WuXi Biologics (Cayman) Inc. (2269) Earnings Call Transcript & Summary

Good morning, good afternoon, good evening, wherever you might be. Welcome to the 40th JPMorgan Healthcare Conference held virtually. And today, we have the -- a very special session with WuXi Biologics. My name is Tony Ren. I'm the Head of Healthcare Research in Hong Kong, and it's where I'm based. Today, on the line here with me, I am extremely delighted to have Dr. Chris Chen from WuXi Biologics here with us to give us an update of the very exciting progress happening at WuXi Biologics. Obviously, you guys know that this is one of the most important companies in our coverage in Hong Kong and China. And Chris, since things are going back to 2011 when he started at WuXi Biologics, has built an absolute powerhouse. So today, we are very delighted to have you here, Chris. So with that said, we have about a presentation that Chris will go through about 25 minutes or so, and then we'll leave the rest of the time for Q&A. In total, we are given 40 minutes. So with that said, I will hand over the floor to you, Chris.

Thank you, Tony. It's great to be here. So I want to give the company -- give you all the global investor update. So the title of my talk would be Global Premier CRDMO: Enabling Global Partners and Delivering Sustainable High Growth. I think this is the key message I want all of you to remember. I'll divide my talk to 5 parts. First, I will give you a company update. I'm really excited about the explosive growth of the manufacturing project. So that's one we're going to cover. And the technology we use is very different from a traditional CMO. So we use disposable manufacturing. Now we have a lot of data to say it is really a disruptive technology. I want to share with you an update on that. And ESG is a very important part of our business strategy. I want to cover that. And then we'll wrap up my talk and also any questions you may have. If you look at the evolution of the biologic service industries, our industry started with the CMO. The core expertise required really large-scale manufacturing. The business rationale is mostly actually a secondary supplier for large pharma, as biotech manufacturing is so important, and so critical, right? So a lot of our current industry leaders are really very strong CMOs. When WuXi come in, and we actually come in as a CDMO, contract development and manufacturing operation, because our timing coincide with small- and medium-sized company, we're really where the biotech boom is, right? Small- and medium-sized companies don't have infrastructure. And they really need an end-to-end and fully integrated service, not something WuXi Biologics pioneered for biologic CDMO. We offer end-to-end services. And that's when we come up with the model Follow the Molecule and later Win-the-Molecule. So the core actually is very different. So besides the manufacturing technology, you also need to have development technology, really need to be very strong, very focused on D part. So WuXi is currently one of the largest and one of the best CDMO out there. And then for the past couple of years, we want to even bring our business more upstream. We want to be a CRDMO, right? This will truly support small- and medium-sized company. Again, this is -- the idea is, if you are an entrepreneur, you don't need any infrastructure, you don't need any lab, you don't need any manufacturing. I can help you become a $5 billion company, a $10 billion company, even a $30 billion company. That's the enabling role that WuXi can play to help the global community, right? So then the expertise is even more different. Now you have the discovery, and we have been doing that for the past 5 years. We have very many successful stories already. So the reason we should go from a CDMO and to CRDMO because we believe biologics are very sticky. In our past 10 years with CDMO, if you do D and you do D very, very, very well, you'll get M, right? And then now we said we want to do R. If I do R very well, we're going to do D. If we do D very well, I'm going to do M. So it's a very sticky business model. And that's why we so much like the Follow & Win the Molecule business model. So we can engage our clients 5 to 10 years earlier than the traditional CMO business. So let me give you a very exciting update on 2021 numbers. But if you look at the RDM model, all of those is shown in this funnel. Most of you investors have already seen this funnel probably a million times, right? This is the first time I disclosed the 2021 number. It's very exciting to see for the full year 2021 we added 156 projects. This is the -- most of it is D part, 156 projects. This is an unbelievable number. A lot of the large pharmas don't have 156 projects total. A lot of our CDMOs don't have the total 156 projects. We added 156 projects in 12 months -- in the last 12 months and despite COVID, despite the biotech environment, right? We have a total of 480 projects. Amazing, right, 480 projects. This is multiple times the largest pharma company or largest biotech companies under our portfolio. And we have 32 programs in Phase III. Every time I tell investors, when you look at WuXi Biologics, you only need to know these 3 numbers, right? As long as I keep adding projects on the left side, as long as the total project grow, as long as the -- we have plenty of Phase III program, the business will grow. So the business -- the financials come with all those 3 numbers. For the past 3.5 years, we also implemented what we call Win-the-Molecule strategy. This is when the global competitor couldn't meet the goal of our clients, and they actually transfer from the global competitor and joined WuXi. We started to implement this mid of 2018. Now in the past 3.5 years, we see amazing results. We actually won 40 projects. This included Phase I, Phase II, Phase III and commercial. Certainly, Phase III and commercial will give us a lot more near-term revenue. But each Phase III program, the revenue generated is probably 3 to 5x the Phase I program, the early phase program. And that's why I'm very excited about -- we actually won 7 Phase III project last year. Our goal is to win at least 5 projects every year, and that will give us near-term growth. We -- it took us 10 years to build a very huge portfolio, the current portfolio. But if you look at the Phase III program, now Follow the Molecule strategy and Win-the-Molecule strategy almost have equal contribution. So I have 17 program Phase III has come from our own -- we developed the program right from the beginning from the DNA. The other 15 programs, we actually won in the middle of the campaign, in the middle of the clinical development. That's how exciting the Win-the-Molecule strategy is. Because of our excellent execution, our best time line and our leading technology, all those actually are support that we win -- we can really -- the newly launched Win-the-Molecule strategy is only 3.5 years old. So if you do a deep dive into our portfolio, it's actually very exciting. It mimics probably the global portfolio, right, because how big our size is. If you [indiscernible] antibodies you have in the portfolio but has seen tremendous growth of bispecific, ADCs, fusion proteins and vaccines, all of those. And that's really what WuXi Biologics will be focused on. Our bispecific ADCs are much harder to do than traditional antibody and much higher growth. That's where we hope we can get a higher market share in the near future. Let me summarize for the past 5 years how our business progress go, right? If you look at the top left, when we IPO-ed in 2017, we have 58 -- we added 58 projects per year. And at that time, it's around 30% of global market share. Now in the past 3 years, we really see a huge growth from 59 to 156. Among the 156, there are 18 through our acquisitions. So even if you take out the 18, 138 is still more than double. So our number of integrated projects more than doubled in the past 3 years. And if you look at the bottom right -- bottom left, you see number of Win-the-Molecule program for late phase. Again, we start with a 2 in 2019, now for 15 in 2021. If we continue to see the trend, the robust, the business growth is already there. As I said, as long as I have the project, we should have always been able to deliver, right, being able to deliver on time, on budget. So if we have the project, the business result will come. And on the right side, you see the total number of project growth, amazing 36% project growth. And once the project -- so far, we have a very good track record. Once the project come into WuXi, we didn't lose them. Our track record right now we are able to retain 99% of the project, 99% project. Once they come in, it was retained. And then so far, we -- actually 8% of the project come from Win-the-Molecule strategy. So we are about -- we come in -- we won about 8% projects, and we lose about 1% of the project. That's the dynamics on the global competition side. And then, again, if you look at the Win-the-Molecule strategy, we started in the middle of 2018. Now in 3.5 years, we've got 40 programs. So amazing numbers. And traditionally, if you look at the Follow the Molecule and Win-the-Molecule strategy and if you look at the CDMO, right, so a CDMO is a perfect match for small- and medium-sized company because they don't have infrastructure. They really rely on WuXi. For the past 10 years, you see many companies, companies like Tesaro, Momenta, Amicus been really successful with WuXi. We start a win with them when they are very small. And then -- some of them, they become multibillion dollar value or they are acquired by large pharma. So traditionally, we are a perfect match for small- and medium-sized companies. Last year was actually a tremendous exciting moment for us. Now global large pharma, the top 20 large pharma, among the 14 of them, already contributed 40% of our revenue versus 20% historically for a couple of reasons. First of all, large pharma also is more and more, and WuXi brand is also getting more and more recognized. And more importantly, actually, large pharma acquired a lot of my clients, small- and medium-sized company and then work with WuXi. They actually find out more intimately how good we are and then give us more projects. I'm very happy to report to you that so far, 95% of projects acquired by large pharma actually stay with WuXi. Only one of them transferred back. This is a large pharma who has a lot more in-house capability and a lot more in-house capacity, so they actually transferred back to in-house, not to a competitor CDMO. Just to give you the progress we have with a global top 20 large pharma. Two of them, a significant portion of their global R&D portfolio now has already been developed at WuXi Biologics. And for another large pharma, a significant portion of approved products already manufactured at WuXi Biologics for the U.S. and European market. And we have additional 2 large pharma, and they are -- we have more than 100 people working for them as an extension of their R&D. So this 5 large pharma is an example, is a snapshot of the 18 large pharma we have been working with. So hopefully -- and this trend will continue, we'll see more and more large pharma working with us. So now our client profile is perfect. Now we serve small- and medium-sized companies very well. Now large pharma is also our core clients. If you look at the past 10 years, WuXi build our reputation by execution. Every project coming to WuXi, we delivered. So if you look at the track record, you see very exciting. 255 INDs, 8 BLAs in the past couple of years. The 480 projects, I already mentioned that. Our bispecific and ADC market shares spread more than 20% globally. So if -- 1 in 5 bispecific ADCs are developed at WuXi Biologics. We have 31 ongoing WuxiBody projects as our own proprietary IP. We developed more than 20 COVID programs, which I'll elaborate later on. Because of the increase in demand, we actually -- we can scale our business to meet the increase in demand. This year, my capacity is actually 150 INDs and 12 BLAs. This is an unbelievable number of -- unbelievable capacity. No one else has this capacity to serve the global clients. Talking about operational excellence. We are a relatively young company, but our numbers actually now stand for world-class, right? We have already built -- we have already operated 15 facilities with about 250,000 capacity by end of this year. Our capacity will still increase to about 430,000 liter in 2025. We have 13 drug product facilities. We are still building additional 13 facilities. If you look at all the manufacturing metrics, mainly, we have 1,500 drug substance batches made at 98% success rate. Industry world-class considered 95%. We have 1,500 -- 1,300 drug product batches. We have 2 facilities: Manufacturing 1, our first facility; Manufacturing 3, our second facility, have both achieved 100% success rate in the past 3 years. This is -- they're making more than 200 batches. This is an incredible track record. I think I'm very proud of my team can deliver because my team can deliver. That's one of the reasons a lot of the global clients from U.S., from Europe, from China, from Asia, they want to work with us because we can deliver. And the quality is a very important part of our equation, especially for CMO, right? The CMO project was very small in 2017. Our CMO project now exponential growth, I'll share with you later on. That's because our quality also improved quite a bit. Last year, we actually passed 22 global regulatory inspections. If you look at the exponential growth of inspection, that actually mimic our exponential growth of our CMO project, right? We have 5 FDA inspection. We have 7 EMA inspection and 5 from China, additionally from U.S., Japan, Canada, Singapore and WHO, right? Now we have 10 facilities certified by the global agencies. So our quality start-up really put out in the first year in the CMO and certainly in CDMO and in our very exciting business growth in the next couple of years. And as part of the strategy to serve clients better, we actually -- in 2018, we provided a global dual sourcing strategy. Basically, we want you to stay with WuXi for all the manufacturing because R will lead to D, D will lead to M. I also want you to stay with WuXi for all the manufacturing. We don't need you to go to a secondary supplier. How can we do that? We can provide you 2 sides within WuXi. We can do all the tech transfer seamlessly with less issue, with higher success rate. And we even have a cost advantage for them, for doing the tech transfer, right? And also, we have 2 WuXi labs, 2 manufacturing sites, learning from each other. And the manufacturing project will be even more smooth. So we started the global dual sourcing strategy back in 2018. We built a facility in Ireland. We bought a facility in Germany. And then this last year, we actually started the construction facility in the U.S. So now we have 4 parallel capacities end-to-end from DNA to BLA in U.S. and Europe. So this is very exciting, fully integrated service as well. So again, if you want -- if you don't want to travel to China, now I can do everything for you from U.S. and Europe. So in the past couple of years, we have invested $1.5 billion to support U.S., Europe infrastructure that network we build. And this network will actually support $1 billion revenue. So the next couple of years, we're going to double down. We're going to invest a total of $3 billion to support about $2 billion of revenue from our global sites. We continue to invest in China. Just to give you a reference, all the revenue we generated last year was from our China investment is actually less than $1 billion. So this 2022 is truly a moment where WuXi become global. We invest a lot more outside of China than what we invested in China. So our global parallel supply chain, hopefully, will also meet -- will also yield all the concern about the trade tensions between China and the U.S. And WuXi -- when COVID hit, WuXi we actually leveraged all the capability, all the technology we have to help global companies to combat COVID-19. I think our technology, our execution also shined during COVID, right? So we are very lucky. We actually have 3 antibodies that's very effective against Omicron based on our clients' data. This is the GSK/Vir's antibody. They already have received FDA EUA approval. Brii's antibody received NMPA approval, China approval, FDA is pending. We actually have another program. They already finished Phase III. It's pending EUA as well. So in September, I updated the U.S. that our 2021 COVID revenue will probably around $460 million, RMB 3 billion. And this year, probably around $300 million, about RMB 2 billion. Now because of Omicron -- our revenue will actually increase because of Omicron. So a lot of you are also concerned about the contract. When COVID goes away, does that impact WuXi's revenue or signed contract? No. Actually, all the contract we have is take-or-pay. So that's also sort of guaranteed WuXi's revenue this year. That's why I said my revenue this year, because -- from COVID, actually, will increase likely because of Omicron. So this slide really showcase all the effort WuXi put in to really -- to help the global community combat COVID-19. We are the main contributor to COVID antibody development. You see, we have more than 20 programs on those. And we have 3 approvals already, 2 program in Phase II. And in the past couple of months, we have already made more than 1,000 kilogram. We'll most likely make 2,000 kilogram of COVID antibodies in -- basically in about 18 months' time frame. So all our manufacturing technology is actually proven during COVID through those manufacturing. While we are also very excited to report to you, WuXi actually is one of the few companies who can make all 3 modality of vaccines. We have already delivered hundreds of million doses of viral vector vaccines to a global large pharma. Now we are making, hopefully, a very significant amount of protein vaccines for global community. We just signed 2 contracts for mRNA vaccines. So we are very excited to get into the mRNA field because we know this is a very exciting field that we need to do, right? In the past 14 months, we built end-to-end communities to manufacture mRNA. So we started with a plasmid DNA to the conversion to a liquid nanoparticle to drive product. So again, even in a very new and exciting field mRNA vaccine, we are offering end-to-end integrated services. And that's in WuXi's team, that's truly WuXi's business model. I just want to use one example to showcase how order execution and technology and people all play in helping our global clients working on COVID program. For this program, they come in around end of March, almost April. We're actually helping get IND approved in 4.5 months. Traditionally, again, it's 12 to 18 months. We get everything in 4.5 months. We actually started commercial manufacturing only 5 to 6 months after that. We finished the PPQ, end up the program, we got EUA approval. From DNA to EUA in about 14 months. Again, if you are a traditional pharma approach, this is 5 to 10 years. But actually, WuXi enabled this company to get it done in 14 months. This is the amazing. Our second success story, 18 months; our third one, around 18 months as well. So we can help -- we can help a small- and medium-size company become -- launch their product in less than 2 years with all the WuXi's technology. Again, in this case, all 3 companies, they don't have the labs. They don't have manufacturing facilities. They totally rely on WuXi. So our business model is really all manifested in those stories. And we -- as I said, we developed majority of the global COVID antibodies. And the speed is amazing. It's only 3 to 6 months. If you look at the bottom of the block, IND time line, first-generation projects, 3 months to IND. The second generation process, 5 to 6 months. So the speed is amazing comparing to the traditional 12 to 18 months. But the productivity is also very exciting. If you look at the -- we develop all those programs. We only have 3 months to do the work. We actually end up getting almost 6 grams per liter, right? So this all really showcase our technology, all the investments we have made in the past 10 years. The platform WuXi had to develop antibody is really state-of-the-art. We actually shared all the learnings we have on this program. We shared an article -- we published an article in [indiscernible] program to share with the global community. Our partner Vir also published another particle -- an article saying how we and WuXi work together to develop the program. Very similar story as well. So a lot of you are -- we have -- we really turn challenges into opportunities for COVID program, right? And we generated RMB 3 billion revenue in 2021. We're going to generate another RMB 2 billion revenue -- more than RMB 2 billion revenue in 2022. But investors ask what -- how about when COVID disappear? I hope COVID disappear in next month. I hope -- I don't have any revenue next year. And even with that, our backlog, our strong momentum, our strong portfolio will still support a sustainable high growth. So that's why I take out the COVID program. So this chart, actually, it's a non-COVID program. None of them are COVID program. You see on the left side, we're still adding 143 programs. As I said, every program is about $6 million or $7 million. What does that mean? That means in 12 months, I can convert the 143 programs into $1 billion revenue. That's the D part. So that's why I said our D part is the strongest in the industry. And this year and next couple of years, hopefully, we can convert new project into $1 billion revenue just from the D part alone. And I have 28 Phase III program, each of them probably give me around $50 million range of revenue. That's $1.4 billion. And if you divide that by 2 years, that's $700 million revenue, right? So -- and then I have commercial projects that will grow from 5 hopefully to more programs outside -- later on, right? So again, when you look at WuXi, you only look at this chart and look at this funnel, look at the 3 numbers, total projects added, the development project will give us $1 billion revenue. The Phase III program will give us $700 million of revenue or even more. And the commercial program will give us more revenue as well. So that's why I'm very confident, even COVID disappeared next month, we still have -- we still can grow, we still can give investors, assure investors we have consistent high growth because of our portfolio because of the Follow & Win the Molecule strategy. Now I'm going to share with you the growth of the CMO, right? So in 2017, we started with 1 project, and that's just post-IPO. And in 2020, we have 2 projects. Last year, we have 9 projects: 5 of them are non-COVID, 4 of them are COVID. And we expect we have 2 to 4 programs in the next couple of years and then go to 4 to 6 program the following years, thus, amazing growth of CMO project as well. So by 2025, we believe we'll have more than 20 CMO projects, so 21 to 26. And this is based on the current portfolio. This is a current snapshot. As we continue to add more programs, this number will grow as well. And that's why I'm so excited about our commercial manufacturing. So we are very strong. We are one of the best CDMOs now. Because of our quality, because of our portfolio, now we are also one of the best on CMOs. And that's why we want to be the best CRDMO. That's the next 5 years, that's our focus. We are already the best CDMO. We are already one of the best CMOs. We want to be the best CRDMO to really enable our global clients. For CMO revenue, it's very hard for you guys to see. And I have so much confidence our CMO revenue will be very exciting. For you guys, it's very hard to see because you don't know what program we are working on. And that's why I actually give you a high-level overview of the programs that we're working on. We currently -- we may have about 11 blockbusters. It means the drugs will sell for $1 billion or more. And then our sales -- our revenue is typically about 10% to 20% of their program. So if someone will get $1 billion drug, our revenue is typically $100 million. And if it is a rare disease or if it's a high-dose program, maybe even $200 million, right? So if you look at the left side, I have a few mega blockbusters. Those are programs believe -- our partners believe they can achieve $3 billion or even $5 billion sales. And with that, hopefully, have $300 million and $500 million of revenue associated with that. But I want to be conservative. So I said it will be more than $200 million. I have a cancer bispecific. That's already approved. I have FcRn antibody. I have CD27 antibody. I have TIGIT antibody. I have cancer ADC. So those 5 programs are very exciting. Hopefully, we're going to generate more than $200 million of revenue. And that will be contributing $1 billion revenue to WuXi. And then we have the traditional blockbuster, the Pompe ERT, additional cancer bispecific, non-COVID vaccines, biosimilar program and infectious diseases program. Hopefully, all those will achieve $1 billion sales, then we'll get $100 million. So this will give us $700 million or even $1 billion revenue. And then we have many programs at small indication. And they will achieve, hopefully, $50 million to $100 million on revenue. And then some of them are for China, some of them are global programs with a small indication. So those programs, those 20-plus programs, really give us the confidence that our CMO revenue will actually achieve more than $2 billion in the near future. And I also want to remind you, we are already achieving significant revenue for all those programs. Some of them we're already getting $50 million a year, others maybe $10 million, $20 million because it takes -- for a biologic program, before -- 2 to 3 years before approval, most of them start inventory build because they really want to have enough inventory when they launch the product. That's why I have so much confidence that even when COVID disappeared next month, which is my hope, right, and -- I can still deliver consistent, sustainable high growth for our clients because of our business model. Again, this is based on the current snapshot. And most of those programs are in Phase III or late phase -- Phase II. And I have another 100 program near Phase I and preclinical. And this leads to what we -- higher and higher. I hope to update you every time during JPMorgan saying, "I'm going to -- I have this mega blockbuster coming. I have this blockbuster coming." That will give you more confidence that WuXi can deliver on our promise. And if you look at the past 8 years is incredibly exciting for us. Our top line grew more than 60%. Our adjusted profit grew more than 80%. Here, the 2021 numbers, I used the Bloomberg's consensus. Bloomberg consensus already said, we're going to be growing 75%. So in a couple of weeks, we'll have a profit alert in the Hong Kong Stock Exchange. So I think, overall, if you look at the past 8 years, amazing, consistent growth, right? Top line 62%; bottom line, 83%. If you look at our profit margin also, go from 14% in 2014 now to 30% in 2020. So we can -- I think this is really the financial performance that really showcased WuXi Biologics as the best -- as a premier CRDMO. I told my company when I have a town hall, I said the past 10 years is very exciting. The next 10 years is even more rewarding because now our top line is ready. Now we are recognized by global clients. Now we are also serving the large pharma company, right? Traditionally, we serve small- and medium-sized company. Now we're serving large pharma company. So our revenue will be even more steady going forward. And come -- with the financial results also come very exciting operating cash flow. But if you look at the operating cash flow, very exciting growth in the past couple of years. 2021 was an exception. To make sure that I deliver on every project, we're actually buying a lot more materials. And as you know, everyone knows, supply chain is extremely tight. So because some of the orders we had placed 12 months ago, my suppliers haven't delivered. So because of that, we have to stockpile, and that affected our cash flow a little bit in there. So my goal is to target free operating cash flow positive this year. I think this is also a huge milestone for the company. For the past 10 years, we rely on equity and loans to grow our -- to grow the business. For the next 10 years, the cash flow we generate ourselves will actually be more than enough to help us grow our capacity. Just to give you an example, next year, the cash flow generated -- next year, I have a total capacity of around 300,000 liters. Next year, the cash flow generated alone can help us -- help me build capacity of 300,000 liter capacity in China. Or if we were going to do it in U.S., in Europe or China, we can build 100,000 liter per year. That's -- again, that's why I said our cash flow position is incredibly strong, and that will drive us -- that will give us plenty of room to grow, to dive into new areas and to expand the current business. So we have been very unique. And from the get-go, we said we're going to be using disposable manufacturing. And we also said it's a disruptive technology. Initially, the industry is more skeptic. And I think now, through the past couple of years, now we are already proven. WuXi is a global leader. It's a pioneer in disposable manufacturing technology. As I said, we already delivered more than 1,000 kilograms of neutralizing antibody for COVID in the past 6 months with -- at various scale, from 2,000 scale to 12,000 scale. We'll probably double our delivery. We'll probably deliver around 2,000 kilograms. Again, this is the same technology. Everyone said the spot rates is expensive, but we can actually achieve very competitive costs. We delivered cost less than $80 per gram for -- at the 12,000-liter scale with a higher productive process. I already shared with you our manufacturing success rate is very high, 98%. Industry world-class is 95%, right? And then for using disposable technology, we have less CapEx, a smaller footprint of the facility. We have built a facility in China in about a year. And we have comparable even lower cost. That's why our ROI of using this technology is very high. Manufacturing 1, we built the facility in 2012, so we're already running it for 10 years. Our actual ROI is actually 51%. This is probably the highest ROI in the biotech industry. And the Manufacturing 2 is a large-scale facility. We believe we can achieve 35%. Manufacturing 3, we're expecting 50% ROI. Again, this technology is really very exciting for us. When we said this -- when we proposed this to the global community, everyone said disposal is going to be more expensive. Now we actually said -- have data from 100 batches from 10 projects today. That's actually wrong. So it's actually counterintuitive. If you compare apple-to-apple, disposable is actually 10%, even 30% cheaper. If you compare my 2,000 liter versus a stainless steel 12,000 liter, we are 30% more expensive because that's not apple-to-apple, right? It's a different scale. But if you consider the facility I have in Manufacturing 2 where I make the COVID antibody, our cost of goods actually can be 10% cheaper than traditional stainless steel. That's with the 2,000 liter. I'm actually going to 4,000 liter and eventually going to 6,000 that's disposable. And that basically means the disposal will truly be cheaper than stainless steel in operations. And that's one way to get the cost of good low, what we call a scale-out. That's at WuXi as we mentioned, always scale-out. The other way to use it is actually to continue. That's -- WuXi pioneers scale-out. That continues, right? Either of those strategy, we can make disposable manufacturing, lower cost of good than traditional stainless steel. And that's why WuXi -- I have made a promise to the global community. We're not invest -- we are not going to invest in any stainless steel. We believe disposable is a disruptive technology. We can achieve the cost of goods anyone want with the disposable technology. I envision with the continuous process, we can get the cost of good down to $30 per gram, maybe even less, once we scale the business. Disposable continuous manufacturing is the next focus for WuXi in the next couple of years. Not only disposable...

Chris, just a quick reminder, we are about 7 or 8 minutes away from our deadline here. Because on the main track, we don't have the flexibility, yes.

Okay. Sorry for that. So disposable now also is fully accepted by the global industry. 44% market share in new capacity addition, 70% in R&D, can go very quickly. And also, it's a very ESG-friendly technology, no -- less water, less energy saving. So it's very environmentally friendly. I think that's actually nice segue to my ESG. WuXi is a very strong ESG leader. I think -- we won award for MSCI [ Front Audio ] Sustainability Index or FTSE. I think that's really -- everyone think we are a good ESG company as well. And I'm going to go very quickly on our energy consumption, emission reduction. I think -- in summary, I think we pioneered Follow the Molecule model, put into service model, disposable manufacturing. A lot of the global peers are learning from WuXi. And our success is really based on all those 7 factors. We have the right strategy. We have a lot of people to execute, very good technology. And in a way, we're learning from [ Amazon ]: We're going to do everything better, faster and cheaper. So I think when most -- a lot of investor label us as the Chinese biotech. What I want to say here, we are truly a global CRDMO, right? Every time China has a policy, our stock has become very volatile. That's really unfounded. 70% of revenue come from global. And I'm investing $3 billion outside of China. So if you remember, the key message I want for the global audience is that we are a global CRDMO, not -- we are not really a Chinese biotech company. I think, again, I want to summarize this here. I think most of my message is already delivered, so go very quickly. The growth -- the need for our service is incredibly strong. The RDMO are strong. Our 2020 outlook, I want to reaffirm, we're going to be growing 45% in 2022. Now we actually see more than 70% of growth. More than 70% of revenue for 2022 are already in the contract. Large pharma now become a core expertise for us, and we are really helping the global community fighting COVID-19. After 2022, after this year, the non-COVID program will make up the revenue from the COVID programs. We want to be better and faster and cheaper. Disposable is really a disruptive technology. ESG is our core. All operations and capacity expansion is on track. We have not been limited by electricity curtailment or global supply chain. And lastly, our financial position is incredibly strong. We have $1.65 billion on revenue -- of cash, $0.5 billion loan. Again, the cash flow generated next year will support 300,000-liter capacity. And back to you, Tony. Thank you, everyone. I think WuXi's vision is every drug can be made, every disease can be treated.

Yes. So this is really exciting. I follow you guys a long time. You guys really gave us a lot of new content this time around. Now I'm going to go straight into the Q&A because we have a lot of questions for you. Let's hope we can now go through them. I'm not sure if you can read them, but I'll read them to you. So this one says, how many are Phase III and commercial projects you have that are related to COVID-19?

I think we have 2 Phase III and 4 commercial, so 6 programs.

Okay. Perfect. Yes. Okay. So next one is, again, related to COVID-19. So what is your estimated -- for non-COVID CMC revenue for -- from 2022 to 2024? So 3 years starting from this year, '22, '23 and '24, what's your non-COVID CMC revenue?

I cannot give a specific number. But as I said, this year, we want to grow more than 45%. I think in the next couple of years, we want to grow twice the industry, close to 40%.

Okay. Yes, I hope that answers your question. Okay. So the next one is -- goes back to what you're saying about being free cash flow positive starting this year. So the question is about what do you think the free cash flow margin forecast is going to be long term? Assuming, let's say, you reach your steady state in about 5 years, what sorts of free cash flow margins are you expecting?

I think our margin will be fairly steady, so I cannot disclose the free cash flow margin at this time.

Okay. That's great. Okay. The next question is, how -- so basically, it's about your guidance. I'm not sure if you're comfortable giving it given that you haven't given the 2021 results. But the question is about your 2022 revenue guidance, excluding the COVID-related projects, which I know you have disclosed.

Yes. So you can do the math. We already guided, the whole year we're going to be growing 45%, right? The COVID revenue is around RMB 2 billion. So the non-COVID revenue, you can actually do the math, is around [ 12 billion ], yes.

Okay. Let me just go through these as quickly as we can here. They keep on coming, Chris. Let's...

You can keep asking questions...

That's a great suggestion, actually. So what is your employee turnover rate in your research business versus in your D&M business? I believe that's manufacturing, yes.

Yes. We don't see differences. And all that -- I think almost very similar. So I think around 9%. So in China, in that competitive environment, it's actually incredibly good.

Okay. Let me see here. Yes, let's skip this one here. So I'll go through this one here about, how do you overcome the net-zero with your disposable strategy?

Yes. I think that's a good question. That's something we are still working on. Disposable strategy is clean, right? Although we're going to burn this piece, but we use less water, less detergent and less footprint. So we -- overall, we actually still use a lot of -- otherwise, 70% less water, 30% -- 32% less energy. So overall, it's still actually positive. But how do we achieve that, that's something we're still working on.

Okay. Great. Yes, Chris, I think we still have more questions to come. So let's -- actually, I think we've just been given the signal that we need to end here. There are at least 2 or 3 more questions on my screen here that we don't have the time to go through. So what I would do is I'll channel them to you, Chris, and we'll get that reverted to our clients. So with that, we'll have to wrap up this session with WuXi Biologics. I think -- in my mind, I definitely think that's one of the best companies in the health care space in China. In fact, I just initiated on this sector yesterday with WuXi Biologics as well as WuXi AppTec being my top picks. So again, I really want to thank our audience for being here. I know you have many other options. And I want to thank Chris for being here, giving us your very valuable time. Again, my name is Tony Ren. I'm the Head of North -- I'm the Head of Hong Kong-China Healthcare Research, and we will make sure that we get back to you on the questions that you post online. And if you have any more, please channel them to me or to the company. We'll make sure that they get addressed. So with that, we'll wrap up the session. Have yourself a great rest of the morning, afternoon or evening, wherever might be the case. So thank you very much.

Thank you, Tony. Thank you, Tony. My pleasure.

Thank you.