【Company Research】WuXi AppTec (603259 CH) – Strong growth outlook in 2021 and beyond

• Positive profit alert for 2020. WuXi AppTec announced positive profit alert that its attributable net profit in 2020 was estimated up 50-60% YoY to RMB2,782-2,967mn, and attributable recurring net profit increased 20-25% YoY to RMB2,297-2,393mn, while its adjusted Non-IFRS net profit rallied 45-50% YoY to RMB3,491-3,611mn. While the US-based laboratory services and clinical CRO services were negatively impacted by the COVID pandemic, the Company’s China-based laboratory services and CDMO services continued strong growth momentum. We estimate the Company’s revenue to grow 33% YoY in 2H20E, accelerating from 23% YoY growth in 1H20. As of end-2020, WuXi AppTec added over 1,300 new customers and provided services to a wide range of over 4,200 active customers, including all the top 20 big pharma companies worldwide.

 

• Phenomenal growth in success-based project numbers. In 2020, WuXi AppTec enabled 33 IND filings and 30 CTAs among its success-based projects. As of end-2020, the Company had 193 ongoing success-based projects, including 2 projects in Phase III, 9 projects in Phase II and 60 projects in Phase I. In addition, WuXi AppTec developed COVID-19 small molecule drug discovery platform very early and enabled 60+ customers globally, which became a new growth driver for the Company’s China-based laboratory services.

 

• CDMO revenue grew fast thanks to follow-the-molecule strategy. WuXi AppTec added 575 new molecules to its CDMO pipeline in 2020 and its total CDMO pipeline expanded to over 1,200 active projects, including 28 commercial projects. The Company’s cell and gene therapy CTDMO backlog also surged 35% QoQ in 3Q20, with 2-3 projects to file BLA in 2021.

 

• Expect solid recovery in clinical CRO services in 2021E. Despite the impact of COVID pandemic on clinical CRO services in 2020, the Company registered 45% YoY growth in its SMO backlog in 9M20 and c. 100% YoY growth in its CDS backlog during the same period. With the ease of the pandemic, we expect clinical CRO revenue to see strong recovery in 2021E.

 

• Lifted DCF-based TP from RMB139.05 to RMB218.73 to reflect strong growth outlook. We revised up the adjusted Non-IFRS net profit of FY20E/21E/22E by 9%/10%/13%, and forecast the adjusted Non-IFRS net profit to grow 47%/33%/35% YoY in FY20E/21E/22E respectively. Moreover, WuXi AppTec’s diversified investment portfolio will bring significant investment gains over the long term.