Wuxi Apptec Co.Ltd(603259) let’s talk about the impact and response of “unverified list” (UVL).
On February 16, Wuxi Apptec Co.Ltd(603259) held a 2021 performance express exchange meeting, at which investors expressed concern about the impact of the “unverified list” (UVL). Wuxi Apptec Co.Ltd(603259) responded that the company is “not on the UVL list and will not be included in the future. All compliance is legal, business operations are normal, suppliers maintain close cooperation, and business guidelines have been improved.”
On February 8, the U.S. Department of Commerce included Wuxi Yaoming Biotechnology Co., Ltd. and Shanghai Yaoming Biotechnology Co., Ltd. under Yaoming biology in the unverified list. Affected by the above news, the share price of Wuxi Apptec Co.Ltd(603259) also fell sharply. On February 9, Wuxi Apptec Co.Ltd(603259) responded that its business and operation were normal, Wuxi Apptec Co.Ltd(603259) was not on the UVL list and was not expected to be included in the list in the future.
Wuxi Apptec Co.Ltd(603259) also said that the company’s legal team is very strong, and corresponding lawyers and compliance (personnel) will be added in 2022, including in the United States and China. In terms of self-examination, the company has always followed the laws of various countries, has strict internal control mechanism and risk control mechanism, and the rules and regulations are constantly updated.
Another major focus of this exchange meeting is Wuxi Apptec Co.Ltd(603259) performance.
After hours on February 15, Wuxi Apptec Co.Ltd(603259) (603259. SH) released the announcement of 2021 performance express. The company’s revenue in 2021 was 22.902 billion yuan, a year-on-year increase of 38.5%; The net profit attributable to shareholders of listed companies was 5.097 billion yuan, a year-on-year increase of 72.19%; The deducted non net profit attributable to shareholders of listed companies was 4.063 billion yuan, a year-on-year increase of 70.38%. This is basically consistent with the performance forecast released by Wuxi Apptec Co.Ltd(603259) a week ago.
For the reasons for the strong growth in 2021, Wuxi Apptec Co.Ltd(603259) is divided into the impact of main business and the impact of non recurring profit and loss items in the express. In the main business part, Wuxi Apptec Co.Ltd(603259) is divided into five parts: chemical business, testing business, biological business, cell and gene therapy ctdmo business and China new drug R & D service department.
Specifically, the revenue of chemical business in 2021 was about 14.087 billion yuan, with a year-on-year increase of about 46.93%; The testing business was 4.525 billion yuan, a year-on-year increase of about 38.03%; Biology business was about 1.985 billion yuan, with a year-on-year increase of about 30.05%; The ctdmo business of cell and gene therapy was about 1.026 billion yuan, a year-on-year decrease of about 2.79%; China’s new drug R & D service department was 1.251 billion yuan, a year-on-year increase of about 17.47%.
For the reasons for the decline in revenue of ctdmo business segment, Wuxi Apptec Co.Ltd(603259) mentioned that “the business in the United States was delayed by the submission of listing applications by some customers”, while the ctdmo business of cell and gene therapy in China grew rapidly, realizing a year-on-year increase of about 87%, which partially alleviated the above impact.
At the exchange meeting, some investors asked “is this phenomenon alleviated?”, Wuxi Apptec Co.Ltd(603259) responded that: “Yes, there is an extension. This customer will declare this year. In addition, he also encountered clinical problems and asked to stop the experiment and solve the problems, which will affect the business of Philadelphia base in the United States. At the end of last year, several early projects were signed, and efficient integration was carried out within the CGT sector. The goal is to complete several landmark projects this year and lay the foundation for sustainable growth next year.”
Wuxi Apptec Co.Ltd(603259) also mentioned the business expectation in 2022 in the express, in which the revenue growth of the chemical business sector in 2022 is expected to nearly double that of 2021; The revenue growth of testing business and biology business is expected to continue the momentum of recent years in 2022. Cell and gene therapy ctdmo business segment 2022 will be a turning year for business development, and the revenue growth is expected to exceed the growth rate of the industry. The business of China’s new drug R & D service department will be upgraded iteratively in 2022 to meet customers’ higher requirements for China’s new drug R & D services. The company expects the revenue to decline to a certain extent.
As for the expected decline of the business of China’s new drug R & D service department, Wuxi Apptec Co.Ltd(603259) said at the exchange meeting that it was mainly due to the change of China’s market environment. According to the clinical value oriented guidelines issued by the State Food and drug administration, the demand for fast follow new drug research and development is declining, and some customers’ demand is turning to first in class / best in class. This part of business needs to be upgraded continuously, which is reflected in the current revenue in the short term. The number of projects has decreased to a certain extent, and the difficulty of projects has increased, resulting in the extension of the delivery cycle, However, the unit price and sales commission of the project will increase in the future.
Wuxi Apptec Co.Ltd(603259) stressed that in the short term, there is a certain decline in income, but it is good in the long run. Customers will be more motivated to promote clinical and charge more sales commission in the future. This business can’t just look at the current revenue. The pipeline will continue to be approved for listing, and the sales commission is an endless source.
