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

Good morning, everyone. Welcome to this session. And this session is for WuXi Biologics, a global CRDMO player. And we are going to invite Dr. Chris Chen and to do the presentation and telling us the most recent updates about the company. Welcome.

Thank you, Yang. It's a great pleasure to give our global investors a very quick update on Wuxi Biologics. I think first, I want to highlight the success of our CRDMO model and why we strongly believe our growth will continue. In the past 2 quarters or 2 reporting periods, we have seen flat growth, right, mostly because of COVID comp and also because somewhat with the weak biotech funding. I think COVID comp is totally over. But biotech funding, we start forecast recovery back in early last year. So we are actually poised for a strong growth. If you look at our business model, it's actually not a traditional CDMO model. We believe I would call it CRDMO Today, I'm actually going to highlight how R part will contribute to our future growth, make our company more exciting than industry peers and also give us a sustainable growth, not only in terms of revenue but also profit. Over the years, we also become a global fully -- a global company. Now we have 4 R sites globally and have 7 D sites and 9 manufacturing sites. So RD&M and are all poised to strong growth in 2025. When we started the company, we said we're going to bet 100% on disposable. At that time, people are very cynical. How can you have a 2k reactor compete with the traditional 15,000 liter stain steel. We have 2 solutions. One through continuous processing. We can make R 2K, look like someone else 15K. So that's one solution. We already have 40 projects using continuous processing. But today, I'm going to highlight a simple solution. If I have a 2K, why don't we put 6 of them together, become 12K. So over the past 6 years, we have run 300 batches already in 5 manufacturing plants in 2 countries in China and in Ireland, we have already proven, proven that the disposable technology can produce the same cost of good that traditional stainless steel. So I want to put an end to this debate in our industry saying stainless steel or disposable, which one is better. Because when we said in the industry, we said, in the future, most of the product will be niche. You don't need 5 metric tons for most ADC for a CD3 bispecific. For a CD3 bispecific, at most you need is 50 kilogram. Why do you need light scale for 50-kilogram product? For an ADC, you probably need only 100 kilo or 500 kilo. So we believe that the disposable really is the future. So now we have data. We have 6 years of data. We made -- on the pie chart, you can see the flexibility of our facility. The same facility, I can run a 10-gram per liter current process. I can also run a 1 gram per liter 1990 process. That's the flexibility of the facility. If it's a 1990 process, I use -- I use 6 2K together or I use 5 4K together become a 20K. But if it's a current process developed by WuXi, I have 10 gram per liter, I only need 1 reactor. The same facility can handle 1 gram per liter or 20 gram per liter. You don't see this in traditional facility design. That's the belief of WuXi, right? Again, just a simple multiplexing. If you have a high [ titer ], we use low volume. If you use a low titer, we use high volume. We have already made 300 batches at 6K scale or even 16K scale. And that's already proven. The cost of goods is very comparable and the efficiency, we truly believe disposable manufacturing is the future. And that's why more and more companies are following WuXi Biologics saying, use disposable to manufacture instead of traditional large stainless steel. If you look at the future, most of the product will be small volume, will be niche because of the competition, because of the specialized medicine, right? So we believe disposable manufacturing is cost competitive, it's flexible, it's agile, also effectively accommodating really both small and large-scale volume. I think this is -- I want to put an end to this debate with this one slide, right? I have already made 300 batches. The cost of goods, I can make the cost as low as $40 per gram or whatever you need in terms of accommodating. If you look at our business model, before our IPO, I have 100 molecules in the portfolio. We released a slide 2 days earlier. Now we have 800 assets. So in 7 in 8 years, our portfolio expanded sevenfold, expanded sevenfold. That's the power of the CRDMO business model, right? You've seen the success from financially. I think as I said, when you look at WuXi, you only need to look at the funnel. Funnel will determine everything, right? The funnel growth will drive the revenue growth, will drive the profit growth. I also want to share with you really the success of our business model. In 2017, we said follow the molecule, we grow with our clients. We grow with our biotech clients. In 2014, this client gave us a few million dollar revenue. In this year, it's probably going to $100 million. Next couple of years, $200 million. That's the business model of WuXi. We grow with our partners, and our revenue also grow from a couple of million to $50 million to $100 million to $200 million for this client. This is truly a success of the following a molecule model, right? So -- and think about it, we have 800 clients like this. We have 800 clients like this. Not every client will be this successful, but if you assume 10%, that's a lot of revenue, but that's very high revenue growth in there. We also have win the molecule. We're also very happy to report to you our first Win-the-Molecule project also received FDA approval. But you see in 2015, again, it's almost $1 million revenue. And then in about 3 years, it will be $100 million revenue. So our business model follow the molecule and Win-the-Molecule are both proven, are both getting FDA approval, right? I think nowadays, you also see a lot of M&A, right? So a lot of innovation residing in small biotech companies. Over the past 6 years, 70 of my clients of my portfolio companies or the company I serve get acquired at average valuation of $1.3 billion. So we already created $90 billion market cap for those companies, $90 billion. And as a result, our revenue also increased three to fivefold because when -- if this was originally a biotech company, they do 5 batches with us. And then after they become large pharma, they do 20 batches with us. So our revenue after the acquisition grow like 3 or 4, fivefold. Among the acquisition, 2/3 are acquired by large pharma and then the other 1/3 are acquired by biotech companies themselves. I think starting last year or starting 2 years ago, you also start to see acquisition of the Chinese IP, and we are behind 70% of the deals. So essentially, we are the CMC owner of 70% of the deals. And after that acquisition, I also see a 10 to 30x increase in our contract, right? So that's actually a huge tailwind for us. As companies -- as large pharma biotech continue to source IP from China, we are actually the ultimate beneficiary because our revenue will grow 10x to 30x near term. And we -- in our portfolio, we have 800 assets. Some of them are from China. Now they convert -- with this acquisition, they convert a China-based local asset into a global asset in the hands of large pharma. So those trends actually help us in a really great deal. As I mentioned earlier, our service model is very different from traditional CMOs. We actually have R. Usually, use our IP to enable global biotech companies. About 10 years ago, I asked my team, -- what's the industry trend? What IP industry need? We actually said 3 things: Bispecific antibody, CD3 platform, ADCs. We bet all 3 things right. That's 2014. Remember, before ADC become hot, before bispecific become hot. So we started to say, how can we create IP in 2014, how can we create IP in 2014 is to enable global peers to do this. By 2018, we already have WuXiBody, our platform launched, right? Now we have 44 projects, 44 projects and 4 program in Phase I development. So all those 44 projects will give us 3% to 5% royalties. So that 44 projects alone will give us probably $100 million, $200 million of royalties down the road in there. And the other platform we created is actually CD3. We believe we have the best-in-class CD3. We spent 2 years trying to find a perfect CD3 so that is potent, but not toxic, does not have a CRS storm. We have 8 programs in the clinical trial. Now it's proven that's okay. So we bet the technology that our industry need 10 years before our industry really needed or before it become popular, everyone needed. So now our CD3 is already accepted by GSK, accepted by Merck and by many large pharma and biotech companies, right? As I mentioned, Merck, that's a good example. So we -- among -- about 5 years ago, we partnered a small Chinese biotech company asked us for a CD3 CD19. We designed a best-in-class molecule for them. This is our CD3 antibody. This is our bispecific platform. This is our WuXi cell line. This is our continuous process. So this molecule has full IP from WuXi. And now Merck take it over, hopefully, for autoimmune disease. And we actually have 10% claim on royalty on this asset. So if Merck are able to sell $5 billion, we actually receive them $500 million a year. And that's the beauty of our business model. And we have 50 assets like this, 50 assets like this, right? So as I mentioned, that also in 2014, we said ADC is going to be hard. Why -- how do we do ADCs? So we designed all those platform technology. Now you see SDC as a subsidiary of us, right? We work with AD Bioscience, we work with Duality and many, many other companies on the space. So R is almost like traditional biotech licensing model. So when we partner with a client, we receive up to $40 million upfront, like the GSK deal, up to $40 million, like GSK deal, like [ AD ] deal, like the deals the [indiscernible] deal we announced in the public domain, right? And through the years, we also -- as the program move forward, we also received milestone payment. So this is what -- and all those were actually -- most of the revenue go directly to the bottom line. That's why I said I have all very confident to investors that every year, our margin will improve because as this become big, this -- our margin will improve significantly. So that's why I want to highlight our R business is very unique. Most of the other peers don't have this business. And this actually will be our main source of profit growth in the near future because this grow profit much faster than traditional CMO model. I'll give you a regular business update. I also start with R. As I mentioned earlier, our CD3 platform may be best-in-class. So every company want to use our CD3 because our CD3 targeted coupled with a novel TAA will give you a best-in-class CD3 T cell engager. So we have -- I already mentioned the Merck [indiscernible] deal. I mentioned GSK, 4 program collaboration and then the Medigene. Again, we have 50 programs like this that will generate a steady stream of upfront payment, milestone payment and eventually royalties. The royalties will be hundreds of million dollars in the next couple of years and hopefully eventually will become even $1 billion. And in the D part, I think in the [deep] part, we continue to improve ourselves. We continue to improve. Before we get into the industry, a typical DNA to IND is 24 months. We change the time line every year, every year. right? Last month, our standard time line was 9 months. So if you're a biotech company, if you work with our peers, it's in 18 months. If you work with WuXi, it's 9 months, you save 9 months of burn, right? So that's why biotech company really love us. We -- every year, we change ourselves. Every year, we improve ourselves. Even last year, there's so much noise outside, we look internally to say, how can we serve our clients better. And that's why you see our market share actually improved last year because we offer even more competitive time line. For a Boston company, last year, we achieved from DNA to IND in 6 months. This is unheard of. Other than during COVID, it's unheard of. Again, right, if you raise $50 million, you want to burn 2 years, now I can save you 6 months of time line through our work. That's why our D is definitely clearly industry leader. Again, as I said earlier, last year, there's so much noise outside. But if you look at our numbers, it's actually incredible. We have more new clients than last year -- last year than ever. We have 62 companies signed mega deals with us in terms of contract, multimillion dollar contract with us, 62 companies. Among them, half of them are in the U.S., right? So this is new client adoption. You see this is a company we never worked with before. Last year, we have 62 new companies come to us saying, WuXi, I need your help, right? I already mentioned earlier, if you look at WuXi, the only thing you need to know is the funnel. Before the IPO, our funnel is 100 assets. Now it's 817 assets, right? And then last year, we added a record 151 projects. I have 63 Phase III program give us a lot of near-term revenue. I have 21 commercial projects. So this is a very powerful funnel that will continue to drive our growth. Tomorrow, if you hear, there is a breakthrough in our industry in CNS, in FcRn, in autoimmune, in ADC, in bispecifics, 40% chance WuXi is making a contribution. And that's because of our funnel. And that's the follow the molecule and Win-the-Molecule, right? So it's very powerful, right? Among the 151 projects added, about 60% is actually from U.S. market. So U.S. continue to be our largest market, followed by Europe, followed by China and the rest is Japan and Korea. And over the past couple of years, you have seen before COVID, on average, we get 60 molecules a year. During COVID, because of our strong execution, that number doubled to about 120. But among them is actually 20 COVID projects. So during COVID, we get 100 traditional projects. Last year, we actually get 150. So basically, after recovery of COVID, we actually get 50% more projects than during COVID for traditional non-COVID projects. That's how amazing it is, right? And last year, we continue to win projects from our global peers. So when someone -- when our peers stumble could not deliver, clients actually look for alternative, they actually came to WuXi. Last year, we have a record high of 20 projects, 20 clients come to us with also a lot of late-stage assets. So as you see, the number of Win-the-Molecules is record high. Also a number of late phase record high, 10 Phase III and 3 commercial projects. The reason people come to us for the manufacturing project or Phase III projects because so far, we have impeccable 100% success rate with U.S. FDA, with EMA, with all the regulatory agency. So essentially, if you trust us with a late-stage asset, we almost guarantee you 100% approval when the agency comes so far 100%. We are actually probably the only company with 100% success in FDA and EMA in all the BLA approval. In the past couple of years, every month or so, you hear someone program get delayed because of inspection issue, right? Someone get delayed because of inspection issue. So far, it has never happened in WuXi, and I believe it will never happen in WuXi as well. We actually have 22 FDA and EMA inspection already. Last March, EMA come to us inspection for 10 products at the same time. And they were so happy. They actually waived an inspection that's supposed to happen this year. Essentially, I have a large pharma client, they filed a BLA to European agency. Europe said, I don't need to go to WuXi because I already seen them last year. I have checked 10 products, they're all fine. So they actually waive an inspection. And this will save our clients probably $20 million, $30 million because they don't need to do a batch anymore and also save them 6 to 9 months of time. It happened to us twice already. Once is because the EMA waived the inspection. The other time FDA moved forward the inspection because they're already coming here. They're already coming to WuXi and said, our program is due in September because I am going to visit WuXi March. Why don't I do the inspection in March? We also save clients 6 months of time. So we hope this will keep happening. Our -- not only we have 100% track record in delivering the BLA package, but also will save you time 6 to 9 months because either waive the inspection or they bundle the earlier inspection. So our manufacturing revenue will be a strong growth in the near future in the near-term future. Our CMO will be as strong as the industry leader because as I mentioned already, we have 66 Phase III program, 21 commercial program. If you add it up, it's already 77 programs, 87 programs, right? It's 87 programs. We continue to see more and more. As you see the number of PPQs will go up. If you look at the bottom, number of PPQs, we had 16 last year. We have 24 this year. 24 this year based on all the signed contracts. If we sign another 5, 6 this year, it will be 30, right? So you notice there's a rise during '22, '23, that's because of COVID. We have 8 COVID products. That's about 12 COVID PPQ. If you take out the COVID, it's a constant trend. It's going up. And now we're already seeing 2026, we already have 15. Again, this is based on the current portfolio, right? As the portfolio grow, hopefully, 2026 will be higher than 2025 as well. I already mentioned that tomorrow, if you hear good news in our industry, 40% chance WuXi is making a contribution. If I look at our portfolio, I already count 18 mega blockbuster, 18 blockbuster drugs, among them 8 mega blockbuster. These are in the FcRn space, in the ADC space, in the bispecific space and in the traditional antibody space, right? So we have 8 programs hopefully will generate $200 million revenue for us every year when it reached a good sales, really good sales. And we have another 10 program that $1 billion. So as I mentioned, some of the programs are already generating $200 million revenue for us starting next year. So among the second column are the 2 examples I mentioned in the past. One of them is the first follow the molecule success. One of them is the first win the molecule success. So it's already real. So I claim to have $100 million revenue will actually give us $200 million next year. One of them I claimed $100 million will give us $100 million in about 3 years. right? So this is the power of WuXi. So whenever people ask me, what's your highlight? What's most exciting? I said, every segment, I'm excited about because as I mentioned, ADC, bispecific antibody, autoimmune, right? We cover everything and CNS. We don't have a near-term Phase III CNS, but we have about a dozen -- more than a dozen Phase I and Phase II program. Some of them hopefully are really the breakthrough medicine that can treat Parkinson's and Alzheimer's. Giving you an update on our global site, I think Ireland is a key for our success, right? As the political landscape change, Ireland is key for our success. We are the first to build a facility in Ireland. We are the fastest to build. It received ISP award for the year. So we build the highest quality facility. Now actually, we're very happy to report to you all the 3 facilities in Ireland are certified by the EMA agency. And then we actually have already completed 2 PBQ with probably a couple more to go. And in Ireland will actually be profitable this year. So since we built the facility in 2019 to 2024 is profitable, it's a very standard industry time line. So the success of Ireland has proven that WuXi not only can be successful in China, we can be successful in Ireland. If we translate the same methodology to U.S., to Singapore, we hope we'll be successful in U.S. and in Singapore as well. I mentioned in the U.S., we actually double -- we're actually increasing our investment in the U.S. We are building a very state-of-the-art facility in Worcester, Massachusetts. It will be ready in 2027. They use the best of our technology. So that facility can -- again, can accommodate a 1990 process with 1 gram per liter or accommodate the current WuXi process, 20 gram per liter. So the same facility can do 1 gram per liter versus 20 gram per liter. And that's the flexibility we have in the Worcester facility. We announced earlier this month that we actually divested the facility in Ireland. So people -- a lot of people are saying, is this because Biosecure? No, not at all. I have an asset sitting in Ireland with $500 million. Our stock is so cheap. The rationale is I sell that asset, get $500 million and buy back 6% of the company, right? With the asset that does not generate a high return for us in Ireland, but it's $500 million of cash sitting in the Ireland. So we decided to sell that asset back to Merck. That was part of the original option anyway. We built a dedicated facility for Merck, and they can take it if they wanted to. But in this case, because our stock valuation is so low, we decided to say we're going to exchange that facility -- trade that facility back to Merck, get the $500 million, buyback our shares and improve shareholder return. Because that facility is a low margin, overall, our margin profile actually improved by 100 bps, right? So we can buy back 6% of the company, our margin actually improved 100 bps. Why wouldn't we do it, right? So that's the deal rationale. It has nothing to do with geopolitics. So I think as WuXi is a global company, we actually are very proud. We're actually leading the industry with green. We are green in every aspect. So as I mentioned over and over again, disposable manufacturing is greener than traditional stainless steel. We use less water, we use less footprint, less electricity and everything. And with our technology, we actually can reduce the sort of the gas emission by our carbon dioxide footprint by 80% with our technology. So instead of traditional 20K reactor, now we have a 4K reactor, but I can get 20 gram per liter or 30 gram per liter. So the same -- we have a smaller footprint, but we can generate more product. That's why our carbon dioxide footprint is actually 80% less. So that's why we believe this is really the future of technology. Our facility in Ireland, if you have a chance to visit, is actually the greenest facility in this planet. It's used disposable technology, is used all the renewable energy as electricity. So it's actually very, very clean in that sense. And that's why we actually won -- we are actually recognized the top 1% in many, many rating agencies as ESG by both Dow Jones by FTSE and by -- even by EcoVadis rating very high. I think as a company originally from China, as we become global, we actually rank top 1% as ESG. I'm very proud of that, right? Very proud of that. So I think I'll give you a summary. We firmly believe that the CRDMO business model we created is the most efficient for our industry, right? The R part, if you are an entrepreneur, if you are a professor at UC San Francisco or Stanford or Harvard or Tel Aviv or Cambridge in London or Shanghai. If you're a professor, if you have an idea, we can convert that idea into a first milligram of drug. And through which you use our IP, whether it's CD3 or bispecific or ADC, as the program becomes successful, we receive $100 million of payment, but also 3% to 5% royalties. The R part, it may not be able to generate $1 billion of near-term revenue, but has billion potential down the road. It's also a very high-margin business. The D part is our cup of tea. And globally, right now, every other asset is being developed by WuXi. Every other asset is being developed by WuXi. That basically means that's why I said tomorrow, 40% of the global grade product is within WuXi. Maybe 5 years later, 50%. So that half of the mega blockbusters will be developed at WuXi and hopefully manufactured at WuXi. And M is most people are familiar with the traditional M. Our M is strong, but the timing for our revenue growth is not there yet because as we follow the molecule, we need to wait for the mega blockbusters. In 2025, 2026, 2027, hopefully, every year, we have quite a few mega blocks come up, and they will generate again, $100 million, $200 million revenue per molecule. I think that's really the beauty of that. I think I mentioned earlier, for the past 2 years, you see 2 reporting periods, we have flat growth, right? That's because we have a COVID -- very high COVID comp. COVID at one point was 20% of our revenue. So we have to ride that over with. Now it's totally over, right? And we also are subject to biotech funding because our revenue, depending on biotech raising money. So we are the first to forecast that biotech already seen a recovery back in December of 2013. We -- I'm very glad to see every time biotech company receive money, the first company to think of is WuXi. So that's why we actually -- we are the first to see the biotech recovery. We are the last to see the impact -- the negative impact from biotech funding, but we are the first to see the recovery. We see the recovery in 2013, late 2013, late 2023. Now we see a very strong, right? Last year, we have 131 projects, record high. Again, record high number of projects. So really, I think our flat growth was due to COVID and sort of lackluster in biotech funding. Now both of the issues are over. So we are poised for strong growth, right? So I already mentioned RD&M all will grow this year and grow probably with exciting growth. The R part, we have 7 deals last year with $140 million of near-term payment, right? And that's a record high for the company. And then we have 50 deals like that. The D part, you name it, right? We have 151 projects last year. And every other molecule is being developed by WuXi. And we have 20 Win-the-Molecule parts. So D part will grow as well. And as I mentioned, more excitingly, the M part, a few mega blockbusters will become -- will be approved and will give us a strong revenue. So the R, D&M will continue to grow. And the company is also implementing lean manufacturing, the WBS system, that lean on everything. And also the company is doing digital transformation of the company, digital improvement. That will also help us grow, help us be more efficient in operation, also help us grow. So here, we want to reinforce that we have a solid performance in 2024. Our 2024 guidance will be reiterated. In 2025, our D&M are both seeing exciting growth. So our business momentum will accelerate. And in 2026, it will be even better than 2025. So you will see a growth acceleration in the next couple of period. We are really excited to see we are back to growth. I think for WuXi Biologics in the end, I think it's our mission. Every drug can be made and every disease can be treated. Again, as I've seen, every other biologics now being developed by WuXi. I think we are achieving our vision. Thanks so much.

Yes. Thank you for a wonderful presentation. Before I open floor to Q&A. I have maybe 2 quick questions for Dr. Chen. By the way, I'm Yang, Head of China Healthcare Research at JPM, based in Hong Kong. So first of all, can you quickly also talk about potential kind of margin for this year? As you mentioned, you're going to have accelerated growth?

I think because our revenue will grow, I think we have already guided investors that our margin will improve by at least 100 to -- by at least 100 to 150 bps per year.

Compared to 2024?

Compared to 2024, yes.

Okay. Great. And also, since you mentioned that you're going to continue your global expansion in terms of facility. Can you talk about CapEx plan for the next few years?

Our CapEx will be still in the range of RMB 5 billion RMB 5 billion, RMB 5 billion to RMB 6 billion range in the next 2 to 3 years. And then after that, I think our -- we'll continue to reinforce that we'll have free cash flow, and we'll use our free cash flow also to reinvest in new facilities and also buy back our own shares.

Okay. Great. And any questions from floor. Yes, there will be mic. Can you use mic, so that everyone can hear you.

Would you commenting on return on equity over the longer term based on your expansion into facilities ex China?

Yes. I think for our Ireland facility, we expect to achieve a gross margin of about 40%. It's an EBITDA margin of 40% as well. So I think that will be very comparable to any other global CDMO. In China, we can achieve a higher EBITDA margin. That's why overall profile, we are still the most profitable company in this space.

Congratulations on the fantastic work, Chris. I can vouch for WuXi's capabilities. They actually were instrumental in getting my drug approved last year. So the question I have for you and your team is you asked to continue to be the innovators in this particular perfusion segment field. Are you still doing a lot of R&D to improve that further. You mentioned continuous processing and more with the upstream processing types of things you're doing there?

Yes, I didn't -- because I only highlight multiplexing because people don't -- a lot of people in the industry is still debating whether WuXi can achieve the same cost of goods using stainless steel. So I use that slide to prove. That's one approach, multiplexing, use 2, 3, 4 reactor bundled together, have achieved a similar scale, then you achieve a similar cost. The other way is actually do you do perfusion use continuous processing. We actually are an industry leader in this project. As you know, your project is a perfusion based. We have 40 projects like that. So for traditional antibody, I can get to 30, 40 gram per liter. That's the UI technology I mentioned, the UI. That's -- if you use that technology, you achieve 80% carbon dioxide footprint reduction. So that's why I said not only we innovate on technology, but also help the environment. That's the technology that I mentioned already called alto-intensified. So if you use a stainless steel vessel, your traditional legacy product, let's say, 1 gram, 2 gram, the new product, 5 gram, 6 gram. But with our technology, I can get to 30, 40 gram per liter. So essentially, my largest reactor now is like 6K single-use, 6K. If you do a 5x in terms of productivity per unit volume, then it's actually like almost like someone else, 30,000 liter stainless steel reactor. That's why we believe this is really the future, right? So if you look at the right side, we have the traditional footprint of project using stainless steel. With the single use, we can reduce it by 70%. With the UI, we reduced by 80% in terms of carbon footprint.

Any questions from audience? If not, I would like to have a quick follow-up here. So with the continued growth expansion for your facility. What's your kind of long-term projection in terms of revenue contribution from China facility compared to ex-China facility?

As we expand more and more globally, I think by 2030, our China facility probably control equally in China versus global in terms of revenue contribution. So that's why we're investing heavily in Singapore heavily in U.S. to raise -- to increase our income from a global footprint.

Yes. Yes, makes sense. And also I would like to understand some kind of impact for early projects given yesterday, actually a few other CRO companies made a comment and maybe also make the guidance for their 2025. And it seems that early projects have some pressure. And I don't know what you have seen in term for your terms in R stage project?

We haven't seen -- that's why I said, every company is different, right? We actually see strong growth in early stage projects. We added 131 projects from DNA to IND. Essentially that's reinforced the statement I made. Every time a biotech company raise money, the first company they think of is actually WuXi. So we're actually seeing -- continue to see a strong recovery of early-stage projects, right? If you've seen -- if you look at our number, right, if you look at the number on the top, that basically reflects the industry dynamics. You don't see the slowdown at all. Right? So during COVID, for 2020 to 2022, you're probably minus 20 because every year, there are probably 20 COVID projects. And certainly, in 2020, we have 80. In 2021, we have 110 in 2022, 110, right? So all those are -- so if you look at WuXi, you don't see the biotech funding challenge at all, right? So that's an interesting phenomenon. That's why we said I was the last to feel the impact of biotech funding. I was the first to recovery. We've actually seen recovery back in 2013 -- sorry, 2023, right? If you see 2023, there was already no COVID. There are already no COVID, right? But we still have 132 projects. That's a record high. And then last year, again, improved another 15% based on that. So if you look at WuXi's portfolio, you don't see biotech funding challenging at all. That basically means our market share actually keep increasing during the tough environment when biotech funding was scarce. I think it makes sense when biotech funding was scarce, people really want assurance coming to WuXi. We make sure we deliver the next milestone, they can raise the next round of money. And that's why you've seen the very strong numbers.

Okay. Makes sense. Any questions from audience?

I was just wondering what are your thoughts about the BIOSECURE Act going? And also, if you have any impacts on your business with that?

I'm sure BIOSECURE has the impact on the business. But if you look at this, right, so if there's no BIOSECURE Act, 150 probably be 160, and that's probably the extendable impact. I think -- so I'm glad that the BIOSECURE didn't pass last year. I think we -- as I said earlier, for Wuxi, we cannot change the dynamics outside, but we look internally, how can we serve the client better. In this environment, right, if we continue to serve clients better, I think the geopolitics is another risk factor. It's another risk factor. I have a large pharma head of manufacturing visit us last April, I asked him, what do you see the impact of geopolitics. He said, there is quality, there is execution, there's price and now additional factor of by geopolitics. If you go the best in every other aspect, geopolitics doesn't really impact you. So that's why we continue to see record high number of projects. You also continue to see -- we actually have 10 Phase III programs transferred to us from our peers, 10 Phase III program. Our peers are doing very well, right? They still -- if they stumble, the next company people go for is WuXi despite all the cloud related to geopolitics, right? You see 10 common projects. You actually see 3 -- sorry, 10 Phase III projects, 3 commercial projects. Among the 10, half of them are U.S. companies. We actually glad to see last year despite all those noise and we actually have a commitment from 9 U.S. programs to launch from outside in China. Because of execution. So again, go back to traditional CMO criteria. First is your track record, right, regulatory track record, we are the best. Your execution we are the best, your quality, your price -- and the other factor, the 6 factor now become geopolitics. If we score well in the other factors, geopolitics doesn't really impact us to that extent. You don't see that from these numbers at all.

Any other questions? And maybe I have another one. So can you quickly comment our new project signing kind of prospect for this quarter and this year?

We continue to believe innovation is key. I think at this JPMorgan meeting, we've already seen a lot of more exciting innovation. We've already seen more than a dozen people want to start program with us actually even this week. So I think this JPMorgan seems to be a very exciting year for a very good start for 2025. We continue to see more and more innovation. It's actually interesting. We see innovation in San Diego, innovation in California, innovation in Boston, innovation in U.K., Netherlands, Germany, almost every part of the world, including China, right, including China. As I mentioned earlier, the China global out-licensing deal, 70% of the work is done by WuXi. We'll see that trend continue this year, maybe even accelerate this year.

Interesting. And another quick question is -- so you mentioned you have like 50 programs just like the Merck acquired the CN-201 project. Can you quickly also comment on which disease area on which stage are those?

That's a great question. Our nearest program -- the program that we receive royalties, we have a couple of programs received royalties already, but unfortunately, they are for Chinese market, so the royalty is very low, a couple of million dollars a year. The first program we received around 10% royalty will be approved by 2026. So starting in 2026, almost every year, we'll have a major component of the royalty bearing program get approved. That's why I said R will continue to deliver very strong growth, both in terms of revenue and profit.

And maybe lastly, you mentioned WuXi has a very successful internal cost control program. So how much kind of margin improvement do you think this program can continue to contribute?

Yes. So I mentioned -- I want to add another point. The contribution from our essentially this part is mostly neglected by most investors because it's very hard to quantify. And you guys don't know it. So I have the asset, but you don't know the asset. So the analogy you have this is basically starting 10 years ago, I started to plan apple trees, right, start 10 years ago. Every year, we plan a couple of trees. So starting this year, starting 2 years ago, we started to see apples. But the first couple of apples are very low-yielding apples. And then starting in '26, '27, '28, we started very high-yielding apples. So we're collecting a lot of apples every year. I think that's a good analogy for this. Go back to your point, every year, we're improving -- I didn't have one slide on headcount. So one of the main efficiency improvement you'll see we actually have a flat headcount, but we will continue to grow -- deliver growth in the next couple of years because of efficiency improvement. So our cost -- we control our cost, maintain our very cost competitiveness from a headcount perspective, but our revenue will grow in -- see accelerate revenue growth in there, and that's the efficiency improvement.

Great. We are right on time, and thank you, Dr. Chen.

Thanks so much for the support from the global investors.