Good morning and good evening to our global investors. Thank you for joining WuXi Biologics First Half 2022 Earnings Call. This is Ziyi Chen, China healthcare analyst at Goldman Sachs. Before we kick off the session, I would like to highlight that this call is strictly for clients of Goldman Sachs and WuXi Biologics only, and this conversation is not intended for the media and is off the record. Participants will be removed from the call if they cannot be properly identified. This call and webcast is not for the purpose of sharing or receiving non-public or otherwise confidential information. Attendees are public market participants who may not receive and should not request non-public or otherwise confidential information about issuers or securities or about markets or securities.
Attending today's call including Dr. Chris Chen, CEO, Mr. Ming Tu, CFO, and Ms. Eileen Wang , Head of IR, for WuXi Biologics. Today's call is gonna be in English. Management is gonna start with their presentation first, then we're gonna open the line for question and answers. If you wish to raise questions, please use the Raise Hand function at the Zoom app, and we're gonna open the line for you. Or you can type in your questions into the Q&A box and management can answer those questions. Alternatively, of course, you can also send over your questions to ziyi.chen@gs.com. I'm gonna help you to ask those questions. Now without further ado, I'm gonna turn the call to Chris to get started. Chris, please.
Thank you, Ziyi. Good morning, good afternoon, good evening, global investors. Really my pleasure to share with you our 2022 interim results. I will talk about interim results first, and then everyone know about our capability and capacity. I want to share with you our progress. We are also a global leader of CDMO. We had a couple acquisitions in the past two years. I want to share with you actually the success of those. Before the finance section, talk about ESG and then I wrap up and answer any questions you may have. I think 2022 is the first two most challenging periods of WuXi Biologics history. You guys have the biotech funding potentially slow down.
WuXi Biologics, our UVL challenges and you see COVID in terms of operations. Despite all those headwinds, achieve incredible results. If you look at on the left side is our business performance. If you look at the number of projects, we go from 408 projects- 534 projects. Largest portfolio ever. What I'm most proud of actually is the in the first half of the year, our non-COVID project revenue grow 72.6%. In the full year, we expect this number to be more than 65%. Basically, you know, everyone is very happy that WuXi Biologics has made a huge contribution to fight COVID, right? You guys are also concerned, you know, what the COVID revenue disappear. Now you have the answer.
You know, basically this year, the non-COVID revenue will grow 65%, and last year it grew about more than 64% as well. Even next year, we expect our non-COVID revenue to grow more than 60%. We have added 59 new projects and our commercial project go from 4- 14. All those basically drive our backlog to grow from $12 billion to more than $18 billion. As a result, we increase our capacity. We increase our capacity by 50% from a 150,000-liter to almost 260,000-liter. We continue to add scientists or add employee to get all the work done. On the right side is the financial performance you're seeing.
First half of last year was an incredible period, because of our very high utilization rate, because of all the COVID opportunities presented to WuXi and we captured that opportunity. So the first half of 2021 was an incredible period. All the financial metrics were all-time high. Despite all those challenges, we actually achieved even better. You see all the growths in revenue, in top line, in bottom line, in EBITDA and EBITDA margin and in EPS. It's been. I'm very, very pleased with our first half of performance. This is a little more detail. Again, on a very high basis of last year, we continue to deliver more than 60% growth on revenue and more than 60% growth on adjusted net profit.
I think, you know, our profitability continues to be amazing. If you look at every aspect from gross profit from net profit from diluted EPS. Gross profit margin reduced a little bit. As I said earlier, first half of last year was incredible because we didn't add staff. Since then, we had added 50% staff. If you think about it, we have about 7,000 people first half of last year, and we have more than 10,000 people now. We added almost 50% of staff. Because of that, our profitability reduced a little bit. Essentially, we are hiring all those people to invest for the future. In terms of the key financials, as we have plenty of funds, we have close to CNY 9.9 billion R&D funds.
Our total liability to equity ratio is very healthy, and we expect to have very sufficient fund for our capacity expansion. We do not have any plan to issue any equity in the near term. We have some loans and we have also bank credit facilities, but our own operating cash flow is very healthy, more than 82% growth. This year our target is to be free cash flow positive and next year certainly will be free cash flow positive as well, right? Starting this year.
Beginning of the year, we bought back about $500 million worth of shares, and we canceled those shares mostly to offset the dilution because of the issue of issuing of new shares for management ESOP programs. In terms of CapEx, our first half is about CNY 2.7 billion. We are on track to spend about CNY 5.5 billion. For the next two years, we raised our CapEx guidance to about CNY 6.5 billion each year. Again, we have our own funds from our cash flow. We do not need to issue any equity or even loans for those CapEx expansion programs. I think again, I'm very pleased with the first half of 2022.
If you look at our growth, actually come from all the engines are firing at a very high speed, right? What's amazing, if you look at our DS part, CRDMO or the DS part, the early phase IND enabling work, we actually grew 82% in the first half. The phase I, phase II manufacturing, we grew 40%, and then the phase III and commercial manufacturing, we grew 63.5%. Both pre-IND and late phase and commercial, you know, made huge contribution to the first half. If you look at the right side, actually this, that's what I highlighted earlier. Our COVID revenue grew 46%, but our non-COVID revenue actually grew 72.6%. Non-COVID really drive the revenue growth for this year.
Again, COVID manifested through COVID. WuXi Biologics manufactured the best in us and, you know, the best in execution, the best in power in our technology platform. Because how successful we are, we have executed this COVID project. We actually gained a lot more recognition on our R&D capability, on our manufacturing capability, because we are able to deliver about 30 INDs, each of them about 5-6 month timeframe. We're able to deliver two BLAs already in 14 months, 18 months. We are able to manufacture 2,000 kilograms of antibody using our technology and deliver successfully to the client. COVID made the best out of WuXi Biologics. WuXi Biologics basically shined when we completed all those COVID projects.
Not only we made a very good COVID CSR, corporate social responsibility fighting COVID, but also our visibility, our recognition, our execution, all are demonstrated very well during COVID projects. Because of this, allowing us to win more trust from global clients, and that's why we are continuing to see high market share in R&D and in M. Because the non-COVID project is so important for the midterm and long-term growth, that's why I wanna even highlight even more. If you look at the chart on the right side, in 2020, our company grew at 40%, but the non-COVID project, basically the regular business, only grew 12%. The business is affected by the COVID itself.
In 2021, our company, you know, really captured all the opportunity presented to WuXi Biologics by working on COVID projects, COVID antibodies, COVID vaccines. The company delivered amazing 83.3% growth. Then the non-COVID project only delivered 64%. Basically, COVID was driving the growth in 2020 and in 2021. This year you start to see the reverse. Now, overall, we grow 72.6%. Our non-COVID program is 72.6%. Our overall growth is 63.5%. Basically, this is the first time in the past three years our non-COVID program are actually driving the most of the company growth. This is exactly what the investor want to see right there. Basically, for this year and for next year, when COVID revenue slow down or even disappear, WuXi Biologics can manage.
As I mentioned earlier, if you look at our 2021, our non-COVID growth, 64%. This year, we expect to grow 65%. Next year, we expect to grow 60% as well. From 2021 to 2023, the three-year CAGR of our regular business is actually 65%, you know, 64%-65% growth. That's, you know, despite the big size of WuXi's current size, right? If you look at our past eight years, our top line growth, you know, around 66%, and that's from a small base. Now that we are getting more than $1 billion revenue, we're still able to maintain the non-COVID business growth CAGR of 65%. That's the right side.
If you look at the left side, that's all the project numbers. I can tell you the similar stories. In 2020, we have 316 projects and 85 non-COVID. In 2021, we have 448 projects and 124 non-COVID. So non-COVID projects was mainstream. If you look at even the first half of this year versus the first half of last year, we actually have more projects. As I said, you know, we have three headwinds, COVID in China, UVL and the biotech funding potentially slow down. We actually still managed to get more non-COVID projects than last year. Last year was a fantastic year for us in terms of market share, in terms of project addition.
We added 128 projects organically, 128. This year we're still targeting to achieve 120. We achieved about 56 non-COVID projects, even higher than last year. This is a very familiar chart we have seen. I think this year, I would really, I want to emphasize the non-COVID revenue growth, very exciting non-COVID project growth. That's why we added two slides before that. You see a very familiar number, 534 total projects, very exciting. You see 59 total projects. As I said earlier, we're anticipating 120 projects whole year. We are right there.
In terms of 59 total projects, only three of them are non-COVID and remaining 56 are non-COVID. Again, if you look at the overall project number we added this first half, it's slightly less than last year. Last year was 68, but last year we have significant chunk, 12 COVID projects, and this year we only have three. Overall, you know, this half versus last half, we added more non-COVID projects, where, despite overall projects slightly less. We are still very confident we can deliver 120 projects this year. You see we have 29 phase III projects, and we now have 14 phase III commercial projects. The reason we change our definition of commercial projects is we have so many Win-the- Molecule projects.
Previously, last time when I communicated with you, the nine commercial programs all are Follow- the- Molecule. Basically we develop the programs ourselves, and that's why the first approval always come out of WuXi. Now as the Win-the- Molecule project becomes so successful, a lot of programs already approved in other countries or by other CDMOs or in our clients' own facilities. Now the tech transfer to us. Previously we treated as a phase III. For example, AstraZeneca's COVID program is already launched in 30 countries, but last year we treated it as a phase III because it's not approved in our facility yet. This year we have seen more and more projects like this. We're seeing projects already approved outside of WuXi.
WuXi take over to basically align our definition of commercial project with the traditional CMO. If you look at other companies like in our industry, most of all, as long as it's approved, it's considered a commercial project. We also change our definition. As long as it's approved, it's a commercial project. That's why we moved 4-5 projects from phase III to commercial this year. 9-14 commercial. Nine of them is organic, five of them are Win-the- Molecule. We're continuing to see more and more Win-the- Molecule projects, and you will see this commercial projects increase very significantly in the next couple of years. In the next 12 months, we hope to achieve another 10 Win-the- Molecule programs.
Maybe about five of them are actually the real programs already launched outside of WuXi. Basically, you know, hopefully next time when I report to you, this number will show significant number increase for our commercial projects. All of us are watching the global market funding. I think, you know, depending on the data you see, sometimes you see the global funding already stabilized, the funding in China continued to be challenging. Overall, we actually seen on our project side, we have seen continuously great interest from all our clients. We have not seen meaningful funding slowdown at all.
Because of the 59 projects added, and because of most significantly we signed a couple of commercial projects, our backlog continued to grow. Our backlog now is $18 billion, right? You see our three-year backlog. You see, maybe slightly less than what I presented last time is because we converted a lot of them to revenue, right? In May, we have a $3.3 billion backlog. We did not sign any new significant projects in May, but our three-year backlog reduced from $3.3 billion- $3 billion because we converted $300 million to revenue. Again, overall, this backlog is still very exciting and we have committed over and over again.
Our backlog is not expected to grow unless we sign a big commercial project because the backlog base is so high. Even though the backlog base is so high, we still continue to have a strong capabilities for new projects. We can start any new project in four weeks. If you look at our portfolio, I continue to see what's happening in our industry. Our portfolio is big enough, now it's really mimic the whole industry. You see, you know, we have 204 first-in-class programs. Our bispecific grow at 40% and ADC grow at 58%. The vaccine project grow at 78%. We continue to be the mainstream player for bispecific ADCs and certainly on the vaccine side. Very excited to see the growth in this new modalities.
I mentioned Win-the-Molecule already. I think our first half, we won five programs. The second half, we continue to win more programs, most notably late phase and commercial programs. The Win-the-Molecule, because Win-the-Molecule, one directly from a commercial program, we changed our definition. As long as it's regulatory approved, it's a commercial program to be in line with the global CMO standard practice. I think I'm mentioning that, we are talking about more than 10 programs. From large pharma, I think, you know, I'll give you a couple of examples. The number one is a European pharma, and we, you know, we are talking to them about five programs at our different facilities. Second is a European, again, European large pharma.
We're talking about similar program already launched in the global market, and they want WuXi to be the manufacturer, primary manufacturer for them. We are pushing ahead with the commercial ADC program and, you know, the U.S. pharma, this is let's say tech transfer of a vaccine program for commercial launch. This is a program we have highlighted a couple of times already in the past. The U.S. pharma, we're talking to them about in more than five program as well. In fact, you know, looking at the commercial manufacturing at a 4K and 4K scale. Overall, I think, you know, I think last year seems to be the hockey stick point for really for WuXi Biologics in terms of CMO, right?
Our reputation, our strong brand now, we are recognized as the best in class in terms of manufacturing. Mostly through our COVID programs and also through our more than 10 regulatory approvals from U.S. FDA and from EMA. It's a perfect storm for WuXi Biologics in terms of CMO. Now we are able to compete with any company out there on the big CMO programs. That's why we are very confident that WuXi Biologics can deliver consistent, sustainable high growth in the next couple of years. That's why I'm so confident that we can actually deliver a CAGR of 55% for the non-COVID projects starting last year. Again, this is we updated our commercial programs.
I think so. Now we are expecting maybe 15 programs this year, and you know, we're expecting more than 30 programs in 2025. Among the current 14 commercial programs, six of them are Win-the-Molecule strategy, and we are, you know, six of them are COVID programs, eight of them non-COVID programs. Basically COVID, non-COVID, almost on half and half. It's very diversified pipeline. Going forward, we expect our Follow-the-Molecule and Win-the-Molecule probably make equal contributions to the CMO projects. Maybe every year we'll add a couple from the Follow-the-Molecule strategy, and every year we'll add a couple from the Win-the-Molecule strategy. That again show really how successful we are on Win-the-Molecule side. CMO revenue will be the key driver for us starting last year.
Because of that, we also increase our capacity. Now our capacity by 2026 is 580,000 unit capacity. I think again, we should not invest in capacity blindly. We look at our portfolio, we look at how many projects are coming, and we look at macro and how much project we need. That's a match. Our capacity also will be spread from U.S. to Europe to Singapore to China. With China about 65% of capacity and outside China about one-third of capacity. I think our investment in outside of China has been very, very successful. Let's go back. We should study starting three years ago, we start to build a parallel supply chain, you know, in U.S. and Europe.
Now for the early phase R&D work, we're gonna start working in New Jersey, also called MFG18, is already running. Now we actually hosted 19 client visits. We signed $54 million contract just in the first six months of the year. What's also interesting, we actually attracted another more than 10 clients. These are new clients pushing. Basically, they do not want to work with our facilities in China. As soon as our facility is ready in the U.S., they'll start to work with us. Basically, we're new, 10 new clients for our U.S. site. Ireland site is almost ready end of this year. We're doing tech transfer for three projects right now.
Among the 10 programs that we're talking about in the next 12 months, most likely five of them will go to Ireland for commercial manufacturing. Our drug product activity, DP7 is acquisition from Bayer, has been very successful into our network. We are building opportunity in U.S. We're pacing ourselves because originally we tried to have very aggressive capacity built in U.S. just to make sure we mitigate the geopolitical risk. However, now we have seen our European facilities has been playing a perfect role in managing that risk for those clients who are concerned. Most of the clients are not concerned about this at all, I think. We're pacing ourselves in a U.S. capacity building. Now we're getting ready in 2024.
I think overall, during COVID, we actually hired 800 people in our global supply chain, in our global manufacturing site, U.S., Europe. You know, we're planning to hire another 400 people. This is really showcase the success of WuXi Biologics. Not only we can hire best talent in China, we can also hire very good talent in Europe, in U.S. and eventually in Singapore. Already talked about Singapore. I think Singapore is a perfect case for us to diversify our capacity and to meet the growing need from all regions. Singapore site can support U.S., Europe and China. If the Chinese company want to manufacture outside of China, can use our Singapore supply chain for that.
Because of that, we are making a very big investment in Singapore. We're planning about 10-year, $1.5 billion, $1.4 billion, yeah, U.S. investment. We also build a CRDMO. We'll cover the D and with the M and we'll complement with R as well. It cover also vaccines and biologics and ADC. I think some of you may have remembered last year, we you know our U.S. business grow incredibly fast. European grow even faster. China sort of didn't grow much at all. Now you see a you know very different picture. Now you see China actually resume 55% growth. That's why I think in you know WuXi Biologics model, serving all regions make it very nicely.
If some region lagging behind, other region will pick up and then in the next quarter, the things will change as well. Now you see a very balanced growth. U.S. 65% revenue growing 78%. We actually, you know, again, despite UVL, despite the political noise and despite the political biotech slowdown, our U.S. is still the main market. We actually added, you know, 32 new customers. The clients who never worked with us before. Again, as I said earlier, U.S. side alone attracted more than 12 new clients. We overall added, you know, 32 new customer from U.S. Among the new project we added, the first half, 59, more than 50% of them is still from U.S. I think the U.S. continues to be our most important market for WuXi Biologics.
Europe on a very high base last year continued to grow very nicely. China again reversed the trend of low growth last year. Now it's growing 54% again. This is the beauty of the, you know, diversifying income for all the regions. I think WuXi Biologics been fighting COVID and, you know, combating COVID with our global partners. We have made a huge contribution in making AstraZeneca vaccine, AstraZeneca antibody, GSK antibody, and Vir antibody. First half of this year, we actually achieved more than RMB 2 billion of revenue. This year, our total revenue is probably around RMB 3 billion. It's actually on par with last year. Last year was RMB 3 billion as well. Basically, the COVID revenue didn't—there's no growth this year.
The non-COVID revenue will grow more than 65%. That will contribute to the whole growth of the company. Currently, we're still expecting about CNY 1 billion revenue next year. You know, our non-COVID revenue will grow very significantly at around 65%. That still give us very high 30s growth next year. This slide is always the slide I'm proud of the most. It's our track record. It's our operational excellence, right? You know, we have the capacity to handle 150 INDs, 12 BLAs. You know, we have already delivered 315 INDs already, and 120 BLAs approved. 20 BLAs, 20 MAAs approved in all the different regions.
If you look at the facility we're building, the success rate we're running overall is incredible. This is also the slide I use most frequently when I work with a client. You know, they just need to look at this number. They know WuXi is a world-class company, world-class operation. We continue to deliver, you know, our track record in execution. Now we have the best execution in our industry. If you look at the WuXi Vaccines, the business continue to grow very well. We have a lot of large integrated projects I shared with you before, 16 of them. But we also have a lot of smaller standalone projects. Now we're serving 17 clients on 38 projects. Some of them are recombinant DNA vaccines, mRNA vaccines, viral vaccines, and microbial vaccines.
Very diversified network. ADC represents the most exciting aspect of our industry. The new modality that's has witnessed fast growth. WuXi Biologics continues to higher market share overall. You know, if you look at our program, we have 76 integrated programs. We probably contribute about one-third of the global INDs for ADCs. That's the contribution we're making to the global community on really enabling them to do ADCs. Our ADC concept is still the same. Follow-the-Molecule, Win-the-Molecule. One-stop shop. We're able to do ADCs at a faster timeline, a better track record than almost any CDMO out there. ADC expects to be our growth engine for the next couple of years.
Lastly, quality has always been our competitive advantage and now is our moat as well, because we continue to see regulatory approvals and regulatory inspections. Now we have 25 regulatory inspections, and six from FDA, seven from EMA. This jibes very well with our global CMO acceptance rate. If you don't have the quality, there's no CMO. Because of our 10 years accumulation in regulatory experience in FDA, EMA inspections, that also set up WuXi very well to compete for the CMO projects out there. That's also the success of the Win-the-Molecule strategy.
I think talent has always been key for us and, you know, if you've seen tremendous growth in talent, I think we are very happy that, you know, by end of this year, we'll probably have more than 1,200 people working in U.S., in Europe. You know, our key talent rate, the retention rate is actually incredibly high this period, 97%. Again, because of the sort of the biotech slowdown, potentially slowdown, funding challenges in our industry. At WuXi Biologics, we're able to retain our top talents, and that's set up very well for the growth for the next couple of years. On UVL, I have shared with you a lot of progress already. I think on-site inspection for WuXi City was completed in June.
I'm very happy to share with you actually now two U.S. suppliers has already obtained export license to ship bioreactors to WuXi City, and just, this week and last week. Very recent update. Essentially, the UVL restrictions for our WuXi site is almost being finally lifted, being removed. Now, our suppliers are able to ship us bioreactors starting last week. One supplier last week, one supplier this week. Now the only UVL impact to our site is actually Shanghai. Unfortunately, Shanghai is still have some sporadic COVID outbreak. We are working very closely with the Chinese government and the U.S. Department of Commerce on trying to find an inspection date for Shanghai.
Hopefully, Shanghai COVID situation can improve, and then we can arrange the inspection as soon as possible. Overall, I think now most of our clients are beyond COVID, UVL, and really clients have no concerns about UVL, and our suppliers have already mitigated and managed to supply us everything through the UVL challenges in the past couple of months. Again, UVL, there's no meaningful challenges to client, no meaningful challenges to supplier. Wuxi City is being very close to be removed from the list. Shanghai, we hope the inspection can happen very soon. I think if you look at our financial numbers, you probably never ever imagined that Shanghai actually we actually lost productivity in Shanghai for about two months, right?
As everyone knows, Shanghai was locked down for two months. None of that is actually reflected in the financial numbers because we have very good strategy. We have a global diversified network and for the work Shanghai couldn't do, we can transfer it to Wuxi City, to Suzhou, to Hangzhou, to [Primary], early next year to Chengdu, western part of China. I think during COVID we also have seen more than 600 people actually camped in our campus. We're actually able to keep our manufacturing running at a 100% rate, 100% success. It's incredible accomplishment from the company. Lastly, we are able to very quickly recover once the COVID is over in Shanghai.
If you look at our overall supply chain, I think you haven't seen anything related to COVID at all. We are able to ship materials to U.S. clients. We're able to receive material from our vendors. Our business continuity plan works very, very well. Our supply chain basically are able to supply us 100% manufacturing needs. You know, again, during the regular business, everyone can get supplies, everyone can buy items or even ship materials to the client. During COVID, I think, you know, during COVID lockdown in Shanghai, WuXi is able to manage this so successfully. It really demonstrates our supply chain resilience, demonstrate our operational excellence.
I think that's the first 30 minutes update on the COVID, on the first half of the year. I also wanted to give you a very quick update on a global drug product capacity. Does everyone know our drug substance capacity and capability already, right? You may not be familiar with our drug product. We are also one of the best drug product developer now and a manufacturer. We have already developed more than 350 formulations, and you know, we have one of the largest group on drug product development. Our strategy for drug product is very similar to our substance, end-to-end, one-stop shop and build our technology first and deliver.
All of the same strategy apply to drug substance and can be applied to drug product. That also led us to the success of our drug product capabilities and capacities. If you look at our drug product projects, we can serve all modalities, traditional antibodies, bispecifics, ADCs and other recombinant proteins. I think this is incredible. You see the number of project growth from 2018, 85 projects all the way to 2021, more than 240 projects. If you look at our manufacturing, I think we are able to do, you know, our manufacturing batches. We made 97 batches in 2018. Now we actually have 590 batches in 2022. You see a significant growth of a number of batches.
You'll also see our technology on high concentration drug product development, as you see different modalities. You see the rapid expansion of capacities. Sorry, I have a signal issue. To make sure we have a very significant drug product capability, we have built 11 facilities globally, in U.S., in China and in Germany to accommodate all these requests to manufacture drug products throughout the facilities in there. Now moving on to the part 3 of our discussion. I will share with you how successfully we integrate all the acquisitions. When COVID hit and when we are faced with a lot of new COVID project, we don't have capacity.
We should take action, especially acquiring sites. We acquired two sites from Bayer. We acquired sites from Pfizer in China, and we acquired our business in Suzhou. We are very close to Shanghai. All those acquisitions turned out to be very well executed. Now we're able to share with you how successful we can integrate those business. I wanna use two examples. I already talked about the Bayer facilities already been up and running, drug substance, drug product DP7. When we acquired CMAB, now we call them WuXi Biologics Suzhou. We acquired them. We know they are a leading CMO in China. We know they have a fairly good recognition, reputation.
In comparison to WuXi, the numbers, their, numbers or metrics are almost day and night. Within about a year, we are able to increase the product output by 4x within 2x. We are able to deliver operations from 70% success rate to a 100% success rate. We are able to utilize the facility more than 80% the first year, the facility. We're the first full year we took over the facility. All that translates to financials. We're talking about the execution of WuXi Biologics. We are able to deliver $100 million revenue from this site, and it is a 3x increase. We are able to deliver a GP margin of about 48%.
That is, you know, one of the best in the industry GP margin. For this under the WuXi umbrella, we're able to achieve such a turnaround. Basically a 3x increase in revenue from a money-losing business to a very high margin business and also again from a 70% success rate to a 100% success rate. How can we achieve that? What happened is we actually dropped 30 people, SWAT team. We totally upgrade the whole facility. You know, we upgraded quality system. We now are redesigning the facilities. We upgraded the team.
I think the CMAB acquisition gives us an insight how competition was in China. If you look at every aspect from technology, from quality, from execution, from experience, they are more than five years behind us in every aspect. Because of this, we really don't see meaningful competition from local CDMOs competing from China. Again, our main competitor will be from the global top ten players. I think, you know, again, it's amazing it only take us, you know, less than a year to convert this Chinese local CDMO to a premier global CDMO. That's how the team can execute. This also can be the model how we can help other sites globally and how our future acquisitions can work, right?
I think the successful integration of our first CDMO acquisition really showcase our strong M&A capabilities, also showcase our execution, how we can upgrade the facility from a local standard to global standard, from you know, money-losing business to a profitable business and profit margin at an industry premier level. Very similar story for the Pfizer facility in Hangzhou. Very, very similar story. We are able to deliver this, you know, a batch within 33 days. Overall, I think the Pfizer facility now is already 80% in transition. When Pfizer had the facility, they run a couple batches a year. They probably run maybe 3%-5% utilization. We actually the first year we have operation, again, running 80%.
We're able to deliver them at around CNY 200 million of revenue at the industry average gross margin as well. You know, both acquisitions, both the CMAB acquisition as a business and the Pfizer acquisition as an asset turn out to be very well for WuXi. Again, this set up how we can really conduct our business now for the future acquisition. Before I turn it over to Ming, I wanna talk briefly about ESG. I think ESG is very important component of our business strategy. We wanna continue to be a global leader in governance. We wanna be a global leader in greening our business. We wanna enable our clients, we wanna give back to our society.
I think we just issue our 2021 ESG report, if you are interested. There are a lot of data in this report. Very exciting. All our recognition has been reflected in this slide. A lot of or most of our recognition. We continue to receive very good rating for our ESG performance from MSCI to Sustainalytics to FTSE4Good. We are again the top 10 constituent of FTSE4Good Emerging Index this year. All ESG efforts have been recognized globally. As a global leader, we are committed to the future, committed to emission reduction, committed to water consumption reduction as well in the next 10 years.
Our global engineering group has really a ESG deployment. We're looking at every aspect greening our business. We want every new opportunity to be greener than the previous one. Not only more efficient, more modern, more state-of-the-art, but also more greener than the previous facility. Yeah, I think one of the facilities we'll be running next couple of months is our facility near Beijing, called Hebei, MFG8. We have all aspects of ESG component in this facility. Another facility that'll be running end of this year is Ireland facility. Actually, this will be the greenest facility ever built for biologics, because Ireland is very green to begin with. 60% of renewable energy supply, none from coal. We also use the largest disposable manufacturing facility.
This is actually besides our manufacturing facility in China, this is actually the largest disposable manufacturing facility globally. We have reduced detergent and water usage by more than 30%, 30%-40%, 50%. I think with that, I'll hand over to Ming to talk about financials.
Thank you, Chris. Now I'm going to talk about our financial performance. Our revenue and the profitability continue to grow into the record territory. This page here gives us the highlights of our financial metrics in the first half of 2022. First, revenue. As you can see that, in the first half of 2022, our revenue exceeded CNY 7.2 billion, a 63.5% increase over the same period last year, continuing our journey of exponential growth over the past nine years with a CAGR of 63%. The 63.5% revenue increase in this year was primarily driven by the successful execution Follow-the-Molecule and Win-the-Molecule strategies with more customers, more projects, and more revenue per project, as more and more projects are moving into the later stages.
A significant growth of revenue from late phase and the commercial manufacturing, now representing almost half of our portfolio. As Chris mentioned, the 82% increase in our pre-IND revenue enabled by the R&D of our unique CRDMO model, research and development. The 73% revenue surge from the non-COVID sector. While the demand from COVID sector is still pretty strong, but although growing at a decelerating pace. Also, the exciting new growth platforms such as ADCs, bispecifics, drug products, also contributed significantly to our robust growth in the first half. Of course, our capacity expansion and associated utilization are the key enablers for us to achieve this significant growth on our top line. Moving to the right, gross profit increased by more than 49% to approximately RMB 3.4 billion.
The increase in the gross profit was primarily driven by the robust revenue growth, the profit growth from late phase and the commercial manufacturing sector, the full utilization of existing and new manufacturing facilities despite the COVID constraints, and of course, our constant improvement of the operation efficiencies. The group's revenue growth exceeded the gross profit growth in the reporting period, primarily due to the reason Chris mentioned. The first half of 2021 was an extraordinary, or I should say exceptional period with record profitability. We took a large number of new integrated projects with very limited new resources added. When everyone was working at 120 or 150 of their capacity, it became a baseline that was very difficult to beat or repeat.
On the other hand, in the first half of 2022, we continued to invest in talent acquisition, in retention, capacity expansion, R&D, and also global footprint expansion to ensure the long-term sustainable growth. Hence, compared to the same period last year, our adjusted GP margin rate dropped about 2 points from 55.7% to about 53.4%. Compared to the historical GP margin performance, it is still a very healthy expansion. Adjusted EBITDA, which is a proxy of our operating cash generation, increased by more than 59% to RMB 3.7 billion in the first half. The Adjusted EBITDA margin reached 51.2%, slightly lower than the same period last year, but is 6.6 percentage points higher than the total year of 2021.
Adjusted net profit is the GAAP-based net profit, excluding the impact of foreign exchange gains, share-based compensations, and the fair value gains from our investment portfolios. This is the proxy for our business profitability under continuous operations. As you can see, that adjusted net profit increased 61% from CNY 1.8 billion in first half of 2021 to CNY 2.9 billion in first half of 2022. The increase in adjusted net profit margin was primarily contributed by the certain gross profit and it was partially offset by increasing R&D expenses as we are investing for the future. Next page, please. This page here illustrate our consistent growth over the past eight years on GAAP-based net income, net profit attributable to owners of the company, earnings per share, and adjusted earnings per share.
You can see that our net profit has grown more than 83 times between 2014 and 2021, and exceeded RMB 3.5 billion last year. We achieved another 39% increase over such a big baseline to reach RMB 2.6 billion in the first half. Net profit attributable to shareholders also increased 38% during the reporting period to reach about RMB 2.5 billion. Diluted earnings per share increased by more than 38% year-over-year to RMB 0.58 per share. Adjusted EPS on a diluted basis increased 63% to RMB 0.65. Again, the most important metric here is the adjusted earnings per share, as it strips out the share-based compensation, foreign exchange hedging results, investment gain and loss impacts. It is a true indicator of our operating performance. Chris, next page, please.
Slide 53 gives us more insight into our gross margin. In the first half of 2022, our gross margin reached 47.4%. Excluding share-based compensation, our adjusted gross margin reached 53.4%. You can see the composition of the cost components in the stack bars below, with roughly 18.5% in labor costs, 20.8% in material, and 13% in overhead, which includes maintenance, utilities, depreciation of the manufacturing facilities. Labor costs and overhead as a percentage of revenue are lower than our historical average, while material cost as a percentage of revenue was relatively higher than the historical pattern.
The key driving force here is the quantum leap of the late phase and the commercial manufacturing projects, which shifted the gravity of our cost structure from labor towards material as the batch sizes increased drastically. At the same time, the labor efficiencies, automations, and the full utilization of the manufacturing facilities also contributed to the lower weights of the labor and overhead in our cost structure. Compared to the same period last year, the 2.6 percentage points of a higher labor cost in the first half of this year were driven by the increase of additional headcounts we hired in the second half of 2021, and also the share-based compensation. The weight of the material and the overhead are within striking distance of those in first half last year and the total year 2021. Chris, next page, please.
Page 54 illustrates the sustained growth of our Adjusted EBITDA since 2017. Adjusted EBITDA is basically the EBITDA excluding the non-operating items such as share-based compensation, foreign exchange, and the investment gains and losses. As I mentioned earlier, it is a true indicator of our operating cash generation capability. As you can see, our Adjusted EBITDA increased from about CNY 600 million in 2017 to CNY 4.6 billion in 2021, with a CAGR of 64%. In the first half of this year, our adjusted EBITDA increased 59% to reach CNY 3.7 billion. Not only did our Adjusted EBITDA increased at a phenomenal pace, our Adjusted EBITDA margin also have expanded over the years from high 30s% to low 40s%, now into the 50s% territory.
The expansion of the Adjusted EBITDA margin is primarily driven by the expansion of the adjusted net profit. Through our relentless pursuit of the productivity programs, automation and economies of scale. Secondly, our years of investment in capacity and global footprint have also yielded some fruition. We extended our drug substance capacity from merely 35,000 liters in 2017 to 262,000 liters at the end of this year. The associated CapEx are amortized through depreciation excluded from the EBITDA calculation, but all these investments made the generation of the revenue margin and EBITDA a possibility. Again, our goal this year is to reach a positive free cash flow and use the operating cash inflow to fund our capacity expansion, as Chris Chen mentioned earlier. Yeah. Next page, please. Slide 55 presents the evolution of our return on equity over the past five years.
During 2017, our year of IPO, our ROE was 6.4%, and over the years of improvement reached a 10.7 in 2021. In the first half of this year, our ROE exceeded 7%. If you simply times that number by two, our ROE this year can reach the range of 12%-14%. On the right-hand side of the page, you can see that the five-year average ROEs of the three global leaders in the CDMO industry. Obviously, there is a range. It's difficult to develop an industry norm. However, at WuXi Biologics, we always aim to be one of the best. The reason our ROE historically was in the upper single-digit range was because our consistent investment in capacity, technology and global footprint.
We just talked about the evolution of our drug substance increase from say 35,000 liters in 2017 to 262,000 liters by the end of this year, 8-fold increase. Biologics industry is such a long cycle business that it could take 8-10 years to go from DNA to BLA. Similarly, building a world-class biologics facility is also a journey. From engineering study to construction to mechanical completion to GMP certification, it could take 2-3 years. After that, commercial arrangements, customer acceptance, quality certification, and then gradually filling the facility to reach full utilization could take another 2-3 years. That is why our ROE was lagging our investment when we were expanding.
The good news is that now with our profitability growth much faster than our CapEx, we can reap the fruition of the past investment and see our ROE continually improve to the top range of the industry. Secondly, we all know that ROE is also a function of leverage ratio. Ever since our IPO, we have been following a very conservative funding strategy. We probably rely more on equity funding than debt funding. Hence, our ROE might appear to be lower without leverage, but it brings more financial stability and flexibility into our long-term growth. Now I'm going to pass the baton back to Chris.
Thank you, Ming. I think if you look at the past 10 years, how successful WuXi is, we attribute those to the seven factors, the seven keys for WuXi establishing ourselves as a premier CRDMO. Our strategy has always been ahead of the time for our industry. You know, whenever industry needs a biofacility, we have them. We invest in vaccine back in 2018 and 2019. You know, we are able to hire the best people. Our people can execute. We incubate our technology to use the technology to drive for our projects. So far, we have been able to demonstrate as the best execution capability in our industry.
Our quality has always improving over the past 10 years, now become a barrier for other people to copy our business model. You know, the WuXi speed is always known in the industry. Now that we have the speed and we have execution, basically we can deliver project at the fastest speed and at 100% assurance on the execution side at a similar quality. I think those are the key factors for our success, and this will continue to be the key factor for our success as well. In a way, we can, you know, we can deliver a project better, faster and cheaper than most of our peers in our industry. That's why we continuously will take more market share and to deliver sustainable high growth.
If you look at the competition, we have built layers and layers of moat, right? You know, from either competing for China or competing for globally. I think most recently now we consider the ESG as a differentiation factor as well. A lot of large pharma, they have a minimum criteria for ESG. If you don't score certain ratings in ESG, large pharma will not work with you. Again, large pharma are the most reliable CDMO partner or most coveted CDMO clients, right? Everyone wants to go after them, but you know, they have very strong ESG ratings required. ESG now become also our moat as well.
To summarize, I think, you know, this year, as I said, it's the most challenging part, six months of our company's history, but we still continue to see huge demand of our services in every region. You know, we added the 59 projects. You know, we are still on target to deliver 120 projects this year. Among the 59, you know, 56 are actually non-COVID projects. If you look at the non-COVID projects alone, we actually added more projects this year than last year. Our business growth momentum continue to be very strong. Because of that, we're raising a guidance for this year, where, you know, our revenue guidance was originally 45%, we're raising it to 47%. Our adjusted net profit guidance was originally 40%. We're raising it to 47% as well.
Essentially, we're raising both our profit, adjusted net profit guidance and also our revenue growth to both 47%. That's incredible accomplishment from the team if we can achieve that. We, you know, kind of need to have strong drivers for sustainable high growth in R&D and AM. This first half was amazing means that the non-COVID revenue grow 72.6% and the full year 65%. Next year, we expect another 65% growth on the non-COVID project. Our three-year CAGR of non-COVID project growth is actually 65% despite of our size, company size. Again, COVID project make WuXi strong.
You know, because how we execute COVID project with our speed, with our success rate, with our track record, with our delivery, now we are actually able to win more projects, either R&D projects or commercial manufacturing projects. We're very happy with the new modalities growth, ADC, biosimilar and vaccine and drug products. Again, large pharma continues to be our key client, and it's a strategic point for us. You know, our large pharma clients go from a 10% revenue to about 40% revenue. We'll continue to maintain you know a strong relationship with large pharma, and then we are talking to them about 10 commercial programs manufacturing there. Lastly, I mentioned very clearly that we are able to integrate the three successful acquisitions.
Now make them earnings accretive and make them, you know from, make our competitor CDMO in China from a local CDMO to a global premier CDMO at a $100 million revenue at a 48% gross margin. We can take over a vacant facility from Pfizer and, you know, get them utilized at 80% and delivering $200 million of revenue last year, next year. We can make a Bayer facility run in within 12 months, get accredited by European agencies. Lastly, ESG continue to be our focus, and we wanna be a ESG leader, and we want ESG to be a differentiating factor for WuXi Biologics as well. Thank you for your attention. Be happy to answer any questions you have.
Thank you, Chris. Now we are opening the line for questions and answers. If you wish to ask questions again, you can use the Raise Hand function at the Zoom app, or you can type your question into the Q&A box. Of course, you can also send over the questions to my email, ziyi.chen@gs.com. Well, we have one online to raise hand. Chen Chen, you can unmute yourself.
Okay. Thanks, Ziyi. Thanks management for taking my questions. Actually, I have two questions about CapEx and capacity. My first question is, well, I am not sure if I hear Chris right just now. You mentioned you raised the CapEx guidance for 2023 and 2024. However, I also noticed that the new capacity plan for these two years is actually a bit lower than what was disclosed before. Why does more CapEx need to lower capacity for the coming two years? That is to me without aim to build more capacity overseas, as it's more expensive to build overseas capacity. Well, that's my first question, and my second one is, you also mentioned that you would adjust capacity according to your project pipeline.
Does the plan to decrease capacity in 2023 mean we are now becoming, like, a bit more conservative for the next year? Thank you.
Yeah. I think most of your questions center around 2023, 2024 capacity. That's actually a strategic move by WuXi to delay or to pace ourselves in U.S. capacity. As you know, U.S. capacity is the highest, is the most costly to build, is least profitable comparing to our global network. Let's say we can achieve higher profitability in China, followed by Singapore, followed by Ireland, followed by Germany, and followed by U.S. U.S. is most expensive to build and least profitable. Because initially we were very concerned about China-U.S. trade tension back in 2019, 2020. We want to build a very large capacity in U.S.
Now, over the past couple years, we seem to be able to mitigate the China-U.S. relationship by relying on the facility in Ireland and now facility in Singapore. We specifically paused the facility in U.S. a little bit, and that's the observation you have in 2023, 2024, that we have a slightly lower capacity because we delay the U.S. facility to end of 2024. All your questions center around that. We are raising guidance for raising our CapEx for next year, the year after, mostly to increasing capacity. I think. Did I answer your question? I think the 2023, 2024 is really a strategic move by the company to. We don't really need the U.S. capacity that quickly.
As you know, U.S. is the most costly to build, least profitable, and also there's a very high inflation right now in U.S. It's a strategic move by the company to basically we don't need the U.S. capacity as fast as we anticipated. Our U.S.-European capacity is more than enough to accommodate that. Now we also get a lot of feedback from our U.S. clients. They're very happy with Singapore, so we don't really need to build U.S. facility very quickly. That's mostly the delay in the capacity ramp-up in 2023 and 2024.
Oh, understood. Thanks, Chris. A follow-up question. For the Singapore site, do you expect the margin to be somewhere between China and the U.S., right?
Yeah.
I also noticed that there are over 10 late-stage projects currently under discussion with some European and U.S. big pharma. I don't know, like in terms of site choice, do they prefer to do their projects in China sites or our overseas sites? Thank you.
Yeah. I already shared with you know, about five of them will go to Ireland, the remaining five will come to China. China and Ireland are both very competitive in their because we offer clients different pricing. If they wanna do it in China, it's cheaper and Singapore is a little more expensive, Ireland is more expensive, U.S. is the most expensive. That's basically. We charge clients more in U.S., followed by Ireland, followed by Singapore, followed by China. We give all kinds of different options. If they want the best cost competitive option, it will be China and Singapore, and then if they wanna be closer to themselves, it will be Ireland, Germany, and U.S.
Oh, that's very clear. Thanks, Chris. I have no more questions.
Thank you.
Thank you. There are a couple of questions online. The first one is a question on the supply chain. Given we have established some pretty ambitious capacity expansion plan over the next few years, could you please comment on condition of supply chain and its readiness to meet the ambition for your expansion? For example, you know, single-use consumables, disposable bioreactors and filters, where the supply chain has been quite tight.
Yeah. Yeah, that's a great question. I didn't highlight that during my talk. In my supply chain slide, I mentioned that, you know, during COVID, we can actually ship stuff, but we are able to get everything we need. Let's say this is the fortunate part of WuXi. We have not missed significant revenue because of supply chain. Again, just partly because our purchasing power, partly because of our growth and everyone want to work with us, they wanna make sure they're satisfied WuXi's need. Our revenue impact on supply chain is limited to $1 million, a few million dollars, where a lot of the global CDMO, even a large number of clients actually, you know.
I talked to one large client and they actually missed 20-30 manufacturing slots because they couldn't get the supplies. For WuXi, we only missed two or three slots because of the manufacturing supply chain challenges. Overall, we're doing very well in the supply chain side. We're very confident.
Got it. This is for the commercial projects. What share of the total volume is WuXi able to capture from commercial project when it is to Follow-the-Molecule and also when it is Win-the-Molecule?
Follow-the-Molecule so far, we think we can still capture at least 80%. Our goal is to keep 90% of the project. Basically, when they're ready, we'll keep 90% of it. Win-the-Molecule, right now I think probably we will be hopefully we can win 20%-30% on the new projects out there. That's already very significant, right? Again, there are 20-30 good players out there, three or four, five that are you know very strong players out there to fight for the global for the market shares.
Got it. Here's a question on the biotech funding environment. Could you talk a little more about what you have seen from the clients in the past couple of months since end of the first half? You know, how would you characterize the priorities and focus in this tough environment?
That's a great question. We actually haven't seen slowdown on new projects. We haven't seen slowdown on commercial projects. It's only in the middle, the phase I and phase II. If you look at our revenue actually, you've seen that growth as well. That's similar trend. Our phase I and phase II revenue only grow 40%. That seems to be the company that struggle most. Basically, the company just IPOed and maybe one or two projects within the clinic. I think that, you know, those are the companies that we've seen sometimes they have to decide what program they wanna go for and how fast they wanna push forward. On the new project, new company formation side, we have not seen any slowdown. On the commercial project, we definitely haven't seen slowdown.
Got it. You mentioned about five new commercial projects. Are they China only products? Are they PD-1, PD-L1 ones?
No. You know, the new commercial projects are all of them from global large pharma. You know, they're not PD-1, PD-L1s for local market.
Great. Since you mentioned about the DP, how does the drug product margin, the DP side compared to that of the DS side, in terms of margin, and how do you think about the contribution of the DP to the overall revenue growth over the next few years?
I think, yeah, DP will the percentage will probably double, but the overall is still very small comparing to DS. We'll probably see 10%-15% revenue growth from DP side. The margin is comparable.
Got it. Another question is, do you have the cancellation fees baked into your contracts?
Yeah, that's a standard industry standard.
Okay. What is the policy on the accounts payable? Is the period expected to get longer or shorter in the future? You know, because if, you know, a third party can help to handle that?
Yeah. We are more disciplined in collecting funds from our clients. I think so you should see our accounts receivable becoming shorter. Accounts payable become shorter.
Here's another question, just to confirm the guidance for the non-COVID revenue. Are you guided for 65% non-COVID revenue growth in 2022 and 2023?
Yes.
65% for both years?
For both years, yep.
Got it. Another question is what has been the main contributor to the China growth in the first half?
That's a great question. It's all of the above. It's R and D and M. That's why the project in China, we still consider China very strategic market, still very important to us.
Got it. How much of the orders on hand are related to COVID, and how should we expect the COVID project contribution in 2023?
That's why you know, last year COVID was 30% of my revenue. This year, probably 20%. Next year, right now it looks like probably, you know, a single digit. Yeah. That's why the non-COVID project revenue growth, I'm so confident the non-project revenue growth will help the company deliver a very exciting year still next year.
Here's another question for Trogarzo from TaiMed Biologics. They're now shifting from WuXi Biologics to Samsung Biologics as its future CDMO partner. They comment that the gross margin will be increased from 50%- 70%. Does this indicate that Samsung Biologics has lower manufacturing costs?
It's the scale, 'cause at WuXi, because they didn't wanna invest, we're doing a 2,000 scale. At Samsung they're doing at least a much larger scale. If it's the same scale, we have the similar cost. It's really a scale issue, not a margin issue.
Got it. To what extent is the new capacity expansion covered and protected from your own Follow-the-Molecule and visibility into your pipeline?
80% of the capacity we build is for our own internal portfolio. 20% is for the outside and optimistic. That's why we said we are the most conservative, most logical in terms of capacity planning. Because we look at our portfolio saying, you know, this is. We look at the portfolio, we look at the risk, we look at success rate and adjust that, and that's the capacity we need.
Got it. Another question coming from investor is, what was the commercial CMO revenue in first half 2022, and how did they compare to last year? What was the mix between the COVID and non-COVID?
Because of our business model, we don't differentiate phase III and commercial because we... There's a huge revenue between phase III and commercial. That's why we only report phase III and commercial combined in there. I think COVID and non-COVID, COVID probably around 30%, 70% is the non-COVID.
Got it. I think that's pretty much all the questions. Lastly, well, just another one is, could you please comment on the 2023 growth rate? Is there any updated guidance on that?
That's why I said, you know, we still anticipate some COVID revenue, as in the non-COVID revenue will grow 65%. If you average that, it will probably be high 35, high 30.
Got it. Great. I think that's pretty much all the questions we got from the investors. Now I'm gonna turn the call back to Chris for any final wrap up comments.
Again, I think, you know, what I'm most excited about is actually the non-COVID growth for you know last year 65%, this year targeting 65%, next year probably targeting around 65% as well. Despite the company's current size, and that's really what I promise always, I always promise you a sustainable high growth. That's the most exciting aspect of it.
Great. Thank you, Chris, and thank you Ming for joining this, today's call. Thank you everyone for dialing this call. We're gonna wrap up the call here. Have a good day. Thank you.
Thank you, Ziyi.