Please be advised that today's conference is being recorded. It is now my pleasure to introduce IR Director, Pengfei Duan.
Thank you, Andrew. Hi, everyone. Welcome to GenScript 2023 interim results conference call. I'm Pengfei Duan, Investor Relations Director at GenScript . Joining me on the call today are Mr. Robin Meng, Chair of the Board, Ms. Sherry Shao, Rotating Chief Financial Officer, Dr. Patrick Liu, Off-Duty Rotating Chief Executive Officer, and Mr. Shiniu Wei, Chief Financial Officer of GenScript . We also have key leaders from subsidiaries and business units joining us. Before we begin, I would like to remind everyone that on today's call, we will be making statements about future expectations, plans, and perspectives, as well as any other statements regarding matters that are not historical facts, which may constitute forward-looking statements.
Actual results may differ materially from those indicated by such forward-looking statements. Because of various important risk factors and changing market conditions, we do not undertake any obligation to publicly update any forward-looking statements.
In today's conference call, Sherry, our Rotating Chief Financial Officer, will share with you the business highlights of the company in the first half, as well as the group's strategic planning. Our Chief Financial Officer will walk you through our financial performance and outlook. We also have a Q&A section for you at the end of the call. I will hand over the floor to our Rotating Chief Financial Officer, Ms. Sherry Shao. Sherry, please.
Good morning, I'm Sherry Shao, the Rotating Chief Financial Officer of GenScrip t. It's my pleasure to share our latest development with you. Despite uncertainties of the global economy, the group's business has maintained robust growth. Over the past four years, our revenue CAGR is at about 30%. In the first half of this year, our revenue reached approximately $390 million, representing an increase of 26.4% over the last year. Our cell therapy business segment, Legend Biotech, made significant progress this year. We saw strong sales growth in CARVYKTI in Q2 of this year. We also raised capital for three subsidiaries. By the end of first half, the group's overall cash position is at $2.167 billion. Our investment plan for CapEx and R&D for the next few years is secured by a solid balance sheet.
At present, we have approximately 6,500 team members globally. Locally, more than 10% of our employees are R&D staff. Thanks to their ingenuity and innovation, we have accumulated over 240 patents and have nearly 1,000 patent applications. We have a diversified global customer base. The customers we serve span more than 100 countries and regions, including top-tier pharma and biotech companies, research institutions, as well as agricultural and personal care companies. Janssen and Legend CARVYKTI is also helping patients with multiple myeloma. A solid customer foundation gives us a unique competitive advantage and ensures our sustainable growth in the future. Now, let's move to our segment highlights. Life Science Group as the cornerstone of the group. The Life Science business has maintained steady growth since inception.
Life Science also serves as the foundation for us to incubate Bestzyme, Legend, and ProBio.
In the first half of 2023, despite a challenging marketing environment, our life science achieved robust external revenue growth of 16.6%, with an increase of approximately 12% in active customer numbers. Our core business, molecular biology, maintained its strong momentum with over 18% year-over-year growth, demonstrating our technical capability and service strength. Regarding our capacity expansion, our focus remains on upgrading quality and delivery standards. Our life science building in Zhenjiang will provide new GMP-grade capacity. In the biologic CDMO field, slowdown in biotech funding has a direct impact on our business. ProBio's external revenue grew about 7%. We added 12 CMC projects, including an antibody CDMO and 21 GCP CDMO projects in first half. Since inception, we have cumulatively helped our customers get 61 R&D approvals globally.
ProBio is accelerating the construction of GMP plasmid facility in the U.S. and protein antibody CDMO facility in China. The plasmid GMP facility in the U.S. will help us penetrate the world's largest GCP CDMO market. Our 2,000 L protein and antibody GMP CDMO facility in Zhenjiang also represents a significant milestone for ProBio. This will fulfill our customers' late-stage clinical and commercial production needs. In early 2023, we completed Series C funding of approximately $224 million for ProBio. Our industrial synthetic biology product segment, Bestzyme, also delivered a number of achievements. Bestzyme external revenue grew about 8.9% year-over-year. Revenue in constant currency grew approximately 16.8%. Our innovative product, protein for liquid detergent, has achieved early commercial success. A number of detergent manufacturers have incorporated our products into their supply chains.
The capacity utilization of Bestzyme has also increased, allowing us to improve cost structure. In June, Bestzyme successfully completed Series A financing. The raised funds will be mainly used to further support Bestzyme's capacity expansion and strengthen our competitiveness in synthetic biology. Turning to cell therapy, CARVYKTI generated total sales of $189 million in the first half of 2023. This year, at the ASCO meeting, we presented new data from our phase III, CARTITUDE-4 study, investigating CARVYKTI in relapsed and lenalidomide refractory patients with one to three dry lines of treatment. In the study, CARVYKTI reduced the risk of disease progressing or death by 74% compared to standard of care regimens. The data were also published in the New England Journal of Medicine and presented at the EHA 2023 Conference in June.
Based on CARTITUDE-4 data, our partner, Janssen, submitted a Type II variation application to the European Medicines Agency and a sBLA to the U.S. FDA to expand the indication for CARVYKTI for use in earlier lines of multiple myeloma treatment, as early as after first relapse. Beyond the success of CARVYKTI, we are also advancing our pipeline for solid tumors. This quarter, the U.S. FDA granted Orphan Drug Designation for our investigational therapy, LB2102, for small cell lung cancer. We have opened two trial centers in the U.S. and are preparing for patient enrollment. Thanks to market recognition of CARTITUDE-4 data, we raised a total of $785 million in the first half of the year.
We also received a $15 million milestone payment this quarter as the acceptance of the Type II application for CARVYKTI, and achieved another milestone of $20 million at the U.S. FDA acceptance of the sBLA of CARTITUDE-4. Now, I will dive into the details of segment performance. In the life science business, we have enhanced customer value proposition from three key aspects. From innovation perspective, thanks to our continuously enhanced gene synthesis capabilities and upgraded TurboCHO platform, we can shorten gene-to-antibody expression timeline to five business days, setting the bar for the industry. In the TCT field, our new offering, GenCircle dsDNA, circular double-stranded DNA vector for gene editing, extended our competitive advantage in the non-viral payload sector. We secured China's first GMP-level GenCircle order and earned three GMP-grade scDNA orders in first half.
In terms of our peptide business, we upgraded cGMP peptide processes, leading to higher success rate, cost optimization, and significant sales growth in cGMP peptide in first half. From a capacity and capability perspective, in first half, we upgraded nucleic acid and peptide services. Now, we can provide our customers with GMP-grade sgRNA and nucleic acid. Our GMP-grade peptide facility was also put into use, which can support customers with anti-filing and clinical manufacturing. In terms of GCT consumables, we completed the construction of GMP manufacturing facility in Zhenjiang, with GMP-grade magnetic beads for T-cell isolation and activation. Our automated plasmid preparation instrument, AmMag Quattro, can significantly reduce costs and improve plasmid preparation efficiency.
The instrument has generated revenue and received positive feedback from customers. To better serve our global customers, we are optimizing our capacity in Singapore and the US, and improving overall profitability. We are a customer-centric company.
Our efforts in capacity and capability upgrading are always driven by customer needs. Throughout our journey, we have enhanced our position as the global number one gene synthesis provider, and continue to provide our customers with innovative services and products. In first half, we continued to see robust growth in customer numbers. Our active customer count increased by 12%. In terms of sales by region, Asia- Pacific region, which includes China, dropped by 11% due to biotech funding slowdown and microeconomy. In other overseas regions, sales maintained strong growth. GenScript Life Science Group is a reliable partner for customers in their R&D journey.
We continue to receive positive feedback from customers due to our insight into the diverse needs of academic and industrial customers. In the biologic CDMO business, we have further enhanced our capabilities in protein and antibody drug and the GCT platform.
In the antibody and protein drug discovery and development business, we have shortened the development time of antibody using hybridoma platform, and further shortening our fully human antibody lead generation time to 1 month. GenScript ProBio also introduced a one-stop ADC development platform. In terms of development and the manufacturing of antibody and protein CDMO, we upgraded our recombinant protein and bispecific antibody titer. Our fast CMC solutions enable us to deliver GMP materials from DNA sequencing to antibody and protein in three and half months. We also launched ProBox, which can help us better utilize our experience accumulated over the years. In terms of GCT CDMO portfolio, we launched proprietary PowerS-ITRrs strain.
The turnaround time for linearized plasmid production has been shortened to five weeks. In the viral vector sector, we put delivery of GMP-grade viral vectors from plasmid in six months.
ProBio is capable of supplying 50 L scale lentivirus production, and our AAV suspension production can be scaled up to 200 L as well. ProBio's proprietary PowerS-293 and 293T strains have completed DMF registration. In terms of new CMC projects, there have been noticeable changes in the project structure. More customers are working with ProBio to explore challenging molecules and emerging GCT projects. In the protein and antibody CDMO area, we added tough CMC projects, including collaborations with customers on clinical sample production, process capitalization, process validation research, and commercial production of recombinant coagulation factor H. This project will help ProBio accumulate commercial manufacturing experience and late-stage project experience. In the GCT CDMO business, CMC projects have steadily increased.
The customers are more focused on non-COVID-related project development. In the industrial synthetic biology products business, Bestzyme maintained stable and positive momentum.
Our product offerings include industrial enzymes and feed enzymes. We also have an R&D team dedicated to synthetic biology. In feed enzymes, we mainly serve the agricultural and animal feed industry. In terms of industrial enzymes, our downstream product applications cover ethanol, starch sugar, baking, textile, and daily chemicals. This year, Bestzyme's innovative industrial enzyme business has achieved encouraging market breakthroughs. Among the others, our detergent protein product, which was launched at the end of last year, has successfully entered the supply chains of healthcare companies and started to generate revenue. We expect to achieve further breakthroughs in the second half of the year. In terms of customer service, we are further upgrading our product service solutions to ensure our customers can effectively leverage our products during their production process.
In terms of production capacity, the utilization rate of our facility continues to increase.
In the second half of the year, we will further increase investment to optimize our production efficiency and quality. We are actively pursuing new opportunities in SynBio field. Our first commercial product, gas acid, has entered the commercial stage, and we are working closely with our partner to optimize cost structure and improve production efficiency. Our SynBio solution for food and nutrition additives are also making satisfactory progress. Due to modern society's pursuit of a healthy lifestyle, sweeteners have significant advantage over traditional super substance. Our sweet protein has undergone preliminary sensory testing and has demonstrated satisfactory results. We are further exploring its commercialization model. We are also developing other SynBio pipelines according to our roadmap.
Thanks to the completion of Series A financing in the first half, we have now been able to further strengthen our competitive edge on SynBio by attracting more talents and upgrade our R&D facility. Turning to cell therapy, we recently announced the submission of the supplemental Biologics License Application to the U.S. FDA to expand the label for CARVYKTI. The application for expansion includes the treatment of adult patients with relapsed and lenalidomidde refractory multiple myeloma, who have received at least one prior line of therapy, including a proteasome inhibitor and an immunomodulatory agent. With this filing, we hope to move CARVYKTI into a two to four prior lines of therapy setting in multiple myeloma, subject to FDA approval. FDA has accepted the sBLA filing and assigned a PDUFA date of April 5, 2024.
On the clinical side, we are on track to complete enrollment of the ongoing phase III CARTITUDE-5 study which evaluates CARVYKTI in newly diagnosed patients for whom transplant is not intended by the end of this year. We are planning to initiate enrollment of our first-line CARTITUDE-6 study in Q4 of 2023. Our R&D team continues to advance our proprietary pipeline. In the last quarter, we opened our first clinical site for our DLL3 program in the U.S., our second ongoing clinical trial in the U.S. Another one of our solid tumor programs, LB1908, targeting Claudin 18.2 in gastric cancer, is also progressing on track. We recently opened two trial sites in the U.S. for this program as well in the Q2, and we anticipate dosing our first patient soon.
A number of patients are being enrolled and dosed in phase I IIT programs in China. That concludes the update on business highlights. Next, I would like to invite Xinyou to share the financial performance.
Thank you, Sherry. Good morning, everyone. I'm Shiniu Wei, Group Chief Financial Officer. I would like to walk you through our financial performance. For those of you following us online, we're on page 17 of the slide deck. In the first half of 2023, the group and its business segments continued to grow. The group's revenue increased by 26.4% year-over-year to about $390 million. Among them, the Life Science segment achieved external revenue of almost $199 million, maintaining a healthy growth rate of 16.6%. Due to slowdown in biotech funding and macroeconomic conditions, external revenue growth of the CDMO segment was 7%, reaching $65 million. External revenue for industrial synthetic biology products grew about $8.9 million, 8.9% to $18 million.
Thanks to rapid increase in sales of CARVYKTI in 2023, especially in the Q2, cell therapy business recorded a 77% revenue growth in first half 2023. In terms of profitability, the life science segment maintained a stable profitability, with adjusted operating profit increasing by approximately 17% to about RMB 39.2 million. ProBio had an adjusted operating loss of approximately RMB 6 million in the first half. Bestzyme's adjusted operating profit for the first half of the year was about RMB 0.3 million. A decrease over a decrease year-over-year, mainly due to one-time IP licensing revenue from last year's space. The cell therapy business is still in clinical development stage. We expect the BCMA program to break even in 2025, and the cell therapy business unit to break even in 2026.
considering the financial outlook of the rest of the business segments combined, we expect the group to achieve an overall breakeven in the second half of 2025. In terms of R&D expenses and capital expenditures, the company maintained a stable trend in the first half of 2023. Total R&D spending was about $207 million. Currently, the largest portion of R&D expenses is related to clinical research and other non-BCMA projects in the cell therapy business, while the overall R&D expenses in other businesses have not changed significantly compared to last year. The company's capital expenditure amounted to approximately $130 million. Currently, the two largest areas of capital expenditure are the cell therapy business and the CDMO business. The CapEx for cell therapy business is primarily to support the manufacturing capacity expansion of CARVYKTI to meet patient demand.
The CapEx for biologics CDMO is focused on 8 by 2,000 L GMP facility in Zhenjiang, and our first GMP plasmid production facility in the U.S. The group has a healthy cash balance with $2.17 billion in cash and cash equivalents, deposits, and investments, among which approximately $1.5 billion belongs to our cell therapy business. Now, on page 19, the Life Science business continued to maintain stable growth. External revenue was nearly $200 million, representing almost 17% growth. The growth at constant currency was approximately 18.8%. The adjusted gross profit increased about 9% year-over-year to approximately $110 million. The adjusted gross profit margin for Life Science was 54.4%, slightly lower than same period last year, but roughly stable as compared to second half last year.
Although gross profit was negatively impacted by product mix, labor cost increase, new capacity ramp-up in recent years, we also note that gross profit benefited from automated production, lean projects, and labor efficiency improvement. Revenue composition by business line did not have significant change in first half. The adjusted operating profit of the life science business increased by about 17% year-over-year to $39.2 million in the first half. The adjusted operating profit margin was about 19%. For the full year, we expect 12%-18% growth in life science revenue, the gross profit margin for the full year is expected to remain at similar level or fluctuate slightly compared to the first half. On page 20, external revenue of the biologics CDMO business grew by approximately 7% to around $65 million.
Growth was mainly impacted by the slowdown in biotech funding. The adjusted gross profit margin for ProBio decreased by about 10 percentage points. In addition to the impact of lower capacity utilization and price adjustments, the gross profit was also affected by a one-time inventory and contract asset impairments. In terms of revenue structure, the proportion of GCT revenue further increased. Expense-wise, the growth of selling and expense was mainly driven by our investment in overseas commercial capabilities. R&D expense did not show significant change year-over-year. However, administrative expense increased by over 40% compared to the same period last year, mainly due to costs associated with the construction of the U.S. plasmid facilities. ProBio's adjusted EBITDA was $5.3 million. Due to recent changes in the CDMO market, there is still pressure on ProBio's overall profitability in the short term.
We expect ProBio's revenue to maintain a low single-digit growth for the full year, and gross profit margin is expected to remain at first half level. On slide 21, Bestzyme's external revenue was approximately RMB 18.1 million in the first half, representing an 8.9% growth year-over-year. Revenue at constant currency grew approximately 16.8%. Revenue from feed enzyme business rebounded, thanks to favorable end market conditions, while revenue from industrial enzyme business grew due to increased sales to major customers and launch of new products. The gross profit margin maintained at around 40%, with a gross profit of RMB 7.2 million in the first half. We did not see significant change in expenses in first half for Bestzyme, but we do expect to increase R&D expenses in SynBio to speed up the pipeline development.
We expect Bestzyme's revenue growth in RMB terms for the full year to be around 20%-30%. The overall gross profit margin is expected to keep stable at, as compared to first half. Now, moving to cell therapy. In the first half, external revenue was $109.5 million, consisting of $94.4 million in collaboration revenue from the sales of CARVYKTI, and $15 million in license revenue from the achievement of milestone during the first half. R&D expenses for first half were about $180.7 million. The increase is mainly due to higher patient enrollment for phase III clinical development programs for cell to cell, and increases in R&D activities for other pipeline programs. On the heels of our strong CARTITUDE-4 data, we were able to raise $785 million.
By the end of first half, Legend's cash pal- position is about $1.5 billion, which is sufficient for the next two years. Legend will leverage its cash position to speed up CARVYKTI's commercial manufacturing and clinical trials, and further support other pipeline development. Now, we would like to invite Sherry back to summarize our group strategy and conclude the presentation. Sherry?
Thank you, Shiniu. First half results are encouraging, and I would like to express my thanks to all GenScript employees and stakeholders. In the life science field, we will continue to empower our clients through our service and product offerings, and enable our customers' diverse needs in academic and industrial explorations. We will also further upgrade our facilities and capacities to better address new R&D trends. For Bio, we'll continue to uphold its global expansion strategy by leveraging our comprehensive strengths in R&D, as well as commercial manufacturing, to accelerate our customers' projects. For Bestzyme, we will continue to optimize our product offerings and launch more competitive enzyme products. We will also accelerate our synthetic biology pipelines, aiming to bring more value to the market. Also, we will expand our footprint in international markets to pursue a bigger market.
For Legend, increasing commercial manufacturing capacity for CARVYKTI is our priority, and we will speed up our CARTITUDE-5 and CARTITUDE-6 clinical trials for cell-to-cell program. Our R&D team will continue to develop other proprietary pipelines as well. We will continue to uphold our company's mission to make people and natural healthier through biotechnology, and help drive global sustainable growth.
Thanks, Sherry. This concludes today's presentation. Operator, let's open up for Q&A section, please.
Certainly. As a reminder, to ask a question, you will need to press star one one on your telephone. We ask that you please limit yourself to one question and one follow-up. One moment, please. Our first question comes from the line of Wilfred Yuen with Daiwa.
Hello, thank you for taking questions. I've got two for the Life Science. First is the adjustment gross margin. I saw the margin decreased by 3 percentage points. What's the reason behind it? What's the margin outlook as we expand more capacity ramp up from the overseas cGMP facilities? There's some more. I have a follow-up.
Good morning, Wilfred. This is Shiniu Wei. I will take your first question. When you look at our profitability from Life Science business, I would point you towards the operating profit line. As you can see, our operating profit from Life Science business grew at the same pace or slightly faster than our top line. I think that suggests that we are improving our operating profit, operating efficiencies. Specifically, with regard to the gross profit, factors impacting gross profit are our overseas capacity ramp-up, as well as, as you know, we have putting to production more capacity in the China side as well. Also, there's a slight difference in terms of product mix.
Overall, we think, when, for the full year, we will maintain or even, slightly increase our operating profit margin compared to last year.
Okay, thank you. I've got another questions on ProBio. Can you give us more color on the biotech funding to our, our CDMO business, or the Life Science segment? Especially for ProBio, do you have updated guidance on the top line and expectation on when do we receive, when do you arrive at profitability? Thank you.
I will reiterate our top line guidance for ProBio and have Patrick to comment on the business environment for ProBio's top line, we do give guidance for the full year. We expect full year revenue to grow low single digit. Patrick?
Yeah. Yes, all right. Sorry. Yeah, thanks for the, for the question. Actually, in terms of the business itself, I think we do see like slowing down in terms of customer need in the past year. But in the mid-term, long term, we still believe that the demand will be strong because let's say overall speaking, we are still facing aging society on global business. Overall needs in healthcare related businesses definitely will remain strong, I mean, in the long run. On the other hand, we also see a lot of, like, technology breakthroughs, which drives like more clinical trials going on looking forward.
So for ourselves and to really compete, I mean, even for the entire industry, if you want to compete to win on the market, those business are really time sensitive and also very competitive. To win on this market, no single company can do everything. So I think the industry is becoming more and more specialized. This will give a lot of opportunities for CDMO, like, like us, like ProBio. So just to really summarize, in the short term, we do face a lot of challenge, but in the mid, long term, we still believe that there's a lot of opportunity over there on the market. Thank you.
Okay, thank you.
Thank you. As a reminder, to ask a question, please press star one, one on your telephone. One moment for our next question. Our next question comes from the line of Wanghua Wu with CICC.
Good morning, I'm Wanghua Wu from CICC. Thank you for giving me this opportunity to have questions. I have two to confirm. The first one is about the CDMO demand. Actually, we've discussed before, going into more details, can you guys please compare the demand of domestic and overseas customer demand, and antibody and CGT demand? Which segment has the worst price worse? Thank you. That's my first question.
Thank you, Wanghua. Patrick?
Yeah, okay. Yeah, thanks for the question. I think I just mentioned it. Roughly speaking, in the short term, we, we do see some challenges and slowing down in terms of need from the customer end. We believe that this market is slowly recovering. From a geographic point of view, obviously, China is facing rather big challenges in terms of external funding. Generally speaking, overseeing capital market is slightly better than that in China. We do see a lot of opportunities will come in the short term. In terms of business portfolio, for biologics, many customers are they are just reevaluating their pipelines and spending very carefully, and which results in a decline in the first order conversion.
We do face some severe, severe price competition in China. For us, we are taking a differentiation approach in, let's say, for example, in terms of molecular structure, we have taken a lot of projects on complex molecules, which demonstrates a strong recognition from our customers. Based on the track record, we believe and also we are confident to get more orders. In terms of GCT, GCT project usually has a relatively faster conversion cycle. In a post-COVID era, and a non-COVID mRNA and also other traditional, CS demand has seen some recovery. Virus business saw impact growth in the first half of the year, which is mostly from our user for CAR-T and gene therapy. We also pretty confident in the GCT field in the long run.
In terms of pricing war itself, and I think China is worse than overseas regions overall, and also in terms of business portfolio, anybody is worse than GCT business. Thank you.
Thank you, Patrick. The follow-up question about ProBio. My question is, will Legend and ProBio cooperate on more business in the future?
Yeah. Patrick, please comment. We also have Dr. Ying Huang on the call, so he can also comment from Legend's side.
Okay. Yeah, maybe I can get started. Yeah, Legend Biotech is a very important customer of GenScript ProBio and also for the entire GenScript Group as well. GenScript ProBio has provided some preclinical development services in the past to Legend Biotech. I think the two teams worked pretty well on those projects in the past. Looking forward, we also see more opportunity to collaborate with Legend Biotech. GenScript ProBio has invested quite a lot in capacity building and also invest a lot to improve our capability in later stage development and manufacture capability. We do see a lot of opportunities to serve Legend Biotech's need to really facilitate their both preclinical, clinical and possibly future commercializing needs, in particularly, GMP plasmid and the lentivirus production.
I think currently the two teams are actively exploring the feasibility of future collaboration. Thank you. Maybe Dr. Huang can give more comment from Legend side.
Thank you, Shiniu and Patrick. This is Ying from Legend. Yes, as Patrick mentioned, we have been collaborating with ProBio and other business units of GenScript Group in terms of some preclinical collaborations. That includes components such as plasmid and virus supply, including some of our ongoing IIT trials in China. Right now, the two teams are working closely to explore future collaborations, especially pending CDE approval when CARVYKTI is approved in China. We're looking to some of the options to localize certain important components for cell therapy manufacturing to give us a cost advantage. That's what we're exploring. Thank you.
Thank you.
Thank you.
Thank you. I'm showing no further questions. With that, I'd like to hand the call back over to management for any closing remarks.
Thank you. Thanks to all the shareholders, investors, and analysts for your continued support and care. If you have any questions, please feel free to contact our IR team. We'll see you on the next call. Thanks.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating, and you may now disconnect.