Financial Data and Key Metrics Changes - In 2025, WuXi AppTec achieved total revenue of RMB 45.46 billion, with revenue from continuing operations growing 21.4% year-over-year to RMB 43.42 billion [6] - Adjusted non-IFRS net profit grew 41.3% year-over-year to RMB 14.96 billion, with a non-IFRS net profit margin improving 5.9 percentage points to 32.9% [6][20] - Adjusted non-IFRS gross profit reached RMB 21.89 billion, with a gross profit margin expanding to 48.2%, up 6.6 percentage points year-over-year [20] Business Line Data and Key Metrics Changes - WuXi Chemistry revenue grew 25.5% year-over-year to RMB 36.47 billion, with an adjusted non-IFRS gross profit margin of 52.3% [11] - Small molecule D&M business revenue increased 11.4% year-over-year to RMB 19.92 billion [12] - TIDES revenue almost doubled to RMB 11.37 billion in 2025, with a backlog growth of 20.2% year-over-year [15] Market Data and Key Metrics Changes - Revenue from the U.S. market grew 34.3% year-over-year, while Japan, Korea, and other regions grew 4.1% [8] - Europe and China experienced declines mainly due to fluctuations in project delivery timing [8] Company Strategy and Development Direction - The company remains focused on enhancing core capabilities and capacity to meet customer demand, with a strong emphasis on the CRDMO business model [7][23] - WuXi AppTec aims to drive operational efficiency and resilience to navigate dynamic market conditions, with a revenue guidance of RMB 51.3 billion to RMB 53 billion for 2026 [23][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining rapid business growth despite macroeconomic uncertainties, with a continuing operations revenue growth expectation of 18%-22% for 2026 [28][60] - The company is closely monitoring geopolitical situations and their potential impacts on operations and costs, maintaining a mature and diversified procurement network [31][59] Other Important Information - WuXi AppTec achieved MSCI AAA and CDP Climate Change A ratings in 2025, reflecting its commitment to sustainability [9] - The board proposed a cash dividend distribution plan totaling RMB 5.7 billion in 2026, maintaining a 30% annual cash dividend payout ratio [25] Q&A Session Summary Question: Impact of currency exchange on guidance - Management acknowledged the impact of FX movements but expressed confidence in their execution capabilities and the visibility provided by the CRDMO business model [30] Question: Geopolitical impact on margins - Management noted potential risks to upstream raw material costs but emphasized their operational efficiency and procurement strategies to mitigate impacts [31] Question: Pipeline behind TIDES CapEx budget - Management highlighted the ongoing demand for peptides and the growth potential of oligonucleotides, indicating a focus on multiple modalities [32][33] Question: Client outsourcing strategy changes - Management stated that large pharma's internal manufacturing does not change their commitment to improving capabilities and providing services [35] Question: Current utilization rate of small molecule capacity - Management indicated strong demand and ongoing collaborations with leading companies, enhancing their business in the Biology and Testing sectors [37] Question: Impact of FDA's regulatory changes on drug approvals - Management expressed that any regulatory streamlining would benefit patients and potentially increase demand for drug substances [39] Question: Positioning in oral small molecule GLP-1 CDMO business - Management confirmed strong growth in the small molecule sector, particularly in GLP-1 drugs, and anticipated benefiting from high demand [41][46] Question: Revenue breakdown and geographical mix - Management noted strong growth across all regions, with expectations for continued growth in the U.S., China, and Europe [48][52] Question: Sustainability of TIDES business growth - Management expressed confidence in sustained growth driven by a robust pipeline and ongoing demand for their products [54] Question: Timeline for new facility contributions - Management stated that new facilities in China can become operational in less than 12 months [57] Question: Competitive landscape in siRNA CRO space - Management acknowledged the presence of many players but emphasized their focus on quality, speed, and cost as competitive advantages [62][64] Question: Confidence in new orders and booking assumptions - Management expressed confidence in converting backlog into revenue and maintaining strong execution capabilities [66]

Summary of Key Points from the Conference Call Industry Overview - The report focuses on the **China Healthcare** sector, particularly the **innovative drug out-licensing** activities in China compared to global trends [1][4][8]. Performance Metrics - The **Hang Seng Healthcare Index** has increased by over **75% YTD**, significantly outperforming the broader **Hang Seng Index**, which rose by approximately **23%** [1]. - China's out-licensing deals accounted for about **15%** of total global deals and **21%** of multinational corporation (MNC) deals in the last two years [4][11]. Strategic Insights - The analysis indicates that foreign companies are not solely attracted to China for low-cost benefits; they are increasingly interested in the **quality of assets**. Upfront payments for Chinese deals are often comparable to or exceed global averages, with **US$213 million** for oncology compared to **US$195 million** globally [4][11]. - **Oncology** remains the primary focus for MNCs in both global and China-specific agreements, followed closely by **cardiometabolism** [4][11]. Licensing Potential - There is significant potential for out-licensing in areas beyond oncology, particularly in **autoimmune diseases** and **cardiometabolism**. The report suggests that investments in **CNS (central nervous system)** could lead to more out-licensing deals from China [4][5][24]. - Advanced drug modalities such as **ADCs (antibody-drug conjugates)** and **bsAb (bispecific antibodies)** are becoming prominent in out-licensing from China [5][24]. Company-Specific Insights - **Innovent** has been highlighted as a top pick in the biotech sector due to its strong out-licensing potential and asset quality. The price target for Innovent has been increased based on favorable licensing income projections [1][5]. - **AstraZeneca** and **Merck** are leading companies in terms of licensing deals from China, with AstraZeneca having the highest number of deals and Merck leading in total upfront payments [4][30]. Financial Health of MNCs - Despite macroeconomic uncertainties, MNCs like **Pfizer** and **Merck** are in strong financial positions, with significant free cash flow available for business development activities, including licensing and M&A [22][23]. Emerging Trends - The report notes a shift in focus for MNCs towards **autoimmune** and **metabolic diseases**, driven by the expiration of patents on blockbuster drugs and the rising sales of **GLP-1** drugs [24][25]. - The average deal value for Chinese assets in oncology is on par with global averages, while the average upfront payment for oncology and immunology is higher than the global average [30]. Conclusion - The findings underscore the growing competitiveness of Chinese biotech assets and the increasing interest from MNCs in out-licensing deals, indicating a robust future for the China healthcare sector [1][4][11].