WuXi Biologics (Cayman) Inc. ($2269)

Good morning, everyone, for those based in China and Hong Kong, and good evening to those -- sorry, good evening to those who are based in China and Hong Kong, and good morning to those who are based in the U.S. Welcome to the 2025 WuXi Bio Earnings Results for 2025. This call will be conducted in English. My name is Laurence Tam, China Healthcare Analyst at Morgan Stanley. Tonight, we're honored to have the management team of WuXi Bio present to us their 2025 annual results. We have Dr. Chris Chen, who is the CEO of WuXi Bio; Mr. Tu Ming, CFO of WuXi Bio; Dr. Lina Fan, the Head of IR team; and Wallis Wu, also part of the WuXi Bio IR team. The call will last for 1 hour and 15 minutes. There will be prepared remarks from management followed by a Q&A session. Investors can type their questions into the Zoom Q&A box at the bottom of the window, or you can e-mail me your questions at [email protected]. With that, I will pass it on to Chris to give us an overview of 2025 results.

Thank you, Laurence. It's great to give a global investor update for 2025. Yes. I think we believe we have a very unique business model called CRDMO. I think we're benefiting from all 3 exciting modalities of bi- and multispecifics, ADCs and traditional mAbs. So I think this combined exciting business model with all those 3 new modalities are delivering -- will deliver sustainable high growth for us. So I will start with talking about annual results and then Tu Ming, our CFO, will talk about the financial review. I will then give an operational update. And then I always want to give global investors an update on our technology platforms and our WuXi Business System and ESG, and then I'll end with a summary and outlook for 2026. For global investors, I think this slide should be very familiar. I've been using the same template for a while. I think I'm very excited to share with you that on this slide, almost every number is record high for the company, except the gross profit margin. As you know, during COVID, our utilization rate was very high. That's why our gross profit margin was record high. And now it's close to record high, but it's not the highest yet. But other than the gross profit margin, every other number is a record high. [Audio Gap] If you look at the number of integrated projects, we grew from 817 in 2024 to 945. And hopefully, next time when we report, we'll see more than 1,000 projects. We added a whopping 209 projects. I think this is a record high for the company. Our number of commercial projects also grew from 21 to 25. I always said the backlog is huge and it's very hard to grow. But this time, we actually see a very strong growth of the backlog as well, growing from $18.5 billion to $23.7 billion. We have a record high number of regulatory inspections. Still we are 100% success. Our target retention rate is still incredibly strong. On the right side is the financials. You guys read from the news release already. I think I want to quickly highlight Revenue grew 16.7%. If you do -- continued operations is 25%. Adjusted EBITDA, 22.8% and adjusted net profit attributable to the owner of the company, 17.9%, right? I promised investors, we're going to improve our margin by about 100 bps every year for the next couple of years. And last year, we see a very strong 500 bps improvement in gross profit margin. As a result, our EBITDA margin and also net profit margin are both near record high. Our EPS grew very strongly at 48.8%. This funnel, global investors are very familiar with already. I think I also shared with a global investor during JPMorgan conference. I think the 4 key numbers on the right side of the funnel really represent WuXi Bio. And based on this, you can actually see how strong our revenue growth will be, right? We added a record 209 projects. We have 25 commercial programs. Our total funnel size is 945, and we have 74 programs in Phase III. Among the 209 projects added last year, about 2/3 of them are actually bispecific and ADCs. About half of them come from U.S. We also have 23 Win-the-Molecule projects, that's 11 plus 6 plus 6. Among the Win-the-Molecule project, also half of them are complex modalities. I think during the past 2 years, we have encountered quite some noise from the global geopolitics systems. But despite with all those noise, our funnel is very, very sticky. We lost about 4 projects during the past 2 years, these are [ only ] 4 projects transfer out. On the right side, you see many, many projects terminated. These are actually terminated for cost, either program didn't work or our client decided not to proceed. They're not because WuXi Bio is not -- they're not because project transfer out of WuXi Bio. So on the right side, we actually only see 4 projects transfer out in the past 2 years. But on the left side, we see about 43 projects transferred in. I use this ratio 10:1 to again show how sticky our business is. Again, despite all those noise in the past 2 years, we only lost 4 projects, and we won 43 projects. Interestingly, for the 4 projects we lost in the past 2 years, 2 of them may come back later this year. So I'll report next time when we actually sign them back. So this gives you a summary of the number of projects we added. So before COVID, the number -- average number of projects added was about 60. During COVID, it becomes 100, 110. And then last year was again 209. This really shows our increased market share, global acceptance of WuXi Bio as a preferred partner and our strong track record of attracting more and more clients globally in U.S., in Europe, in China and in Asia, Japan and Korea. Win-the-Molecule project has been very steady, about 20 projects a year. And then among them, some are early phase, some are late phase. So because over the past 7 years, we have won so many projects, every project are transferred in. Those are projects either completed at large pharma and transferred to us or completed at our peers and transferred to us. I think we have all those 100-plus projects are delivered successfully. We actually have 12 CMO projects already come from this Win-the-Molecule strategy. So now we are proven by our industry as a company who are most versatile, who are most -- who are able to receive anyone's process and make it work. I think so we have worked with probably a dozen, more than a dozen different cell lines, different process, different media, and then we are able to make all the process work. So they are either ADCs or bispecifics or mAbs. I think this tech transfer in excellence really will drive our future revenue growth as well. I mentioned tech-transfer-in, right? That basically means either large pharma or our competitor don't have enough capacity or fail to do the project and then it transfer to us. The other phenomenon in our industry is acquisition. When large pharma acquire biotech or when large biotech acquire an asset from China, if the program is already done at WuXi, what do they do? Do they transfer project to someone else? The answer is absolutely no. So for all the programs who are in the clinic, if the program is acquired either by a biotech company or by a large pharma company, they actually end up -- the projects stay at WuXi 100%. Beyond that, they actually -- because they know more about WuXi, because we are doing the project for them, they actually give us more projects. So over the past almost 7 years, we actually see 32 more assets coming to us because through the acquisition, clients get to know us better and they trust us and they give us more projects. So again, all those slides basically show how sticky our business model is. So that's why I always said the funnel, if you look at the funnel, that's how the assurance I have for future revenue growth because the funnel is very sticky. Once the project get into the funnel, despite all the geopolitics, we lost 4 projects and then 2 of them may come back. And then we are talking about a total of about 900 projects in the funnel during the past 2 years. I think in terms of revenue, we see a very strong growth in early phase, right, from R and early D or DNA to IND enabling. We see almost 32% growth. In terms of M, the PPQ and commercial, we see a 26% growth. In the middle, the program, who are in Phase I and Phase II, we see a decline. As I explained last time already, I think we've seen a similar trend last year, last time it's because quite a few very strong program, quite a few programs give us a lot of revenue in Phase II. Now we classify -- we moved them to Phase III because they are already in Phase III. Our client moved them to Phase III. As a result, we move them from Phase II to Phase III. That's why you see a very strong growth of Phase III and you see a decline of Phase II. So hopefully, this is only temporary, and we will see all 3 segments grow again. If you look at it geographic-wise, we actually see China has been fairly stable and all other regions actually grow significantly. You see U.S. account for 58% of revenue. It's still growing 18% plus. Europe is 23% of revenue and growing almost 17%. So combining U.S. and Europe is actually more than 80% of revenue and is growing around 17% to 18%, right? The highest growth actually went to Japan and Korea. We actually see almost 70% growth. So it's become now a very meaningful revenue. So a couple of years ago, it was only 1% to 2%. Now it's actually 6.5% of revenue, half of the China already, right? In China, we see a slight decline of revenue, but you have seen so many out-licensing deals. If you adjust the out-licensing deal of last year alone, you will see almost a flat year-over-year growth. If you put all the out-licensing deal in the past, added together, China, we will see a much stronger growth. So overall, I think this -- we don't manage this. This is a result of our last year's operations, but you can see our revenue is very diversified in the U.S., Europe, 80% of the revenue. China and Japan, another 20% of revenue. And with -- other than China, every other region grows very well. Investors are already very familiar with our backlog. I think I also -- I keep mentioning over the past couple of years, our backlog is already so big. It's very, very hard to grow. And when you look at from 2022 to 2024, it is true, the backlog barely grew, right, because it's so big. And now as we sign more and more large manufacturing projects, the backlog starts to grow as well. So we see a service revenue grow by $1 billion. We see milestone revenue grow by -- milestone backlog grow by about $4 billion, right? So I think this is a very healthy growth. And that again give us more confidence that we can deliver -- continuously to deliver high growth. So our funnel is already -- have 945 assets. It almost mimic our industry. Among them, you see bi- and multispecific grow 30%. You see ADC project grow 30%. I think if you look at our portfolio, now complex modality is already more than half of the portfolio. And the more complex it is, the higher market share WuXi Biologics has because it's very hard to handle. We got a reputation to be able to handle a tough project in our industry. So for traditional mAb, we may have more than a dozen competitors. But once we go to bispecific and ADCs, we're becoming a few -- only a few competitors. That's why we have a higher market share for those newer modalities. And that's the higher -- the complex modalities are also much more stickier. I'll explain later on, which is actually right in my next slide. So as you know, so bispecific and multispecific are actually becoming very, very popular. We start to work on those projects back in almost 10 years ago. And so now, bispecific and multispecific actually is -- you can see strong growth in R, D and M. On the R side, our CD3 platform, now we have close to 20 royalty-bearing projects. On the D part, this is the largest portfolio globally. On the M part, we actually have 3 commercial projects. All of them hopefully have a multibillion dollar potential. Bispecific is not -- developing bispecific actually on the CMC side. So development and manufacturing of bispecific is actually very, very hard. I want to give you one example, right? So if you use 1a/1b bispecifics, when you work on a cell line, you potentially get 1a/1b or you could get 2a or 2b or 2a/1b, 2b/1a. So if you don't do it well, you're going to get a mess. And how do you get the product you want from the mess is actually very, very complicated. So that's why for bispecifics, cell culture is very different, difficult. cell line is very difficult. You also need to purify the downstream. When you purify, you also lost the yield. And then what's key is that you need all the tools to look at it. So you need the analytics to look at it. One analogy, what you're looking at for bispecific, when you look at the common company available tools, you're only looking at the tip of the iceberg. But the bottom, the iceberg under the sea, you need to use very high-power analytics. Not every company have this power and WuXi Biologics is actually the best at it. So you need to use a mass spec or very advanced tools to look at this. We actually have a few cases where a large pharma acquired an asset and come to us. We actually found out the product -- the company they acquired claimed the product is pure with 95% purity. In our hands, when we use amplifying glass, to look at the iceberg, the company only see the tip of the iceberg, we actually see the bottom of it. It's actually only 70%, 65% pure. So that's how difficult it is for bispecifics. And because of that, when you have an issue, [ trouble shooting ] is also very, very difficult. So I mentioned all those challenges of developing and manufacturing bispecifics. The message is bispecific is actually very, very sticky. Once the project come in, it's very hard for them to leave WuXi Biologics. So with that, I'll hand over to our CFO, Ming, who will give you an update on the financials for 2025.

Thank you, Chris. So now I'm going to present our financial performance for the fiscal year 2025. This Slide 16 gives us the highlights of our financial performance last year. First, revenue, although there were still tariff and geopolitical uncertainties and also uneven paces of biotech funding recovery, our revenue continued to grow at an accelerated pace. As you can see from the chart that our revenue reached RMB 21.8 billion, 16.7% increase over that in 2024. Sequentially, our revenue in the second half was about 18% higher than that in the first half. We're not just continuing our journey of solid growth over the past 5 years, but also transitioning into a phase of accelerated growth post-COVID. Our revenue increase last year was driven by R, D, M, all 3 cylinders. In R, our research and discovery service segment, we were able to sustain the momentum from the second half of 2024, landing mega deals from our innovative platforms of bispecific, multispecific and ADC. Overall, upfront payments for our research services more than doubled last year and reached USD 150 million with potentially over 4 billion of the milestone income streams in the future years. We also have a full pipeline of new deals. So the momentum in R will continue into 2026 and also the foreseeable future. On development side, with the tailwind of our biotech funding recovery throughout last year and also our share gain in the pre-IND space, we achieved revenue growth about 32% year-over-year, thanks to the 209 new projects we scored last year, among which 186 were in the pre-IND space. This is a new record, representing over 60% of the global presence. Our process optimization and productivity improvement also enabled us to shorten our revenue conversion cycle from DNA to IND to about 6 to 9 months. The decline in our early phase revenue year-over-year, as Dr. Chen mentioned, is largely due to timing as 5 large-scale clinical manufacturing projects progressed from Phase II to Phase III, created a gap of about RMB 1 billion, which will be replenished by the projects from pre-IND phase over time. On manufacturing side, with the successful execution of our Follow and Win-the-Molecule strategies, more and more projects were advancing through our funnel towards the later stages. Now we have 74 projects in Phase III and 25 at the commercial manufacturing stage. And the volume of these late-stage projects are ramping up steadily with the growth of our clients' drug sales. Overall, late phase and commercial manufacturing revenue grew over 26% year-over-year and now represented over 43% of our total portfolio during this reporting period. From a modality perspective, bispecific, multispecific and ADC contributed half of our overall revenue in 2025. Moving over to gross profit, which increased about RMB 2.3 billion to over RMB 10 billion last year. The whopping 31% increase in gross profit also gave us 500 bps of gross margin expansion year-over-year. The margin improvement was primarily attributed to the following factors. The first is a solid growth from R, the research sector, which gave us a positive mix impact as the upfront payments and the milestone income grew more than 2x during the reporting period. Margin rate for development sector extended 1 point, largely driven by the productivity improvement and also the higher margins delivered by the complexity of the modalities as bispecific and ADC now represent more than half of our pre-IND portfolio. At the same time, the activity from late phase and the manufacturing sector continue to meet or exceed our expectations as the plant utilization rate in China continued to improve throughout 2025, and also our Dundalk, Ireland facility continued its ramp-up journey. The productivity improvement from WBS, our lean manufacturing implementation also gave us 150 bps of the margin lift. Lastly, SBC, our share-based compensation decreased to 200 million year-over-year as we continue to optimize our CMB structure, this gives us about 150 bps of the GP margin expansion. Excluding share-based compensation, our adjusted gross profit margin stood at 48.8%, 340 bps improvement year-over-year, one of the leading positions in the global CDMO industry. Adjusted EBITDA, which is a proxy of our operating cash generation capabilities, increased about 22.8% to RMB 9.8 billion during the reporting period. This enabled us to have another phenomenal year from a free cash flow generation standpoint. The adjusted EBITDA margin rate also expanded by about 230 bps to 45.1%, one of the highest in the global CDMO industry. Adjusted net profit is the IFRS-based net profit, excluding the impact of foreign exchange gain and loss, share-based compensation, fair value gain and loss from our investment portfolio or asset divestitures and some onetime restructuring charges. This is a proxy for our business profitability under continuous operations. As you can see from the chart that our adjusted net profit increased 22% year-over-year to reach RMB 6.6 billion, 5.3 percentage points higher than the rate of the top line growth, which gave us a margin expansion of 130 bps to 30.2%. The adjusted net profit margin expansion was largely driven by the solid control in SG&A, partially offset by the tax expense increase year-over-year due to the Pillar 2, the adoption of the 15% minimum tax in Hong Kong, and also the onetime DTA, the deferred tax asset adjustment in Ireland in our 2024 baseline. Next page, please. So this slide shows our profitability growth over the past 5 years, including IFRS-based net profit, net profit attributable to owners of the company, earnings per share and also adjusted earnings per share. You can see that all these financial metrics reached record high in 2025. As you can see that our IFRS-based net profit has grown at a CAGR of 27.6% during the past 5 years and exceeded RMB 5.7 billion in 2025. The RMB 1.8 billion of the 45% growth last year was primarily driven by the 31% increase of the IFRS gross profit, as we discussed earlier, and also the RMB 400 million of the net gain and loss from investment, divestiture and the foreign exchanges, partially offset by some onetime restructuring charges we took at the end of last year. These gains and also cash inflows from our investment and divestiture activities will give us more dry powder in the future for global capacity expansion, biotech incubating, M&A or share buybacks. IFRS net profit attributable to the owners of the company grew by 46% last year, slightly higher than the IFRS-based net profit at both WuXi Bio and the subsidiary, WuXi XDC, grew at a similar pace. Hence, the financial impact of the minority interest pickup remains proportional to the net profit growth. Basic earnings per share grew from RMB 0.82 to RMB 1.22 per share, 49% increase, 250 bps higher than the growth rate of IFRS net profit attributable to the owners of the company as we completed our 2-year USD 600 million share buyback program in the first half of last year. So our shares outstanding is smaller. After we exclude share-based compensation, investment divestiture gain and losses, FX translation and onetime restructuring charges, our adjusted EPS stood at RMB 1.40 per share, approximately 20% increase year-over-year. Next page, please. This slide gives us more details into our gross profit and cost components. In fiscal year 2025, our gross profit margin reached 46%, 500 bps expansion from the prior reporting period, a multiyear high post-COVID. Excluding the RMB 800 million of the share-based compensation, our adjusted gross profit margin was 48.8%, 340 bps improvement year-over-year. In the second half of last year, our adjusted gross profit margin reached 51.5%, another multiyear high post-COVID. As we discussed earlier, the gross margin expansion was primarily attributed to the takeoff of the research and discovery services, which gave us about 1 point of the favorable mix impact from the upfront and milestone payments, which command 80-plus percent of the gross margin. We gained 150 bps of the margin expansion from WBS, our lean productivity implementation. The improved capacity expansion in China and also steady ramp-up in Europe also supported the margin growth. You can see the components of the cost elements in the stack bar below with roughly 17% in labor, 18% in material and 19% in overhead, which includes maintenance, utilities and also depreciation of the manufacturing facilities. Labor component was about 2 to 3 percentage points lower than our historical average as we focus on labor productivity. Revenue generation per employee is a crucial KPI for all our business units. In 2025, our total number of employees only increased about 2%, while our revenue increased 16.7%. So the reduction of the share-based compensation expenses also contributed RMB 200 million to the overall labor cost reduction. Material cost was down 1 point year-over-year, largely due to the material usage productivity improvement. The overhead cost as a component of revenue was down about 2 percentage points compared to the prior 2 reporting periods. There were several cross currents here. The first, as we expanded our global capacity from 156,000 liters at the beginning of 2023 to over 300,000 liters at the end of last year. The new capacity brought on more depreciation, utilities, maintenance and other fixed overhead. However, as these capacities are ramping up, the revenue generated from the manufacturing sector were growing at 26% last year, a pace that's much faster than the increase of depreciation and other overhead expenses. Also during the last reporting period, as part of our ongoing initiatives to optimize our global manufacturing footprint to improve the return on assets, we divested our vaccine facilities in Ireland and also our DP facility in Germany. These divestitures also helped us to reduce the fixed overhead costs. Next page, please. Page 19 here is about liquidity. At WuXi Biologics, we have a strong balance sheet and a solid cash position. As of the end of last year, we had RMB 15.7 billion cash on hand, sufficient funds to support our accelerated growth globally. Compared to the beginning of last year, the overall cash balances increased about RMB 5 billion, among which RMB 2.3 billion were generated from a free cash inflow from the operation cycle. RMB 4.1 billion cash was contributed by our asset optimization and divestiture activities, partially offset by RMB 1.7 billion of the debt reduction and also share buybacks. We always have a conservative funding strategy. For our RMB 64 billion balance sheet, we only have about RMB 1 billion of debt, most of which are working capital facilities. And our gearing ratio, which is defined as the interest-bearing debt over equity is nearly 2%. At the same time, we have close to RMB 7 billion of the bank credit facilities to tap into if we need to. Our CapEx spending last year was about RMB 3.7 billion, mainly for the capacity expansions in Singapore and also in the U.S. Subtracting working capital occupation and tax payments, our free cash inflow last year was a whopping RMB 2.3 billion, a new record in our history. This is the fourth year in a row for us to deliver positive free cash flow. With the acceleration of our capacity expansion in Singapore and the U.S. and also the RMB 1.5 billion carryover from last year, our estimated CapEx spending in 2026 will be about RMB 7.1 billion. However, with our operating cash generation capabilities from business growth and also our focus on working capital management, we are committed to delivering another year with strong positive cash inflow in 2026. Now I'm going to pass the baton back to Chris to share more insights into our business operations.

Yes. I want to give a global investment update on R, D and M. I already mentioned, bispecific is the highlight of this presentation. So we started investing traditional mAb or R on mAb 15 years ago. And 10 years ago, we started working on bispecific. In the past 5 years, we started working on ADC. So you'll see, I think this is a very successful story. We invested a couple of million dollars on the CD3 platform. So now the CD3 platform, the out-licensing of CD3 platform already generated in the past 5 years -- past couple of years, already generated $205 million of revenue and then at an 85% gross margin. So our partners, including companies like GSK, Merck and Vertex. So I think this is an incredible successful story. So not only we -- this platform investment already generated more than RMB 200 million of revenue and very high profit, we also have RMB 5.2 billion potential milestone that can be achieved in the next couple of months -- couple of years. And then for every program using our CD3, we have a 2% to 10% royalties and average about 5%. And for all those projects, 100% of them -- 100% are going to our development. So that carries -- also carry into about $80 million downstream contract. I think this is a really very good example of how our business can really -- can help strong solidify the multi-dollar business model. So that's the CD3 platform, I mentioned it's less than a dozen assets. Overall, we actually have 50 programs like this, right? So again, 15 years ago, we started working on mAbs with accumulated critical mAbs and then multispecific and then now ADCs. So all those royalty-bearing programs will help improve our margin profile in the years to come. I think this is the first time we want to use one table to share with global investors our business model, our revenue stream is very different from traditional CMO. If the program started with us with R, if we are -- for this client, if we are seeing CRDMO, the economics of WuXi Bio is significantly stronger than any other business model, as you can see. So I'm using an average biologics sales of $1 billion. Again, if we have a 5% royalty, that basically means every year for about 10 years' time frame, we'll get $50 million revenue from the sales royalty alone, right? And then that's the sales royalty from our R. And then if they manufacture with us, we waive the cell line royalty. But if they don't, we charge the cell line royalty. So then you can look at different scenarios. The first scenario is 100% volume manufacturing with us, right? And we have $50 million revenue from the manufacturing. And we also have $50 million revenue from the sales royalty, and it's almost -- it's the same number. And with that, we are able to generate a net profit of $53 million for this program alone. I think that hopefully is 10 years, as I said earlier, right? And even if the manufacturing volume is not 100% with us, it's 70%, our profit is actually $50 million. And even if all the manufacturing is done somewhere else, but if this is our R, our profit is actually $44 million. If you go to the extreme to the right side, that's basically the CMO. If you're a pure CMO, with $50 million revenue, your profit is about $13 million, $13 million, right? So I think that really show how our business model is very different. So the CRDMO profitability is about 4x the traditional CMO profitability. I want to even go to the extreme case. If we use our cell line, if we do not manufacture at all, we still have about $5 million cell line royalty and with $4 million profit. And that basically means if somebody else do the manufacturing, I don't do anything, but I have 30% of the profit of the CMO. That really -- I think this table, if you study this table, it really showcase how different our business model is. With the R, I can generate 3x to 4x more profit than the traditional CMO. With the D, even if we don't manufacture anything, we can generate 30% of net profit. And certainly, we want our M to be big. We want the M to grow as well. I think that's why this slide really showcase our strong business model and the strong -- a very unique business model, our CRDMO. So that's a very quick update on R. On D, I think that's really the strength of the company. So, so far, we have delivered more than 786 INDs by end of last year. And last year, we delivered record high 156 INDs. And among the 38 projects were delivered at a 6 months time line. Just to give you context, most of our peers deliver project at 10 to 12 months time line. So we are almost twice as fast as our peers, as the competitors. I was always joking with biotech CEO, I said, if we deliver a 6-month project for you and they pay you, you pay me $6 million to $8 million to deliver the IND. But I saved them 6 months. If their burn rate is $2 million a month, I save them $12 million, while they only pay me $6 million or $8 million. I think that's how WuXi can help the biotech community. That's why biotech companies prefer WuXi as a partner of choice, right? So as a result of the recent growth, now we have already increased our capacity to handle 200 INDs a year and 20 product filings. So look, if you look at the bottom right chart, when we IPO-ed, we can only deliver 20 INDs a year. Last year, we delivered 156. This year, we delivered 180, a 9x increase in the past couple of years. I think that's an update on D. On manufacturing, everyone know our manufacturing is excellent. We have a very strong track record. If you manufacture with us, it's almost a guarantee. If we said we'll deliver material to you by Christmas, we'll deliver material to you by Christmas, it's like buying insurance. That's our manufacturing. And one prerequisite or leading indicator of biomanufacturing, cumulative manufacturing, that PPQ. So that's a step. You said you'll do a PPQ, you file the FDA, and when FDA approved, you begin selling the product, right? So on the left side, you see the PPQ growth. In 2019, we only have 6 projects. I think by end of this year, we have more than 137. I think this is based on the contract we signed as of today. Most likely this year, it will even be higher. If you look at 137, you may think this is a pure number. But for one -- for every successful PPQ, potentially for 20 years, that can generate for a reasonably -- for a reasonable biologic with $3 billion sales, 1 PPQ can generate a future potential of $3 billion in 20 years. So I assume $1 billion to $3 billion drug and the manufacturing, and if you look at 20 years, it's actually $3 billion potential. So that's -- so I have 137 of them. And if you adjust for industry failure rate, if you adjust for someone else taking it home, adjust for all those variable, this 137 PPQ means cumulative revenue potential of $75 billion in 20 years. So on average, about $3.7 billion of revenue. That's how powerful this 137 is. $3.7 billion revenue, what does it mean? That means another WuXi Biologics 2025 revenue. So in this PPQ alone, you can actually see for the next 20 -- for 20 years, every year, we may have $3.7 billion of revenue. And that's how powerful it is, this PPQ number. On the right side, you see before COVID, we do about only a couple of PPQs. And during COVID, we are getting into about 10 range. And now this year, we're getting into 30s, right? If you look at the blue and green color, that's a global client, mostly U.S. client. You see, we have 10 PPQ in 2014 (Sic) [ 2024 ], 20 in 2025 and 30 plus this year. Now again, 2 year 3x growth, 3x. That's really the number of PPQs we're doing. So this -- all those bode well for our commercial manufacturing revenue down the road. I think what's the reason why companies love us, why they want us to do PPQ for them because as I mentioned earlier, our PPQ is 100% success. When they file the PPQ to the agency, we hope it's also 100% approval, 100% success in approval as well. And that's why global companies trust WuXi not only in the R&D phase, but also now more and more in manufacturing. I think we -- Ming already mentioned that we have a WBS effort, and digital is another effort. Through WBS and digital, WuXi Biologics will continue to innovate, continue to improve our efficiency. You will see our efficiency improvement year-over-year. So as the business grow, we are also investing more and more in the global. And we are investing in U.S., investing in Singapore. We finished investing in Ireland. We're also looking at Qatar. But now because of the war, we will reevaluate after the war. So Qatar right now is on hold. We will reevaluate after the war. The U.S. investment is in mostly 2 locations. One is Cranbury, New Jersey, right, by Princeton. And we converted a small clinical facility into commercial facility because of demand. And we're building a much bigger commercial manufacturing facility in Worcester, Massachusetts. With all those facilities online, we can generate hundreds of million dollar revenue in the U.S. I think every time when I meet investors, I really want to share with you what's exciting about WuXi Biologics on technology side. So we have a very strong execution track record. We have very high quality. We have faster speed. But we also have one of the best technology platforms. And I already mentioned over and over again, the bispecific platform, the CD3 platform, right? And we also have a nanobody platform called SDArBody. But today, I want to highlight a few ADC-related technologies that WuXi Biologics are working with WuXi XDC to develop for the global community. The first program is actually called WuXiDARx. This is a specific conjugation technology using a single chemistry. If you look at the global community, a lot of people are doing conjugating use a very sophisticated tool, a lot of very complex enzymes, very -- you have the engineered antibody to create a mutation for the antibody, and that will change the antibody properties as well. So we actually only use a single chemistry where we are able to do a site conjugation using a single chemistry. Not only this technology can be used for traditional ADC, we can actually use for dual payload ADC. We can put 4 payload 1 first and then put another 4 payload 2, or we can put on the right side, we can put 4 payload 1, 2 payload 2, 6 payload 1, 2 payload 2. So I think this gives a global community a lot of options on developing next-generation dual payload ADCs. We believe this will be a start of earning milestone and royalties for WuXi XDC. Similarly, WuXi has developed a proprietary linker technology and also proprietary payload as well. I think between the conjugation and payload and linker and with all the WuXi's mAb, we can create next-generation ADCs for the global community. That's why I said 15 years ago, we started working on mAbs for the global community on R. And then 10 years ago, we started working on bispecifics and multispecifics. 5 years ago, we started working on ADCs. So we will see more and more milestone payment and the royalties, upfront payment, milestone royalties from the ADC technology as well. That's a new offering on R side. On the D side, D is the workhorse of the company, more than 50% of the revenue come from D. The evolution of technology from D is also very, very obvious. 15 years ago, when the company started, we used what they call random integration technology. Random integration means because random is lower productivity. So 15 years ago, we have to look at 3,000 cells. It takes us 6 months. And in the end, we can produce 2 gram per liter. The technology we have right now, we just launched last September is called targeted integration. You may not know the details, but it doesn't matter. Look at the results. We only look at 1% of the cell comparing to 15 years ago, less than 30 cells with the time line reduced by more than half. Instead of 6 months, now it's 2.5 months, we get 4x more productivity. So this technology can help our industry reduce the cost of goods by 30% with this technology. So we have -- this technology was only launched last September. Now we will have -- already have 50 projects using this. Our first IND filing with FDA in the next couple of months. Once FDA approves this, I think we're going to use it for every project from WuXi Biologics. Again, this will help our clients save 30% of the cost of goods eventually down the road. And I think this again shows how WuXi Biologics. We are working on -- we're innovating every step, trying to make the drug manufacturing process, the biologic manufacturing process more efficient, lower cost. I think this is really beneficial for the industry. And with this technology, we can -- as I said earlier, last year, we delivered 38 INDs in 6 months. With this technology, we may be able to deliver 100 INDs in 6 months because every project will be saved by this amount in there. So again, I can make industry faster and faster and better and better, and the cost of goods cheaper and cheaper. Another aspect of this technology is we will be using this technology to make a lot more biosimilars. Biosimilars, cost of goods is hugely important. As I said, with this technology, I can save the industry by 30%. Why not work on biosimilars. So we have already many, many biosimilar companies come to WuXi want to use this technology and eventually help them reduce cost of goods, help them improve the sales. Now from the get-go, WuXi Biologics, our manufacturing platform is disposable. 10 years ago, the single disposal reactor is 2,000. Now we have -- go to 4,000, go to 5,000. And in our WuXi scale, it will be 6,000. So reactor getting bigger and bigger. But people are always challenging me. If I have a mega [indiscernible] faster, how can you do it? We have already proven 352 times, I can do it for you. As I mentioned, each reactor is getting bigger and bigger. We can also multiplex. The largest scale we run in China now is 16,000 liter scale. That's bigger than most of the stainless steel facility out there, right? Most of stainless steel tanks are 10,000, 12,000, even 15,000, but we can actually run 16,000 by multiplexing 4 or 4,000 reactors. In Worcester, Massachusetts, or in Singapore, our single reactor is already 6,000. I can do 3, 6,000 become 18,000 liter reactors. But I think as I mentioned earlier, our cell line productivity is higher. So we may not need to go to large scale. But if I need to, I can do very large-scale manufacturing. The cost of goods is very comparable to traditional stainless steel. We have already proven this 352 times. So as our industry move to more and more patient convenience, a new technology is needed, what we call high dose delivery. Traditionally, with a subcu injection, you can only do 1 ml. How do you pack more product into that 1 ml? It's called -- we use a technology called WuXiHigh. I can put as much as 240 mg of materials into that 1 ml. If you look at -- if you are interested in biologics, most of the biologics are 30, 50 mg per ml. So actually, I can pack 8x to 10x more into that 1 ml. That's why patients can do the injection themselves or nurse can do it in a few minutes instead of a few hours of IV, that's the WuXiHigh. This is also a technology that we collect milestone payment and potentially royalties from global community. The other one is called hyaluronidase, it's an enzyme that can dissolve some tissue and have you get to a large volume, you can -- as big as 20 ml. I think this is a technology readily available in the industry, but now we are doing the biosimilar version of it. I think we already have many projects that's working on that. So I think WuXi, from WuXi's perspective, I want to make sure we help our clients. Whatever they need, I have them for you. And that's the technology development that we have. So that's the 2 technology I want to highlight. I think I already mentioned that WuXi Biologics business system is our way of continuous improvement. Every year, we look at how can we save costs there? How can we be more efficient in labor? How can we save materials? How can we save expenses? How can we optimize ESG? And how can we -- how can we increase our revenue? I think all those are the WuXi business system. So last year, we did 400 projects -- more than 400 Kaizen projects. Overall, the business results is actually impressive, right? We achieved 150 bps improvement in margin. So I think this was a continuous effort. This is already year 5 of us implementing WBS. We'll continue to do that. I'm also very proud of our ESG results. Every year, we now get the highest rating almost from every agency, top 1% on quite a few of them, AAA remain in rating agencies. So I think that's the high-level summary that I wanted to share with the global community. I think in the end, I still want to share with you that I truly believe our business model is very unique. With the revenue -- with the royalty calculation slide that you can see our revenue model, our profit model is very different. Our business model is very different. R, D, M, we strongly believe R will lead to D, D will lead to M. Everything coming to our funnel will stay there, right? Almost everything will come to the funnel will stay there. Our R is very unique, give us not only a very high-margin business, but also will lead to D and lead to M, right? I think for R, 15 years ago, working on mAbs, 10 years ago, working on bispecific. Now we're working on ADCs. So we are answering to the need of a global biotech community. Our D is the working horse of the company, right? We have delivered 38 projects at a record 6-month time line. This year, we'll probably deliver a lot more. We help companies save money by doing 100% success in delivering projects in the fastest manner. In M, I think we already have near a decade of large-scale manufacturing experience, right? We can really cater to the clients' need. And in our portfolio, now we counted many, many blockbusters, about more than 10 programs with $5 billion sales potential and more than 20 programs with $1 billion sales potential. So that will drive our M. I shared this slide during the JPMorgan conference already. I think WuXi Biologics in the next couple of years will benefit from the 3 high-growth modalities. I already mentioned bi- and multispecific, right, we mentioned in the other -- previous slide. Bi- and multispecific grew actually 120% revenue for us last year. Now it's almost 20% of our group revenue. It is getting close to the 30% ADC contribute. There are 2 types of bispecifics. One is CD3 enabled and CD3, CD19, CD20, PSMA, CD19, CD20 or CD19 BCMA. All those programs could potentially generate -- each one of the drugs could be $5 billion, sometimes even $10 billion sales. Certainly, our industry is very, very -- chasing after the PD-1 VEGF. But there are many other dual model -- dual target bispecifics. So WuXi will benefit from all of those. Some of those are very high-volume multi-metric ton scale manufacturing, and WuXi will benefit. And ADCs, I'm sure you have heard about from [indiscernible]. So it's 30% of revenue, and we have quite a few programs pending approval. And with all the emergency ADCs, the B7-H3, DLL3, ROR1, CLDN18.2, CLDN6. So tomorrow, if you hear good news on our bispecific or ADC, 50% chance WuXi Biology is behind them. 5 years from now, 70% chance, WuXi Biology is behind them. And that's how much contribution we made to the global community on bispecific and ADCs. We have been already working on that for 10 years. Now we have many programs that are getting to close to commercial stage. So the FcRn antibody, IGF-1R a antibody, CD19 antibody, C1 antibody, program for [indiscernible] disease, program for autoimmune, allergic reaction. So again, in those portfolio, we can count on many programs will require multiple metric tons of manufacturing. That corresponds to $100 million, $200 million, $300 million of revenue for WuXi Biologics. And that's why I believe our business model, our business will continue to grow. Oftentimes, investors ask me, what's your near-term potential? What's your margin look like in 2028, 2029, which is 2 to 3 years from now? I'm very happy actually, second half of last year, we already delivered the 2028, 2029 like margin profile. But if you see the second half of last year, our R is incredibly strong, our D is incredibly strong, our M are the strongest also in the past 5 years -- in the past 3 years. So that's why we are able to deliver a gross margin of about 48%, adjusted gross profit margin almost 52%, and adjusted net profit margin of 32%. And that's really the sort of the near-term margin potential of the company. With that, I want to summarize 2025. Again, we have an incredible 2025. You see bispecific and multispecific growth. You see ADC growth, right? You continue to see us invest in new technology. I mentioned the cell line, the high concentrated formulation. So R, D and M all shined last year. And the momentum continues to shine. I think this 2026, momentum will continue to shine. We continue to see R, D and M, where R, CD3 even more proven. We signed 209 projects. Most of them will be translated into revenue in D this year. And I mentioned we have 10 programs with $5 billion potential with another 10 programs with at least $1 billion potential. So we have 20 blockbusters waiting for us to manufacture. And we have 35 PPQs based on the January data. And hopefully, by this time next year, we'll report to you actually more than 34 PPQ. The business momentum in Q1 of this year continue to be very, very strong. So if you look inside, our business is growing very, very well. But outside, there are 2 war going on. We're not sure how Fed is going to do on interest rate. And also the RMB versus U.S. exchange rate give us some volatility. So because of that, we want to be conservative. So we want to guide a revenue growth of 13% to 17%, taking into account the RMB to U.S. dollar fluctuation, taking into account some potential challenges in biotech funding because of the war, because of the funding situation. So I think this is still a decent growth. We certainly wanted to under promise, over deliver. I think that it will be another great year in 2026. Thank you.

Thank you very much, Dr. Chen and Mr. Tu for a wonderful presentation. And once again, congrats on a strong 2025. We will now move to the Q&A session. [Operator Instructions] So we have 2 questions coming from Alessandra David from the Ashmore Group in the U.S. So let me go one by one. Chris, you sort of alluded to it on the guidance slide. But at the JPMorgan conference, you guided for soft acceleration year-on-year, and it was later confirmed to be 13% to 17% year-over-year. So can you comment on the reason for the change?

Yes. It's mostly currency, mostly the currency, right? Because I think because this year, because we have already seen very volatile RMB to U.S. dollar exchange. That's why I want to be conservative. We're baking quite some room for those.

And also the volatility in biotech funding, you mentioned, right?

Secondary.

That's secondary, yes.

So far, biotech funding has been strong. I mean we only saw 2 months of data, right? But like there's a lot of uncertainty this year in the macro backdrop. So we want to be conservative.

Okay. Thanks, Chris and Lina. And his second question is, there's a slowdown in China revenue or flat when you strip out the out-licensing deals. So can you comment on the onshore biotech funding environment?

Yes. I think overall, China, I think biotech funding may not be that strong, but there are a lot of deal activity and some IPO. So because of that, I think funding in China is okay. Funding in China so far is okay.

Next, we have two questions coming from [ Chris Tan, ] representing [ ZE's ] team at Goldman Sachs. Firstly, can you comment on the ramp, the capacity ramp in China versus overseas?

We don't -- because our manufacturing is already so big, we don't comment on a specific site. But overall, manufacturing utilization improved by a few percentage. That's why last year, margin was expanding. So that's why second half of last year, I mentioned margin is almost -- you can see this margin at 2028 because when every year, we improve our efficiency. Second half of last year is very evident.

Next, we have a question coming from Linda Xu at HSBC. With increasing proportion of new modalities and the progress of clinical trials and commercialization, could you give us the outlook of the IP-based revenue growth in this year and next year?

That's great. So I think the IP-based, sort of the upfront payment, milestone payment kind of income is actually very hard to predict. So that's why -- so last year, it was almost about 15% of profit as well. So I think as a rule of thumb, we want to guide you basically saying, we see a 30% CAGR, right? But last year, we see a very strong growth. It's almost like 50%. But overall, because it's so unpredictable, we still want to guide you on a 30% CAGR in 5 years. So this was still a very strong revenue and profit component. Any other question?

Okay. Next, we have a question coming from Vicki Tiu on the buy side. Can you comment on the contract pricing trend?

I think overall, I think the contract pricing is very stable. At the beginning of the year, we actually raised the price by about 5% to 10%. So because I think we see the global demand, I think for a CPI adjustment, it's actually very reasonable in our community.

Okay. So in line with inflation basically.

Yes.

Okay. Next, we have a question coming from Huang Yang at JPMorgan. Chris, you mentioned there are a number of M programs with peak sales potential of USD 5 billion. Can you let us know how long those drugs have been on the market? We would also like to get a sense of when we can see those drugs reach peak sales.

Yes. That's a great question. So, so far, we have -- among the 25, we see 2 of them. Among the 25 approved, we see 2 of them. But the other programs are still in Phase III. So they're not approved yet. But for 2 of them, 1 of them hopefully will be achieving $5 billion of sales very soon. The other one, hopefully in the next couple of years. So that's our business model. Our business model basically, we work with the client and their program need to go from $1 sales to $1 billion to $5 billion. So it takes some time. That's -- so our business model is not as straightforward as straight CMO where you can do $50 million, $100 million revenue per project right away. I think that's our business. That's our business model. We grow with our client. But the good thing is our revenue -- our M revenue will continue to grow, right? If you -- as a straight CMO, year after year, at some point, your revenue will decline. For us, our revenue, our M revenue for every program will increase and it will reach a peak and then will decline. So that cycle is actually 10, 15 years or even 15, 20 years. So we are at the beginning of that 15-, 20-year ramp-up. That's why I said our M revenue will continue to grow. But for the multiple $5 billion projects, 2 of them are already approved. One of them is already on the market a couple of years, one of them is only 2 years.

Okay. The next question comes from Hugh Sloan on the buy side. Would the company do more buybacks?

Yes, because we have a very strong cash situation. We are looking -- as you look at the CapEx, we are investing heavily. We are also doing more M&As. So you already see one M&A from XDC. So we're looking at all the options. And then buyback is certainly one of the ways to reward investors.

Okay. The next question comes from Zhang Jialin at Nomura. So what is the rate of the company retaining Chinese firms projects if they were out-licensed to MNCs? And what is the current market share based on your knowledge?

For the program, the Chinese company partnered with a global, Chinese company out licensed global. If they use CMO, we have 70% market share. And then every company who acquired the asset actually keep the project with us. So we have 100% retention of the program. So as I said in the earlier slide, so this is -- when I mentioned 90 program was acquired and then they add 30 program, that includes Chinese company program being acquired by a global company. So instead of moving them away from WuXi, actually, they always -- so far, 100% project kept at WuXi. In the meantime, they actually give us more projects. So it's actually net even surplus. Not only there is no project transfer out of WuXi, instead, they actually give us more projects.

Okay. The next question comes from [ Jason Lai. ] There's been an increased focus on AI and how it could impact pharma R&D outsourcing as AI gets more advanced. What is your view on the impact of AI and if it could decrease pharma R&D outsourcing?

Yes. I think it's actually probably the other way around. So AI will make it more and more outsourcing, right? So our business model is very complex. So I want to explain R, D and M. For R, AI can make R more efficient. And if that's the case, if R is more efficient, that basically means there will be more and more D and M. So WuXi Biologics will benefit from that AI, right? Because again, if R is easier, every company can create 50 projects, who can handle that 50 new projects? Only WuXi Biologics has the capacity and bandwidth to handle that. So R, D and M will benefit from that. On the R side, so far, I don't see a disruption of AI disrupting R yet. So our R will continue to benefit. But behind the scene, we actually use AI in every part of our business already. The reason we are so fast in D and M -- the reason we are so fast in D, the reason we are so good in M is because AI is already part of our process. And in R side, we already developed quite a few molecules with traditional technology cannot develop. Basically a wet lab, you cannot create a drug. But with AI, we're able to create the drug. But it's not from first principle. It's not from -- in silicon. It's basically, we use wet lab to create a molecule, not ideal, and we use AI to fine-tune the molecule, make it ideal.

Okay. So we're actually almost at the time limit now. So I will turn it back to Chris to do concluding remarks. Chris?

Yes. Thank you, Laurence. Again, right, if you look at 2025, like almost every metric is record high, revenue, profit, free cash flow. I think 2026, we hope to see similar. Everything will be record high. But the growth, we want to be confident we can deliver the revenue growth. That's why we factor in some variances of currency, of currency variability. That's why we give you a range of growth of 13% to 17%. But we hope we can do better than this. And thanks to the global investor support. Thank you.

Thanks again, Chris. This will conclude the call for WuXi Bio 2025 results. Thank you all.