Wuxi Apptec Co Unsp/Adr

Hi, good morning, everyone. For those who are based in China and Hong Kong, and good evening for those based in the U.S. This is the 2025 Wuxi Aptec results call. My name is Lawrence Tam. I'm a China healthcare analyst at Morgan Stanley. We're honored today to have the full team from Wuxi Aptec to present the 2025 results in English. The format of the call will be two parts. First, I'll let management go through their prepared remarks. You can refer to the slides on the webcast. And then the second part will be a Q&A session. To ask questions, simply open the link that was sent to you during the registration. And you can type your questions into the Q&A box at the bottom of the window. You can also send me your questions at the following email, lawrence, L-A-U-R-E-N-C-E, .T-A-M, at morgansandlee.com. And I'll repeat your questions to management. With that, let me now pass it on to the head of IR at Wuxi App Tech, Ms. Tang Rui-Chiang, to introduce management and to start the prepared remarks. I'll pass it on to you, Rui-Chiang.

Okay. Thank you, Lawrence. Welcome, everyone, to Wuxi App Tech's 2025 Annual Results Conference Call. We released our financial results last night and have posted the latest on our company website. During today's call, we will make forward-looking statements. Although we believe that our predictions are reasonable, future events are uncertain, and our forward-looking statements may turn out to be incorrect. Accordingly, you are strongly cautioned that reliance on any forward-looking statements involves known and unknown risks and uncertainties. In addition, to supplement the company's consolidated financial statements presented in accordance with IFRS, We provide adjusted IFRS financial data. We believe the adjusted financial measures are useful for understanding and assessing our core business performance. And we believe that investors may benefit from referring to these adjusted financial measures by eliminating the impact of certain unusual and non-recurring items that are not indicative of the performance of our core business. However, these adjusted measures are not intended to be considered in isolation. or as a substitute for the financial information under IFRS. All IP rights and other rights pertaining to the information and materials presented are owned by Wu Shabtac. Audio recording, video recording, or disclosure of such materials by any means without the prior consent of Wu Shabtac is prohibited. This call does not intend to provide a complete statement of relevant matters. For relevant information, please refer to the company's disclosure documents, and information on Shanghai Stock Exchange, Hong Kong Stock Exchange, and the company's website. As usual, in today's call, there will be Q&A session after our presentation. Please kindly share with us your name and institution before asking questions. With that, please allow me to introduce our co-CEO, Dr. Mingzhang Chen, to present our 2025 annual results. Mingzhang, please.

Thanks, Rika. Good morning and good evening. Thank you for joining our 2025 Annual Earnings Call. We will begin on slide number five. In 2025, we tapped and beat full-year guidance and achieved a record performance in both revenue and the profit. Total revenue achieved 45.46 billion RMB. Notably, revenue from continuing operations grew 21.4% year-over-year to reach 43.42 billion RMB. Our adjusted non-IFRS net profit grew 41.3% year-over-year to 14.96 billion RMB. With non-IFRS net profit margin further improved 5.9 percentage points year over year to 32.9%. Next slide, please. The company remains focused on enhancing our core capabilities and the capacity to better meet customer demand. With continuous capacity expansion by end of 2025, our backlog for continuing operations reached 58 billion RMB. growing 28.8% year over year. This does not include business operations we sold or discontinued, such as clinical research services. Next slide, please. Slide seven shows our diversified revenue streams of continuing operations. Based on customer headquarters, revenue generated from U.S. market grew 34.3% year over year. Japan, Korea, and other regions grew 4.1%. Europe and China saw some decline, mainly due to fluctuations in project delivery timing. This diversified revenue structure reflects our global footprint and the capabilities to enable healthcare innovations. We believe it will continue to underpin the stability and the resilience of our performance. Slide eight, please. So as an enabler of innovation and trusted partner and a contributor to the global pharmaceutical and the life science industry, the company continues to drive sustainability, embrace initiatives with sustained recognition by leading global ratings. In 2025, we achieved our first MSCI AAA and CDP climate change A ratings. maintained CDP water security and the Ecovirus gold ratings and were included in the SMP global sustainability yearbook for the fourth consecutive year. And meanwhile our near-term greenhouse gas emissions reduction targets have been successfully validated by SBTI. As a committed the UNGC participant and the PSCI supplier partner, we actively embrace global initiatives and are dedicated to integrating sustainability into our business strategy and operations. Next slide, please. For over two decades, WCF Tech has remained steadfast in our commitment to safeguarding customers' IP and adhering to the highest standards for quality and compliance. In 2025, we completed 741 quality audits and inspections from global customers, regulatory authorities, and independent third parties, as well as 60 information security audits by global customers. This means, on average, we welcome three quality audits per day and over one information security audit per week, all with no critical findings. Currently, 20 of our main sites are ISO and IEC 27001 certified covering all main sites in China. IP is the lifeline for both our company and our customers. We uphold integrity as our foundation and enforce zero tolerance policy against any infringement. This is our core value and our highest responsibility and commitment to our customers. Now, let's move on to the segment of performance. So, please turn to page nine. WC Chemistry's CRVMO business model drives continuous growth. In 2025, WC Chemistry revenue grew 25.5% year-over-year to 36.47 billion RMB, benefiting from continued process optimization and enhanced capacity efficiency driven by the growth of late-stage clinical and commercial products. Our adjusted now IFRS gross profit margin steadily improved 5.9 percentage points year-over-year, reaching 52.3%. Our small molecule drug discovery, our business, continues to generate downstream opportunities. In 2025, we have successfully synthesized and delivered over 420,000 new compounds to our customers. And meanwhile, 310 molecules were converted from R to D in 2022. As we continue to strengthen the capabilities of our integrated CRDMO platform, we consistently enhance the internal conversion of molecules at different stages. Our small molecule DNM business remains strong. and the small molecule CDM pipeline continued to expand. In 2025, small molecule DNM business revenue grew 11.4% year-over-year to 19.92 billion RMB. Meanwhile, the company continued to build small molecule capacity. In 2025, our Changzhou, Haixing, and the Jinshan API sites all successfully passed FDA on-site inspections with no single observation. By year end, total reactor volume of small molecule APIs reached over 4,000 cubic meters. Wichita Heights, our pneumatologist business, sustains rapid growth with a sequential ramp-up of new capacity released in 2024 and 2025. Thais revenue almost doubled to reach 11.37 billion RMB in 2025. As of year end, Thais backlog grew 20.2% year-over-year. Thais D&M customers increased 25% year-over-year. And its number of molecules increased 45% year-over-year. In September 2025, we completed testing peptide capacity construction ahead of schedule. The company's total reactive volume of solid-phase peptide synthesizer has reached over 100,000 liters. Next page, please. So, driven by following the molecule and win the molecule strategies, WC Chemistry's small molecule CRDM pipeline efficiently converts and captures high-quality molecules and delivering sustained business growth. This reflects our customers' strong trust in our technical capabilities, our service efficiency, and our quality system. In our stage, we delivered more than 420,000 new compounds in 2025. representing a significant scale. At the same time, the complexity of these molecules continue to increase, demonstrating the sustained demand from early stage R&D customers for high quality services. Building on this strong foundation, we continue to enhance the synergy between our R and the D capabilities by strengthening the conversion of molecules from R to D The new compound synthesizing R stage served as a continuous funnel driving downstream demand for our DNM services. Moving to the DNM stage, we added 839 molecules to our pipeline in 2025 with 310 of them converted from R to B. As of year end, our small molecule DNM pipeline reached 3,452 molecules, including 53 commercial projects, 91 in phase three, 377 in phase two, and 2,901 in phase one and the preclinical. Notably, commercial and the phase three projects increased by 22. As our late-stage pipeline grows, the complexity and the quality of the molecules continue to grow. This depends our collaboration with customers and the least solid foundations for sustained long-term growth. The next page, please. Our Tides business has maintained a rapid growth over the past few years. So in 2025, Tides revenue grew a strong 96% year over year. to reach 11.37 billion RMB, nearly doubled. We have been continuously enhancing our capabilities and capacity to better meet customer demand. Now I will hand over to our co-CEO, Dr. Steve Yang, to talk about Wuxi testing and Wuxi biology. Steve, please.

Thanks, Ming Zhang. Please turn to slide number 14. In 2025, Wuxi testing revenue returned to positive growth, increasing 4.7% year-over-year to 4.04 billion RMB, of which revenue from drug safety evaluation service grew 4.6% year-over-year, maintaining its leadership position in Asia Pacific. Adjusting non-IFRS gross profit margin declined year over year as the impact of market pricing were gradually reflected in revenue through backlog conversion. However, with our differentiated capabilities and enhanced operation management, margins continue to improve sequentially quarter over quarter. We actively enable customers in global licensing deals. supporting nearly 40% of the successful out licensing projects from Chinese customers since 2012, 2022. Our new modality business continue to expand with revenue contributions exceeding 30% in 2025, maintaining a leading position in multiple areas. Meanwhile, we continue to advance automation. Our DMPK team launched a proprietary all-in-one compound identification software solution improved efficiency by 80% in spectral interpretation and metabolite identification for nucleic acid and peptide test articles. Finally, in 2025, our Suzhou and Shanghai facilities successfully passed multiple regulatory inspections by FDA, by OECD, NMPA, and the PMDA. This underscores the high quality of our GLP operations and our quality systems. Let's turn to slide number 15, please. Wuxi biology follows the science, strategically builds differentiated capabilities in emerging areas, and we actively expand our global customer outreach. This allows us to efficiently generate downstream opportunities for our CRDMO model, continuously contributing more than 20% of our new customers. We efficiently enable global customers through our integrated in vitro and in vivo drug discovery capabilities for biology, the cross-regional collaboration, and to end point solutions in emerging areas. Washi biology revenue resumed the positive growth in 2025, growing 5.2% year over year to 2.68 billion RMB. The adjusted non-IRFI gross profit margin was 36.9%, down 1.9% each point, reflecting market pricing dynamics. We closely follow market conditions with a flexible pricing strategy, maximize our value in generating downstream opportunities. Our revenue growth was driven by advancement in our comprehensive in vitro screening platform and enhanced in vivo pharmacology capabilities. Our non-oncology in vivo business maintained a competitive edge serving as a key growth contributor to Wuxi Biology. Our new modality business continue the momentum with the revenue contribution exceeding 30% in 2025, supported by rapid new customer expansion in multiple areas. Now, I would like to turn the call to our CFO, Florence, to discuss our financial performance. Florence, please.

Thank you, Steve. Let's turn to slide 17. We would like to recap on the company's financials. In 2025, we beat our full-year guidance and achieved the record high performance in revenue, profit, and the cash flow, all aspects. Thanks to the visibility provided by our CRDMO business model, we proactively planned our capacity and the capabilities. As new capacity ramp up deficiently quarter over quarter, we timely supported the growing demand from late stage clinical and commercial projects. Meanwhile, we continue to drive quality growth, strengthen our technological expertise, and improve operational efficiency. In 2025, our adjusted non-I5 gross profit reached 21.89 billion RMB. adjusted NIFI's gross profit margin expanded to 48.2%, up 6.6 percentage points year over year. Adjusted NIFI's net profit grew 41.3% to 14.96 billion. Correspondingly, adjusted NIFI's net profit margin improved by 5.9% points to reach 32.9%. Net profit after deducting non-recurring items grew 32.6% to $13.24 billion, and net profit attributable to the owners of the company surged 102.6% to $19.15 billion. Building on our robust business growth, we sharpened our focus on the CRDMO core business, and continue to enhance our investment management capabilities. This resulted in pre-tax investment gains exceeding 8 billion RMB in 2025, further boosting our net profit attributable to the owners of the company. Consequently, our diluted earnings per share reached 6.61 RMB, more than doubling year over year. Please turn to slide 18. With the standard business growth, particularly the rapid increase in late-stage clinical and commercial projects, combined with enhanced operational efficiency and financial management, our 2025 adjusted operating cash flow reached a record high of 16.67 billion, growing 39.1% year-over-year. This fully demonstrates the sustainable momentum driven by our high-quality molecules and projects. We continue to actively advance our global capacity expansion as planned with capex payment of $5.54 billion in 2025. Now, I'd like to hand over to Mingzhang to share the company outlook. Mingzhang, please.

Okay. Please turn to slide 20. Okay. We remain focused on our unique integrated CRDMO core business, accelerating the growth of our global capabilities and capacity. We provide highly efficient and exceptional services to our customers, benefiting patients worldwide and driving long-term growth. We will also drive the O in our CRDMO model operations. By driving optimized management and operations, we aim to continuously improve efficiency and strengthen organizational resilience to navigate dynamic market conditions. With customers' ongoing demand for enabling services, our CRDMO business model and the management execution, the company is confident to sustain rapid business growth We expect total revenue to reach 51.3 to 53 billion RMB in 2026, with continuing operations revenue growing 18 to 22% year over year. By continuously driving quality growth, realizing scale efficiency, and enhancing operational excellence, while proactively managing new capacity ramp up, and exchange rate challenges. We are confident in maintaining a stable and resilient adjusted non-IFRS net profit margin in 2026. Finally, a capex for 2026 is expected to reach 6.5 to 7.5 billion RMB. Along with business growth and efficiency improvements, we expect adjusted free cash flow to reach 10.5 to 11.5 billion RMB. Next page please. While accelerating the growth of our global capacity and capabilities, we remain committed to rewarding shareholders and actively upholding the company's values. The board proposes a cash dividend distribution plan totaling a record 5.7 billion RMB in 2026. Specifically, we plan to maintain the 30% annual cash dividend payout ratio expecting to distribute 2025 dividend of 4.71 billion RMB while continuing our interim dividend plan of 1 billion RMB in 2026. To continuously attract and retain top talents, we propose the 2026 H-Share Resentive Trust Plan. Under this plan, no more than 1.5 billion Hong Kong dollar worth of H-Shares will be granted if 2026 revenue reaches 51.3 billion RMB. An additional $1 billion worth of H shares will be granted if revenue reaches 53.0 billion RMB or above. This aims to strengthen management resilience and align our team for long-term shared growth. Importantly, all underlying H shares will be purchased in the open market at prevailing market prices. with no dilution to existing shareholders. Thanks for your attention. And we are now open for questions.

Thanks a lot, Drs. Chen and Yang. Lawrence and also Ray Chow. We will now enter the Q&A session. Once again, I would like to remind investors that if you would like to ask a question, please type into the Q&A box on your screen within the window. You can also send me your questions at the following email. Lawrence, L-A-U-R-E-N-C-E dot T-A-M at Morgan Stanley dot com. We apologize if we couldn't get to all of your questions within this call because we have a lot of questions in the queue. So let me start off with the first question. First of all, let me congratulate management and a very positive 2026 guidance. Obviously, this year there's a lot of uncertainty in the markets and also we have experienced a lot of volatility. Despite that, the company delivered a very positive 2025 and a continuous operations revenue growth range expected For 2026, 18 to 22%, which means that the midpoint is 20% growth in 2026 for continuous operations, which gives investors a lot of visibility. One of the key concerns this year from investors for the CXO industry is the exchange rate. Year to date, the U.S. dollar has depreciated against the RMB. So, the first question is, in the context of this renewed guidance, how does management think about the impact of currency exchange? And what is your outlook or guidance for each of the three business units?

Thanks. Yeah, thanks. We do consider the FX movement and the challenges. So it is – I also would like to appreciate everyone recognize even with not only the FX, But with all the complex and the volatility in the macro environment, we are navigating, every company navigating today, we still provide a very clear and a narrow guidance range of our total revenue, which is only about like 3% of our top line at the beginning of the year, which is pretty consistent with our historical practice. Basically, that reflects the strong visibility in our CI demo business model and our confidence in our execution capabilities, same as the management capabilities on the FX movement as well.

Thanks a lot, Rachel. So the second question is a little bit on geopolitics. Obviously, the situation in the Middle East has escalated in recent weeks, and investors are worried about the rise in oil prices and the impact on raw material costs. Your margins improved significantly last year, and this year, guidance is that margins would be stable. How would you think about the impact of geopolitics and oil prices on your margins going forward?

Yeah, I will comment on the cost fluctuations could be impacted. So, first of all, our global operation is running smoothly as usual. We acknowledge there are potential risks to certain upstream raw material costs, but it takes time to transmit through the broader supply chain. We haven't seen any direct or quantifiable impact on our operations or costs. but we will closely monitor the situation and the market dynamics as everyone did. We have matured and diversified the procurement network in place in the past 25 years. On top of that, we constantly optimize our manufacturing process, driving operational efficiency, which helps us focus on the certainty of meeting the customer demands we need and remain committed to deliver exceptional services.

Thanks, Lawrence. So we have, so we get to sell side and investor questions now. So I will first start with two questions from Goldman Sachs . So his first question is, the company continued to be highly committed to Tides CapEx. So he would like to understand a bit more on the pipeline behind the CapEx budget beyond injectable peptides, which has been a key driver in the past few years. and what would be the next key modalities that could potentially be the new focus, for example, siRNA, antisense, oligos, oral peptides, or any new modalities that biopharma is thinking about at the early stages.

Well, so right now, the modalities, there are many modalities, you know, it's a combination. So there's no single modality that says, okay, replace all. So we have small molecules, you know, we have peptide, and then we have oligos, and then we have, you know, all kinds of conjugates. So, but currently, you know, the demand, the demand for, for peptide cells is so high. So we're continuing to build the capacity and to meet the market demand for the peptide. At the same time, we're also seeing oligonucleotide is growing. And although the market is still small, but we see that there are many, many molecules in the pipeline. And also, you know, it's coming, it's going from from a rare disease now to a very broad to general disease. So the growth will be fast. And also, the small molecule, you know, small molecule, now the molecule become more and more complex. So, to manufacture large-scale, very complex molecule needed, you know, very technical capabilities as well as, you know, manufacturing capacities to meet the market demand. So, we are doing all this.

Thanks, Dr. Chen. So, Xi's next question is, there's been some debate on what will be the impact of pharma's announced big CapEx on building internal capacity, particularly in the U.S. What is Wuji Aptec's view on that? Have you sensed any change on client outsourcing strategy in the past six to 12 months?

Well, so, you know, so in the pharmaceutical industry, historically, all the pharmaceutical, you know, all the ATIs, drug products are manufactured internally. And then, you know, some of the work is done by the CMO, CDMO. And so this has been, you know, has a long history. So it's nothing new that, you know, the large pharmacies But, you know, we just committed to continuously to improve our capabilities and to invest in capacities and, you know, meet the cost, provide the best service and meet the customer needs.

Thanks, Dr. Chen. So, the next few questions are coming from Michael Law of CLSA. His first question is, can Wuxi Apptech give us some color on the current utilization rate of the company's 4,000 cubic meter small molecule API capacity? And also, do you still have any plan to expand capacity in this area this year?

Yes. Our current capacity is highly, highly utilized. And, you know, we have the, well, we just, you know, because we don't usually talk about the capacity for the, you know, we are building the capacity for small molecules. But actually, you know, we have the land and we continuously build the small molecule capacities to meet the demand. So we grow double digit over 11% last year to, you know, to almost 20 billion RMB for the small molecule DNM. So that needs a lot of capacity. And this year, we expect accelerated growing from the small molecule DNM. So that will be more capacity. So we continuously to build a new capacity for small molecule. And if you go to our testing site, We have the land and we continue to build new plants all the time, yeah.

Thank you. And his next question is beyond obesity and diabetes-related projects, can management highlight any pipeline products or areas that may become meaningful contributors to revenue growth in the next three to five years?

Yeah, so our business model is the CDMO, the CRDMO business model. So we have a very broad, we have a very broad pipeline. So for example, currently our D&M pipeline for small molecule, we have more than 3,000 molecules. And so we continuously, you know, as a funnel, we continuously have the project moving to the late phase and the commercial projects. And many of those products are very high quality molecules. You know, clearly, GLP-1 is the, right now, has the most demand in terms of volume, clearly. But also, you know, we have quite a few. very promising high-quality molecules into the late phase and the commercial stage. For example, you know, the, you know, PCSK9 molecule, autoimmune molecule, you know, pain and neuroscience. So we have a, you know, a number of that, you know, just, you know, the number I gave in the investor day last year. uh you know the 2024 uh the drug counter uh you know named uh top 10 molecules and we work on eight of them again just a few days ago they published 2025 top 10 molecules and we work on seven of them and the best selling uh small molecules and we work uh the top 10 we work we work on four of them so We work on many of the, you know, the high quality as a big, you know, large volume molecules. But of course, you know, right now, GLP-1 is still the number one, no doubt about that.

Thank you. His next question is, can management share how you're thinking about CapEx allocation this year? In particular, which business areas or capacity building are likely to be the key focus going forward?

Yeah, I think the CapEx spending really reflects our business model and our global expansion strategy. So a majority of our capacity spending will be put on the CDMO capacity expansion because our business generates more and more downstream DLM targets. And also we accelerating our global expansion in US, Euro, and also the Middle East in future. But at the same time, we are also expanding the capacity for both small molecule and the new modalities in China as well.

Okay. Thank you, Florence. His last question is, given the recent volatility in the Middle East, has the company's strategic approach to the region changed in any way? And also, which types of business or operations, if any, do you see as potentially suitable for the Middle East over time?

Yeah, our global capacity and capability building is our long-term strategy. Clearly, that will continue. And we have announced a memorandum of understanding with government agencies with Saudi Arabia late last year. And our strategic initiative in Saudi Arabia continue to proceed. We are engaging with relevant stakeholders and develop tactical plans for the next step so that continue. We, our CIDMO business model and our globalization of our capacity and capability is really the key to our continued growth, and we will continue to build the global capacities. In terms of what suitable area in Saudi Arabia, we are going through a deep dive with the advisory of local strategic advisory firms to understand local regulatory requirement and what are the suitable capabilities we should localize Based on our preliminary feedback, clearly, there are lots of opportunities. We will likely start in the discovery space and then gradually expand to other part of our global platform.

Thanks, Dr. Yang. Next, we have three questions coming from CICC's . First question is, what is the current capacity utilization rate of the company's solid-phase peptide capacity, which now exceeds 100,000 liters? What level of utilization does the company expect to reach in 2026? Are there any plans for further capacity expansion?

Yes. The peptide capacity currently is highly used. So as a result, actually, we just started the two new tights building, so both peptide and oligo. We just started two tights building construction in our Taiqing site. In the meantime, we also did a new plant in Singapore for tides. So, you know, before, yes, we have our capacities highly utilized right now, and we are building new capacities to meet the growing demand.

Thank you, Dr. Chen. Our second question is, what is the progress of U.S. and Singapore sites? And is it currently in line with expectations? How will these new facilities coordinate with the company's domestic capacity? And has there been any change to the expected timeline for commencing operations?

Both projects are on time, on schedule, and on budget. So, our U.S. plant, which is the in Middletown, Delaware is for drug product. So it will have both oral solid dosage and injectables once completed, you know, operational. So Q4 this year, we're going to start the operation of the oral solid dosage and a year later, Q4 next year, we're going to start the injectable business. And this U.S., yeah, this is the U.S. plant site. For the Singapore site, it's also on schedule and on budget. And the first plant will be operational next year, 27. And that is for API. So this way, then, we will have, you know, due supply chain for the customers. So they can either make in China or make outside China, which is Singapore for API. The drug product U.S. side is mainly for the U.S., North American market customers. And we also have a drug product facility in Switzerland, which is mainly for the European market.

Thanks, Dr. Chen. Her last question is, the company has seen a significant increase in inventory. This is mainly related to stocking for large orders. When are the corresponding orders for these inventories expected to be recognized as revenue?

Yes. I think this truly reflects our business model. Our inventory is being built based on the orders in hand. At the same time, as we have the capabilities to capture the high-quality molecules, which is more complex and takes longer manufacturing process. So that's why the imagery growth is higher than the revenue growth. Actually, I think that's a further validation of the high-quality growth trajectory of our business.

Thanks, Florence. So, next we'll go back to from Goldman Sachs. He has a question on AI. So, in the past two months, US CRO company share prices have been hit hard by concerns on AI and how that could pose competitive pressure on pricing or volume for lab services and clinical services. What is Wuxi App Tech's view on this?

So, first of all, our biology and testing business remain robust, both in terms of the return to positive growth as we reported and also our outlook for 2026. We actually believe AI under the, in combination with human intelligence, could be a huge enabler, not only for our industry, but specifically for our company, and help us to increase efficiency. At the same time, increase our ability to anticipate and forecast the future in terms of customer need and in terms of capacity utilization. This is an area we have invested heavily in terms of ability to using operational data to make our animal room scheduling, study scheduling, reactor cleaning, as well as other aspects of work. become more efficient. The example we cited, you know, during the presentation on spectral resolution and interpretation for our DMPK team is a good sign. That situation is obviously very different from, you know, as we have seen in other sectors, such as in enterprise software. Secondly, we do believe our web lab capabilities to generate massive data and with high quality and consistency is actually very important for companies who are interested to build a new model and algorithms. to increase their prediction capabilities. And we had an opportunity to work with many leading companies in this space. And so, while they may have models that have the potential to generate a new hypothesis, at this stage, most of those models require high-quality data, and we are uniquely positioned to provide those data So this is actually a driver to more business for our biology and the testing business. And finally, we believe for our CRDM model with more advancement in ability to unlock either target space or come with new hypothesis to design molecules, it will only accelerate the flow of new ideas into project start. And that will ultimately benefit the funnel, the CIDMO funnel, and in a world where research and discovery become even more globalized and decentralized.

Thanks, Dr. Yang. So, now we have two questions coming from Chen Chen of UBS. First, the US FDA has announced that it plans to drop the standard requirement of two phase three or pivotal trials. Instead, the FDA's default position will be for one phase three trial for drug approvals. Do you think that it would accelerate drug approvals and benefit your new orders growth?

I will start and then invite Mingjia for additional comments. So first of all, any regulatory streamlined process will benefit from patient. Secondly, any acceleration in clinical development potentially will drive more demand and more timely demand for drug substance and drug product to supply clinical trial, and if that shortens clinical development time it will help actually accelerate the commercialization drive. So, you know, we think all of those initiatives shorten the time to patients will beneficial for our CRDMO model. Mingzhang, any additional comments?

No, I think that's sort of well said.

Thank you, Dr. Yang, Dr. Chan. So her next question is, one of your biggest clients announced a 10-year plan to invest $3 billion in expanding its oral dosage supply chain in China, focusing on oral GLP-1 manufacturing. And one of your peers, a CDMO, has received part of this investment, actually $200 million initially. Do you think you can also benefit from this multinational investment in China, and to what extent?

Well, so we all know that, you know, JLP1 drugs, no matter it's peptide or small molecule, has a huge demand. So has a huge demand. And so this announcement, this investment just further proved that, yes, you know, the demand is very high for this molecule. So because of the demand is very high and we are the major player in this field. So we will, we believe that we will benefit from the opportunities. I don't want to comment, I don't want to comment on the specific partnership or collaborations, but so I think But only, so the $3 billion investment right now is only $200 million economy. So, you know, where to spend the rest?

Yeah. Thanks, Dr. Chen. Okay. Sorry. Anything else?

Yeah. Yeah, that's it.

Yeah, thanks. Okay, great. So the next question comes from Huang Yang of JP Morgan. What is Wuxi Apptech's positioning in ORO small molecule GLP-1 CDMO business?

Well, we have a very, we have a double-digit growth last year. And we are accelerating the growth for the small molecule this year. And, you know, part of that is coming from the, part of the contribution of this growth is from the GLP-1 small molecule.

Okay. And his next question is, it seems that small molecule DNM business will have better growth in 2026 versus 2025. What would be the main drivers for that?

Well, it's just demand, high demand, because the drug will be approved this year, I believe. Yeah.

Okay. Next, we have two questions coming from an investor from Franklin Templeton. Hi, this is Harry from Franklin Templeton. Congrats on the robust performance. So, firstly, what is the revenue breakdown? What is the mix? Do you see and how do you see the geographical mix changing? Growth, obviously, is very strong in the U.S., while Europe and China are showing some recovery. So, let's first address this question.

Do you want to comment on the mix?

Oh, okay. Yeah. I think because we follow the customer, follow the market, and follow the science. So, the geographic revenue growth really demonstrate where the innovation come from, where the customer need our capabilities and the capacities. We do see the strong growth from across all the regions. And we believe that we can better deliver and execute in 2026.

Thanks, Mark. We see the PO growth across all the regions for 2025. So, we believe that's growth for all the regions in 2026. but particularly the growth strong last year in U.S. So that's why the percentage of the other regions relatively become smaller. But we expect the growth for all regions this year. And a small decline in China and Europe last year was mainly due to the delivery schedule of some large projects. But the growth momentum is there.

Yeah, I think that's basically proof we have very good condition everywhere, and we continue to see the strong growth in U.S., in China and Europe and all the other regions.

Okay, thanks. And his next question is on the Tides business. How do you see sustainability of its growth?

The largest product that we're making, you know, the forecast, the demand will continue to grow in the next many years by forecast, by market forecast. So the demand will continue to grow. Also, you know, we also are working on quite a few late phase, very promising projects, which potentially could be, you know, big products as well. But one more step back, we are CRDMO, so we have a very big pipeline, not only in small molecules, but also in peptides and also in oligonucleotides. We have a pipeline, and that pipeline continues to funnel the product into the late phase and the commercial products. And that's where our sustained long-term growth comes from.

Okay. And on oligonucleotides, what is WUSHI Aptek's differentiation from the other oligo CDMOs or manufacturers?

Yeah. So, like all other modalities, oligopeptide small molecule, if you can find a place that has quality, speed, cost, technical capability, and the capacity, you tell me. Yeah. Yeah. So I think it's same, so we, you know, we put all this together, and I think that that's our unique advantage.

And this last question is, can you give us some color on the general timeline that it takes for a new facility to be built and to bring, to contribute in a meaningful way to earnings?

So in China, we can do that in less than 12 months. from stock to fully operational.

Thanks. So we have two questions next coming from Nomura's . So firstly, how is the range of Tides Business? What is the range for the Tides Business gross margin? Do we calculate over 60%? Is this about the right range, and how should we think about the margin trend for tides?

Well, we don't, I don't believe we disclose the margin for tides. Florence, can you answer that?

Yeah, we don't disclose the specific, the margin, but I think the margin naturally reflects our capabilities, the capacities, and the value creation to the customers.

Okay, thanks. His next question is, what is the current Middle East, how is the current Middle East situation or conflict impacting the company's investment view in Saudi Arabia in the midterm?

As I already mentioned earlier, we don't see any near-term disturbance changing our long-term strategy. Our long-term strategy is strengthen CRDMO model, build global capacity wherever there is customer need, and we continue to engage with stakeholders in Saudi Arabia and proceed with evaluation of different localization options. continue to proceed based on our plan.

Thanks, Dr. Yang. So, next, we'll go to Citi's John Young. You initially guided continuing operations revenue to grow 10 to 15% for 2025, and you delivered 21% plus. Now, the same guidance for 2026, is a range of 18 to 22%. We also expect this guidance to be prudent and that you are confident to beat it.

Rather than calling our guidance prudent, I would view it as responsible to the market. And I appreciate you track our records. We are navigating a lot of the complex and volatile macro environments but we do have the confidence to execute the guidance we provided to the market. Of course, we will closely monitor and give the update timeline to all investors if we see any different situation.

Thank you, Florence. So next, we'll go back to the Chen's question. So, 2026 guidance has been very clear and exciting. He would like to understand the growth sustainability a bit more. What is the reasonable growth expectation beyond 2026 when the TIDES business will be slowing down given the large base and key product cycles? What could be the key growth driver beyond 2026?

I think we have the confidence to keep the sustainable growth. And basically we follow the molecule and the CRM model really give us the confidence. We will continuously capture the high quality molecule and follow the science. And we do have the capabilities and capacities to better serve our customers.

And going back to Nomura's , he has a follow-up question. Can management help us understand the competitive landscape of siRNA CRO space and the growth outlook? How much will it contribute to the current tight segment?

Yeah, so there are many players out there that has, you know, provided the CDMO service on the oligonucleotide pipe, specifically, I think, SRNA. And also, SRNA is a very, it has a very large percentage in our pipeline as well. Like I said, you know, we continue to focus on the service we provide. And we continue to focus on, you know, the quality service, the capacity, the speed, and and the competitive cost. So I think with our unique advantage, we just focus on providing the best service and, you know, win the competition in the end, just like we do in every modality in our business.

So next, we have an investor question. Wuxi App Tech has 42 plus billion RMB of backlog expected to be converted in 2026, but you're guiding for 51.3 to 53 billion RMB of total revenue. So, that means roughly an extra 9 to 11 billion will need to come from new orders signed and delivered within the year. In the current environment with great policy uncertainty, how confident are you in that year booking assumption, and has Q1 2026 order activity remained consistent with that trajectory?

Yeah, I think you're right. You notice, actually, In our total backlog, it is expected to convert, like 70% of our total backlog is expected to convert into the revenue in 2026, which is within the next 12 months. I think our ability to convert orders into revenue with speed and efficiency is actually reflects our strong execution capabilities across our whole organization. And if you compare with the historical number, actually the percentage is significantly improved, which also demonstrates we have more and more late-stage clinical and commercial projects on hand. That really enhanced the near-term visibility and the certainty of our growth trajectory. As I mentioned, we do have the confidence with all the efforts we are making. We do have the confidence to deliver our guidance and And of course, we always try to beat it, right? So I don't see that there is any big concern about the new orders coming in the commercial.

Okay, great. Thanks, Florence. So, last question, let me wrap up by touching a bit on geopolitics. We haven't really talked about the 1260-page list from the U.S. Pentagon. Obviously, it was released shortly in February and then withdrawn within like an hour, and a lot of investors looked at that list and saw Wuxi App Tech being on there together with a lot of big Chinese companies. Does the company have anything to say on that? Obviously, Sino-U.S. relations were moving in a positive direction in the months prior to that with obviously the Baosecure bill not naming the Wuxi companies. What is the company's view on relations between the two?

Yes, I'll take that question. So thank you. As you mentioned, we have seen that in February the list was put on and withdrew. So at this time, the final 1260-H list for 2026 has not been officially published. And there's no definitive timetable at this time. You know, as, you know, when this is going to publish, no one actually knows, and we won't make any prediction or speculations for the timing of the U.S. government's actions. At the same time, they are very confident that WSJF tech shall not be included in the 1260 issue list. we are a public traded company listed in Hong Kong and Shanghai with transparent corporate governance. The company is not owned or controlled by any government or affiliated with any government or a military organization. So at this moment, the company will continue to monitor the situation and take all necessary actions to correct any misinformation and clarify any misunderstandings. And in terms of biosecurity, as you mentioned, that we all know that the bill was passed as part of the NDAA at the end of last year. Since then, there's no recent development on the implementation, so we'll continue to monitor.

Thank you. Thank you very much. So we're coming up to the time limit, so let me pass it back to management to do concluding remarks.

All right. Thank you all for joining today's earnings call. So 2025 is the 25th anniversary of Wish App Tech. So for the past 25 years, Wish App Tech has been dedicated to lowering the barriers to R&D and advancing healthcare innovation worldwide. Entering 2026 with a sharpened focus on our core CRDMO strategy, we are accelerating the growth of our global capabilities and capacity further improving production and operational efficiency and delivering greater value for customers and shareholders. Staying true to our founding aspiration, we will remain committed to doing the right thing and do it right, enabling our partners to deliver life-saving therapies to patients in need and advancing our vision that every drug can be made and every disease can be treated. Thank you all.

Thank you very much to Wuxi AppTax Management and the IR team. This will conclude the presentation. Thank you all for joining.

Thank you. Thank you. Thank you.

Bye-bye. Bye.

Bye-bye.