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

Hello. Hi. Good morning, everyone. Welcome to the 42nd JPMorgan Healthcare Conference. Next, we are pleased to introduce the CEO of WuXi Biologics, Chris Chen, to stage to give us a presentation on the company. Welcome.

Thank you, [ Remin ]. It's really my pleasure to give everyone an update. So as everyone know, 2023 is a very interesting year. But every time I come to JPMorgan, I actually want to reflect what our industry is facing and what are the trends that's coming to our industry. So BioPlan, some of you know, BioPlan, is an industry consulting. They act -- Every year, they collect the data from 200, 300 companies and they predict what are the trends for our industry. And so this is -- they come up with a [indiscernible] that's relevant to WuXi Bio and they mentioned top 10 trends, basically, cell and gene therapy, what's going on in there, and qualified staff, FDA standards and all that. So 3 trends are very relevant to Wuxi, I highlighted them here. Sorry, I already go direct, straight to the content. So this is how I'm going to be spending my time. I'll give you a business update. I want to especially highlight Microbial as an industry driver because we -- over the past -- during the COVID, we actually built Microbial capability to -- for end-to-end, everything like WuXi Bio. In 4 years, we built a very strong platform, so I'm going to share with you with that. And then as some of you know that we spin off XDC, and we still consolidate all the top line, still reflected in WuXi Bio's P&L. But I want to share with you, reflecting on why WuXi XD, why we want to do that and how successful it can be. Every year at JPMorgan, I want to highlight our technologies. I think this year, I want to highlight 2 technologies we believe are transformative for our industry. One is going to significantly reduce the cost of goods and manufacturing. When a cost -- we're going to cut the cost of manufacturing by half by using our continuous process and technology. And we also believe we have the best CD3 antibody for biospecifics. And lastly, every time I want to share with you our ESG progress. So I started already, as basically saying BioPlan, as an industry consultant, that every year, they predict what's our industry trend. And I pick 3 that's relevant to us. What they said is basically CMO is actually -- is in the right trend -- right industry, right trend. BioPlan surveyed 200 companies out there, large pharma, small biotech, medium companies saying, what's our industry trend? So outsourcing will continue. Regarding whether a small biotech or large pharma. Large pharma actually increasing outsourcing in R, D and M. So we are in the right industry sector. That's the first one. First one they identified. Second one actually is a single-use technology. As you know, WuXi bet on single-use technology 10 years ago. We are the global leader. We have been extremely successful with it. And now, the industry is finally recognizing that. I think the BioPlan said single-use technology accelerating replacement of stainless steel reactors. And I think it's making a huge impact. As I mentioned earlier, we actually now have a technology to use a single-use reactor to produce the same amount of material as stainless steel and with half of the cost. So I'll share with you. Combining a single-use reactor with our technology, we actually can truly transform the industry. The reason we want to do that is because we really want to make the biological drugs more affordable for the emerging market. And lastly, the trend that they identified is offshoring basically, CMO to Asia, it really still a right -- is a trend that the company has seen. Again, BioPlan, as you know, is an industry consultant, pretty reputable. I think these are the 3 trends they highlighted. I think this is what we'll be -- basically the trend that we'll see this year and hopefully next year. So as I said to you earlier, 2023 is a very exciting and interesting year for us. It's interesting and exciting. So in Q1, as you know, as also -- you follow the company, you know the number of projects -- new projects we signed is a very good, strong indicator, a leading indicator for our revenue growth. So in Q1 of last year, we signed -- sorry. In Q1 of last year, we signed 8 projects. And by May, we have 25 projects. So investor panic saying, why would you only sign 25 projects? And then by June, we signed about 46. And Q3 was pretty good, and we signed 61. And Q4 was tremendous. It's the best quarter ever. We actually signed -- in Q4, we signed more projects than the first 9 months of the year. So we -- last year was very choppy. Again, if you look at this, almost like a rollercoaster ride for us, right? So at the beginning of the year, we believe that our industry -- we're going to sign 120 projects. We actually delivered 132. But by May, we guide down the number of projects to 80 because we -- May, we only have 25, we said last year, 80 would be good. By June, we signed 46. And by September, by November, we signed 61. So December, we actually -- every day, we signed 2 contracts in December. So somehow, the sentiment changes dramatically between November and December. And it's also across the board. We have project signed in London, in Basel, in Shanghai, in New York, in Boston, in San Francisco. It's across the board. Even in China. So if you look at the right side of the chart, the U.S. accounted for 55% of the new projects. Again, basically saying, we actually -- we did see from this number is a very strong recovery of U.S. biotech. And in Europe, 14%. China, amazingly 25%. The struggle we had in the first half of the year was also because China was really like last year. The most significant drop in number of projects, first half of the year is China -- was China. But second half, we actually see the number of projects tripled in the second half comparing to the first half. And that's why China now still account for 25% of new projects. So it's very exciting. So as I said earlier, so we see across-the-board recovery. We see large pharma, midsize biotech and small biotech. And it's the strongest in U.S., in Europe, in Korea, in Japan, but it's also relatively good in China. But in China, I want to caution you, in China, it's a very small subsegment. It's a company working on ADCs, company working with autoimmune. So not across the board. So I think, we'll remain to be seen how China will perform this year. But again, if you look at this number, it's actually a rollercoaster ride for us. I said over and over again last year, we are the last person to feel the cold during the biotech downturn because biotech downturn started in November of 2021, but we didn't feel the number of projects impacted until Q1 of last year. But we hope, we're the first to see the recovery. Now you actually clearly see very, very strong recovery. So my BD Head, told me the story, almost like the whole last 12 months, almost like every biotech company is like a plane hovering around the airport, and they don't know when to land. And somehow, November, December, everyone to land, and also they land on WuXi. I think that's a great story. That's a great story. So our market share actually was the highest in ever last year. Again, because the pie is much smaller. If you look at -- if you exclude COVID, right? The number of -- we actually achieved a record high number of projects last year. That basically means we have a strong ammunition for growth, for -- starting from Q2 of this year, we have a strong ammunition to grow, Q2, Q3 and Q4. We'll see WuXi really go back to a very strong growth momentum because of the number of projects signed already there. I think the other thing that I want to also mention is we do see really, I think China play a huge role in terms of ADCs there. I think -- so again, 2023, looking back, right? I think, we had quite a few events but now, I think we think for us, the weak biotech funding is over. For us, we see a full spectrum recovery in other territories. And although in China, we still want to see more data. So that's the win the -- that's the Follow-the-Molecule strategy. We see a record number of projects. Win-the-Molecule, we continue to do extremely well. That's also the best year for us. We actually signed 7 Phase III program and 2 Phase -- 2 commercial program from our partners, from our competitors. So Win-the-Molecule continue to be another great year. And this is something we are very familiar with. Now we have the largest funnel ever. So I think the funnel paused a little bit last year. Now we actually -- we have close to 700 assets. If you look at our Phase III commercial combined, now we have 75 projects. This is comparable to industry leader in CMO. We have 51 Phase III program, 24 commercial program, 75. If you look at our peers, even the large CMO, they have probably 80 -- 70 to 80 number of projects. So by -- that basically means our CMO revenue will catch up very quickly. So historically, we are very strong, indeed. That's why you look at the top of the funnel. It's very heavy and we have 339 programs, preclinical; 200 programs in Phase I; 80 programs in Phase II. But I think the Phase III and commercial will drive the near-term revenue. And for near term revenue, again, as a preindicator for CMO, it's a number of PPQ's you are doing, basically, you're doing the final process lock and then you create a data package, so submit to FDA, so for FDA approval. So that's a leading indicator of a CMO revenue. So if you think about -- back in 2019, we have 4, now '23 we have -- 2023, we have 35. And next year, we're probably adding another 10, another 10. So every year, we're probably adding another 10 CMO projects, 10 projects in PPQ that led to the -- eventually will lead to CMO. Our PPQ success rate is also incredibly high. We're looking at 97%. So that's why the company trusts us. When they look at this data, basically, usually, if I give you the project, I'm almost guaranteed, it's going to be successful, 97% industry leader can do 90%. I think we're actually at 97%. That's a strong early indicator for our future manufacturing revenue. So I think, I've given -- Ireland is really the first global site we are operating in right now. It's actually very exciting. We are about a year ahead of schedule in Ireland in terms of business progression. Now we believe Ireland will break even this year, will be generating profit for us next year. So just to remind you, we built the whole facility during COVID. And our industry, I think, this is one of the best facility to be built because we received the ISPE award. Now we actually -- Ireland facility now is 85% booked. We have 3 factories in here, 3 factories in here. 2 factories are 100% booked, 1 factory is about another 50%, 60% booked. So this facility is already 85% booked. We just started the manufacturing this year. We have made 2 batches. We have finished 1 batch successfully, and we're working on the second batch. So we're just beginning the operation for this facility, now actually the facility is 85% booked. So I think the playbook that we have for Ireland is transferable, hopefully to Germany, to U.S., and that basically means our future success of our global capacities. I think we have 700 assets. We have 75 Phase III in the commercial programs because we don't disclose the project. A lot of you know is struggling with how do you model the revenue. But I want to highlight that the 20 programs in this 80 -- in the 75, the 20 programs are very exciting programs that I want to share with you. We have 7 programs, hopefully, will be mega blockbusters. Our clients believe this will be a $2 billion to $5 billion drugs and even more. We have 2 biospecifics. We have actually 3 biospecifics, but 2 for cancer, 1 for non-cancer. We have FcRn antibody. We have 2 ADCs. We have another autoimmune program. Those programs, clients believe this will be $5 billion -- $2 billion to $5 billion drugs. We have 10 programs that will be a $1 billion drug. Actually, our client believe will be -- and this includes the Pompe ERT, the cancer antibody, vaccines, biosimilars, and lastly, long-acting HGH and we have many other programs. So this gives me the confidence saying that our CMO revenue will be comparable to industry leaders eventually. I think, give us a couple of years. Again, we have these 20-plus -- a very exciting program. We need time for them to ramp up because right now, they're in the early phase. And most of those programs just either get approved right now or still just finishing the Phase III trial. Being a CMO, quality is hugely important. I'm actually very proud to announce that we have 32 regulatory inspections. So far, we are 100%. 100% successful on every inspection. We also have a leading indicator. Every year, we have 200 visits from our clients. Every year from -- we have a leading indicator for quality. Every year, 200 clients in a company like Lilly, Merck, GSK, AstraZeneca or Amicus audit us, audit us. And this is a track record for -- in the past 4 years. Back in 2019, every time they come to see us, they find 1.7 issues, back in 2019, 4 years ago, 5 years ago. When they come to see us, whether it's AstraZeneca or GSK or Amicus or a small biotech company in San Francisco, right? They come to audit us, they find 1.7 issues. Now it's 0.55. So basically it means, every 2 clients, they can only find 1 issues. And that's why we believe this is a very strong -- we have a very strong quality system that set us up for future success. And we are very proud. We have 32 regulatory inspections. We have no data integrity issue. We have 0 data integrity issues so far. In -- This is one of the best track records in our industry. So quality form another strong foundation for our future success. So as I mentioned in the beginning, during COVID, we actually built end-to-end community for microbials. Microbial is, alternative platform. As you know, 95% of our revenue comes from [indiscernible] so far. So Microbial is a new segment we are working on. But we built this capacity during COVID, in the past 4 years, but we actually progress it very, very fast. Now we have -- this year, we have 25 programs already. I think, as you know, Microbial, what does it do, Microbial, we can make insulin, we can make GLP, we can make nanobodies for eyes, for cancer. So that's the -- that's the target we're working on right now. So we have 25 programs right now. And again, if you look at the -- we actually just signed our first commercial project for Microbial. This is something I'm very pleased. We invested in the capacity 4 years ago. We signed our first commercial program, our CMO. I think this product is actually one of the best-in-class HGH, and hopefully, will become a blockbuster as well. And so again, in a very brief 3- or 4-year time frame, build end-to-end [indiscernible] for microbial. We can do plasmid DNA. We can do mRNA vaccine. We can do a GLP analog. We can do insulin or insulin analog. And those are the projects in the current -- in the pipeline already. I think, looking at WuXi, we have been incredibly successful in the past 10 years. We believe, we always have the right strategy. We have good people to execute. WuXi always focus on technology, technology, technology. I'll share with you the technology we want to highlight today, right? And we have a very good [indiscernible] in execution, very strong quality, I mentioned earlier. The speed is always #1 at WuXi. When you ask all my client, what are the first things they felt. Well, WuXi deliver a high quality but at the fastest speed in our industry. And lastly, we are very flexible with the client. This is how WuXi have been very successful. We apply the same concept to ADCs. And then in a couple of years, we incubate another very good company, WuXi XDC. So again, go back to the strategy. For XDC, we do everything, one-stop shop. We do [ penolinker ], we do antibody, we do conjugation with the drug product. So if you look at the current ADC supply chain, you have to travel around the world a couple of times, right, thousands of miles. For WuXi XDC, we do anything within 200 meters, basically almost like this building, we can do everything for ADC, right? And we hire the best people. We are working on technology for conjugation. We're working on technology for manufacturing. We have very strong execution and very strong quality. So everything is reflected in the XDC as well. And that's why XDC had a very successful IPO last year. It's very similar to WuXi Bio. XDC has a number of -- more projects than anyone in the space. Revenue-wise, #2 globally. We're a dominant leader in China, and we have pretty significant market share globally. I think if you look at the XDC funnel, and it's very -- also very exciting, about almost close to -- this is actually last June's number. So close to 100 programs is being developed by WuXi XDC. And so again, if you look at the -- really the growth of the WuXi XDC in terms of number of clients, we started 2020 with almost less than 50 clients. Now in 3 years, we actually -- number of clients tripled, number of clients tripled. Because XDC is a subsidiary of WuXi Bio, this time, we did everything right. I think when XDC has a strong growth, it's everything, both the profit and revenue are reflected in the books of WuXi Bio as well. So we remain consolidated. So the only difference between IPO and non-IPO is actually before IPO, I booked 100% of revenue, about 60% of profit. Now after IPO, I book 100% revenue, 50% of the profit. So that's the only difference. So basically, essentially, all the benefit, all the growth from XDC in the [ Asia ] field still reflected in the P&L of WuXi Bio. And lastly, I want to clarify here at this podium as well. I think we have a very strong corporate governance. Myself, as the Chairman of WuXi XDC, I don't receive any conversation from XDC. I think all the WuXi Bio and the WuXi AppTec employee do not receive any option or shares from WuXi XDC. Only full time WuXi XDC employee are eligible for the compensation from WuXi XDC. But as a Chairman, I actually bought shares during the IPO, just to -- as a support. So I think this is really clear the show WuXi governance. I think, myself, as the Chairman of WuXi XDC, I only benefit from XDC by WuXi Bio share price, by WuXi Bio shares. I think, as I said earlier, every year, I want to highlight with you the technology we're developing. I think this year, we have 2 technologies I want to highlight. One is something that's already proven. Last year, GSK signed a deal with us, a $1 billion deal. GSK wanted us to develop 4 biospecifics for them using our CD3. This is actually -- we believe, this is potentially best-in-class CD3 programs out there to make biospecifics. As you know, biospecifics, ADC, actually have a very similar -- similar target right? ADC, you use in the chemical payload. Biospecifics, you use the body's own payload. You use a T cell, right? So you use the CD3 to get a T cell response. So we believe, after -- we believe the second hardest area in our space -- the hard is certainly ADCs. The second hard is actually biospecifics. We believe, WuXi had a strong way in biospecifics as well. And as you know, in the past 10 years, we have been working on technologies to transform biomanufacturing. We want to use a continuous process to improve productivity. Finally, we launched our third generation process called WuXiUI, ultra intensified process. What does that mean? I mean, per liter volume, now we can get 5x the productivity of a [indiscernible] process. So our highest productivity pattern we got is actually about 30 grams per liter or 40 grams per liter. So what does it mean? For this technology, what it means is, for my 4,000 bioreactor, I can produce the same amount of someone else's 20,000 reactor. My 4,000 is equivalent to someone else's 20,000. My 2,000 is equivalent to someone else's 10,000. Now, that's a technology input that we have. And it's amazing. I think we just launched the technology in November. We already have the first client sign up for it because they want to really use this technology to reduce the cost of goods by half. I think our industry has a long debate on disposable versus stainless steel. As I mentioned in the beginning, disposable is actually, majority of the technologies that companies use. Majority of companies pick disposable now instead of stainless steel. If you compare a single disposable versus single stainless steel, large stainless steel, it's not an apple-to-apple comparison. Certainly, disposable is more expensive because disposable, largest one is 6,000 right now. But stainless steel can go to 12,000 or 20,000. But if you multipack them, if you multipack them, if I have a 6, 2,000 reactor or someone else's 12,000, it's equivalent. At WuXi, we can do it 10% cheaper because I use less water, my facility's footprint is smaller, I actually can do -- to change over much faster. So disposable can actually -- even apple-to-apple comparison can make biologics cheaper. If you apply the technologies we use, if you apply our WuXi App technology we launched about 4 or 5 years ago, we can get 20%, 30% cheaper. And if you use the technology we launched last month, 2 months ago, you can actually get 50% cheaper. So I think this is very meaningful for emerging markets. So with this technology, I can make PD-1 as close as $500 a year. The cost of PD-1 treatment for patients is $500 a year, $500 a year for PD-1 treatment. I think that's how this technology can change our -- I think, at least the affordability of biologies in the emerging country. That's something we're very passionate about. And certainly, we can help -- if you have a project that's very cost sensitive, and if you have a project that's a replacement of plasma industry, right, if you -- using recombinants to replace plasma, you have to compete with the plasma industry, cost of goods, this technology is there to help you. I think lastly, I want still want to give you an ESG update. I think we're very pleased. Now we are actually part of the Dow Jones Sustainability Index. This is actually very hard, and very premier index and only the best company in our space, in our sector can get in. They consider us #1 in this sector and identify us as a global sustainability leader. I think as you know, you guys know the significance of this. We're also very pleased to say that we actually received MSCI AAA ratings. I think we started with A 3 or 4 years ago. We had AA last year, and this year was AAA. So it's an incredible progress. And the whole community recognized us as the ESG leader because of our corporate governance, because of our talent development, because of our quality, because our serving the global market, because our sustainability efforts. So EcoVadis is a pharma consortium like a company like Pfizer, Merck, BI, AstraZeneca, GSK, they come together and saying, I want to have a standard ESG requirements. The consortium is called EcoVadis. We actually rank also top 1% in that section. So I think we are very pleased with our ESG progress. I think -- I think every one of you are familiar with the CRDMO model. I think 2023, as I said, it was a challenging year, we actually ended the year with a high note. But if you look at our business model remain -- our business fundamental is incredibly strong. Our business model remains the strongest in the industry, right? I think we just announced that we had a collaboration with BioNTech. We helped BioNTech develop 2 novel antibodies, and that's our R, right? So our R continue to be very unique, we use our IP to help companies like BioNTech, like GSK develop their portfolio. And as a result, we get royalties the milestone payment, and so we have $6 million milestone payment. We have 50 programs with royalties. And royalty is becoming significant in the next couple of years. And D, we are the strongest in this community. Last year, our market share actually is 50%. And we added 132 projects last year. And this year, we believe, we'll continue to add another 110 projects. Previously, last year, we were guiding 80 projects this year. Now we raised the guidance from 80 to 110 million. I think, this new project will give us about $1 billion revenue every year, and that give us sustainable growth. We have a very sticky business. Our [ R ready to D, our D ready to M ]. So in summary, I want to highlight 2023. I think biotech funding, especially the weak biotech funding in China hurt us pretty badly in Q1, but we see a very strong recovery in Q2, Q3 and Q4. We actually -- we've already seen across-the-board recovery as well in the U.S., in Europe, in Japan, in Korea and in China. So that's why we signed a record high number of projects. We have -- we also -- Win-the-Molecule strategy also works very well. We actually signed 9 Win-the-Molecule projects, 7 Phase III, 2 commercial. We have 24 CMO projects right now. If you add a Phase III and commercial combined, we're getting to 75 projects, and that's going to be a good indication for our future CMO revenue. I think, I want to highlight again, WuXiUI also intensified process that can reduce the cost of goods of biomanufacturing by half. I think, certainly, WuXi will benefit from that as well. And in the Microbial business, it's a new business that we invested in the past 4 years. Now it's growing significantly, and we have 1 commercial project that hopefully will give us a very strong revenue. So again, 2023, we see a weak first half or weak Q1. We see a very strong recovery rebound in Q4. So as a result, we will start seeing accelerated growth in Q1, Q2 of this year. And Q1 and Q2 was still impacted a little bit by Q1 or Q2 of last year. But Q2 and Q3 will start to see accelerated growth. So we're very positive in terms of outlook for second half of 2024 and then for 2025. Again, with the 75 project in Phase III and the commercial, I think definitely this will be -- CMO will become a bigger and bigger part of our revenue. And lastly, we have been always betting the sector, right. We have a very strong investment in ADCs. We have a very strong investment in biospecifics. Now we invested in microbials. In the meantime, we are working on our own lean manufacturing called WBS, WuXi Business System, WBS, and also the digital and automation to improve our overall efficiency. Thank you for your attention.

Thanks, Chris, for the presentation. I guess now we'll open up the floor for questions, if any. [Operator Instructions] Maybe I'll propose 1 question. So Chris, you saw a strong -- we saw a strong rebound in the new projects signing for the fourth quarter of last year. And you talked about there's a specific subsector for the China new project. Can you elaborate for the rest of the world, especially for the U.S., who accounts for more than half of the new projects?

Yes, for U.S., Europe and Japan and Korea, we actually see excitement. Again, I think the reason we have such an exciting in Q4 is actually -- we have been engaging with these clients year all long. Again, in June time, when we talk to them, they probably say, maybe wait for a couple of months. I'm not sure whether we're going to do it now. But in November, December time, suddenly, the sentiment change, maybe because either the funding is improving or they feel like they need to -- they really need to get to start the -- I think we are an enabler. If they have money, if they work with us, their company value-add increase. Because if they have the money, if they keep the cash, but don't move the project, the company doesn't add value. So I think maybe November, December time frame, suddenly, the mindset change for my clients. I think that's why my team said it's a sales cycle, it's going to be a little bit longer. But overall, still like all the airplane hovering on an airport and suddenly, they need to land. And somehow, they want to land before Christmas. I think that's why December is incredibly busy for us. So every day, again, every day, we signed 2 projects, and that's how crazy it has been. It was the best ever Q4, it was best ever December. We also, as I said earlier, we have a client from London, from Basel, from Munich, from San Francisco, from Boston, from Shanghai and Japan and Korea. So December, we actually signed -- almost every country signed new projects.

And do -- sorry, I saw a gentleman raising up questions.

Chris, great presentation. Just as you were landing all the planes, pricing, there's a lot of industry talk about all the capacity coming online. What are you seeing with pricing?

That's a great -- that's a good question. Yes, I didn't -- the pricing was actually -- we didn't use any incentive. We didn't use the pricing [indiscernible] at all to sign those projects globally. Globally, pricing is still very stable. We just -- starting this month, we are increasing pricing by 5% for -- across the board for our clients.

I saw, there was a lady back there who has a question.

Chris, I actually have a quick follow-up on the pricing. How would you comment on the trend in China versus globally when it comes to pricing? Because we know there are a lot of local players in China going very aggressively after a lot of the orders you're signing now.

In China, there are 2 worlds. There are WuXi, there is no-WuXi. So because the companies that can't afford -- because WuXi use a premium pricing. We have the same pricing, for if you are [indiscernible], you come to us, versus the biotech, you come to us, it's the same pricing. So I cannot say there's a China pricing. So because of that, only the premier companies in China can afford our services. And as a result, there is a natural selection. So the companies that work with us, they end up having very good assets and then they end up licensing the program to BioNTech, to AstraZeneca, to BMS, to Merck. I think, I didn't mention this. In the past 18 months, you'll probably see a wave of the global deals, right? And 80% of the CMO program -- 80% of the licensure programs, behind them, WuXi is the platform. I think so you clearly see a WuXi based, WuXi supported companies or WuXi enabled companies versus non-WuXi-enabled companies. So it's 80% versus about 5%. So if -- I think that actually become my marketing campaign. If you work with WuXi, you can partner with large pharma. If you don't work with WuXi, you only have 5% chance, right? I think -- and that's -- we actually -- our pricing premium is about 50% to 100% to compare to peers in China. And that's really the value, 80%, 80%, probably, they are working with large pharma and 5%. Actually, I want to share with you, just even this week, there are a lot of announcement. A lot of them are actually behind them, WuXi is a CMC leader, WuXi is an enabler. Large pharma didn't even do due diligence. So we will announce they're going to do due diligence, I heard large pharma said, I know WuXi, we'll juts pass. So that's the WuXi brand. So if you -- regardless whether you're in Basel or you are in San Francisco, if you work with WuXi, right? And I think when you license your asset to large pharma, large pharma, [indiscernible], being all the large pharma are my clients. And I'm also very pleased to report, large pharma now account for 50% of my revenue 50%. So IPO, is 10%, 20%. Now large pharma is 50%, large pharma keep cropping up new biotech companies. So I think that's the WuXi brand, that's the WuXi value. So when you work with us, the incredible delivery that we give to you. So we assume -- first of all, we assume almost 100% success. And secondly, when large pharma look at due diligence, there's no issue. It happened -- especially during COVID, there are so many deals. Large pharma, even if you want to do due diligence, you could not, it's all remote. So large pharma, actually waived most of the due diligence. I was -- every time I go to visit large pharma, I was joking. Next time when you buy a company, 60% chance, it's a WuXi, 60% chance it's a WuXi. It has been true.

Yes. We have a question online. Can you explain more -- in more detail how single-use technology is 50% cheaper than stainless steel? And if this is still the case for the Ireland?

Yes, there's a lot of misconception about disposable versus single -- disposable versus -- disposable being more expensive than stainless steel. because stainless steel, you don't use a bag. But you don't use a bag. The bag component, we pay some of the [indiscernible], very expensive bags. But the bags -- from every bag, let's use the 12,000-meter bag. The bag cost, let's say, $100,000. But I use a lot less water. If you think about a reactor, you have to clean it so many times to make it clean, the water that you used to clean it is it costs $2 or $3 a liter. But it's a water you can inject into your vein. You've got a water for injection, right? Because it's water for injection is very expensive. The water actually cost $2 to $3 a liter. And you wash it, it's crazy. And because you wash it, you also need to prepare the water, you have to send it to the area. And so actually, there's a lot of costs you don't know for stainless steel. I think I don't know how many engineers you have in there. There's a gasket in -- if you have fermenter, you have -- maybe 200 gasket, each gasket is $50 to $100. When you [indiscernible] the gasket, lot of money as well. So with the disposable, you have a much smaller footprint, much smaller water steel, much smaller footprint of the facility, much smaller -- much less piping to send the water over. So because of that, actually, the cost is actually lower. So your CapEx is lower, your OpEx is really higher. So it's a balance in that sense. It's a balance of CapEx versus OpEx. So your operational CapEx, as I said earlier, every bag you use $100,000 more bags, but you compensated by less water, by less CapEx, by being able to do more batches, by also a higher success rate. So with the disposable, now I can do 98% success rate. And if you have a stainless steel, our industry best track record is about 95%. So basically, if I make 100 batches, I can have 98 batch successful. If I use stainless steel, maybe 95%. So that's 3 bags, actually make a huge difference, because if you lose 3 bags, you have -- net profit is only 12% -- 25%. If you lose 3 bags, you have to make 12 batches to compensate, right? So you're making 12 batch, that profit from the 12 batch just compensate the gap between the success rate. Again, that's 12% of the batches, right? So it's not that obvious, but we have been doing disposable for 10 years. We know disposable, it is cheaper. But now, with the technology coupled with our new technology, now it's obvious. We want to cut the cost by half. So if you want a $20 per gram or $50 per gram, this is a technology that can give you that.

And I have a -- just a small question about the U.S. You have adding the capacity, manufacturing capacity, I mean, 2 days ago in U.S. Would you please give more color on that?

We see a lot more demand in the U.S. for -- as you know, U.S. government wanted to do more onshoring. We are part of the effort to support that as well. That's why we actually invest more in U.S. to be close with the customer. So we have -- as you know, we have strategy, we invest in Ireland, invest in Germany, invest in Singapore and the U.S. This way, we have a global diversified network. Really, and you know, I think that basically -- if you want -- for every 1 of my client, they can have a choice. They can go to WuXi City in China or they can go to Ireland or they're going to Germany or they can come to the U.S. to give them a lot more option.

Go ahead.

Do you have any plans to expand into bioprocessing tools, through either M&A or internal development to kind of more of the thermal model?

I think I'm focusing on the things that we do well. I think that CRDMO keep me busy already. I think we do have -- we invested a couple of small companies in China as a business continuity plan. But I don't think that's going to be our major focus.

One question from online. None of the other big CDMOs have talked about the snapback of the projects in Q4 last year to the extent you did. Do you see that more of a industry-wide willingness to put more project forward? Or that's more of a share gain from WuXi Biologics?

I think it's probably -- I think it's both. We are definitely gaining market share, but I think the pie is also getting bigger. So the prior first half of the year versus the second half is probably very different.

So you do see a turnover for the biotechnology industry funding coming back?

We do -- that's why I said, the client sentiment is changing. This week, we are meeting 80 clients, 80 clients at the Hilton. I think everyone's mood is much better than the last June when we talked to them. So we're doing bio. So I think that somehow, between the November and December, something magic happened. Our clients are more comfortable of signing the check, right? Is that [indiscernible].

Okay. I think our time is up here. Thanks, Chris, for the great presentation, and thanks, everyone.

Thanks so much, [ Remin ]. Thank you. .