Key Performance Highlights for the First Half of the Year
WuXi AppTec has seen a remarkable performance in the first half of the year: net profit exceeded 10 billion yuan for the first time, with both revenue and profit showing growth, driving the A-share market to limit up and the Hong Kong stock market to rise significantly. The profit mainly came from its core businesses (chemicals, testing, etc.), which experienced a 48% increase in sales. The rising cost of laboratory monkeys had little impact on the company due to its own monkey farms and efficient management. Changes in fair value (from investments and the appreciation of biological assets) contributed only modestly. Despite the emergence of new technologies for alternative animal experiments, the company embraces these trends but believes that the demand for animal experiments remains strong.
1. Why Such Strong Performance? The Key Lies in “End-to-End Services” and Customer Success
WuXi AppTec’s revenue for the first half of the year was 28.897 billion yuan (a 38.9% increase), and net profit reached 11.08 billion yuan (a 29.4% increase), with net profit exceeding 10 billion yuan for the first time. There are two main reasons for this success:
1. Successful Customer Products Driving Business Growth: Many of its clients’ new drugs and products were successful, leading to more orders as WuXi AppTec assisted with research and development and production.
2. The CRDMO Model Ensures Customer Loyalty: The company provides end-to-end services from drug research and development to production, eliminating the need for customers to work with multiple companies separately for different stages of the process. This high level of integration results in strong customer loyalty and stable business growth. Additionally, its core businesses (chemicals, testing, biology, etc.) grew by 48%, which was a crucial factor in driving overall profit growth.
2. What About the Rising Cost of Laboratory Monkeys? WuXi AppTec Is Well-Prepared
The cost of laboratory monkeys has recently increased significantly, with some animals fetching prices as high as 200,000 yuan, and they are essential for new drug development. However, WuXi AppTec is not worried:
- Self-Sufficient Monkey Farms: The company owns its own monkey farms, ensuring a steady supply of monkeys for its internal needs without having to purchase them at high market prices.
- Efficient Cost Management: It is working to improve monkey breeding rates and reduce mortality, further reducing its reliance on external suppliers.
Management has stated that the increase in monkey prices has had little impact on profits, as the company’s main profit comes from its core businesses.
3. How Did WuXi AppTec Earn 600 Million Yuan from Fair Value Changes? It’s Not Just Luck from Investments
In the first half of the year, WuXi AppTec reported a gain of 684 million yuan from fair value changes (compared to a loss of 182 million yuan last year). Where did this money come from?
- Mainly from the Appreciation of Equity Investments: For example, the company’s investments in other companies have appreciated in value.
- Appreciation of Biological Assets: The appreciation of biological assets (such as laboratory monkeys) also contributed to this gain.
However, management clarified that the contribution from biological assets was only 260 million yuan, which is a small portion of the total net profit of 11 billion yuan. Profit still primarily comes from actual research and development activities, not from lucky investments.
4. What About New Technologies for Alternative Animal Experiments? WuXi AppTec Embraces but Remains Cautious
Countries in Asia, Europe, and the United States are promoting the use of organoids and AI models to replace animal experiments. WuXi AppTec’s approach is pragmatic:
- Embracing Trends: The company is actively investing in new technologies to meet regulatory requirements.
- Strong Demand Remains: Many new drug developments still require animal experiments to prove safety (for example, to test whether a drug will be toxic). As a result, the volume of orders has not decreased, and business growth continues.
In short, while new technologies represent the future, animal experiments are still a necessity in the short term, so WuXi AppTec is focusing on both areas.
Conclusion
WuXi AppTec’s impressive performance this year is due to its strong core businesses and some unexpected gains from investments and the appreciation of monkey prices. The company has also been well-prepared for industry changes (such as rising monkey prices and new technologies), which is why its stock price has risen. The market recognizes its stability and competitiveness.