Earnings Call: H1 2021

Aug 24, 2021

Thank you for standing by, and welcome to the Wuxi Biologistics Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Today's conference call is being recorded. I would now like to turn the call over to your first speaker for today, Ziyi Chen. Please go ahead. Thank you, and good evening and good morning to our global investors. Thank you for joining Wuxi Biologic First Half twenty twenty one 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 only and this conversation is not intended for the media and is off the record and participants will be removed from the call if they cannot be properly identified. And this call is not for the purpose of sharing or receiving non public or otherwise confidential information. Today, we are honored to have Wixiball's management team on the call to discuss the results and also the recent business updates. Management attending today's call include Doctor. Chris Chen, CEO Ms. Christine Liu Wang, CFO Doctor. Michelle Chen, VP and Head of Corporate Development Ms. Sharon Tang, VP, Head of Corporate Communications and Public Affairs and Ms. Eileen Wang, ED, Head of Investor Relationships. And today's call will be in English. The presentation slides are available at Wuxi Biologic's website, IR section. Chris and Christine will give us an update on results and after that we're going to open the line for question and answers. Ciyi. Chnjs.com. I'm going to help you to answer those to ask those questions. Now I'm going to turn the call to Chris to get started. Chris, please. Yes. Thank you, Ziyi, for the introduction and great to meet all the investors online. And I think it's great to have this update again. So I'm going to go directly to my favorite slide, slide number 5, where you see a bridge, where you see every year I use this slide to really highlight the company's business. So I always tell investors that if you follow Weixi Biologic, you only know that you need to know the top left three numbers, right? How many total projects, how many new projects and how many late stage projects, because all others are basically all other business are results of agreement by these three numbers. So you see incredible progress of all these three numbers, right? So we have the number of integrated projects, same period of last year was 286, now it's 408. So incredible more than 42% increase. The new projects even more surprising that we have to go from 38 to 79, certainly the 79 include about 18 CMAP acquisition. So even if you exclude 18, 61 is still incredible. That's probably correspond to about more than 45% of total market share. So our total market share can be reflected in the 4 0 8 number. The incremental market share is actually 79 number and you see a significant increase of late fees number from go from 19 to 32 as close more than 78% increase. As you know, late phase project will drive near term revenue. For the 2nd row, the new projects, each project on average give us a $6,000,000 revenue in 2 years. But for late stage project, it's 20,000,000 in the next 2 years, but it's probably can go to as high as 50,000,000 per year in a couple of years. That's why I always share investors, if you understand the Weiqi Biologics, these three numbers will give you really the best of everything. Because we have those incredible numbers, so we have our backlog will grow significantly. I always tell investors, backlog growth is very hard because we consume a lot of them to revenue. So this time we still see a 31% growth of backlog. I will explain later on when we go to the backlog slide. And because of this portfolio, we need the 4 30 ks capacity and then 2,800 scientists, more than 7,600 employees right now. As of now, we already have more than 86,000 people. So basically between end of June to now, we already added more than 1,000 people as well. So the left side is really the business, the operational metrics and on the right side is the business metrics you guys are very familiar with. You see an incredible revenue growth from RMB1.94 billion to RMB4.41 billion and you see the adjusted net profit also increase of more than 163%. I think our gross margin and net profit margin, EBITDA margin are the highest. This last year, not last year, this past March, when I talk about the second half number, I said the second half, we all almost achieved a steady state margin because everyone is working very hard, all the facilities are fully occupied. And the first half of this year is very similar. But the numbers are even more even better. So this really showcase our operational improvement. What's the best we can do? So I think if we maintain the current pace, if we don't add any new facilities, if we don't have a very strong dilution of new people and our margin will be able to maintain that. But to sustain the growth, we need to add new facilities, we need to add more people. So you'll see margin coming down a little bit and then go back to this when we get full utilization again. So diluted EPS, you'll see a more than 130% increase. So all those financial numbers are looks great. Page number 6, I think this is again, this is the same number, just different format. So I'm not going to go through this number again. But again, those both revenue, profit and profit margins are record high. I think that's really showcase what I call a steady state margin that which balances can achieve if we don't need to do a significant investment or if we don't need to add too many people. Slide number 7, the key financials. I think we have plenty of funds for us to grow and currently we have more than RMB13.9 billion and we have borrowed around RMB3.2 billion and we have another line of credit of RMB2.4 billion, another banking bank credit facilities of RMB 2,400,000,000. Our operating cash flow also increased very, very fast, more than 85%, so RMB 798,000,000 on RMB and our CapEx spending year to date is about RMB 4,000,000,000. We anticipate it will be sorry, the first half, not year to date, first half CapEx spending is $4,000,000,000 We're anticipating we'll double that this year, mostly for all the capacity expansion I talked about. So Slide number 8 is a very familiar slide you guys have seen, right. So it's a very including final slide. So I also the difference this year versus last year, I also put the key numbers for the last year's number for the same period last year. This is the year over year growth. You see incredible growth of the entire funnel on every level and certainly the three numbers I had last time in the first page. I think this is I use this funnel to showcase our follow the molecule strategy. Our win the molecule strategy, you can also see it. We actually won 12 projects, 12 external projects, including 4 Phase 2 and 4 Phase 3. So I will go to that page when we highlight even more. We only in the funnel, I wanted to showcase projects with the revenue higher than around $5,000,000 I mean, so basically any project more than $5,000,000 we consider a key project, easily projects. But we also have a lot of smaller projects and some of them sometimes lead to key projects. So we have actually additional almost 700 non integrated projects. I just want to give you the context of those numbers. The most exciting development over the past 6 months is certainly we added 2 more commercial projects. So one COVID-nineteen anomaly, one non COVID-nineteen the PD-one from Vir from TESARO and GSK. The milestone revenue in this reporting period was slightly less than expected, $24,000,000 This is mostly because of timing issue. So as you know, this is linked to clinical milestones. So sometimes there is milestone hit June 30 versus July 1 makes a huge difference. So we still expect a significant growth of milestone revenue this year. Going to Page number 9 where I showcase really the pipeline what are the different modalities, different biologics that we're working on. So overall, you see tremendous growth of the portfolio, about 42%. You do see for some area, the more exciting area that the industry is heading to, right? You see more than double of the bispecific antibody. You see 60% of growth of antibody drug candidates and you see 800% of growth of vaccines, right. So those are the 3 new areas that we highlighted and also in the past couple of years. So we really set up the trend to be able to handle the to be able to handle very tough projects. So in particular, I never did project we see a slower growth 27% for two reasons. One is that we do see more and more complex projects and also for smaller projects, for complex projects, which is basically cut the teeth. Everyone trusts Wuxi, they can do very complex projects. So among the portfolio of 408 projects, we actually have 152 for same time program. So I already mentioned 9 vaccine projects, 6 of them are non COVID and 3 of them are COVID. And recently Alzheimer's drug approval from Biogen attracted a lot of attention. We actually have 5 programs that focusing on that area from global companies with very exciting potential. And we have established our capability to manufacture mRNA vaccines. We have already manufactured mRNA vaccine in the lab scale from beginning to the end. We just have a GMP facility ready. So if the opportunity is right, we should be able to make 50,000,000 or 100,000,000 doses of mRNA vaccine in our facility in Hangzhou, the newer facilities. With that, I'm going to go to Slide number 10, where I will highlight with you more about the Wyndham molecule strategy. So I mentioned earlier the Wyndham molecule, we have great results. We have 5 Phase 2 and 4 Phase 3. So this is only half a year, right. So you see hopefully this year we'll do much better than last year. Last year we have 6 Phase 3 and the 4 Phase 2. With the molecule study does not contradict the follow-up molecule actually there is actually complementary. So follow the molecule basically means we'll start from the beginning, you take it all the way through, but it takes time for every molecule to go through its own stages. But when the molecule is when our global partner find the current their current CMO supplier, when they are not happy with the current CMO or when they either because of technical reasons, it doesn't deliver or because the quality is bad or because they consider having a capacity. And so at some point they need to think about switching to an alternative CMO. This is where we should come in and we can help you. So we started the strategy late 2018, mostly early 2019. Now you see the progress. So we have already won 34 projects, majority of them actually is Phase II, Phase III. So as I mentioned in the introduction, Phase III give us $20,000,000 revenue in the next 2 years, years, dollars 20,000,000 to $50,000,000 versus the Phase 1 preclinical asset with a molecule follow the molecule strategy give us $5,000,000 to $6,000,000 in 2 years. So you see a near term revenue boost and also immediate conversion to a CMO to contract manufacturing if the program is successful. That's why I said the 2 strategy really help each other. The winner molecule will really drive the expanded pipeline, also drive additional near term growth. So it's a boost of near term growth. Going to Slide number 11, because all those exciting metrics, our backlog grow substantially again. So I always tell investors don't expect which is backlog to grow because for the backlog you consume a lot of them to revenue every year. So you have even with maintaining a 0% growth, you have to fill that gap because revenue converted, you have to spend. But over the past couple of years, we are still able to grow backlog and it's getting harder and harder. And also, if you notice the backlog is very interesting. So we have about $12,000,000,000 worth of backlog, about 82% of them is long term. The 3 year backlog is about RMB2.2 billion, so that's about 18%. So among the current backlog, 18% of them is we'll convert them into next 3 years and then 82% of them is year 3 to year 10, sometimes maybe even year 12. So this really showcase the stickiness of Biologics business. So let me go into a little more details on the backlog. Among the $12,000,000,000 backlog, dollars 7,000,000,000 in services and this app is almost like guaranteed. But among the 7,000,000,000 services, there is a one project for 3,000,000,000 for 20 years. There's another project for about 1,000,000,000 for 10 years. So it's actually so a few long term projects really dominated the service business backlog. So again, the RMB 7,200,000,000 is among 4 80 projects, but actually 4 projects is more than half of this. That's the long term stickiness of the business process over our current business. And if you look at the R and D project is R and D project is RMB 5,200,000,000. This is about close to 60 projects. Every project we receive on average about $90,000,000 milestone payment. Again, we will receive this payment only if the program is successful. So let's say for the program, this is mostly the program that we use our IP. If they use our IP, our Wuxi body, our Wuxi app and all the IP that we generated. So typically it's also back end loaded. So when they approval, we get $10,000,000 $20,000,000 $30,000,000 When they get a big sales, when they exceed $1,000,000,000 sales, we'll probably get another dollars 10,000,000 $20,000,000 So the front end is actually relatively small. And typically, let's say, if they go into IND, let's say, we'll get $3,000,000 So if the program actually pause after IND, then out of the 90,000,000, we only get 3. That's why for this 5,200,000,000, I always internally I put a 30% basically. I think we will receive about RMB 1,500,000,000 milestone payment from this. And this last year was about RMB97 1,000,000 already. In this first half, as I said earlier, is RMB24 1,000,000 because of timing issue. This year, we still hope we can achieve a significant milestone payment. And if you look at the 3 year backlog, we have a 2,200,000,000 Among the 3 year, about 70% to 80% of them is actually next 18 months. So this really give us a near term visibility, basically saying sorry, next 80% 70% actually next 12 months. So basically meaning the next 12 months, we actually going to be seeing about $1,500,000,000 revenue and this really give us a near term visibility. So I think if you read this backlog, there's a lot of content in this, as I said earlier. So a couple of key messages, right. So the backlog give us really the visibility of long term, right. You see day 7, day 3 and day 10 actually is 82% of the backlog day 3 year 3 year 10, but also give us a near term visibility that in the next 12 months we should be able to see $1,500,000,000 revenue. And so again, this backlog is a contract signed that have not been converted to any revenue. It does not mean with this $12,000,000,000 backlog, some investors said, are you full? Are you turning away clients or projects because you have such a great backlog? It's actually not related at all. We can take any projects. So we can take any project within 4 weeks. So if you have a large scale CMO project, we can take it in 4 weeks. If you have another clinical program that you want to develop, we can take you within 4 weeks. So this backlog just show our near term visibility and also our long term sustainable growth. So I'm spending a lot more time on backlog this time than the past couple of years because we received a lot of questions because of backlog growth. I'm going to Slide number 11, where sorry, number 12 will give you an update on the COVID programs. The most exciting thing is really now we have a COVID approval from GSK and AVR and our other progress is still ongoing. Originally, when I talked to investors, we said 2022, we don't think 2022 will be significant revenue. So now we have changed our position and because we added additional 8 COVID antibody projects this year, we added another COVID vaccine, we may have another COVID vaccine. So this year, we probably have at least 10 additional COVID programs. That basically means in 2022, COVID will still contribute to a very meaningful revenue for us on both antibody and the vaccine. So I'm going to Slide number 13. Because of our global portfolio, because our we want to be a global company, we're investing very aggressively in the global capacity. So in Germany, the facility is ready to go for drug product, drug substance next year. Ireland, 2 facilities will be ready next year. The U. S, Princeton will be this year and then Worcester will be a couple of years. So you see our capacity growth, you see the chart there. End of last year, we have 50 ks capacity, everything is full, right. End of this year, now we have 150 ks. So even right now, we only have 70 ks. So we only have we only have about 100 ks capacity. So we have additional capacity online end of next year. But right now, our capacity is almost 80%, 90%. So that's showcased in our profit margin, in our growth in there. So we'll continue to invest in capacity to match our portfolio growth. So if we need the capacity, we can accelerate. If we don't need the capacity, we can also put some of those capacity on hold as well. So it's a very dynamic process. Slide number 14, this is always my favorite slide. So last time when I talked to you during the annual results, I said we have 4 engines. We have 2 big engines, North America and China and 2 smaller engines, Europe and Asia. Asia is mostly Japan, Korea and Singapore. And this time actually the small engine in Europe turned to a big engine. You see Europe acknowledged 22% of revenue, mostly because of the commercial program on the vaccine. Certainly, the original business, the non COVID business also grow very well. So you see the balance in nature of our business, because we have clients in all four regions, some area grow well, other area may not be that stellar performance, but overall give Wuxi sustainable high growth. So let me use North America as an example. North America last year because of COVID will only grow 16%, but now grow almost 150%. It's incredible. So typically in the past couple of years, North America grew about 40%. So this time because of the COVID, now it's growing very significantly. And Europe has been growing very fast, typically about 100% because it's a very small base. So Europe has been growing average about 100%. But last year because of COVID, it only grow 40%. So again, this year because of the COVID commercial program will grow at 700%. And China traditionally has been growing about 40% a year and biotech in China is just picking up. So it's traditionally growing 40%. But last year, we have a lot of COVID programs, so we actually grow 80%, 75%. And so you see the balance in nature. So U. S. Grow slower last year, but China grow very strong and Europe grow strong. China relatively speaking grow slower is mostly because of the program that the COVID program in China did not grow in revenue as big as U. S. And Europe. We have many COVID program in China that because is no market for COVID, no significant market recognized last year for COVID therapeutics in China. And that's why most of the program is sort of kind of on hold. And this year, we do see additional market again. So hopefully China growth will pick up. And rest of Asia, rest of the world is mostly Japan, Korea, Singapore is actually very interesting as well. So this is the first time we see a slowdown. This is also because last year we had tremendous growth of 75% because we are working on COVID program. In this region also COVID program didn't grow at all, also part that led to a reduction of revenue, decrease of revenue. Full year we still expect a growth versus last year. So I'm going to Slide number 15 where I will talk about the customer. I'm going to focus on the right side first. And so if you see in now the 2 big engines, 2 small engines still true for client space. The China now have more clients than U. S, but China clients are mostly early phase and whereas the U. S, a lot of Phase 3 and the commercial. That's why in the next couple of years, you continue to see U. S. Drive the growth, China growth will pick up and Europe and rest of Asia, client base wise, still about 10%. So still too big engine to small engine in terms of client base, but revenue distribution changes a little bit. On the left side, you also see the existing clients continue to give us more projects. Our top 10 clients now on average 7 projects and top 20 almost 6. And so what's more exciting is that the current client, there's 80% chance when they have a new project they'll give it to WuXi. So our brand recognition is already well recognized with the client base. And last year because of our performance in COVID, we are getting more and more projects. As I mentioned, our incremental market share was almost 45% because we got 61 projects globally in the 1st 6 months of the year. Because of that, we're also expanding our capacity to grow to be able to handle 120 projects and that's almost the largest capacity ever. So basically starting this year, we'll be able to take 120 projects and process them through our engine of development. Page number 16 is a very familiar number. So I mentioned large customers, we do not count the customer who give us the contract less than 5,000,000 and so we see a very healthy growth. Our client the customer number grow almost 30% in the past 7 years. You see top 10 customer top 10 twenty customer revenue contribution is still very diversified. It comes in a little bit compared to last year because of the commercial program. But even despite that, the top 20 clients only have 60% revenue. So on average every client is only RMB20 1,000,000,000, 3% revenue. You see because of the success of the follow the molecule because every client also want to give us more product, you see the top 10 clients, the average revenue also grows very significantly, CAGR of 49%. Basically in 2014, our average line divided by RMB21 1,000,000. Last year was RMB230 1,000,000. Now, this first half is already RMB215 1,000,000. So you see a significant increase in this number again because of the commercial manufacturing success, because of follow the molecule success. So because of that, our average revenue per project also increased because each program move to later phase and also the program is getting more and more complex as the bispecific ADC, the cost is higher than traditional antibody. On Page 17 is my highlight of this entire presentation. If you don't remember anything else, you'll remember Page 17. I think again for the past couple of years, our revenue growth is incredible, 60%. But if you look at the pre IND, the revenue we collect before the MOG program going to a patient is a 47% growth. But post IND that's including clinical manufacturing and commercial manufacturing, 93% growth. But if you amplify even further going to the late Phase 3 and the commercial, this year we're seeing a 366% growth. This is the first time we actually see CMO revenue exceed more than RMB 100,000,000. So it's almost RMB 890 1,000,000. So this is really the say this is really a success both follow the molecule and the win the molecule. So you see the follow the molecule success is basically the post IND revenue grow faster than pre IND revenue, right. And then the late phase program grow faster than even pre IND, right. So you see acceleration of late phase and commercial revenue. So we'll continue to see the growth. And as I mentioned earlier, the commercial manufacturing revenue will drive a lot of the growth in the next couple of years. And I also shared with you last time that our margin for commercial manufacturing is very similar to clinical manufacturing. This is a total surprise to us. Originally, we expect the margin will be about 500 basis, even 100,000 basis points lower. Now we actually can achieve similar margin. This also explains why the first half our margin is so good, right, because we have a very significant commercial manufacturing revenue, but our margin is comparable to the previous announced clinical manufacturing. That's why we can achieve a 52% gross margin, about 42% net margin and about 50 4% EBITDA margin. It's because again our margin profile now is almost similar pre IND, post IND and the commercial manufacturing. So Page 18, this is a slide you guys are very familiar with. So I'm going to probably not go spending too much time on it. So we have the track record, now we have 215 molecules in the clinic. Now we have 7 BLAs and MAA. Our facilities, I want to own the only thing I want to highlight is that we are bringing 13 facilities online this year and including 6 of Build Ourselves and 7 from the 3 acquisitions we talked about earlier this year. And then so all the operational metrics is still from the same number last year. Again, bringing a sourcing facility online this year that really give us additional revenue next year and the year after. Again, we see what we see promise investors is sustainable high growth. So I'm going to with this, I'm going to go to the second section. During the Investor Day, I share with you the 6 factors that we have been so successful. I added another factor, the technology base. So I think the 7 factors that really led to our success in the past 10 years will drive our continued success in the next 10 years. So I want to highlight I'm going to put you on the 20. I'm going to highlight the same factors again. So when you know from the get go, which has the right strategy, we have assembled a team of people who are really dedicated, who have a can do attitude, who are in the business to win. And with those people, we are able to invest in technologies that are state of the art and globally leading. And with those people who have a can do attitude, who have built a very proud culture, who can execute at high quality and at the speed that no one can match. In the meantime, we're still very flexible working with our clients and we cater to their needs. So with these seven factors, this really contributed to the huge success over the past 10 years. And with these seven factors, all of them become a barrier for a global company has to compete with Wuxi. All of them becomes Wuxi's strength. So certainly, let alone all the competitors from regional, from China or from India. So with the right strategy, with the right people, with the best technology, with so far perfect execution and improving quality, already global premier by improving quality and with unmatched speed and with the flexibility to cater to our clients, I think our success in the future, I think is sustainable. So I'm going to go through them very quickly each one of them, but some of you already have seen the slide. So it's very similar to the last time. So the strategy of success, both the follow the molecule and the 1 molecule has been very successful. A good case study, right, will be the GSK PD-one. We started with TESARO in 2014. Now 7 years later, the PD-one is approved. If there was no COVID, we could get approval in 6 years, For Versus COVID antibody GSK as well, now you see approval within 14 months. So the strategy is clearly there. Follow the molecule and win the molecule. And we also can pre proactively invest. I'm going to place number 22. So when we get into the vaccine business in 2018 and no one know what we should want to do. Now the vaccine business is this year probably going to be $300,000,000 revenue, right. So it's incredible growth of the vaccine business. And the Wishybody, the investment in Wishybody in a similar way, I for the story of Wishybody over and over again. So I think we are in a position to see what the industry needs and we are investing R and D money to invest in technology so that when the industry needed, we have it. I think that also set up a huge barrier for our competitors because we work with our clients so closely. We know what they need. Slide number 23. And as I mentioned, go back to the portfolio slide where I mentioned that the highlight for Wixibayo will be the vaccines in ADC and in bispecific. So to grow this vaccine and ADC business even further, we actually spend over separate companies. We formed a separate company to allow those companies to focus on the vaccines and then the ADCs. I think if you count them separately, they are already a global top 20 player and top 5 player in China. So I think we have we give them a lot more freedom so they can drive the business even harder, even faster for both vaccines and for ADC. I think I'm going to Page number 24, talking about people. I think every time I told either employee or investors or clients, I said, people are really our assets. This is something not I didn't say it lightly. I think, which is success has always been we have the great people and you see the growth of your talent is unbelievable. And this year, we're adding 3,000 people. We began the year with 6,600. We'll probably end the year with 9,600 and probably even more. So we're able to recruit, we're able to attract, recruit, develop, retain them. I think that's the incredible success of Wixi. That also become a huge barrier for our competitor to cover our business model. So our talent retention rate is more than 95% for both the overall employee and also key talent. I'm proud, I'm very proud that we actually have more than 500 employees working in the U. S. And Europe, mostly in Germany, Ireland and the U. S. I think that will probably grow to 1,000 beginning of next year. So we can replicate our success with the talent in China and in global settings as well. I'm going to spend the next couple of minutes talking about the technology. And I think Wuxi again, during the Investor Day, I didn't highlight on technology, but the technology is a foundation for Wuxi to get new projects, get more projects. So with all the background technology we created, the 59 IP that also drive to the $5,200,000,000 milestone backlog, not only the service, but also milestone backlog. So Slide number 26, the Wuxi Body, I think I've been talking about the Wuxi Body over and over again. I think now we have additional projects, now we have 31 Wiki Body projects, 2 of them in the clinic. Hopefully with some good data, we can even promote our Wiki Body even more. Slide number 27. And we also not only we are a leader in the industry, now we start to publish a lot of what we learned and to share with the industry so that everyone can learn and benefit from which is experience. So on the bi specific anomaly alone, we have already worked on 11 formats. We actually published 34 people alone in purification. And so this again showcase our industry leaders digital position. We actually share with people how we work on developing a Wishy Body clarification or non Wishy Body clarification and how this way other people can learn faster from Wixin's experience. So number 28 and that's the only manufacturing side, this is on the discovery side. How can we develop a bispecific antibody? So our discovery team also wrote a very nice article. Now everyone is a lot of people are reading this and get insight on how to develop the next generation bispecific antibody. And besides the bispecific, now we are getting into cry specific Tetra specific. So we have developed our own technology from scratch. Again, this is from scratch. We take a I would develop a nano body from either a Apical or a Llama and we assemble them in different formats to call them a spa body. And we can again, as I said earlier, we can use this to build traditional antibody, biospecific. We can also use it to do a multi specific, a type of specific. So this is a great progress. Most of those companies have this technology, a spin off a company in the U. S. Who have the $1,000,000,000 valuation or $2,000,000,000 valuation. I think Santa Fe just bought a similar company for about $2,700,000,000 with the asset. I think this is a very valuable technology that will drive additional IP for Wuxi in the next couple of years. Slide number 13, we have amazed the global community by how fast we can move and how quickly we can do COVID project and very high productivity. We actually share that with the global community as well. We published an article in biotechnology progress. We only have 2 to 3 months to do the project. We still get a walk in average, almost 6 grams per liter and 80% of the project will get 5 grams per liter. This is because of our cell line technology, because of which we call our overall cell line IP cell line platform. So we actually again, we share this with the global community, so other people can follow. But because we amended, we're still way ahead of the any competitor if someone want to follow us. So I think so far we have delivered more than 15 molecules in this approach. And this is the tremendous progress of WuXi's technology and really a showcase of WuXi's technology as well. I'm going to Page 31, Continuous Manufacturing. This is not an easy platform for global community to adopt because most people are not using a current platform. I use this analogy versus a landline versus a wireless. So this technology is almost like a wireless. When Motorola already approached AT and T, AT and T said, I don't need your technology. So I think this industry is very conservative. So probably still say most companies still they say, I don't need the continuous processing. But I think this is a key to reduce the cost of goods down the road. So we have already have 5 BLAs targeted 13 projects. Most of those are for emerging markets. So this can reduce the cost of goods by at least 50%, if not 70% for emerging markets. So we are using this for emerging market first and at some point as a global community will take this for global as well when the pricing pressure is there, so in U. S. And Europe. So still great progress on the Wuxi technology, the Wuxi app. Up means ultra high productivity. So traditionally people can get a 3 gram per liter, 4 gram per liter. For us, with the traditional technology, I can get 6 gram per liter. We mentioned COVID earlier on. But with the WuXi up out of high productivity, we can get 20 or even 85 gram per liter. So we can reduce the cost of goods significantly with this technology. We also published on Page 32, we also published this in a premier journal. Again, this is to showcase our technology, also let others learn from WuXi, what we can do, how we did it. So, WuXi's success has never been easy, but one of the key success factor is actually because we use disposable manufacturing. From the get go, so I'm on page 33. From the get go, I believe the disposable is disruptive. Now we pretty much showcase to the world, now it's disruptive. Right. So we can we have already shown we can make 1,000 batches of clinical at 98% success rate. Now we can showcase, we can make an up to metric ton scale. We already made a metric ton scale at a very low cost, 80 gram per liter and a very high margin. So I think so this is truly proven. I think through COVID, through last year, the technology we endorsed now truly become a proven technology. If you look at the industry overall, go to Page 34, and this is also already being adopted by other people as well. So in new capacity, there's already 44% market share. So the technology we pioneered, we embrace from the get go now have 44% market share in new capacity and have 70% market share in R and D already. Again, 10 years ago, when we said, we're going to change the whole CDMO industry by using this technology, while people didn't believe that. Now everyone is following us. And Page 35, so I think I spent a lot of time talking about technology and with the right people, with the right technology, our And with this, if And with this, if we can get an antibody approved in 14 months, globally there are only 3 or 4 companies have done that. And we are one of the in the service space, we are the only one. The other companies are Lilly Regeneron, as you know, and they bring their own antibody to the market and through this technical, so very similar approaches. So again, we are using this as a gauge, we are the best in the service industry. We're comparable to Lydian Regeneron in execution in bringing COVID antibody to the patients. So our executing is clearly shown here. Next example is actually our facility in Germany. We signed an agreement with Germany during the JP Morgan with Bayer during JP Morgan. And then in April, we start to take over the facilities. And in June, I hired site head. So we have 3 people in June. And now this past July to get approval. So this is a tremendous program. This is the Wuxi Bio speed and the quality demonstrated outside of China and was implementing again, you guys know German culture is meticulous, it's everything doing right, but we're still getting done in 12 months. Another good example in Europe would be our facility in biological facility in Ireland. So again, in less than 2 years, we actually get the facility almost ready, almost ready to go. Now we have about 300 people in there. So this is a biologics study, not the vaccine facility. Vaccine facility is actually right across the street on a smaller plot. And I can also show you how we execute when we have acquisition. So Page number 38, we acquired a 5 year facility and in 33 days we actually made 1 batch. So we include all the process including building up the team, including do a tech transfer and do the manufacturing themselves, 33 days. We actually replicate that with the C MAP acquisition, take number 39. It only took us 47 days to go from a tax hospital project, get it done. Typically in a traditional setting, this is 3 to 6 months and we'll get it done in 47 days. In the prior setting, typically it's about 3 to 6 months as well, but it is 33 days. So all those really showcase our execution capabilities. Again, this become a huge barrier, but if you can execute, we don't fear any competition if you can execute. So initially when we started Huixibay, our quality is always our focus because we want to make sure we do quality better than anyone in the industry. We want to make sure our quality is comparable to the global large pharma in our clients. So I think now I can very proud to say that our quality is tied in too. So we have already had the most recent number is already 15 regulatory inspections. This 6 months, 1st 6 months alone, we have 9 regulatory inspections and we passed all of them and most of them are with a flying color. So again, this is really this is probably one of the best track record in the CDMO space. So we are I already achieved what I promised that the best quality system in the service space. Now this is getting comparable to the companies like Merck, Lilly, Pfizer. They have been doing biotech manufacturing for 30 years. We are a 10 year old company. The quality is something that we used to be picked on, but now I'm very proud of this. Now there is no quality barrier between Wixi and our global clients. So number 41, speed. I've been talking about speed for so long. I'm going to skip this slide. And the flexibility, so I think this is the same slide I shared with investors. So every client really appreciate how we should help them. We'll be very flexible with them. Again, in the way we are working on a lot of times, not only science, but also art. So the things happen in projects. So how we work with the client to resolve the issues, to resolve the technical issue, resolve the logistic issue, resolve the business issue is really make us shown us different from we really care and we're very flexible about the time. And because of that, we have won all the CMO award every year since 2019. So with that, I will hand over to Christine to talk about the finance. Thank you so much, Chris, for your exciting presentation on our business update. I will go through the details of our financial performance in first half of 'twenty one. Let's turn to Slide 44. We Spiologics achieved an outstanding financial result in first half of twenty twenty one by extraordinary efforts devoted on enhancing utilization of existing resources and seized more opportunities from the booming market as well as the global COVID-nineteen pandemic. Our revenue reached RMB4.4 billion, with an increase of 126.7 percent year on year. The increase was mainly attributable to four factors. 1st, the group's acceleration to undertake promptly execution and generate revenue from existing and new COVID-nineteen projects 2, leading technology platform, best in industry timeline and excellent execution track record contributing to significantly higher revenue and market share of new integrated projects. 3, successful execution of Win the Monocle strategy, adding considerable late phases and near term revenue and number 5, our relative low base of first half last year was disrupted by the pandemic. On gross profit, our gross profit increased by 191% year on year to approximately RMB2.3 billion. Gross profit margin increased from 40.5% in first half twenty twenty to 52.1% in first half of twenty twenty one. The increase in the gross profit margin was primarily attributable to the group's strong business growth as the result of the rapid increase in the number of integrated projects, and we have greatly enhanced utilization of group's existing resources to undertake and complete more projects. The group's deployment to fully utilize existing manufacturing facilities for COVID-nineteen and other late phase projects, and the group's cost saving efforts in material, labor and overhead. I'll elaborate more in Slide 46. Adjusted EBITDA increased by 163.9 percent to RMB2.3 billion during the reporting period. The adjusted EBITDA margin was 52.6% compared with 45.1% in the same period of last year. Net profit attributable to owner's company increased by 150.3 percent year on year to RMB1.8 billion. Margin of net profit attributable to owners of the company improved 390 bps to 41.8%. The increase in margin of net profit was combined result of the strong gross profit increase as mentioned above and 2, undertaking a large number of new development projects with very limited human resources added in the first half of twenty twenty one and 3, the successful execution of operational efficiency improvement programs. We exclude the if we exclude the impact of foreign exchange gains, share based compensation, fair value gain on the group's investment portfolio, our adjusted net profit increased by 163% year on year to RMB1.8 billion in first half of twenty twenty one. And our adjusted net profit margin went up 5.50 basis points to 40.1%. The reconciling table can be found in Slide 62. After our placement in February 2021, as of June 30, 2021, our full year share count number to be expected at basic shares approximately 4,100,000,000 shares fully diluted shares approximately 4,400,000,000 shares. Let's turn to Slide 45. This slide showed that we also achieved solid financial results in first half of twenty twenty one. In terms of net profit to shareholder of the company, net profit and EPS in the first half of twenty twenty one, As mentioned in previous slides, net profit increased 150% year on year to RMB1.8 billion. Net profit increased 157 point 7% year on year to RMB1.9 billion. Diluted EPS improved 133.3 percent year on year to RMB0.42. Adjusted diluted EPS improved 150% year on year to RMB0.4. Let's turn to Slide 46. I will go quickly because the slide Chris has already went through quite thoroughly just now on our revenue growth by region. In short, North America remains our largest market accounted for close to 50% of total revenue. And among our 79 newly added integrated projects in first half twenty twenty one, 36 of them are from North America, showing the strong business momentum we continued. On the China market, we also made sustainable growth of 42.3 percent that contributed 26% revenue in 2021 first half, which benefited from the favorable macroeconomic environment with surge in R and D investments. In first half of twenty twenty one, we have brought in 26 new projects from China market. We expect to see continued favorable policies and environment in China for biologic innovation. On the EU market, Chris has already spent quite some time explaining, the EU market achieved robust year on year growth of 707% and accounted for 22.5% of total revenue, and that substantial growth is attributable to COVID projects. On 47 last slide on the financial on 47 Slide 47, In first half twenty twenty one, our gross margin reached to around 52.1%, a historical high number. Overhead costs were 12.4 percent of revenue, direct labor costs were 15.9% and raw material costs accounted for 19.6% of revenue respectively. Local labor, labor costs and overhead as a percent of revenue were lower than that of the same period last year. It is primarily due to significantly enhanced utilization in both capacity, such as facility overhead and human resources. But at the same time, we undertook much more projects than the same time last year. In the meanwhile, material costs as a percent of revenue was relatively higher than the same period of last year, because much higher number of late phase and commercial projects were undertaken in first half of twenty twenty one, which have more mature consumption by nature. The group delivered outstanding performance in all financial metrics in 2021 first half by accelerated business momentum and extraordinary efforts devoted on enhancing utilization of existing resources. To deliver sustainable high growth, we will add around 2,000 people and bring online additional 8 facilities in second half to support the business growth for our next 2 years' growth. In summary, we delivered incredible performance in first half of twenty twenty one and remain very positive for our future. I'll turn the mic back to Chris. Back to you, Chris. Thank you, Christine. I would briefly go over our ESG effort as we want to be a ESG leader, we want to share with our investors. We opened the concern in our ESG effort. So I'm on page number 49. Our ESG efforts already were well recognized by the global ESG rating agency. The technology we use from get go is actually just structurally nature for business is actually ESG friendly. It is a lot less water, less energy, limited 100 percent detergent. As a company, we now set up a goal for every year how much revenue per dollar revenue. We want to reduce our consumption on electricity, reduce our water consumption, we want a lower emission on carbon and also nitrogen as we produce less waste. So we set up a goal and management team will be rated on those goals as well. So I think again, all our ESE ratings has been well received. In COVID itself, that's going to get the efforts as well. So now we still have more than 300 people working in COVID program, those including vaccines and antibodies. So we'll probably be making vaccines for 200,000,000 people and then antibodies treatment for a million patients globally. So we're making a huge impact to this effort. And go back to Page 51. So technology I mentioned, it is the disposable manufacturing technology itself is consuming less water, less energy, more ecosystem friendly, better for human health and it definitely has a lot less impact to climate change. So from the get go, we use a technology that's really better. It's a disruptive business, but also better on ESG side. I'll use water as an example. So every year just based on because we operate, we already saved 120,000 ton of water in last year using our metrics. Page 52 is what we'll talk about. We set up management team now have objectives. So we have to reduce our electricity consumption, water consumption and reduce our green gas emission and putting our nitrogen oxide emission. And Page 53, when Henan had a flood, we actually act very quickly. We help with the donation. We also have our employees who originally work from Henan Province. On Page 54, our diversity efforts have been well communicated. So I'm going to skip through this this time. So in summary, I'm very proud of the 5 things that we have achieved in the first half. The first one is really the follow-up molecule success and again the CMO, commercial CMO success, right. You see that GSK SEDARO PD-one approval, GSK VIIRS, COVID antibody approval. So all of those will drive the near term commercial manufacturing success. And second one is we can do deals. We actually did 3 deals almost at the same time. Now we integrate them into the company. We also start all the facilities in China start to get be operational. I use the execution example in the past couple of slides ago. And then I'm very bullish, very excited about our next couple of years, our XTC business, our vaccine business and a new modality. So I think if you I mentioned the latest revenue growth 366%, that's the most exciting slide. This is the second exciting slide that you can remember. And Page 57, we are a global leader in CDMO. We actually pioneered all the trends. Global CMO is following, follow the molecule concept, fully integrated service, disposable manufacturing. Continuous processing is the only one that industry is still lukewarm. Hopefully at some point it will pick up. And in 10,58, I use this as a summarized slide. So I think this has been incredible 6 months for us. Again, I think I'm very bullish on the full year. I think certainly will be the same message that deliver to investors, sustainable high growth. So as I mentioned earlier, we are expanding our capacity to 100 projects, 120 projects a year. Last year, our capacity was 80. So we've seen the growth. So we will have we were able to handle 80 projects last year, but first half of this year already got we already got it close to 80. That's why we have to increase our capacity. So now we are targeting 100 projects this year instead of 80. And the Window Molecule, we hope to be continuing to be more successful. First half, we signed 4 late phase program. Our full year was still more than 5. We already mentioned mRNA technology, star body technology, continue to invest and to meet the industry needs. We want to continue to be good for ESG. And COVID, originally we expect COVID revenue in 2022 to be less significant, now it's likely to be very significant. Lastly, I want to mention that we're bringing 13 facilities online. Those 13 facilities will generate additional when they are all in peak will generate additional $1,200,000,000 opportunity for us. I think again, all the key messages I have for investors really sustainable high growth. With that, I would like to thank you for your attention and go back to Sean go back to Lee for the questions. Thank you, Chris and also thank you Christine for the very thorough introduction of the results. So now we're going to open the line for please press star 1 on your telephone keypad or you can send over your questions to ziyi.chemgs.com. I'm going to help you to ask those questions. While we are waiting for the questions, I probably got 2 common questions from investors. Number 1, I think recently there have been a lot of concerns on the policies on the China healthcare sector and also on the U. S. China tension or geopolitical uncertainties? How will that affect we should buy larger business and what is your view or your thoughts on the overall innovation sentiment amount to try to buy out your clients? Thank you. That's a great question. I think my personal opinion is that all the guidance stock guidance from Chinese government actually is beneficial for the industry in the long term. Maybe painful. I think long term is reducing the waste in the system as you really encourage innovation, innovation both in first class and also quick fast follow on. I think the innovation like PD-one is still absolutely necessary. It will be majority of the innovation globally as well. So I think that all the policy are really ready guidance. I think the near term, the overall service in the sector may be impacted a little bit because there will be less projects, but the top companies like OXI BioLogic actually will benefit from this even mid term and long term because all the companies in China need to work on premier asset now. They couldn't just do another routine or me too or even a new world asset. So I think the quality of assets now become a hugely critical for the success of our biotech company in China biotech and pharma company in China. So I think the right trend is actually the same trend that global companies are going through. Got it. Thank you, Chris. And also the second question is really regarding the expectation of the contribution from COVID-nineteen projects. So as you just mentioned during the prepared remarks, you highlighted that your view probably going to change 2022 or even going forward there's going to be still some of them significant revenue coming from the COVID-nineteen projects. So how will that affect your assumptions for the future year's growth? And are you going to change the guidance? Yes. Right now based on most of our discussion with the clients, most people now start to think that COVID will be there for the next 3 to 5 years. It wouldn't go away this year or next year. So that basically means our revenue will be most likely be there. But how big is the revenue is or how much will come to Wuxi remain to be seen. That's why I still treat it as a bonus, but I will update you as long as I have any information that can help make the future guidance a bit clearer. Right now, I would still treat it as a bonus, but you do see me adding 3,000 people, right? We're adding a very significant number of people. So that's another hint that I think that the COVID revenue most likely will be there for the next 2 to 3 years. Got it. I think I actually got a couple of questions from email, but I'm going to turn to operator, see if there's any questions online first. Your next question comes from the line of Brand Deacon of Berenberg. Please ask your question. Yes. Hi, everyone. And thank you so much for doing this very insightful call. Thank you so much for this. I have actually 2 short ones and one longer one. On the margins, you're saying, okay, you're expecting like higher investments on the short term because you need to invest in capacity. So what is your view and how should we think then about margins? One side on the shorter term, like what is really then the bottom level of margins and then like on the midterm when you're saying, okay, you're coming out of a maybe higher level? And then I have a follow-up then on this. Yes, I think so. As I said earlier, so this the first half is almost like the steady state margin. So if we don't bring in a big facility, bringing many big facility or don't hire too many people, so we will be able to sustain this type of margin. But again, as I said, we're bringing the search facility online this year. We're adding 3,000 people. Most of them hit on the second half. So I think our margin will if you look at the past couple of years, our gross margin will continue to trend higher as we continue to improve efficiency, as we continue to improve efficiency and achieve more economies of scale. But on the other hand, if we bring too many facilities too fast, fast enough and the margin may be may occasionally have a flat or even slight drop. But our goal is to improve our margin over the years and to achieve this type of margin in a steady state in a couple of years. Okay. Thank you. And then on this win the molecule kind of topic, as this is extremely impressive, from your perspective, if you like, from what kind of CDMOs are you typically winning the molecules? And then also another question, like as you're sustaining the 6% revenue growth kind of guidance and then compare this with currently above 100%, is revenue like falling off? Or what are you seeing especially in the last 2 months of the year? So the Wyndham molecule actually went about 80% of them were from global top 10. So it's really our competitors, our peers and then only about 20% of them from China. The majority of them from global setting. And on the revenue growth side, side, you see a very impressive top line growth first half. 2nd half will still grow, but because there are still uncertainties in hiring so many people and getting facility online in supply chain. As you know, this year supply chain has been incredibly tough. Some of the material you have to wait for 6 months, even there's more longer ones, you have to wait a year to get the material. So there is still some uncertainty. I don't want to raise guidance. I want to more deliver step by step. So if in October, if we see clearly that we can execute better and we don't have any we don't see we see a lot of less risk we can talk about in October timeframe. Okay. Thank you. And congrats on the great results. Thank you. Thank you. Again, if you wish to raise questions, you can press star 1 on your telephone keypad. So I'm going to read some of the a long list of the questions from email. The first one is, how is the 20 year vaccine contract value of RMB3 1,000,000,000 captured in the backlog? Is there part of the service backlog of RMB7 1,000,000,000? Any more details that can help us in forecasting revenue for this contract? Yes, it's in the RMB7 1,000,000,000 service contract. That's what I mentioned that among the 7,200,000,000 service contract, the big one is a 3,000,000,000 vaccine contract and this is in 20 years. So next year we'll probably getting close to 50,000,000 and then the year after maybe $80,000,000 to $100,000,000 and then after that is about $100,000,000 ramping up to $150,000,000 So starting next year, we're getting fairly significant revenue from them. Sure. And second one is in the first half twenty twenty one, were there any milestone payments? And if so, how much? And also what's going to be the trend for the milestone payment? Yes. I mentioned the first half milestone payment is US24 million dollars Last year was about US97 million dollars total. And so this is we think this is purely a timing issue. Milestone are much harder to predict. So last year, if you look at our last year, most of the $97,000,000 milestone also happened in the second half. Sure. And the third one, can we have an idea of how much of the planned capacity are backed up with contracts already. Am I right to say that DP facilities produce the drug products while at MFG facilities produce different products. So those production are not interchangeably interchangeable between those facilities? Yes. MFG means mostly for DS. So that's how many liter capacity. DP is for making vials, product capacity. Yes, MFG and DP are not interchangeable, but among MFG they are interchangeable, among DP they are interchangeable. Yes. So the first part of the question is can we have an idea of how much of the planned capacity are backed up by with contracts already have in our head on hand? Yes. About 80% of them is backed up by a nonentity contract, this contract could also be a goodwill because there so every company has a style, some company decided to sign a contract very early, for example, the 20 year vaccine contract, other companies decided to do the last minute. So every company has a different style of signing the contract. So that's why if you look at our backlog, our backlog of $7,000,000,000 is only the signed contract ones. If you put all the potential projects, we'll have 32 Phase 3. If you put among them 32 Phase 3, we expect now we expect 20 approvals. If you put all the 20 approvals in the backlog, in the potential backlog, you can probably add another 20,000,000,000 another even 20,000,000,000 in there for 10 years. So that's incredible. So again, the current backlog is basically means the client already legally signed the contract. That's why it's only a snapshot of the total future revenue. Got it. And here's a question on margin. Since management has mentioned that gross margin, operating margin will potentially be dropping. So but is there any portions that is sustainable and how we should be looking at the margin trend going forward? The margin is dropping from this first half level. The first half, again, that's incredible, right? So basically, the first half, I already I emphasize every facility is full and we're trying to squeeze everything out of it and every person is running at 120%. So that's not sustainable. That's why we're adding 3,000 people. We're bringing searching facility online. Once you bring new facility online, once you hire new people, every new people probably need about 2 years to go to full productivity and every new facility also need 2 to 3 years to ramp up to full potential. So that's why the margin will drop from this first half historical level. But I think year over year, we still our goal is to hope to achieve a steady margin and hopefully improving margin as well. Great. Last question from this client is, what is the measurement's target capital structure in terms of debt to total assets? Any plan to raise more capital through equity? Currently, we don't need to unless we do a big M and A, we don't need to use equity to raise more cash. I think we want to probably use a little bit more debt, at least to know our debt ratio is very, very low. So this is something that management teams are very much aware of. So we don't have any plan to raise equity. If we need to use more cash, we'll use debt near term. Got it. That's right. As Chris mentioned at the beginning of the call, we still haven't tapped into our facilities that much yet. We still have potential on reaching out to the debt side. That's right. Sure. Here's a question from another investor. Can you confirm what is the COVID-nineteen related revenue for in the first half twenty twenty one and how much coming from COVID-nineteen vaccines, how much coming from neutralizing antibodies? I actually don't have the number because COVID revenue come from everywhere because we have a development, we have manufacturing. On the manufacturing side COVID revenue probably be around more than close to 100 $150,000,000 revenue. But on the development side, it's probably a lot more as well. So I don't have the total COVID revenue. I think you have a number. I think the first half around total maybe 30% revenue come? Yes. 33%, about 1 third of our total revenue is related to COVID And about 40% come from vaccine, yes, in first half. Got it. Thank you. And here's another question. I think it's more on your mRNA technology, the new platform you have been investing. So any progress on that in terms of the capacity ramping up in terms of the technology preparation, talent recruitment? So is there any potential partnership we should be expecting towards the end of this year? Yes. We have already made mRNA vaccine from beginning to the end. So in the lab, we already have the team to make it a large scale. And right now we are negotiating with a couple of partners and hopefully we will have a good news by end of this year. But this is something we're working very diligently on, not only COVID mRNA vaccine, but also other mRNA programs. So we're serving the mRNA community, not only the vaccine, but also not only COVID vaccine, but also other vaccines and other COVID mRNA technologies. So it's a much broader mRNA platform. Also it's end to end. So basically from plasmid DNA to essentially basically someone give us a sequence from sequence to vials, the same concept. Everything Wuxi does is end to end services. Great. Just to remind investors again, if you wish to raise questions, you can press star 1 on your telephone keypad or you can e mail me your questions. Here's another one is on the commercialization progress. So we're going to have a multiple project towards the end of this year. So going forward over the next few years, is there any expectation on number of commercialized projects projects moving to commercialization stage? Next 2 years, we'll probably expect at least 3 to 4 per year, at least 3 to 4 per year and then around 2024, 25 will probably be 4 to 5 per year. So this is an incredible growth. Got it. I see there is a question online. Operator? Your next question comes from the line of Jingyi Li of Harding Loebner. Please ask your question. Hey, Chris. Thank you for taking my question. Two quick ones. One is you mentioned your mRNA capability. There are lots of, call it, ingredients or some raw materials that are needed. So you said you are end to end. So I'm surprised. I just want to double check that you're able to make all these materials along the supply chain, so that you will not be subject to any constraints on that. And maybe just Yes, Karrukin, what I meant is actually manufacturing. So we buy those ingredients from a company like Wixia Tech or other companies. Yes. So we don't we can't manufacture mRNA from beginning to the end, but not the raw materials. We're not raw material supplier for mRNA. Just clarify that. Okay. Okay, got it. Another question is on your capacities overseas. So if we fast forward 3 to 5 years, how much of your capacity will be overseas versus in China? And do you feel that there's any constraints or considerations when you expand overseas capacity like the speed of construction or the capability to recruit local talent? Thank you. Yes. The overseas overall cost is higher, margin is lower. That's why it's a balance of basically is what percentage. So we have currently we're planning about 30% overseas, 70% is still in China. Because in China, we have incredible financials. We have very good execution. And overseas, the cost is significantly higher. So the margin wouldn't be comparable at all. So we're balancing the sort of the clients need, the potential geopolitical risk and then versus what how much we can convince client to leverage our China facility. That's why even so I think currently our strategy is so for every client, our proposal is to make 70% of them in China and 30% of them overseas. That's why it's seventythirty. So we want to if there's a trigger event, they kind of switch, go from 30% China 30% China, 70% overseas. But overall, I think we wanted every client to make majority of them in China. They enjoy lower costs in China as well. So for the same services overseas will be 15% more expensive than China. Okay, thanks. And maybe one last question to the extent that you can, when you interact with the pre IPO investors, so do you have any understanding on their strategy or schedules on how much they want to own or how fast they want to exit their holdings in Wuxi Biologics? Thank you. And I will get back to you. Yes, they are my shareholder. They don't share with me their plan, so just like you do. Thank you. Thank you. Great. I think our call already run for about 1 hour and 22 minutes. So given the time limit, I'm now going to turn the call back to Chris for any closing remarks. Thank you. Yes. Thank you, Lee. Again, it's incredible year. I really appreciate all the support from the global investors. I think that from Wixi side what we have set up incredible platform. So I mentioned the 7 factors that contribute to our success for the past 10 years. You will drive our sustainable high growth in the next 5 years as well. So I think the commercial manufacturing revenue will be very significant and we expanded our capacity to 120 projects that's unheard of in the industry, right. So most of my large pharma clients have 10 projects capacity per year We can do 120 this year. So I think again, sustainable high growth. Great. Thank you, Chris. And thanks, Wuxi Biologic Management team for attending this call and thank you everyone for attending this call. We're going to wrap up with the call now. Thank you. Have a good day. Thank you, everyone. Thanks for your time.