Profit exceeds expectations! WUXI XDC(02268) performance soars: perfect combination of industry growth and competitive advantage.

On January 15th, according to an announcement from the Hong Kong Stock Exchange, WUXI XDC (02268) issued a positive profit forecast for the year 2024. According to the announcement, the company predicts that its revenue, net profit, and adjusted net profit for the full year of 2024 will increase by more than 85%, 260%, and 170% respectively compared to the previous year. According to the forecast calculation by Yingxi, it is expected that WUXI XDC's revenue in 2024 will exceed 3.9 billion RMB, with adjusted net profit exceeding 1.1 billion RMB. Compared to current Bloomberg market expectations, this report can be described as explosive and well-deserved. According to the announcement, the company explains that this strong growth is mainly due to several key factors driving it. Continued rapid growth in the ADC and bioconjugate drug industry The ADC and bioconjugate drug (XDC) industry continued its rapid growth in 2024. According to the latest market research data from Frost & Sullivan, the global market for ADC and XDC is experiencing rapid expansion, with the global market size expected to reach 66.2 billion USD by 2030, with a compounded annual growth rate (CAGR) of 31%. It is reported that there are currently 16 approved ADC drugs globally, accounting for only 1% of the market share. Out of approximately 2400 ADC/XDC molecules, more (up to 95%) are in clinical and early stages; in addition to traditional ADC molecules, there are also innovative molecules such as DAC, AOC, APC, BsADC, and ACC. With ongoing BD transactions and optimization of clinical data, we have witnessed several ADC transactions exceeding 1 billion USD in the past three years, and the landscape of pharmaceutical companies' ADC pipelines has entered a lively scene of "I have it when others don't, and I have it better when others do". With the maturation of ADC technology and a focus on unmet clinical needs, global innovation collaborations continue to show vitality. Collaboration entities are diverse, including collaborations between large multinational pharmaceutical companies and innovative Chinese biotech companies and international giants; collaboration content is rich, involving global development, production, and commercialization rights transfer for ADC drugs, as well as equity investments, joint development, establishment of Newcos, and various other methods. List of Some Global ADC/XDC Transactions from January to April 2024 (Data source: Yimayomagic, compiled by the author) WUXI XDC, the only globally-focused CRDMO for ADC and other bioconjugate drugs, is undoubtedly an important driver and enabler of the rapid development of this industry. WUXI XDC maintains its leading position in high growth, combining production and technological advantages At the 2024 World ADC Congress, WUXI XDC once again won the Best CDMO award, demonstrating its brand recognition and development value. The company has become one of the few global ADC CRDMO enterprises that can cover early-stage research and development to commercial production. Currently, due to the complexity of ADC production processes and the interdisciplinary challenges, the entire ADC industry's outsourcing rate remains at over 60%, and this high outsourcing rate further raises the entry barrier. The company's rapid development has made the "strong get stronger" effect of its leading position more evident. WUXI XDC, with its unique XDC drug "one-stop" development and production capabilities (R/D/M), covers four major production segments: antibody intermediates, payload linkers, bulk drugs, and formulations. Despite facing challenges in process complexity and production costs, WUXI XDC, with its "integrated" production platform, demonstrates outstanding process capabilities and production advantages, consolidating its leading position in the industry. This builds a globally scarce comprehensive outsourcing service in ADC CDMO, making it a leader in the industry. This unique competitive advantage not only constitutes a high barrier to competition for the company, but also increases customer stickiness, allowing customers to leave the full life cycle development of new drugs to the company. Group production facilities maintain high capacity utilization rates, continuously commission new production lines to meet downstream demand From the announcement, it is evident that WUXI XDC's group production facilities maintain high capacity utilization rates, one of the factors contributing to the company's high growth performance. Currently, global ADC capacity remains scarce, and many global CDMOs have announced capital expenditure plans for ADC capacity construction. As a CDMO company specializing in the field of bioconjugate drugs, WUXI XDC's production capacity expansion plan is proceeding steadily. The group's second mAb/DS dual-functional production line (BCM2 L2) went into operation in the fourth quarter of 2024 and is ramping up rapidly. The formulation production line (DP3) at the Wuxi base is actively under construction and is expected to go into operation in the second quarter of 2025. In addition, the integrated production base in Singapore has completed the transportation of modular plants and is rapidly being assembled, expected to start operating by the end of 2025. This expansion pace is in line with the industry's development pace: as clinical development progresses, several ADCs have already entered the BLA stage, with multiple drugs expected to be approved and launched between 2025 and 2026. The establishment and commissioning time of WUXI XDC's Singapore factory coincides with the wave of approvals for ADC drugs, allowing the company to fully leverage this special opportunity to ride the wave of commercialization. Operational efficiency continues to improve, significant cost management effects Based on the data in the announcement, it is conservatively estimated that WUXI XDC's profit margin for 2024 will be around 25%-26%, and the adjusted net profit margin will be around 28%. The company's net profit margin in 2023 was 13.4%, with an adjusted net profit margin of 19.4%. Compared to 2023, the company's net profit and adjusted profit margins have seen significant increases. It is commendable how the company has achieved significant improvements in operational efficiency and precise management, as wealth comes from regular business skills! WUXI XDC's outstanding performance in 2024 is the result of the combined effects of industry growth, company strengths, capacity expansion, and efficiency improvements. Through continuous technological innovation and platform development, the company has elevated its position in the ADC.With competitive advantages in the field of bi-specific drugs, we have successfully seized market opportunities and achieved rapid business growth. With the continuous increase in global demand for ADC drugs, WUXI XDC is expected to continue to maintain its leading position in the industry, providing global customers with more innovative and efficient treatment solutions.JPM 2025: Highlighting the Potential of the ADC Market, MNC and Biotech Strategic Layouts Help Market Expansion The JPM Conference is a gathering of the biopharmaceutical companies. As in previous years, we see that Antibody Drug Conjugates (ADCs) are still one of the hottest topics at this conference. Some capital institutions predict that due to drug patent expirations, pharmaceutical giants may face varying degrees of revenue loss from 2025 to 2029. Especially as MNCs gradually lose market exclusivity for their blockbuster products, how to further support MNCs, ADCs may continue to strengthen. Today is the second day of the conference, and we have seen many MNCs list ADCs as one of the key strategic layouts for their companies beyond 2025. This includes Roche, whose two approved ADC varieties will continue to increase in volume, while making progress on their in-development ADCs (such as the new type of DLL3-targeted antibody-drug conjugate introduced in collaboration with INNOVENT BIO recently); BMS's EGFR x HER3 bispecific ADC continues to advance in overseas clinical trials; MNCs continue to invest in ADCs, bringing more PoC data to the market continuously. WUXI XDC announced that they will give a speech at 6:15 am on January 16th at the 43rd Annual JPM Healthcare Conference in the United States, sharing the company's latest business developments and global layout information. Let's look forward to WUXI XDC sharing more exciting business progress and future prospects at the JPM Healthcare Conference tomorrow.