WuXi XDC Cayman Inc. (2268) Earnings Call Transcript & Summary

Good morning, and good evening, everyone. Welcome to XDC 2026 Interim Earnings Call. This is Chris Van Halo IR. Joining us today online are our Chief Executive Officer, Dr. Jincai Li and also our Chief Financial Officer, Mr. Xiaojie Xi, together with the IR team. So for today's earnings presentation slides are available on our corporate website under IR section and also Hong Kong disclosure platform, please double check and also at the beginning of the earnings call, management team will walk you through our half year business updates and key financial highlights followed by our Q&A session. Please note that this call contains forward-looking statements kindly refer to our published announcement for relevant disclaimers. With that, I will hand it over to the management team. So Dr. Jimmy, please go ahead.

Great. Thank you, Chris. Good morning and good evening, everyone. Thank you for joining our earnings call. So we are very happy to share that XDC has achieved another outstanding first half of 2026. I will start by going over some highlights and then borrowed by business and operations update, and then Michael will share the financial results. And then I'll come back to a quick sharing of the outlook and summary. The next slide, Yes. So as usual, we start with sharing some of the key highlights on the projects as well as the financial part. On the project side, as you have seen, we have signed another record number of iCMC projects for the first half as well as 2 new PPQ projects. So total number of iCMC continued to increase rapidly, indicating the gain of market share, but also more importantly, the continued expansion of the XDC space. Our number of PPQ projects continue to increase. And also with the acquisition of Bidding, we also added the second commercial projects. On the financial side, we're happy to report that we achieved another very solid growth in the first half. So top line in terms of RMB reporting we increased the revenue to HKD 3.7 billion. So that's 37% on the AER. On the constant exchange rate basis, that growth is 41.5%. And so as you can see also the profit margins slightly expanded compared to 2025. And also very importantly, the backlog continued to increase at a very strong growth rate. So service backlog increased to slightly below HKD 2 billion indicating a 50% increase. We also added the milestone backlog for the first time. So if you add that number, that total goes to around HKD 2.2 billion, so solid growth in terms of the backlog. Next slide. For other key achievements on the innovation and execution side, we continue to increase the global client number as well as submitting the IND for first in human. Our innovation monetization continued to make good progress. We mentioned that we signed a first licensing deal with Earendil in early this year. And also, we're happy to share that we have secured the second in a licensing deal with a European biotech, which will be announced very soon. Another important milestone is that the Singapore side officially has now transitioned from construction to operation with the GMP release of the mAb adn BCM3 on August 17. And then in the next couple of days, we'll be also releasing the DPI facility. Our global talent continue to increase with close to resolving new employees added. Total head count now is around 3,600 including about 500 from BDK. So those are the quick highlights on the interim results. And next, I will go over a little bit more on the business and operations. So starting with the funnel. This obviously you might be already familiar with. Also best to represent HTC's CDMO business model. So we continue to help clients to develop the best-in-class and first-in-class ADCs and XDCs, so total number of assets moving from discovery to development now accumulated to 77. As mentioned, we signed a record number of iCMC in the first half, 51 total and we continue to help clients submit many INDs. So that number was 27 in the first half, accumulating to over 160 from the last 5 to 6 years. We continue to expand on the PPQ and also now added the second commercial. So the strong growth of this basically indicates the continued expansion of the market, the ADC and XDC market also our solid service and platform that continue to attract more and more clients. Next slide shows the stand-alone -- XDC stand-alone because this is the first time we consolidated BDK results. So we wanted to also share XDC stand-alone, which obviously is the most of the numbers coming from the XDC side. Next slide. If we look at the details of the 51 iCMC signed in the first half, we can see that about 3 quarters of the unit signed by iCMCs represent a newer type of modality, including new targets, normal payloads, bispecific ADCs, dual pad ADCs and also some of the newer, what we call XDC modalities, including, for example, antibody article conjugates, antibody peptide conjugate and other type of local country gas. So again, this shows that the field continues to evolve quickly from the more traditional ADC to a broader type of XDCs and that innovation continue to show strong momentum. Next slide shows the -- more details on the PPQ projects. And you can see that around half of the PPQ projects are coming from overseas clients and among the line from MNCs. Also, those represented 14 differentiated targets on MOAs. So we also added, as I mentioned earlier, as 2 PPQs in the first half. And in terms of execution, we now have completed a total of 27 PPQ components over the past few years. Again, this represents more and more opportunities flowing down potentially into the BLAs and commercial manufacturing. We also look into the indications of those PPQ projects and excited to see that about a quarter -- about actually 1/3 of those projects involved first-line therapy clinical trans. And obviously, that -- if those are successful, it provide a broader market assets and therefore, more commercial success potentially for those assets. Next slide. In terms of our client base, we continue to grow our client base and also continue to make very solid engagement with MSC. So 15 out of top 20 of clients in terms of revenue contributed just about 1/3 of the total XDC revenue. The bottom deal numbers also show that XDC continue to enable our clients to be successful in terms of licensing, in terms of financing. So a large proportion of those deals are from XDC clients. And also, particularly interesting is that for the first half of 2026, every single M&A deals involve clients of XDC so I think the number is around 5 to 6 of those M&As occurred in the first half. And all of those were actually acquired by major pharmas so again, continue to show how XDC support and enable clients to be very successful. Next slide, those obviously are based on the very solid and continued evolving technologies that we provide to the clients. So XDCs technology mainly focused on conjugation and also on the linker payload innovations. Our conjugation platform is the WuXi platform that initially supported and continue to support many assets to use DAR4 technology and moving into the clinics. So 10-plus iCMC programs, including a couple that are already in the pivotal trial in PPQ stage. And over the past couple of years, our DARX continue to evolve to serve the newer mobilities, especially in the DAR1 and DAR2 conjugation technologies to enable development of AOCs and APCs or also importantly, the dual-payload ADCs. So with our DX contribution, there's no need to engineer the protein and we basically tap into the wild-type is conjugation site, but achieving the results of site-specific contribution which is -- provides a great convenience and also CMC brandness for clients down the world. Our linker technology center around hydrophilic linker, basically that enable the WuXi Tecan 2, which we signed quite a few molecular licensing deals. But also we now continue to expand the linker payload technology to include MAEs, ATRI and also are building, so those help to tap into the newer type of payloads, for example, the DDR immuno agonist. Those payloads are actually coming handy when we -- the relevant dual platforms and systems to support clients' needs for developing best-in-class dual payload DCs. Next slide shows are we continue to stay at the forefront of the industry and basically helping clients to explore all sort of different country game modalities. So the total number of bioconjugate molecules made by the team increased to over 22,000 through first half of the year. As you can see that the discovery earlier development stage over 30% of those are what we call the XDC projects and only iCMCs 42 out of the 328 are also the norm newer modalities. The next slide is one of the favorite slides to demonstrate how we see the industry moving forward. So these are always early indicators in terms of what might be coming in the next 6 to 12 months or even further down the growth. So basically, the picture continued to show that about 50% of the traditional ADCs, but a higher proportion of [indiscernible] ex-domain new bioconjugates. So this includes the AOCs, APCs, degrader conjugates and others. And not even on the ADC part, more and more only dual-payload bispecific ADCs. So again, we stay at the forefront of helping clients to advance these novel mobilities and also allow us to see great visibility in terms of what might be coming further down the road. So to support the continued strong growth of the industry, next slide, we continue to invest on our capacity. And so -- we now -- in China, we have the Wuxi City side, largest center of excellence for ADC manufacturing. Shanghai side, we also continue to expand on the earlier discovery service and also development. As soon as decide we acquired the BioDlink that offers also pretty much all in my service within that campus as well. And we acquired Hefei site late last year for peptide capability, which now also added audio capability. And then the site, is our very large scale commercial manufacturing for Peloton as well as new modalities that includes peptide and molecules. As noted, we now officially also transition from Singapore from construction to operation. So I'll also update some of the major sites a little bit more in the next few slides. So the first is the WuXi side. Next slide. The WuXi side basically remain as the largest manufacturing site for which we have established operational excellence across all 4 of the ADC components. And the lower right show that WuXi side we are adding more capacity. For example, the payer income manufacturing 2, but also 2 very large scale drug product facility, DP5 and DP6, which are scheduled to be released in early 2027 and also 2028, respectively. Next is the Singapore side. We mentioned earlier that Singapore has now achieved a major milestone from construction to operation. And also, we continue to engage global clients to visit Singapore to actively start to also schedule audits, especially for farmers, and they have to conduct audits before they actually can sign and secure any deals for manufacturing in Singapore. So we continue to see a lot of interest. And we very happy that Singapore is now ready for operation, which provides flexibility as well as supply chain resilience for clients, especially at the later and commercial stage. [indiscernible] side, as mentioned, is a very large-scale linker payload commercial side with total construction area in the plant at over 80,000 square meters. It's not just for highly potent linker payers, but we also manufacture peptides as well as audible components for APCs and AOCs, so this is part of the effort to support the accelerated growth of the pet linker part of the business and which is supported by our own innovation to bring new novel inceptor to clients to the market, but also more and more projects also potted to advance 2 PPQs. So we also added a slide to basically update in terms of how we see the linker pedal business momentum. Basically, starting in 2026, basically, we seen that linker pedal business growth outpacing the overall XDC consolidated business. And this is supported by more and more programs, also getting into late stage. So we have signed over 10 PPQs for linear component and also the innovation to newer type of payloads and lower payload, including, for example, linker oligo conjugates, RMPs, PROTACs, GalNAc et cetera. So our innovation, our continued capability in terms of the peptides oligo as well as our aggressive expansion on the commercial capacity, we will ensure that the payload linker business becomes a faster growth engine for HCC Group in the next few years. We also happy to update that since the completion of the acquisition of BioDlink by end of March. We actually made great progress in terms of the integration of BioDlink. We continue to see a lot of strategic alignment and also partnerships, continuation of the strong collaboration with the BioDlink customers and also the improvements on the operation on utilization as well as on quality alignment between and XDC and BioDlink continue to benefit our global clients. As noted also, XDC signed CCT relation partnership with BioDlink and also wish signed a CT agreement with outdoing as well. So those will provide also a solid work condition for BioDlink itself in the next few years. So that's basically a quick review of the business, operations and also Singapore progress as well as BioDlink integration. So next, I will hand it over to Michael to go over the financial results of the first half.

Thanks, Jim. Next slide. Yes. I'll just recap our financial performance for the first half 2026. As you can see that our revenue reached RMB 3.7 billion actual exchange rate basis or year-over-year period-over-period growth 37%, but on a constant exchange rate basis, it's almost 42%. I think that I will emphasize that the investors should look at the constant exchange rate to take out the fluctuation in the exchange rate. And from gross profit perspective, actually, our gross profit reached around RMB 1.4 billion and our gross profit margin on a consolidated basis reached 37%, which compared with last year's only the same period last year is only 36.1%. I think that bearing in mind, we consolidated about the length and which is loss-making at this moment. So actually, we are very happy that we were able -- we're still able to achieve a better margin, gross profit margin compared with last year, mainly because we have a higher percentage of high value-added services in our overall revenue contribution. And also, we continue to maintain a very high utilization ratio to capacities and be able to further exclude the operation leverage. And from adjusted net profit perspective, as you can see, that is the first time first for the 6 months, our adjusted net cost is actually went beyond RMB 1 billion. And also on adjusted net profit margin also remained very stable around 27.8%. Next slide. And I want to -- because we consolidated BioDlink link starting from Q2 this year. So I want to explain to every investor on a stand-alone basis, what does XDC financial profile look like. If you look the revenue on a stand-alone basis, still, we achieved -- on a constant exchange rate basis, we achieved a year-over-year period-over-period growth of around 36%. And our XDC stand-alone revenue reached around RMB 3.6 billion. And if you look from gross profit and adjusted net profit perspective, our gross profit margin increased from 36% to 7.6%, and gross profit itself reached around RMB 1.4 billion and adjusted net profit reached more than RMB 1 billion as well. Next slide. Yes. And if you look at the revenue breakdown, based on the project status, our pre-IND and the post-IND revenue breakdown remain pretty much the same compared with on 2025 and 2024. I think this particular worth highlighting because if you look, our scale continues to grow and a lot of programs in our portfolio actually moved forward smoothly and which the richer later stage. And that's very important, right? We will able choose continue to secure early-stage projects, which will help us to maintain the same growth momentum. And this breakdown actually tells you that despite we grow our site growth much bigger and the pre-IND programs stay the same in terms of revenue contribution, which provides a very strong solid foundation for continuous fast growth going forward. And if you look at the breakdown by regions. Still United States remains the main growth engine. And in first half this year, it accounts for 46% if you compare with 2025 or 2024, you may say that it's jumped a little bit, but I think that's mainly because -- mainly because of the depreciation of U.S. dollars in terms of the -- on a constant exchange basis, it doesn't change that much. And one more thing about Europe, I think that -- the percentage contribution from Europe actually increase a little bit. I think that it doesn't -- you can't do the conclusion that you are catching up very quickly. It's just because the size is more volatilities is higher compared with other regions. And then you did in the first half, we signed a couple of larger contracts than European companies, that's what the contribution for Europe increased a bit. Next slide. Yes this slide once again highlights the margin trends. As I mentioned before, if you look from both the first half and full year basis, our gross profit margin increased by 1% if you compare with 2025 full year. And our adjusted net profit margin increased by 1.6%, thanks for the continuous high utilization ratio and also high proportion on value-added -- high value-added services and also for mutant control on the SG&A. And on a stand-alone basis to maintain the same trend and you can see that our gross profit margin and adjusted net profit margin also increased quite a bit despite our size growth leader. And here, I want to emphasize that on a full year basis, we expect that you will be able to maintain the guidance we gave previously. From the revenue perspective on a stand-alone basis, we think that the FCC should be able to achieve at least 35% growth on a constant exchange rate basis and on a consolidated basis that we will be able to achieve around 30% on a constant exchange rate basis. And in terms of margin profile, I think that in the second half because we have the Singapore facilities ramping up. And also, we have the lot impact on the about the link. I think that just will have a certain negative impact on our margin profile, but we hope that we can manage to maintain the same gross profit margin compared with last year, but I expect still August right now. So I guess that you will have a better picture by the end of the year. Nevertheless, I think the margins should even it may have certain fluctuations that shouldn't be -- it should grow beyond like 1% more or less side. Next slide. And I also want to talk about the -- our backlog. As you can see that besides -- we achieved a very good financial performance, our backlog actually grows very significantly as well. If you look at the -- compared with the same period last year, our backlog without considering the milestone -- potential milestone income. So our backlog actually reached more than USD 2 billion, which represents a 50.4% period-over-period growth compared with end of June last year. And then we also have around USD 150 million at income milestone income. If you add back we will be able to achieve 62% backlog growth period-over-period. Amount of, I think, particularly, I want to highlight is that just the first time we were able to have around USD 120 million in the contribution from commercial backdrop. Like I -- when we sat year-over-year, we believe that we will gradually transition into a company with end-stage revenues and just the beginning. As you can see that this year, we started to record backlog from commercial stage. And I think that we have more programs are moving to a later stage, we should be able to see larger and larger numbers on commercial stage backlog. Next slide. Just that this just captured the our manufacturing -- the status of manufacturing facilities, as you can see that from the left-hand side. You can see that almost every year, we will have a new facility up and running. In particular, this year, of course, is Singapore. As you can see from #8 #9, #10. #8, #9, we just -- by the end of month, we will have BMI and BPI operational-ready and released -- and also in -- by the end -- before the end of this year, we'll have BCM3 and BP4 up and running. So the story we told you guys we are actually executing those stories gradually in a solid pace. And I think we are very confident that with the outlook and what we will achieve a way ahead. Next slide. Yes, those are the financials and the CapEx and then I will transfer back to Jimmy about talk about the outlook.

So I will close by sharing tumors slides 1 in terms of the update on the overall commercial one, which obviously is important part of both engine in the next few years. So this is a similar slide that we shared earlier this year at the 2025 year-end earnings. So we continue to see modality advance from ADCs to new modalities, including XDCs to come to commercial in the next few years. And to support that growth, we continue to expand our own capacity, including acquisition of the BioDlink and also including the release of the Singapore site in August this year. We also continue to invest both in China as well as outside of China. We have mentioned and we'll continue to evaluate investment decision for the U.S. and also continue to potential opportunities in Europe. In terms of the PPQs and BLAs, we mentioned earlier that we now have completed 27 PPQ component execution. And in 2026, we will actually anticipate to see 4 to 6 BLA submissions. So that will continue in the next few years by 2028. We are looking at over 60 PPQ component execution and around 12 to 15 BLA submissions. So the continued advancement of the newer modalities as well as also start of the commercial manufacturing and more and more programs get into commercial stage, give us the confidence that by 2030, we will be able to achieve 20% revenue each from the new XDC modality as well as from the commercial manufacturing. So that's on the commercial side in terms of the outlook and the next slide basically summarizes the message that we shared earlier this year. We continue to see our compounded growth rate staying between 30% to 35% in the next few years, basically outpacing the industry growth and to -- enable and to achieve that, we need to have a full synergy growth for DSDN commercial manufacturing. So that, we continue to innovate to help clients to develop the best-in-class ADCs and XDCs and on the B, obviously, help clients to move the assets into first in human at the fastest possible speed in high quality. For end, we continue to capture opportunities down the funnel. We need to be right first time for every single molecule that goes into BLA and inspection. And we'll continue to expand our capacity to support the ADCs as well as the XDC modalities moving into commercial stage. With that, I'd like to end the presentation in the next slide basically show some of the key take-home messages to share with investors. Next slide. Basically, we see the industry maintaining a very strong momentum. And we are glad that the BioDlink acquisition has completed and integration has gone quite smoothly since the acquisition. We see more and more innovation and advancement of the new type of Bio conjugates including bispecific dual pad, but also AOCs, APCs. And as mentioned, we see the linker payload business growth outpacing the overall XDC growth starting in 2026. And as also noted, backlog continues to be strong and we'll also make it a priority to increase backlog for Singapore facilities. And also the CMO commercial business ramp up continue to maintain a very strong momentum. And we start to also see commercial orders coming into our backlog starting 2026. So those are the key takeaways for the earnings call. So that completes the management presentation, and we are open -- I'm happy to take questions, if you have.

[Operator Instructions] So the next question is coming from Austin Laurence. Laura, can you hear us? Yes.

Okay. First, congrats to management for these great results. I just have 2 quick questions. So you signed your first ever licensing deal with Endo Labs, which is an AI-empowered protein therapeutics company, right? Can you talk briefly about the potential for AI to help design biologics, in particular, for bioconjugates and whether I can broaden the project funnel For WuXi XDC. So that's my first question, the potential for AI. And my second question is, for the first time, you added a milestone backlog, your total backlog right? And as Jimmy mentioned, there's one more deal coming with a European biotech company, right? So can we touch a bit on the time frame for these milestone payments? And when can we expect the gross margin to improve from these IP income.

Yes. Thank you, Laurence, for the questions. On the milestone timing and the impact on margin, as you might be aware, the timing of the milestone payments are highly sort of unpredictable, if you will, because it's always project-specific and client specific in terms of when and how we might move the programs forward. So we are not adding any of those into our current management guidance. So if any of those happens, it will be basically a bonus upside to any guidance we provide. And then on the AI-enabling innovation, we do see that the industry is actively embracing AI to help improving efficiency, but also to help speed up innovation in many of the different modalities also from our country base as well. So in addition to some of the biotech activity, deploying AI, we also see some tech companies basically getting to the biotherapeutics field and actively basically introducing new potential assets, molecules into about coat space. So to that end, we have actually engaged and also started some of the services with such companies that actively exploring the use of AI for innovation.

And then the next question is coming from Goldman.

So my question is on the market share. I think we have a record high on iCMC projects at 51 first half. What do we estimate the market share for -- in terms of these new projects and also for the full year, do we have a sense roughly how many new projects we will get for this year and also for next year?

Yes. Thank you, Chris. I think in terms of the iCMCs, so we made a big jump in 2025, right? Remember, 2023, 2024, our iCMC signed was right around 50 for the 2 years and then 2026 -- 2025, sorry, 2025, we jump to 7. And this year, first half alone, we signed 51, so we see the momentum actually continue to be quite strong. For the full year, I think we will sign anticipating at least 80 another step-up from 2025. But it's not easy to predict exactly how many more it will be more than 2027 for sure. And sorry, what was the first question?

How about the market share do you estimate?

Okay. We are not calculating market share in terms of the exact percentage. But in terms of the iCMCs, I think we continue to see probably 40 plus/minus percentage there a few different metrics to look at, for example, we mentioned that we have helped clients submitted 160 INDs cumulative. So globally, I think they are around 300 to 400 assets in the clinics. So that gives you some indication in terms of total market share in terms of active clinical stage programs but also the number of first in human trials, we also continue some health and cut some many more and more last year. It was close to 40. And this year, first half alone help summited 27. So that's another indicated that we will closely monitor each year and this half year. So not in terms of the exact number of market share, but I think we will continue to -- we believe that we continue to expand our market share and then probably will be -- we'll be able to provide a more quantitative update at the year end and timing.

And then the next question you might please Tony from Mari Tony.

Okay. Perfect. Yes. Yes. Congratulations on a very strong first half print. Just a couple from me. So you guys have a site at the Hefe, right, which you mentioned a couple of times for peptide and oligo synthesis. So I just want to ask you what is the consideration of building this in-house versus subcontracting to your sister company, WuXi AdTech, they are obviously quite strong in this space, right? So that's my first question. The second one is on Slide #15. Jimmy has been talking about this slide for the last few presentations. I noticed the AOC and the APC grew very quickly compared to 6 months ago, but DAC declined quite a bit from 32% to 24%. Just want to get some color about what's behind the drop in DAC.

DAC dropping to the out of the 3,100 conjugate the team made in the first half, is that right?