WuXi AppTec Co., Ltd. ($603259)

Good morning, everyone. For those who are based in China and Hong Kong, and good evening for those based in the U.S. This is the 2025 Wuxi AppTec results call. My name is Laurence Tam. I'm a China health care analyst at Morgan Stanley. We're honored today to have the full team from Wuxi AppTec to present the 2025 result in English. The format of the call will be 2 parts. First, I'll let management go through their prepared remarks. You can refer to the slides on the webcast. And then the second part will be a Q&A session to ask questions, simply open the link that was sent to you during the registration. And you can type your questions into the Q&A box at the bottom of the window. You can also send me your questions at the following e-mail, [email protected], and I'll repeat your questions to management. With that, let me now pass it on to the Head of IR at WuXi AppTec, Ms. Tang Ruijia to introduce management and to start the prepared remarks. I'll pass it on to you, Ruijia.

Okay. Thank you, Laurence. Welcome, everyone, to WuXi AppTec 2025 Annual Results Conference Call. We released our financial results last night and have posted the latest on our company website. During today's call, we will make forward-looking statements. Although we believe that our predictions are reasonable, future events are uncertain and our forward-looking statements may turn out to be incorrect. Accordingly, you are strongly cautioned that the reliance on any forward-looking statements involve known and unknown risks and uncertainties. In addition, to supplement the company's consolidated financial statements presented in accordance with IFRS, we provide adjusted IFRS financial data. We believe the adjusted financial measures are useful for understanding and assessing our core business performance. And we believe that investors may benefit from referring to these adjusted financial measures by eliminating the impact of certain unusual and nonrecurring items that are not indicative of the performance of our core business. However, these adjusted measures are not intended to be considered in isolation or as a substitute for the financial information under IFRS. All IP rights and other rights pertaining to the information and the materials presented are owned by safe. audio recording video recording or disclosure of such materials by any means without the prior consent of WuXi AppTec is prohibited. This call does not intend to provide a complete statement of relevant matters. For relevant information, please refer to the company's disclosure documents and information on Shanghai Stock Exchange, Hong Kong Stock Exchange and the company's website. As usual, in today's call, there will be a Q&A session after our presentation. please kindly share with us an as institution before asking questions. With that, please allow me to introduce our Co-CEO, Dr. Minzhang Chen, to present our 2025 annual results. Minzhang, please?

Thanks, Ruijia. Good morning and good evening. Thank you for joining our 2025 annual earnings call. We will begin on Slide #5. In 2025, we appetite indeed full year guidance and achieved a record performance in both revenue and profit. Total revenue achieved RMB 446 billion. Notably, revenue from continuing operations grew 21.4% year-over-year to reach RMB 43.42 billion. Our adjusted non-IFRS net profit grew 41.3% year-over-year to RMB 14.96 billion, with non-IFRS net profit margin further improved 5.9 percentage points year-over-year to 32.9%. Next slide, please. The company remains focused on enhancing our core capabilities and the capacity to better meet customer demand. with continuous capacity expansion by end of 2025, our backlog for continuing operations reached RMB 58 billion, growing 28.8% year-over-year. This does not include business operations we sold or discontinued such as clinical research services. Next slide, please. Slide 7 shows our diversified revenue streams of continuing operations. based on customer headquarters, revenue generated from U.S. market grew 34.3% year-over-year. Japan, Korea and the other regions grew 4.1%. And Europe and China saw some decline, mainly due to fluctuations in project delivery planning. This diversified revenue structure reflects our global footprint. and the capabilities to enable health care innovations. We believe it will continue to underpin the stability and the resilience of our performance. Slide 8, please. So as an enabler of innovation and a trusted partner and contribute to the global pharmaceutical and life science industry, the company continues to drive sustainability embrace initiatives with sustained recognition by leading global ratings. In 2025, we achieved our first MSCI AAA and CDP Climate Change A ratings, maintained CDP water security A and EcoVadis gold ratings and were included in the S&P Global Sustainability Yearbook for the fourth consecutive year. And meanwhile, our near-term greenhouse gas commissions reduction targets have been successfully validated by SBTi. As committed, the UNGC participant and PCI supply ban. We actively embrace global initiatives and are dedicated to integrating sustainability into our business strategy and operations. Next slide, please. For over 2 decades, WuXi AppTec has remained steadfast in our commitment to safeguarding customers' IT and adherent to the highest standards for quality and compliance. In 2025, we completed 741 quality audits and expansions from global customers, regulatory authorities and independent third parties as well as 60 information security audits by global customers. This means, on average, we welcomed 3 quality audits per day and atone information secured out of per week, all with no critical findings. Currently, 20 of our main site 1 of our main sites ISO and IEC-2700-135, covering all many sites in China. IP Is the lifeline for both our company and our customers. We offer the integrity as our foundation and enforce a zero tolerance policy against any infringement. This is our core value and our highest responsibility and the commitment to our customers. Now let's move on to the segment performance. So please turn to Page 9. We see chemistry's CRDMO business model drives continuous growth in 2025, which chemistry revenue grew 25.5% year-over-year to RMB 36.47 billion, benefiting from continued process optimization and enhanced capacity efficiency driven by the growth of late-stage clinical and commercial projects. Our adjusted non-IFRS gross profit margin steadily improved 5.9 percentage points year-over-year. reaching 52.3%. Our small molecule drug discovery, our business continues to generate downstream opportunities. In 2025 we have successfully synthesized and delivered over 420,000 new compounds to our customers. Meanwhile, 310 molecules were converted from 2D face from RTD in 2022. As we continue to strengthen the capabilities of our integrated CRDMO platform we consistently enhance the internal conversion of molecules at different stages. Our small molecule D&M business remains strong. and the small molecule CDMO pipeline continued to expand. In 2025, small molecule D&M business revenue grew 11.4% year-over-year to RMB 19.92 billion. Meanwhile, the company continued to build small molecule capacity in 2025, our Changzhou, Taixing and the Jinshan API sites all successfully passed FDA on-site inspections with no single observation. By year-end, total reactor volume of small molecule APIs reached over 4,000 cubic meter, which implies our new medalists business sustain rapid growth with a sequential ramp-up of new capacity released in 2024 and 2025 tax revenue almost doubled to reach RMB 11.37 billion in 2025. As of year-end, highest backlog grew 20.2% year-over-year. D&M customers increased 25% year-over-year, and its number of molecules increased 45% year-over-year. In September 2025, we completed pacing peptide capacity construction ahead of schedule. The company's total reactor volume of solid phase peptide syndicate has reached over 100,000 leaders. Next page, please. So driven by Follow the Molecule and Win the Molecule strategies, which chemistries small molecule CRDMO pipeline, efficiently converted and captures high-quality molecules and delivering sustained business growth. This reflects our customers strong trust in our technical capabilities, our service efficiency and our quality system. In our stage, we delivered more than 420,000 new compounds in 2025. representing a significant scale. And at the same time, the complexity of these molecules continue to increase, demonstrating a sustained demand from early-stage R&D customers for high-quality services. Building on this strong foundation, we continue to enhance the synergy between our R&D capabilities by strengthening the conversion of molecules from R to D. The new compound synthesized or state served as a continuous funnel, driving downstream demand for our D&M services. Moving to the D&M stage. We added 839 molecules to our pipeline in 2025 with 310 of them converted from R&D. As of year-end, our small molecule D&M pipeline reached 3,452 molecules, including 53 commercial buybacks, 91 in Phase III, 377 in Phase II and 2,900 in Phase I and preclinical. Notably, commercial and Phase III projects increased by 22. As our late-stage pipeline grows, the complexity and the quality of the molecules continue to grow. This deepens our collaboration with customers and lay solid foundations for sustained downturn growth. Next page, please. Our TIDES business has maintained a rapid growth over the past few years. So in 2025, TIDES revenue grew 96% year-over-year to reach RMB 11.37 billion, nearly doubled. We have been continuously enhancing our capabilities and capacity to better meet customer demand. Now I will hand over to our Co-CEO, Dr. Steve Yang, to talk about WuXi testing and WuXi biology. Steve, please.

Thanks, Minzhang. Please turn to Slide 14. In 2025, WuXi Testing revenue returned to positive growth, increasing 4.7% year-over-year to RMB 4.04 billion, of which revenue from drug safety evaluation service grew 4.6% year-over-year, maintaining its leadership position in Asia Pacific. Adjusted non-IFRS gross profit margin declined year-over-year as the impact of market pricing were gradually reflected in revenue through backlog conversion However, with our differentiated capabilities and enhanced operation management, margins continue to improve sequentially quarter-over-quarter. We actively enable customers in global licensing deals, supporting nearly 40% of the successful out-licensing project from Chinese customers since 2012 -- 2022. Our new modality business continued to expand with revenue contributions exceeding 30% in 2025, maintain a lead bidding position in multiple areas. Meanwhile, we continue to advance automation our DMPK team launched a proprietary OEI compound identification software solution improved efficiency by 80% in spectral interpretation and metabolite identification for nuclear acid and peptide test articles. Finally, in 2025, our Suzhou and Shanghai facilities successfully passed multiple regulatory inspections by FDA and by OECD, NMPA and the PMDA. This underscores the high quality of our GLP operations and our quality systems. Let's turn to Slide #15, please. WuXi Biology follows the size strategically build differentiated capabilities in emerging areas and we actively expand our global customer outreach. This allows us to efficiently generate downstream opportunities for our CRDMO model continuously contributing more than 20% of our new customers. We efficiently enable global customers through our integrated in vitro and in vivo drug discovery capabilities for biology, the cross-regional collaboration end-to-end and solutions in emerging areas. WuXi Biology revenue resumed positive growth in 2025, growing 5.2% year-over-year to RMB 2.68 billion. The adjusted non-IFRS gross profit margin was 36.9%, an down 1.9 percentage points, reflecting market pricing dynamics. We closely follow market conditions with a flexible pricing strategy, maximize our value in generating downstream opportunities. Our revenue growth was driven by advancement in our comprehensive in vitro screening platform and enhanced in vivo pharmacology capabilities. Our non-oncology lab business maintained a competitive match serving as a key growth contributor to WuXi biology. Our new modality business continued the momentum with the revenue contribution exceeding 30% in 2025, supported by rapid new customer expansion in multiple areas. Now I would like to turn the call to our CFO, Florence, to discuss our financial performance. Florence, please?

Thank you, Steve. Let's turn to Slide 17. We would like to recap on the company's financials. In 2025, we beat our full year guidance and achieved a record high performance in revenue, profit and cash flow or aspects. Thanks to the visibility provided by our CRDMO business model, we proactively planned our capacity and the capabilities. As new capacity ramp up efficiently quarter-over-quarter, we timely supported the growing demand from late-stage clinical and commercial projects. Meanwhile, we continue to drive quality growth, strengthen our technological expertise and improve operational efficiency. In 2025, our adjusted non-IFRS gross profit reached RMB 21.89 billion. Adjusted non-IFRS gross profit margin expanded to 48.2%, up 6.6 percentage points year-over-year. Adjusted non-IFRS net profit grew 41.3% to RMB 14.96 billion. Correspondingly, adjusted non-IFRS net profit margin improved by 5.9 percentage points to reach 32.9%. Net profit after deducting nonrecurring items, grew 32.6% to RMB 13.24 billion and net profit attributable to the owners of the company surged 102.6% to RMB 19.15 billion. Building on our robust business growth, we sharpened our focus on the CRDMO core business and continue to enhance our investment management capabilities. This resulted in pretax investment gains exceeding RMB 8 billion in 2025, further boosting our net profit attributable to the owners of the company. Consequently, our diluted earnings per share reached RMB 6.61, more than doubling year-over-year. Please turn to Slide 18. With sustained business growth, particularly the rapid increase in late-stage clinical and commercial projects, combined with enhanced operational efficiency and financial management. Our 2025 adjusted operating cash flow reached a record high of RMB 16.67 billion, growing 39.1% year-over-year. This fully demonstrates the sustainable momentum driven by our high-quality molecules and projects. We continue to actively advance our global capacity expansion as planned with CapEx payment of RMB 5.54 billion in 2025. Now I'd like to hand over to Minzhang to share the company outlook. Minzhang, please.

Okay. Please turn to Slide 20. We remain focused on our unique integrated CRDMO core business accelerating the growth of our global capabilities and capacity. We provide highly efficient and exceptional services to our customers, benefiting patients worldwide and driving long-term growth. We will also drive the old in our CRDMO model operations. by driving optimized management and operations, we aim to continuously improving efficiency and strengthen organizational resilience to navigate dynamic market conditions. With customers' ongoing demand for enabling services, our CRDMO business model and the management execution, the company is confident to sustain rapid business growth. We expect total revenue to reach RMB 51.3 billion to RMB 53 billion in 2026, with continuing operations revenue growing 18% to 22% year-over-year by continuously driving quality growth, realizing scale efficiency and enhancing operational excellence while proactively managing new capacity ramp-up and exchange rate challenges. We are confident in maintaining a stable and resilient adjusted non-IFRS net profit margin in 2026. Finally, CapEx for 2026 is expected to reach RMB 6.5 billion to RMB 7.5 billion. Along with business growth and efficiency improvements, we expect adjusted free cash flow to reach RMB 1.5 billion to RMB 11.5 billion. Next page, please. While accelerating the growth of our global capacity and capabilities, we remain committed to rewarding shareholders and actively upholding the company's value. The Board proposes a cash dividend distribution plan, totaling a record RMB 5.7 billion in 2026. Specifically, we plan to maintain the 30% annual cash dividend payout ratio, expecting to distribute 2025 dividend of RMB 4.71 billion. while continuing our interim dividend plan of RMB 1 billion in 2026. To continuously attract and retain top talent, we propose the 2026 H-share incentive trust plan. Under this plan, no more than HKD 1.5 billion worth of H-shares will be granted if 20.6% revenue reached RMB 51.3 billion. And additional HKD 1 billion worth of H-shares will be granted if revenue reaches RMB 53.0 billion or above. This aims to strengthen management and resilience and align our team for long-term shared growth. Importantly, all underlying shares will be produced in the open market at prevailing market prices with no dilution to existing shareholders. Thanks for your attention, and we are now open for questions.

Thanks a lot, Minzhang Chen, Steve Yang, Florence and also Ruijia. We will now enter the Q&A session. [Operator Instructions] We apologize if we couldn't get to all of your questions within this call because we have a lot of questions in the queue. So let me start off with the first question. First of all, let me congratulate management on a fantastic 2025 and a very positive 2026 guidance. Obviously, this year, there's a lot of uncertainty in the market. And also, we have experienced a lot of volatility. Despite that, the company delivered a very positive 2025 and a continuous operations revenue growth range expected for 2026 of 18% to 22%, which means that the midpoint is 20% growth in 2026 for continuous operations, which gives investors a lot of visibility. One of the key concerns this year from investors for the CXO industry is the exchange rate. Year-to-date, the U.S. dollar has depreciated against the RMB. So the first question is in the context of this renewed guidance, how does management think about the impact of currency exchange and is your outlook or guidance for each of 3 business units?

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

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

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

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

Well, so not right now, modalities. There are many modalities is a combination. So there is no single modality can replace all. So we have a small molecules. We have pet and we have all in goes, and then we have all kinds of country-based. So -- but currently, the demand for peptide shelf is so high. So we are continuing to build the capacity and to meet the market demand for the peptide. At the same time, we're also seeing oligonucleotide is growing. And although the market is still small, but we see that there are many, many molecules in the pipeline and also it's going from a rare disease not to a very broad general disease. So the growth will be fast and also a small molecule small molecule now the money to become more and more complex. So to manufacture large scale, very complex molecule either very technical capabilities as well as manufacturing capacity to meet the market demand. So we are doing all this.

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

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

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

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

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

Yes. So our business model is CRDMO and low business model. So we have a very broad -- we have a very broad pipeline. So for example, currently, our D&M pipeline for small molecule, we have more than 3,000 molecules. And so we continuously as the funnel, we continuously have the project moving to the late phase and commercial projects. And many of those projects are very high quality plot molecules. Now, clearly, GLP-1 is right now has the most demand in terms of volume, clearly. But also, we have quite a few very prominent high-quality molecules into the late phase and the commercial stage. For example, PCSK9 molecule, autoimmune molecule, pain. So we have a number of that, just the number I gave in the Investor Day last year. the 2024, the drug counter name top 10 molecules and we work on 8 of them. Again, just a few days ago, they published the 2025 top 10 molecules, and we work on 7 of them. And the best small molecules, and we work -- the top 10 we work on all of them. So we work on many of the high quality as a big large volume molecules. But of course, right now, is still the #1, no doubt about that.

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

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

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

Yes, our global capacity and capability building is our long-term strategy. Clearly, that will continue. And we have announced memorandum understanding with government agencies with Saudi Arabia late last year. And our strategic initiative in Saudi Arabia continue to proceed. We are engaging with relevant stakeholders and develop tactical plans for the next step. So that continue. Our CRDMO business model and our globalization of our capacity and the capability is really the key to our continued growth. And we will continue to build the global capacities. In terms of what suitable area in Saudi Arabia, we are going through a deep dive with the advisory of local strategic advisory firm to understand local regulatory requirement and what are the suitable capabilities which should localize. Based on our preliminary feedback, clearly, there are lots of opportunities. We will likely start in the discovery space and then gradually expand to other parts of our global platform.

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

Yes. Look, the peptide capacity currently is highly used -- it's highly used. So as a result, actually, we just started 2 new TIDES building on both for both peptides and oligo. We just started 2 types of building construction in our Taixing site. In the meantime, we also built a new plant in Singapore for ties. So in short, yes, we have -- our capacity is partly utilized right now, and we are building new capacities to meet the growing demand.

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

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

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

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

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

Ziyi, so first of all, our biology and the testing business remain robust, both in terms of the return to positive growth as we reported and also our outlook for 2026. We actually believe AI under the under -- in combination with human intelligence could be a huge enabler, not only for our industry, but specifically for our company and help us to increase efficiency, at the same time, increase our ability to anticipate and we forecast the future in terms of customer need and in terms of capacity utilization, this is an area we have invested heavily in terms of our ability to use operational data to make our animal room scheduling, study, scheduling, reactor cleaning as well as other aspects of work become more efficient. The example we cited that during the presentation on spectral resolution and interpretation for our DMPK team is a good sign. That situation is obviously very different from -- as we have seen in other sectors, such as in enterprise software. Secondly, we do believe our web lab capabilities to generate massive data and with high quality and consistency is actually very important for companies who are interested to build a new model and algorithms to increase their prediction capabilities. And we had the opportunity to work with many leading companies in the space. And so while they may have models that has the potential to generate a new hypothesis. At this stage, most of those model requires high-quality data and we are uniquely positioned to provide those data. So this is actually a driver to more business for our biology and testing business. And finally, we believe for our CRDMO model with more advancement in ability to unlock either target space or come with new hypothesis to design molecules, it will only accelerate the flow of new ideas into project start. And that will ultimately benefit our -- the funnel, the CRDMO funnel and in a word, where research and the discovery become even more globalized and decentralized.

Thanks, Dr. Yang. So now we have 2 questions coming from Chen Chen of UBS. First, U.S. FDA has announced that it plans to drop the standard requirement of 2 Phase III or pivotal trials instead the FDA default position will be for 1 Phase III trial for drug approvals. Do you think that could accelerate drug approvals and benefit your new orders growth?

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

No, I think that is well said.

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

Well, so we all know that drugs no matter it's peptide or small molecule has a huge demand. So it has a huge demand. And so this announcement, this investment just to further prove the yes, the demand is very high for this product molecule. So because the demand is very high, and we are the major player in this field. So we will -- we believe that we will benefit from the from the opportunities. I don't want to comment -- I don't want to comment on the specific partnership or collaboration. But so I think only -- so the $3 billion investment is -- right now, it's only $200 million. So where do you spend the rest?

Thanks, Dr. Chen. Okay. Sorry. Anything else, Dr. Steve? Okay. Great. So the next question comes from Huang Yang of JPMorgan. What is WuXi AppTec positioning in oral small molecule GLP-1 CMO business?

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

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

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

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

Florence, do you want to comment on the mix?

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

We see the PO growth across all the regions for 2025. So we believe that growth for all the regions in 2016, but particularly the growth strong last year in U.S. So that's why the percentage of the of the other regions relatively become smaller, but we expect the growth for all regions this year and a small decline in China and Europe last year was mainly due to the delivery schedule of some large projects but the growth momentum is there.

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

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

Yes. So the largest product that we are making, the forecast, the demand will continue to grow in the next many years by forecast by market forecast. So the demand will continue to grow. Also, we have -- we also are working on quite a few late phase, very promising projects, which potentially could be a big product as well. But 1 more step back we are CRDMO. We have a very big pipeline, not only in small molecules, but also in petites and also in oligonucleotide. We have a pipeline and that pipeline continue going to funnel the product into the late phase and commercial projects, and that's where our sustained long-term growth come from.

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

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

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

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

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

Well, we don't -- I don't believe we disclosed the margin. Florence?

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

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

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

Thanks, Dr. Yang. So next, we'll go to Citi's John Yung. You initially guided continuing operations revenue to grow 10% to 15% for 2020. for 2025, and you delivered 21% plus. Now the same guidance for 2026, is the range of 18% to 22%. Should we also expect this guidance to be prudent and that you are confident to beat it?

Rather than calling out guidance prudent, I would view it as responsible to the market, right? And I appreciate you track our records. We are navigating a lot of the complex and volatile that for environments today, but we do have the confidence to execute the guidance we may be provided to the market. Of course, we will closely monitor and give the update timely to older investors if we see any different situation.

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

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

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

Yes. So there are many players out there that has providing the CRDMO service on the on the oligo near pipe, specifically, I think RNA. And also siRNA is very -- it has a very large percentage in our pipeline as well. Like I said, we continue to focus on the service we provide. And we continue to focus on the quality of service, the capacity, the speed and the competitive cost. So I think without a unique advantage, we just focus on providing the best service and win the competition in the end just like we're doing every modality in our business.

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

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

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

Yes, I'll take that question. So thank you, as you mentioned that we have seen that in February, the list was so put on and withdrew. So at this time, the final 1260H list for 2026 has not been officially published. And there's no definitive timetable at this time as when this is going to publish, no one actually knows and we won't make any prediction or speculations for the timing of the U.S. government's actions. At the same time, they are very confident that we share shall not be included in the 1260H is list. We are a public traded company listed in Hong Kong and Shanghai with the transparent corporate governments. The company is not only controlled by any government or affiliate with any government or military organization. So at this moment, the company will continue to monitor the situation and take all necessary actions to correct any misinformation and clarify any misunderstandings. And in terms of biosecurity, you mentioned that we all know that the bill was passed as part of the NDA at the end of last year. Since then, there's no recent development on the implementation. So we continue to monitor. Thank you.

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

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

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

Thank you.

Thank you.

Thank you. Bye-Bye.