a global company emerged from China, I'm very proud of what we have done and what we have been doing with ESG.

I think overall, we are on track to deliver 2025 with sustainable growth momentum into 2026. So we are on track to deliver a very strong 2025 with both top line and bottom line. I already mentioned to you that bi and multispecifics are our most exciting platform and the fastest-growing within Wuxi Bio because we have R, D and M.

We have already fully established track record in large-scale manufacturing with either disposable or our own high-producing cell line. We'll continue to invest in technology. So I highlighted the CD3 technology we invested, highlighted bispecific technology we invested, highlighted cell line technology we invested, right?

On the R side, we see a record high number of milestones and the upfront payment. On the D side, record number of projects. On the M side, the number of PPQ increased by 75% comparing to last -- the year before. We are very excited about Qatar and our future investment in Qatar.

Looking forward into 2026, I think we'll continue to see, and you already know the funnel, you can see the growth in 2026. We always continue to see R grow strong, D grow strong, M grow strong. We have quite a few blockbusters.

We had FDA inspection in our Ireland facility last month. We have 1 more FDA inspection next month in our [ Shijiazhuang facility, Hebei facility ]. We have 1 March, basically FDA coming to us almost every month for a product approval inspection. So we're expecting a few product launch this year. All those inspections are hopefully for mega-blockbuster products. So the revenue -- the explosive growth of manufacturing revenue will come. Thank you.

Thank you, Dr. Chen. Before we start Q&A session, may I invite Mr. Tu, the company's CFO, to join us on the stage.

So for our audience, if you have questions, you can raise your hand, but please wait for mic so that everyone can hear you. And also for our online audience, if you have questions, you can submit the questions through our conference digital app.

Any questions from audience? Here. Just please wait for mic.

For the 3 end-markets: bispecific/multispecific, ADCs and mAbs, what are the underlying market demand during the next, let's say, 5 years?

Because of confidentiality, I cannot disclose the program, but one of them should be a $5 billion product. The other one should be towards -- the other one, the analysts, because all of them are public companies, financial analysts expect $2 billion to $3 billion. So the 3 mAb -- the 3 bispecific combined peak sales should be around $10 billion. So they are really mega-blockbusters.

Congratulations to you and WuXi Bio as a whole. You definitely delivered a wonderful performance in 2025. And it's exciting to see that you have a huge investment in Middle East. Can you just elaborate a little bit more in terms of at what level of contribution to the future performance, let's say, in 2 years, as you mentioned that you will get to the project and finish in 2 years, and -- yes.

In Qatar, we probably expect $500 million to $800 million of revenue by end of the decade, by 2030. So 4 years from now, we'll be $500 million, $800 million in revenue.

Okay. And in Middle East, I'm wondering if there was any technical problems, let's say, to deploy the talent. So what's your strategy or plan to solve this problem?

You mean talent challenge?

Talent, yes.

Yes. I think we will be able to hire from global. I think certainly, initially, a lot of expats from China. But Middle East has a very diversified workforce, we believe we can win.

Chris, so obviously, the future milestone sort of outlook is really exciting for the company. But as an investor, one of the things that's hard to sort of think about is just how do you model that because it's so lumpy, right? But I guess the volume will increase, so then the lumpiness should kind of even out. What do you sort of think, just broad speaking, like guidance could be for milestone contribution, let's say, in the outer years, 3, 4 years from now?

Yes, that's a great question. I think that's why rule of thumb, you can assume the milestone -- the upfront milestone will grow at a CAGR of 30% and may accelerate when the royalty come in. Because just upfront milestone, as a company, we just assume it will grow CAGR of 30%. That's why I promised investors our margin will continue to improve. Because the milestone revenue will come in -- will continue to improve with our WBS, WuXi Business System, and then our efficiency improve over years. And then our global sites start to ramp up, right? Because we invested very heavily globally, we have U.S., Germany and Ireland. So all those loss will come into profit in the next couple of years. That's why our margin will continue to expand every year.

So just on the funnel and the termination stage, are most of those terminating and going over to a competitor, or are most of those terminating to say, "We're not continuing with this phase?"

So far, in the past 5 years, we lost 2 projects with competitors -- 2 projects to competitors. So out of 1,000, 2. But maybe we need to clarify, all the termination is actually the fate of the molecule, is not successful.

So we won 23 projects -- we won probably 100 projects over the past 5 years. We lost 5. So win-to-loss ratio is 20:1.

Over there?

Hi. You go very fast on the AI impact and digital. Can you elaborate a bit more? And what's your vision about the impact of this technology in your area and driving performance, I guess?

Yes. I think as I said earlier, if AI really can discover a drug, we will probably be the first beneficiary, because someone still needs to make it and test in human, right? So we are the most efficient maker of the protein or of the antibody, of the drug. So we'll benefit from that.

And then as a company, not every company use AI. So AI is part of our business strategy as well, we use in every part of our business.

Okay, then. I guess we're approaching to the end of this session. Thank you for joining this presentation by WuXi Biologics.

Thank you.

Good morning, and good evening, everyone. Welcome to Wuxi Biologics 2025 interim results briefing. So today, it's our great honor to present to you Dr. Chris Chen, CEO of WuXi Biologics; and also Mr. Tu Ming, CFO of WuXi Biologics; and also Ms. Lina Fan who is the SVP and also the Senior IR Director of WuXi Bio.

So now, I will hand over to Dr. Chris to share with us the results. Thank you, Chris.

Thank you, Cui Cui. And good morning, good afternoon and good evening. So really my pleasure to share with global investors about WuXi Biologics interim results again. The topic or the theme of my part is actually accelerated growth and very consistent with the talk I gave during JPMorgan Conference.

So the first slide I want to share with you, this is a slide everyone is very familiar with. I think what's striking this time when I presented to you during the 2025 interim is actually except a few gross margin numbers -- margin rate, all numbers are [ presenting ] record high for the company, record high. So on the left side, really operating metrics, on the right side, the financials. So except the margin -- except during COVID, we have higher gross margin, high EBITDA margin because of the high [indiscernible] but now this year, I present metric [indiscernible] is record high for the company. So that's really the content, the background of my talk today.

So -- going to the left side, we're looking at project numbers, a record, 864 numbers, 864 projects. New projects added for the first 6 months, 86, right? This continuing the strong momentum that we had last year was 151 projects. Last year, 151 was already record high, almost on par with during COVID years, and now we continue the strong momentum. So now it's 86 for the first half. This is certainly a record high for the first half. So our commercial projects also grew 50%. As I always tell investors, WuXi is -- our business model is very unique, very different. Besides become a good CRO or CDMO, we will also be a very strong CMO contenders. So our end projects now also grow 50%. As a result, our backlog also grew as well, very -- a meaningful way.

We're very proud that we hosted 44 regulatory inspections with 100% success rate. This is almost like the best student in the class, right? No one can beat a 100% success rate. So if you look at our employee numbers, it's very consistent and very stable and our employee retention rate very high, 98.8%.

So on right side is the financial numbers, you guys all read them, so I'll just highlight a few. Our revenue is close to RMB 10 billion, our adjusted EBITDA, CNY 4.3 billion, and our adjusted net profit by CNY 2.8 billion. As I mentioned earlier, so that our margin is slightly lower than during COVID years, but in fact, is still one of the best in the industry, right? So you see our gross margin -- gross profit margin grew from 39.1% to 42.7%. So our CFO, Ming, will talk in a lot more detail later on. And as a result, our EBITDA margin, our net profit margin all grew significantly. It's similar to our EPS with whopping 56.8% growth.

If you look at the revenue breakdown, we actually see a very exciting trend in both early phase and late phase. You see early phase, R and early D, we actually grew more than 35%. The M part grow 25%. So both are very, very exciting for us. And in the middle part of the program in Phase I and the Phase II, we see a decline there. The most -- the #1 reason is actually quite a few large-scale projects was in this bucket and now get to manufacturing. So this, again, this paved away for our strong manufacturing revenue growth near future. And we also hope that this decline as the project -- as the program in Phase I and Phase II evolve, this one, this project or this decline will also be reversed in the near future. So again, you see very strong growth of revenue from R and early D and very strong revenue growth in M. This is our M revenue growth, almost 25% because of several large-scale manufacturing projects.

This is the slide that our investors has been very familiar with. This is called the golden funnel. But if you -- I always tell investors, for WuXi Biologics, you only need know this funnel to be able to predict our financial performance. But I already mentioned the record high 86 projects earlier for the first 6 months of the year. Among them, 9 of them are Win-the-Molecule. So even in this year, first half, we have 9 Win-the-Molecule, including 2 Phase III programs.

Among 86, actually, more than half projects come from U.S. Among 86, actually, more than 70% are ADC and bispecific or multi-specific projects. So WuXi Biologics is their sort of industry partner of choice for ADC and multi-specifics. And because they're very hard to do and they require a lot of expertise, they also require a lot of experience, and we happen to have the largest portfolio of multi-specifics. We also have a large portfolio of ADCs, right?

So on the right side, now you see we have 67 Phase III programs. If you assume a 70% success rate, basically in the next 5 years, we have another 50 manufacturing projects. So our commercial manufacturing grow from 24 to 70s in the next 5 years. That's assuming a static number based on today. As you know, we'll have more and more projects added later on. So I think that's why I always said our M will grow as significant as the company evolves in the next couple of years, right? And then 24 commercial projects, I already mentioned in the beginning of the talk.

So again, this funnel give us plenty of growth in the next few years. This continues to reinforce our business model, CRDMO, right? So our R-to-D conversion is more than 90%. Our D-to-M conversion is more than 90%. Actually, right now, both of them are more than 95%.

So I have always cautioned investors in our backlog is so big that, is so huge that you don't expect to us see -- don't expect to see significant growth of the backlog. And this time is an anomaly, right? Now you see our backlog, we have two part, milestone backlog and service backlog. You see milestone backlog grew from about $7 billion to $9 billion because of a significant progress of R as we mentioned that earlier this year. And then our service backlog grew from about $10 billion to $11.3 billion as well. And on top of that, we actually convert a lot of them to revenue.

So really, this is -- for the first time, we see a significant growth of our backlog. And similar trend is for 3-year backlog, has been stable for the past couple of years. Now you see a very meaningful growth. Again, this is consistent with the funnel and consistent with the contract we signed and consistent with the project we introduced over the years.

So as I mentioned earlier, we have the most exciting portfolio of our industry, right? We have 864 projects. Among them, more than 300 are first-in-class programs.

Among them, maybe about more than 50% of global ADCs and global bispecifics, multi-specifics are in this portfolio. So you multi-specifics grow more than 36 -- almost 37%, right? So now we are working on 168 multi-specifics. This includes the most exciting programs like the CD3, CD19; CD3, CD20; CD3, BCMA; CD3, 19, 20, trispecifics, right? This also includes into the PD-1, VEGF and other bi-specific and multi-specific program. So we have the most exciting portfolio of multi-specifics.

Similar to that, we also have more exciting portfolio with ADCs. Now you see our ADC program also grows significantly. And our -- now we have more than 225 programs. Those are programs in either entering clinic or in the clinic right now, amazing growth. So as I mentioned earlier, ADC and bispecifics or multi-specifics now account for more than 40% of our portfolio. And also early part of this year is actually account for more than 70% of this year's wins.

So the two exciting segments of the biologics space, we are actually a very strong leader. We are a partner of choice for any company who wants to develop multi-specifics or ADCs because our technology, because our speed, because our execution, [ because of our ] quality.

So we always wanted to share with you our regional -- in every geography, how WuXi fares in that. But North America continues to be the largest market for us, almost 60% of revenue come from North America, with that 20% growth actually is very exciting. This continue to be the strongest area for us. With all those noise, we continue to see whether it's early phase or late phase, whether it's R or D or M, we are the preferred partner of choice for North American clients.

Europe, we see close to 20% of revenue with a modest growth. But because in the past, we did a lot of CMO projects. Now we are overcoming the CMO projects. Now we are really working on a lot -- including a lot of early-phase programs, and hopefully, you will see more exciting growth later on as well.

China, you see now China accounts for 13% of revenue with also a single-digit decline in revenue. If you take into account all those programs Chinese companies out-license to global peers, if you move them and then put them in this bucket, then we actually see a single-digit growth in there I think. So China is really a negative growth or decline is mostly because of a lot of -- quite a few programs that out-licensed to global partners.

You see very, very exciting growth in Asia, mostly Japan, Korea and Singapore. So I think now getting close to 7% revenue was more than double in terms of the growth speed. We continue to foresee this region and maybe getting close to 10% in the next couple of years. We continue to see very exciting development in Japan, in Korea, in Singapore and in other Asian countries.

So with that, I'll hand over to our CFO, Ming, he will tell you a lot more about our financials for the first half.

Thank you, Chris. Slide 12 will give us the highlights of our financial metrics for the first half of fiscal year 2025.

First, revenue. As Dr. Chen just mentioned, despite of the uncertainty from tariffs, geopolitical headwinds and also uneven pacing of biotech funding recovery, our revenue continued to grow at an accelerated pace. As you can see that our revenue almost reached RMB 10 billion in the first half, 16.1% increase over the same period last year. We're not just continuing our journey of solid growth over the past 5 years, but also transitioning into a phase of accelerated growth.

Our revenue increase in the first half was primarily driven by the following factors: First is the successful execution of our Follow and Win-the-Molecule strategies as more and more projects advancing through our golden funnel towards the later stages. Now we have 67 projects in Phase III and 24 at the commercial manufacturing stage. And the volume of these late-stage projects are ramping up steadily. Win-the-Molecule strategy also added 9 projects to our portfolio with 2 in the late phases. All post-COVID industry adjustments have been fully absorbed in our financials. Overall, late phase and the commercial manufacturing revenue grew close to 25% and represented over 43% of our total portfolio during this reporting period.

On development side, although the biotech funding recovery is still zigzagging, our share gain in the pre-IND space enabled us to achieve a revenue growth over 35% year-over-year, thanks to the 151 new projects we scored last year, followed by a record 86 projects in the first half of this year. Our process optimization and the productivity improvements also enabled us to shorten our revenue conversion cycle from DNA to IND to about 6 to 9 months.

The decline in our early phase revenue year-over-year is largely due to the timing as the 3 big scale clinical manufacturing projects progressed from Phase II to Phase III, created a gap of close to RMB 0.5 billion, which will be replenished by the project from the pre-IND space over time.

In our research and discovery services, we are also continuing our momentum from second half last year, thanks to our strong innovative technology platforms on bispecific, multi-specifics and ADC.

You might recall that during our annual earnings release back in March, we talked about 7 molecular discovery deals that brought us about USD 140 million of upfront payments. Half was booked in the second half of last year and the other half, roughly $70 million, was booked in the first half of this year, with potentially $2.3 billion of milestone and royalty incomes in the future years. We also have a full pipeline of the new deals. So the momentum of R will continue in the second half and into the future.

From a modality standpoint, our new exciting growth platforms such as ADC, bispecific and also multi-specifics contributed significantly to overall revenue increase during this reporting period. Lastly, with our capacity expansion globally, [ Dundalk, Ireland ]; Cranbury, New Jersey contributed close to [ 100 million of ] incremental revenue to other commercial and the clinical manufacturing sector in the first half.

Moving over to gross profit, which increased about RMB 900 million to approximately RMB 4.3 billion in the first half. The whopping 27% increase in the gross profit to give us a 360 bps of the gross margin expansion year-over-year. The margin improvement was primarily attributed to the following factors: First, the [indiscernible] growth in R. The research sector gave us a positive mix impact as the upfront payments and the milestone income grew more than 2x during this reporting period. The margin rate for development sector expanded 1 point largely from the productivity gains.

And also, the profitability from [indiscernible] and the manufacturing sector continue to meet or exceed our expectations. First utilization rates in China and Ireland continued to improve throughout 2025, the productivity improvement from WBS, our leading manufacturing implementation, also gave us 100 bps of the margin lift.

Lastly, SBC, our share-based compensation declined CNY 200 million year-over-year as we continue to optimize our [indiscernible] factor, giving us 2 points of the GP margin expansion. Also, I want to mention here that there is no tangible tariff impact to our financials in the first half this year.

Excluding share-based compensation, our adjusted gross profit margin stands at 45.6%, 120 bps improvement year-over-year, still one of the leading positions in the global CDMO industries.

Moving on to our adjusted EBITDA, which is the proxy of our operating cash generation capabilities increased about 20.6% to RMB 4.3 billion during the reporting period. The adjusted EBITDA margin increased 117 bps to 43.3%, which is also one of the highest in the CDMO industry.

Adjusted net profit is the IFRS base, the net profit, excluding the impact of foreign exchange gain and loss, share-based compensation and also fair value gain and loss from our investment portfolios or our asset divestitures. This is a proxy for our business profitability under continuous operation.

As you can see that the adjusted net profit exceeded CNY 2.8 billion in the first half, 11.6% increase year-over-year. The growth in adjusted net profit was less impressive than the top line growth, was largely due to the SG&A increases as we continue to build the stand-alone capabilities for XDC and investing in our global business development capabilities. Also, the tax expenses in the first half were higher year-over-year due to the onetime DTA, the deferred tax adjustment in Ireland in our first half 2024 baseline and also the smaller deduction basis for our share-based compensation in China.

Next page, please. This slide shows us the profitability metrics over the past years in the first half, including IFRS-based net profit, net profit attributable to owners of the company, earnings per share and also adjusted earnings per share. You can see that IFRS-based net profit has grown at a CAGR of 23.6% between 2020 and 2024 and reached the CNY 2.8 billion in the first half of this year, a whopping RMB 1 billion increase over the same period last year.

The 54.8% growth is largely driven by the 27% of the IFRS gross margin increase, as we discussed earlier and also the combined gain and loss from investment, divestiture and the foreign exchange of roughly CNY 378 million in total, 22 points of the net profit improvement year-over-year. So these gains from investment and divestiture activities will give us more dry powder to enable us to -- for more biotech incubating, global capacity expansion and also share buybacks in the near future.

IFRS-based net profit attributable to the owners of the company grew 56% of the first half -- in the first half, slightly higher than the IFRS-based net profit as both the WuXi Bio and the subsidiary, WuXi XDC, grew at a similar pace between 53% and 55%. Hence, the financial impact of minority interest pickup remains proportional to the net profit growth.

Basic earnings per share moved in tandem with IFRS net profit attributable to the owners of the company, grew 56.8% to CNY 0.58 per share. If we exclude share-based compensation, investment divestiture gain and loss, FX translation impact, our adjusted EPS was about CNY 0.59 per share, 7.3% improvement year-over-year.

Next page, please. Slide 14 gives us more insights into our gross profit and the cost of sales. In the first half of this year, our gross profit margin was 42.7%, 360 bps extension from the same period last year. Excluding the CNY 300 million of the share-based compensation, our adjusted gross profit was 45.6%, 120 bps improvement year-over-year.

As we discussed earlier the gross profit -- the gross margin expansion was primarily attributed to the takeoff of the research, discovery services, which gave us a favorable margin lift from the upfront payment and also the milestone payments, the improved capacity utilization in China and Europe and also the 1 point of productivity gains from WBS lean manufacturing implementation.

You can see the composition of our cost components in the stack bars below, with roughly 16.5% in labor costs, 19.6% in material and 21.2% in overhead, which includes maintenance, utilities and the depreciation of the manufacturing facilities.

Labor component was smaller than the historical average as we focus on labor productivity. Revenue generation per employee is a crucial KPI for all our business units. Dr. Chen will show you more later. Our total number of employees did not increase for the past 18 months, while our revenue increased 16.1% year-over-year.

The higher overhead costs were primarily driven by the new facilities coming online as we extended our global capacity from about 150,000 liters at the beginning of 2023 to over 300,000 liters at the beginning of this year. The new capacity brought on more expansion -- more depreciation, utilities, maintenance and also other fixed overheads. The higher R and M, the research and the manufacturing mix in our portfolio will also contribute to a lower labor cost component over time.

Next page, please. This page is about liquidity. At WuXi Biologics, we have a strong balance sheet and a solid cash position. As of the end of first half, we had CNY 12.5 billion cash on hand, sufficient funds to support our accelerated growth globally. We have a conservative funding strategy. For our CNY 60 billion balance sheet, we only have about CNY 2.7 billion of debt, 30% of which are working capital facilities. And our gearing ratio, which is defined as the -- hello, can you hear me?

Yes, Ming, please continue.

I just want to say that we have a very conservative funding strategy here for our CNY 60 billion balance sheet, we only have about CNY 2.7 billion of debt, 30% of which are working capital facilities. And our gearing ratio, which is defined as the interest-bearing debt over equity is nearly 5.6%. At the same time, we have close to CNY 6 billion of the bank credit facilities to tap into, if we need to.

Our CapEx spending in the first half was CNY 1.9 billion, mainly for our capacity expansion for both Biologics and XDC in Singapore, Biologics facility in U.S. and also XDC's expansion in China. Subtracting working capital, occupation and tax payments, our free cash flow in the first half was slightly shy of breakeven, but adjusting certain timing items, we expect a substantial improvement in our free cash flow in the second half.

For the total year of 2025, we're still committed to delivering positive free cash flow. This will be the fourth year in a row for us to deliver positive free cash flow. Hopefully, this time in a more meaningful way, and make a new record in our free cash flow history.

Now I'm going to pass the baton back to Chris to share more insights into our business operations.

Thank you, Ming. I think Wuxi Biologics has a very unique CRDMO model. Our model is very complex. It's not easy to understand. So often, investors just compare with typical CMO. So that's why I want to use this slide, again, to highlight the difference of our CRDMO model.

So besides the traditional, our business model is called Follow the Molecule, so we -- for the R, we prepare the first milligram -- the first 10 milligram of the molecule. For D, we prepare for the 10-gram -- 100-gram. For M, hopefully, 100 kilo, even a [ metric ton ]. So as the mass of the drugs increase significantly, right, our revenue also increase exponentially. And that -- but that business model is mostly based on cost-plus model. But besides the cost-plus model, we actually have a very significant IP-driven revenue.

So I want to highlight here, during R phase, if the program is -- if a partner get one of the program from WuXi Biologics, typically, we receive upfront payment of $30 million or $40 million and milestone payment up to $200 million and then a royalty of 3% to 5%, even up as high as 10%. So for a $1 billion drug, we may be able to get $100 million of royalties alone. Those are actually very high margin revenue because most of the cost was already absorbed in the prior years. So the GP -- gross margin could be as high as 80% or even more, right? So this is the IP-driven revenue.

And then once we get into development, this is a normal part of our business of WuXi, as I mentioned, this is cost-plus. But besides that, we actually have a cell line IP as well. And this is something we've not mentioned frequently in the past because we assume everyone will be manufacturing with us. But if they don't, if they don't manufacture with us, the cell line IP, we actually generated a significant amount of revenue. So we have more than 600 projects -- we will have more than 600 projects with cell line royalties by the end of this year. So let me give you an example.

So if -- for example, if WuXi Biologics making 100% of the M, then my partner, my clients don't need to pay any cell line royalties. But if they decide to give 50% volume to WuXi Biologics, another 50% in-house or to a third party, then I make money from the 50% of the M in WuXi Biologics. I also makes the money for the products that someone else makes, and that's because we have the cell line IP.

So in terms of the difference of the profit. So for example, if I make $100 from the manufacturing ourselves, and if my partner manufacturer outside of WuXi, then they have to pay out between $25 to $200 in terms of the royalties. Again, this really showcases resilience of our business model. So even if someone don't manufacture with us, we still get a portion of manufacturing profit, and the product can be even as high as revenue from manufacturing profit for some of the programs. And this -- that's why for WuXi Biologics, we have a very unique business model.

So our R-D-M CRDMO model is very unique in that sense. We -- R leads to D, D leads to M, so our revenue get higher and higher. Not only we have the service-based revenue, we also have IP driven revenue.

So last year, the IP-driven revenue was already a significant part of our revenue composition. If you look at the profit from 2024, about 15% of the profit actually come from those IP driven, by either R or D, either cell line royalty or the milestone payment or upfront payment. And that's why I always said WuXi Biologics has a very different business model. We are not a CMO. We are not a CDMO. We are a CRDMO. And hopefully, that's very clear with this explanation. That's why I spent quite a few minutes on this slide.

So talk about R. We actually have more than 50 programs that we are eligible for royalties. So we are also eligible for milestone payment upfront. So this is -- that's why last year, this IP-driven revenue or profit is already significant in our portfolio, right? We have 50 programs like that. Among the 50 programs, a few, let's say, two or three potentially have achieved mega blockbuster sales, $5 billion or even $10 billion of sales. But if you think about that, if we have a program with a $5 billion or $10 billion sales, even 3% or 5% of that royalty becomes very, very meaningful to our top line and the bottom line.

So I think at some point, the WuXi Biologics will be receiving hundreds of million dollars of royalties and milestones from those programs and eventually will be $1 billion or more. And that's why I always said our CRDMO business model is very different from our peers.

This was -- when I IPO-ed, I had the same business model, but at that time, it was, let's say, 10, 15 years away. Now it's only -- now, it's reaching -- now this is already getting too close, getting -- now this is actually already close to $100 million. So go from $100 million to $300 million to $500 million to $1 billion is foreseeable in let's say, 5 to 8 years later, this will become $1 billion revenue. And that's how significant is this model is to WuXi Biologics.

So on the D part as everyone knows, that's our stronghold, that's really WuXi cup of tea, right? So we have a very strong market share. As you know, and that's why we won 86 new projects early this year. And as everyone knows, our industry is -- there is also a lot of M&A, right? So either U.S. biotech being acquired by large pharma or Chinese biotech program out-license to global. And WuXi actually will benefit from all those trends because oftentimes, WuXi continue to be the main CMC player behind scene, helping either the global acquisition or the Chinese asset out-licensed to global peers.

So for Chinese assets out-licensed to global partners, we typically have about 70% market share. And then as the program goes from China to global, our revenue -- our service revenue tends to grow 5 to 10x. And that's why I have always tell some investors, this is almost like a pie in the sky for us.

If the Chinese program gets out-licensed to the global to companies like Merck, Lilly or Pfizer, right, or J&J or Roche, so -- because a program just for China, I may receive, let's say, $10 million to $15 million revenue. A program destined for global, then I received $100 million or even $200 million of revenue as there is a 5 to 10x amplification on that.

And the good news is, whether it's a small biotech acquired by large pharma or a Chinese program licensed to global, WuXi always keep the project. So far, our keeping rate is more than 95%. And that's why our revenue will continue to grow as the global deals are happening. So that's the D part.

And then now I'll talk about M. So at the beginning of the call, I mentioned already that M will actually be driving a significant part of the growth. So PPQ is a key -- it's almost like a gate for M. So you do PPQ and then you wait for -- you file for FDA approval and then once they approve, you launch your product. So that's why PPQ is a very good leading indicator of M revenue.

So you see during COVID time, we are able to do 20 PPQ a year. But this year, we already have 25. What's more exciting, actually next year, even as of today, we already see 27 for next year. So we still have 12 months to work on additional projects. So hopefully, next time when I share with you, 2026, you will see a lot more PPQs. So more PPQ means more revenue. More PPQ mean exponential growth of the manufacturing revenue as well.

I think another fact that I want to share with you is that we have done close to 100 PPQs already. We only have one failure so far. So our track record is at 98% plus, almost 99%. And that's why everyone in the industry, our partners love us because when they do PPQ with WuXi, it's almost like they have insurance, it's going to be successful. And that basically means the BLA filing will be on time. And on top of that, we -- as I mentioned earlier, we have a very strong regulatory track record and the product will be approved.

So with the PPQ success, with regulatory approval success, our partners can really trust WuXi to deliver the product for them.

So over the years now, we have built a very strong global network. We have a strong network in China for R, D, and M. Now we just finished building out our strong network in U.S. and Europe for R, D and M. So R is in Boston, the D in Cranbury, New Jersey. The M is already in Ireland and will be in Worcester, Massachusetts. So that's the second line -- second R-D-M. And the third R-D-M will be in Singapore. So I think to really serve every client in every region, now we have three parallel supply chain to be able to really address the global need of any client from Basel, from London to New York, Boston, San Francisco, Shanghai and even Tokyo and so.

So I want to give you a very quick update on our global site as well as I said I'm sure you are very -- very much interested. As I mentioned, we have a very strong network in Ireland. So we have three facilities in Ireland. And as of today, all three facilities are producing product for us. We have done four PPQs with 100% success. And last week, we actually received EMA approval for the first product in this site. So that's really marked a great milestone.

So from -- for this Ireland facility, to remind global investors, this is one of the fastest-built facility in Ireland. This is also one of the most high-quality facility in Ireland. We received ISPE award for that. And now we received the product approval for this site from essentially year 5, and this is actually an incredible track record. So we can deliver this in Ireland. So that's again, demonstrated a strong execution capability of WuXi Biologics and our mindset, our quality, our operations are all now carry over very well in Ireland.

So as I mentioned earlier, we have three supply chains. One is in the U.S. The U.S., the clinical is in New Jersey and the commercial is in Massachusetts, all are progressing very, very well. And lastly on this slide, we are also adding more capacity in China, the facility. For the first time, now we have launched a 5,000 single reactor. 10 years ago, when we started with single-use, it was 2,000. Now we're going to 5,000. And in U.S. next year, we're going with 6,000. So single reactor now is as big as 6,000.

So I mentioned our third supply chain with the third line that reside in Singapore from R and D and M. So I'm happy to share with you that we started our drug product facility construction. We are finishing up the design of drug substance facility. What we can achieve in Singapore is actually unbelievable. Our subsidiary, XDC, is close to finishing up the facility in Singapore. So if you visit Singapore, I'm more than happy to have someone host you to visit this site.

About February of this year, you see green -- you see the graph on the line. And on March, now we started piling. And this June, we -- actually, the facility is ready, and now we are doing [indiscernible] runs. By end of this year, we'll be doing product runs in there. So essentially from piling to product runs is about 18 to less than 20 months. This is for the first time we are doing this outside of China, on time, on budget. So this is a very significant. That's why we are very confident that we can deliver a third supply chain in Singapore.

So I mentioned earlier that our PPQ success is very, very high. Another very essential quality, essential attribute for -- become a manufacturing global leader is quality. I'm very happy to say that we have -- so far, we have 100% success on -- that's why I said it's the best student in the class, right? No one can beat 100% success. We have 44 already, including 22 from U.S. FDA and from EMA.

And almost every day, we are being audited by our clients. And so, so far, for the first half, we already have 139 client audits. That basically translates to full year, almost 300 audits. So as you know, we only have 200 working days. So every day, we're being audited by global clients.

And then for every two client -- every three client audits, oftentimes, client don't have any finding. They send five people to spend three days with us. So you're talking about 10 to 15 persons a day. And then reviewing every document, trying to find any issues that we may have in our manufacturing process, in our QC process, in engineering. And then about 30% of the time, they don't find anything. If you think about it, if you send 10 people -- 10 person a day -- 10 person a day to visit a facility, and you didn't find anything for that visit. And that's how good we are in terms of our quality. And that's why we can consistently pass FDA inspections and EMA inspections.

So I think as everyone in our space getting to digital, WuXi Biologics is -- also want to be a global leader in digital. So we have already spent -- I think this is already our fifth year in digital journey. So I think even before COVID, we started our digital journey. So I think end of this year, hopefully, we will be a global leader in digital as well.

So DaVinci client portal is a go-to resource for every data, every invoice or every action items that our clients need to work with us is in DaVinci client portal. BioFoundry, our own system for digitalized lab. And then EBR is our own -- it's our way of digitalized manufacturing, automated manufacturing in there.

I think with the WBS with digital and with our way of improvement, that's why you have seen over the past 8 years, we have -- over the past 8 years, our revenue per person grew from $100,000 to more than -- almost $250,000. So actually, it's an incredible growth. So every year, our per FTE revenue actually grew 11% on average. We continue to foresee this and maybe even higher -- at an even higher rate in the next couple of years as we go through more digital, more WBS. And certainly, the high margin revenue from upfront payment from milestone and for royalties will help because there's no FTE associated with that because all the work cost was already absorbed in the prior years.

I think for me, every earning, I always have differentiating factors work for us. I think we have been talking about bispecifics for a long time. Back in 2018, we launched WuXiBody and that's a bispecific technology. Back -- 2019, we launched a CD3 platform. So now our CD3 platform is being used more than 10 programs, the leading program from Merck, from GSK, from [indiscernible] all using that CD3 platform, our own bispecific platform.

So today, I want to highlight a few on ADCs, I think you probably heard that from Jimmy yesterday as well. So now we have our own ADC technology, you can either cover linker, payload and conjugation. Again, this really showcases how WuXi want to help our global partners, our global clients saying, if you need a technology, we have something for you, and hopefully, it's also the best-in-class.

When we started -- when WuXi Biologics was started 14 years ago, we bet that a single-use technology is the future, single-use is the future. Now looking back, I think we really think that we bet on the right path, everything is so successful in there. So single-use technology is not only cost efficient, it's also sustainable. It's actually very efficient.

And if you look at the next slide, right, we have already made metric ton level of quantity of [ mAbs ] for global clients for using our technology. So as I said earlier, 10 years ago, it was 2,000 liter, now it's 5,000 liter, next year it will be 6,000-liter single reactor. If the reactor volume is not enough, we'll [ multitask ] them. We now input, [ 6 -- 2,000 reactor, 3,000, 4,000. ] In the figure, we can put two 6,000 together. I think that we have already made more than 300 batches in five manufacturing facilities in two countries using this technology. Now we have already received more than 20 FDA approvals for this.

So it's proven with a single use, now we can deliver not only 100 kilogram, but now at 2 to 3 metric ton, 2,000 kilograms or 3,000 kilogram. I think this is one way of achieving that.

The other way of achieving that, I'm not sure whether some of you investors follow our own news. WuXi Biologics achieved 100-gram per liter using continuous processing technology. 100-gram per liter using continuous processing technology. Continuous technology, as you know, is 3 to 5 gram per liter. Basically, we can achieve 20x productivity improvement. So for our 10,000 -- our 1,000-liter reactor is equal someone else's 20,000-liter reactor using our continuous technology. That's in two ways how we can really become a manufacturing powerhouse either using this technology or using continuous processing.

As our industry shifts more and more to autoimmune disease, the kidney disease, the convenience, essentially administration at home is more and more important. So we -- over the past 10 years, we developed our own formulation technology so that we can -- for every biologic, we try to develop it in a liquid formulation and put in the syringe so that patients can administer at home. It's so much more convenient, but also saves a lot of money for the health care system.

To achieve that, you need to do a very high concentration because oftentimes, the dose is fixed. For example, if dose is 200 milligram, and if you only able to formulate 25 mg per mL then you have to do 80-gram delivery -- 8 mL delivery. You cannot ask the patient to shoot themselves 8 times for one treatment, it's too much. But now with technology, we can do 200 milligrams in 1 injection, 1 mL. And this almost work we have done over the past 8 years. And now we have more than 100 projects. Among the 800 projects, now we have more than 100 projects we are able to do this. So again, this is a proven technology for us already and really help the autoimmune patients in a good way.

WBS and ESG are always a key component of our strategy. So I think Ming already mentioned WBS, I think this is already -- this is a WuXi way of improving ourselves. Every year, we improve our time line. Every year, we improve quality, we improve delivery, we improve in regulatory. I think WBS is -- financially, we are able to achieve our 100 bps improvement on gross margin just because we're doing WBS. And that's our goal for every year. Every year, at least from WBS, we want to achieve 100 bps improvement on margins.

I'm also very proud that the global community rate us very high on ESG. We are ranked highest on every metric on ESG. On two rating agencies, we're actually top 1%. In one rating agency, globally they're rating 800 companies in the pharmaceutical space and pharmaceutical-biotech space and supply chain space, we actually ranked -- all of 800 companies, we ranked at #2. We are almost there with -- ranked #1, essentially the most ESG-friendly company, the most ESG-committed company in this space.

So with that, I want to summarize. I think from the beginning, I said. What's unique about WuXi is our business model, is our CRDMO business model. We made the first milligram, first gram, first kilogram, first metric ton, right? And then revenue grow exponentially. And not only the cost-plus model of revenue, service revenue.

We also have IP revenue for our R and D. And R will lead to D, the current conversion rate is more than 95%. The D will lead to M. With all those noise, with all those challenges, now our D to M conversion is still more than 90% -- more than 95%. So our CRDMO model is really, really unique. And that's why we always said we are unique in our industry.

So for the strong first half '25 results really reinforce was our confidence, right? So you see our overall revenue grew 16%. Our early-phase grew a whopping 35%. Our manufacturing grow almost 25%. Continuing the momentum, the largest -- the highest number of projects of 151 last year. Now this first half grow 86. And a lot of them -- 70% of them are highly complex projects like ADC and bispecific with a single ASP higher than traditional mAb projects, right? Our manufacturing, I mentioned 25 PPQ, now and even more next year, right?

So I really -- I think the -- so first half 2025, we can see this is almost a launchpad for accelerated growth. Over the past couple of years, past 18 months, we also divested some assets, improve our efficiency, right?

So looking forward for the second half -- I mean for 2026, now we really see accelerate growth. That's why I said launching pad right now. R, D and M are all on fire, right? So M, I already mentioned the growth in there. On top of the growth on top line, our margin actually will expand, right, from WBS, from digital, from more milestone and royalty revenue, from large-scale CMO projects. But Ming already mentioned, we are expecting a significantly higher free cash flow this year. And as our CapEx will continue to be realize, our free cash flow will be stronger and stronger.

Our global expansion, Ireland, Germany, U.S., Singapore, are on track. The loss from global operation is getting reduced and reduced, is significant as well. So that's also another way our margin will be higher and higher.

And largely, with all the new technology we're launching, it will help us achieve more business. The highly automated DS manufacturing. This is what I mentioned. For 15 -- if we do this manufacturing, we do it for 15 days, we get 100 grams per liter. The actual result is actually 110 per liter. 110 gram per liter for 15 days. So if we supply 100% of KEYTRUDA, we only need three reactor, each one of them 1,000 liter. And that's the technology -- next-generation technology we're developing for our industry.

So with a very strong result in the first half, we are very confident that's why we raised our target for revenue from 12%-15% to 14% to 16%. Not only we have a higher revenue, we also believe our margin will be higher and our free cash flow will be higher as well compared to last year. That's why I said first half 2025, launching pad -- is a launching pad for accelerated growth. Thanks so much.

Thank you so much, Chris and Ming. So now we are heading for the Q&A session. [Operator Instructions]

So before we open up the line, so I will ask a question on behalf of all the investors. I think on top of our mind, BIOSECURE Act is still the most relevant part. So recently, we heard some good news about BIOSECURE Act because for the updated version, no WuXi names were on the list. So Chris, so can you share with us your insights and also take away from this?

Thank you, Cui Cui. As you mentioned, so the proposed version of BIOSECURE will likely be -- the proposed version BIOSECURE is out. It is proposed to be introduced in this year's NDAA. The good thing is with all the industry-wide effort with lobbying from WuXi Biologics, right now, our names are not on it. We always -- we continue to lobby, the U.S. politicians saying, we are a very compliant company. We help U.S. companies become more successful. We are enabler. We don't compete with U.S. companies. We are enabler of the global biology industry. I think so this message is probably heard. And we really -- I think the WuXi Biologics now continues to develop our -- continue to focus on our core business, can you serve every client in U.S., in Europe, in China and in Japan.

And also, congrats on this progress and also on your very solid result delivery. So now we will open up our line. So our first question is coming from Ziyi Chen from Goldman Sachs.

I've got a couple of questions. First is about the CapEx. We saw that WuXi Biologics trimmed the total CapEx for this year by about CNY 700 million, while yesterday, XDC mentioned that the raised CapEx by about CNY 160 million. So net-net for non-XDC part, company has revised down the guidance by CNY 860 million. So we're trying to understand what has been the reason for that?

And the second question is, it has been very encouraging to see the company raise the forecast for PPQ in 2026. Just wondering, what has been the contribution of commercial projects to the revenue now? Because we know that late-stage plus CMO is over 40% in the first half. But if we only look at CMO, how much was that. And out of the 24 commercial projects, how many are global projects? And also, we try to understand a bit more about for those global commercial projects, what kind of wallet share WuXi Biologics have been -- gotten in the past few years?

My last question is on -- Chris, you mentioned about the milestone payments contributing about 10%, 15% of the profit last year. And also you illustrated a very promising IP-based income model. So we try to understand a bit more in the longer run, what will potentially be the contribution from those IP-based income to the earnings, including milestone payment, upfront payment for our project, cell line royalties for the project?

Thank you, Ziyi. Yes, to go back the CapEx, I think, as I mentioned earlier, now WuXi is improving everything, including also the CapEx timing. So if we can buy the equipment next February, we don't need to spend money this November. So we're trying to compress the time line of our own projects. So the CapEx reduction is a deferral, it's not really a reduction. So we'll save $700 million or defer $700 million -- RMB 700 million this year, but they will be spent next year. So it's -- we're continuing to optimize the CapEx process. So it's really not really a CapEx reduction, it is a CapEx deferral. That's the first question.

The second question on your CMO, among the 24, I think about 20 are for global. So this included bispecifics, bispecific ADC components and antibodies, enzymes. So I think it's several of them are very high potential as well. I think -- what's the other question on the M part?

On M part, what has been the percentage of the revenue contribution coming from fewer CMO projects?

So for the Follow the Molecule, it's actually 100%, Follow the Molecule. For Win-the-Molecule, so we have a few wins, it's actually Win-the-Molecule. So far, large pharma in-house is a primary supplier, but they will intend to transfer -- make us primary supplier as well. So that's why we believe our M will continue to grow.

So for the Follow the Molecule, so far, we are able to keep 100% of volume. Again, this is what a lot of investor fears is actually once the M come over, they will switch to other companies. So far, that hasn't been happening. So I think we are able to retain 100% of the volume for Follow the Molecule. I think Amicus is a good example, we were manufacturing in China first. Now manufacture in Ireland. And GSK, PD-1, we manufacture them in China, and -- so for the other global program, it's the same way as well. So for Follow the Molecule so far, we are able to keep 100%. For Win-the-Molecule, we are the secondary supplier right now. And in several years, once we have a steady supply, hopefully, we will become primary supplier. We have a couple of examples like that.

The last part of the question is around IP-based income, what could potentially be a longer-term contribution.

I think in terms of the revenue percentage-wise, it's probably only a few percent right now. And hopefully -- so really, if we are lucky, it will become 10%, 15% revenue in, let's say, in 5 to 6 years. And by then, if we achieve 10% revenue, that basically means 25% of profit will come from this. And that's how significant this is.

So our next question is coming from Yang Huang from JPMorgan. Maybe we'll come back to Yang later.

So our next question is coming from Laurence Tam from Morgan Stanley.

So I have one question on WuXiHigh 2.0. So you mentioned -- Chris, you mentioned that the -- so in your press release, you mentioned that WuXiHigh 2.0 pushed the titer up to 230 milligrams per millimeter. I just want to understand the business impact of this upgrade because in the same filing, you also mentioned that 20% of the FDA-approved antibodies are considered high concentration meaning titers of over 100 milligrams per milliliter, right?

So that's for the approved biologics on the market, right? But what about drugs that are in the pipeline, right? How would WuXiHigh 2.0 expand your addressable market on an earlier basis [indiscernible] you mentioned over 100 programs now are over 150 milligrams. Can you just quantify for us that this is the [ impacts ] of this upgrade.

Yes, that's a good question. So as I mentioned earlier, our now -- near-term focus is on [indiscernible] you'll be administer [ PD-1 ] at home with a single injection now. And then [ perception ] added as well. So this is a -- this is absolutely needed for autoimmune, for kidney disease, for other chronic disease. Now it's already [indiscernible] into the oncology area. So as you'd imagine, currently about 20% I think approved [indiscernible] maybe 40% will need this technology, as we mentioned [indiscernible]. A 3-hour IV right [indiscernible] 4-hour infusion, now it's one injection. So essentially, instead of waiting in the hospital 4 hours, now you just shot yourself in arm or in belly for 2 minutes and it's done.

So it's very convenient but behind the scene, this is the technology that enables all those happenings. So that's why High is a very powerful technology. Only a few companies have the technology to make this happen and in the meantime, eventually we will collect royalties and milestone on this technology as well. [indiscernible] And this will become a differentiating factor in everyone who has a [ PD-1 retail ], right? This will become a differentiating factor if you can do a one shot instead of 4 hours in the hospital.

[indiscernible]

[indiscernible] There's only a few. There are only -- 200 is already very, very high.

And, yes, we'll now get back Yang Huang from JPMorgan.

Before Yang, [indiscernible] I need to clarify. I think that WuXiHigh has already been there for us for 10. This is 2.0, right, so that's launching [ here as well, ] October. We have been in business for the past [ 15 years ]. So, yes.

[indiscernible] technical problem. So our next question is coming from [indiscernible].

Congratulation for these very great [indiscernible] results. And first of all, I would like to have understanding for the actually [indiscernible] as well. And as [indiscernible] has mentioned, this revenue [indiscernible] from last year and should have been become [indiscernible] next few years. Can you just add some color on how would you forecast in next 2 to 3 years about visibility? If I understand it correctly, this will directly contribute to the bottom line, increasing also the margin expansion. So that would be great for us to understand how we can pull it off the revenue [indiscernible] in the next 2 years? So that's my first question.

And next, I would like to understand about [indiscernible] margin, which [indiscernible] growth sectors improved the margin? And as mentioned by Dr. -- as mentioned by Mr. Tu, we are about to have a better [indiscernible] margin to the level high as 52% from the current [ stage ] [indiscernible] for the margin expansion? And what about the margin level in the next 2 years?

Yes. So I think for the IP [indiscernible] income, we are at the beginning of the [ phase ]. So it's harder to predict. But this time we'll give -- we assume [indiscernible] for year. And that high could go from [indiscernible] in 2 years, but hopefully [indiscernible] in another 2 years. That's why [indiscernible] even the margin expansion, we have already mentioned that our site losing less money, money well spent. Our royalty base or IP-based income higher and higher. There [indiscernible] more and more, higher and higher margin. I forgot to mention IP-based revenue, typically the margin is 80%, gross margin 80%. And that's why the margin will be higher and higher.

So global [indiscernible] from losing money to making money. And then the IP revenue and then WBS [indiscernible] and then digital. So all those efforts are contributing to margin expansion. So I think we -- our goal to basically improve our margin from the current state all the way to about close to 50%, the record high we achieved during COVID.

So thank you very much and also due to the time constraints, so we will stop here today. And thank you, again, Dr. Chris Chen, Ming, also Dr. Lina for your time today. And thank you, everybody, for participating. So thank you so much, and congrats again. Thank you.

Thank you, Cui Cui. Thank you.

Thank you.