The Triple Play of Performance, Efficiency, and Strategy: WuXi AppTec's (02359) CRDMO model will fully bloom in Q3 2025.

Against the backdrop of the continuous acceleration of global biopharmaceutical innovation and the increasing diversification of research and development demand, WuXi AppTec (02359) released its financial report for the third quarter of 2025. As of the first three quarters of 2025, the company achieved operating revenue of 32.86 billion yuan, an increase of 18.6% year-on-year. Of particular note is the continuous operating revenue representing its core competitiveness, which increased by 22.5% year-on-year, showing strong growth momentum. The company has raised its full-year continuous operating revenue growth guidance to 17%-18%, and the overall revenue outlook for the year to 43.5 billion to 44 billion yuan. Through these outstanding data, we can clearly see the two core drivers that guide WuXi AppTec through the cycle: first, the company's firm focus on the integration strategy of CRDMO (Contract Research, Development, and Manufacturing) is correct and forward-looking; second, under this strategic guidance, its excellent lean operational capabilities are building a strong and broad "moat." Strategic focus on CRDMO: Doing difficult and correct things to build long-term value barriers In the ever-changing field of pharmaceutical research and development, choosing the right strategic direction is far more important than short-term tactical execution. The development history of WuXi AppTec is an interpretation of the business philosophy of "doing difficult and correct things." WuXi AppTec's unique "CRDMO" integrated platform, its core value lies in achieving seamless and efficient connection and high-efficiency drainage from front-end drug discovery (Research, R) to back-end development and manufacturing (Development & Manufacturing, D&M). As of the end of September 2025, the company's continuous operating business orders amounted to 59.88 billion yuan, a strong year-on-year growth of 41.2%, far exceeding the revenue growth of the same period, laying a solid foundation for performance in the coming quarters. As the cornerstone of the company, the chemical business achieved revenue of 25.98 billion yuan in the first three quarters of the year, an increase of 29.3%. Among them, the "R" business successfully synthesized and delivered over 430,000 new compounds in the past twelve months, and in the first three quarters of 2025, 250 molecules successfully transitioned from the discovery stage to the "D" development stage, with the drug discovery business ("R") continuously providing a steady stream of "ammunition" for downstream development and production ("D&M") business. As of the end of September, the total number of small molecule D&M pipelines reached 3,430, including a total of 15 new projects in the commercialization and clinical Phase III stages. This continuous internal transformation is the "Alpha" value created by the CRDMO model. In addition, in the first three quarters of 2025, the forward-looking layout of new molecular types business has become the core driver of growth, DRIVE. During the period, the revenue of TIDES business (oligonucleotides and peptides) reached 7.84 billion yuan, a dramatic increase of 121.1%. This explosive growth demonstrates the company's continued investment and leading edge in the field of peptide drugs, oligonucleotide drugs, PROTAC, conjugate drugs, and other cutting-edge technologies, also marking the successful opening of the "second growth curve" that the company has embarked on. It is worth noting that this growth is not due to incidental market tailwinds, but the result of the company's strategic layout and execution effectiveness: on the one hand, the company has made precise predictions on the market demand for popular drug targets such as GLP-1, with 19 TIDES molecules transitioning from the R stage to the D stage in the first half of this year, accounting for 50% of the total number of TIDES process development molecules from the previous year. On the other hand, strong execution capabilities ensured timely capacity matching, such as the completion of the Taixing peptide production capacity construction ahead of schedule in September 2025, with the total volume of peptide solid phase synthesis reactors increased to over 100,000L, laying a physical foundation for meeting the demand for explosive growth. Reflected in financial results, in the first three quarters of 2025, the company's overall gross margin exceeded 46% and the adjusted profit margin broke through 36%. As of September 30, 2025, the net cash flow generated from operating activities was 11.413 billion yuan, an increase of 36.21% over the same period last year; and the year-end cash reserves (cash funds + trading financial assets) reached nearly 33 billion yuan. In terms of strategic focus, in recent years, the company's decisive sale of non-core businesses such as ATU (cell and gene therapy) is precisely the "difficult and correct" strategic decision made to concentrate resources and focus on the main CRDMO channel. This resolve has allowed the company to build deeper barriers in core areas. The value of WuXi AppTec's platform lies precisely in providing one-stop, efficient, and scalable services, greatly reducing the research and development thresholds and financial pressures for global innovators, addressing this core pain point and truly embodying the grand vision of "making medicines that are difficult to make". Lean operation and technological breakthroughs: Decoding the "moat" of efficiency and quality If the grand strategy is the "brain" of WuXi AppTec, then the precise operation system is its strong "heart and bones". For a giant with business operations around the world and tens of thousands of employees, lean operation and technological innovation are key to maintaining competitive advantage and enhancing profitability. In the company's recent Investor Day activities, multiple cases vividly revealed its operational efficiency "secret weapons." Case one: The ever-renewed "WuXi speed" The period from the construction of a workshop to its full production capacity is a key indicator of operational efficiency. The data shows astonishing progress: in 2017, it took nearly two years (22.6 months) for a new workshop to climb from production to full production capacity; by 2024, this period had been dramatically shortened to 2.4 months, just over two months, a brand-new workshop could reach full production capacity. This exponential improvement in efficiency is due to two core capabilities: scale effects, as the company can quickly deploy experienced engineers from other bases to support new projects, and a comprehensive training system, where new employees complete systematic training at the training center before being assigned to their respective positions, ensuring seamless and rapid replication of production capacity. Case two: The digital "intelligent brain" driving production The main characteristic of CDMO is that there are many customer projects, and each customer and project has different requirements. In a complex scenario with five production bases, 40 workshops, and over 800 reactors, the company produces over 30,000 batches of products per year, traditional manual scheduling is no longer able to meet the demand. It is understood that WuXi AppTec has achieved intelligent management of production through its self-developed digital system. Its self-developed Pyxis intelligent scheduling system can achieve automated real-time scheduling, increasing equipment utilization from 60% to 72%. The benefits brought by this improvement are equivalent to building eight new production workshops, providing a powerful explanation for why the company's revenue growth rate can surpass its production capacity growth rate. Case three: The "eagle eye system" that pursues ultimate quality control In drug production, quality is an inviolable red line. In the solid feeding process, where chemical names are similar and specifications are varied, it is a critical risk point prone to errors. To address this pain point, WuXi AppTec developed the eagle eye system, reducing the human error rate in this process to 0.05 per hundred batches, meaning an average of one human error may occur every 2,000 batches, close to the limit level. This series of technological breakthroughs fundamentally guarantees the stability and reliability of production quality, with the company's "zero defects through FDA inspection" records mentioned multiple times in financial reports serving as strong evidence of this ultimate quality control system. In these three cases, "WuXi speed" demonstrates its unparalleled ability in large-scale replication, the "intelligent brain" constructs software-defined efficiency barriers, while the "eagle eye system" pushes quality control to physical limits. These three aspects together constitute its operational moat at the execution level that is difficult to imitate. Reassessment of the head value of CRDMO, promising prospects In summary, we can clearly outline the core competitiveness profile of WuXi AppTec: its unique "integrated CRDMO" model, forward-looking new business layout (such as TIDES), stable and global customer structure, and operational efficiency empowered to the extreme by technology, combined to form a solid foundation for fundamental growth. Currently, the company's growth momentum is strong and clear: on the one hand, the high 59.88 billion yuan in-hand orders are the most clear "cornerstone" for the company's future performance growth in the next 1-2 years, providing high certainty. Secondly, new types of services represented by the TIDES business are thriving, with a wide market space, continuously contributing high-growth momentum to the company. In addition, its deepened globalization layout, such as the capacity construction in Middleton, the United States, Singapore, Switzerland, and the important cooperation with the Future City and the Ministry of Health of Saudi Arabia, can better meet the needs of global customers and effectively hedge against geopolitical risks in the current complex international environment. Looking forward, whether WuXi AppTec's valuation can be re-evaluated will depend on the market's re-cognition of the industry cycle and the company's ability to deliver sustained performance in high-growth areas such as TIDES. For investors seeking growth certainty and high-quality operations, its value proposition remains clear, returning to the company's core vision of "making medicines that are difficult to make, curing difficult diseases". In this process, the integration and global deployment of the CRDMO model will become its moat for crossing the cycle and achieving high certainty growth.