Ladies and gentlemen, thank you for standing by, and welcome to the WuXi Biologics conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one on your telephone keypad. Please be advised that today's conference call is being recorded. I would now like to hand the conference over to our first speaker today, Mr. Sean Wu. Please go ahead, sir.
Good evening, and good afternoon for the people in Europe, and good morning for the people in America, and good whatever for everybody else. My name is Sean Wu. I'm a senior analyst at Morgan Stanley, covering Greater China Healthcare. It's my great honor to have this opportunity to host the conference call for WuXi management to talk about their incredible interim results for 2019. Management joining today's call are Dr. Chris Chen, Company CEO, Ms. Christine Lu-Wong, CFO, Vice President and Head of Corporate Development, Dr. Michelle Chen, and IR Director, Eileen Wang. Management will provide a business update and also talk about their financial performance, of course. There will be followed by Q&A. You may ask management directly or submit questions via email at my email address, sean.wu@morganstanley.com. Without further ado, Dr. Chen, please start your presentation.
Thank you, Sean. My pleasure here. Good morning, good afternoon, good evening to those of you who are online. Welcome all of you to join us for this exciting interim results announcement. I'm very pleased to share with you our 2019 interim results and give you an overview of our recent development, as well as discussing the promising future of WuXi Biologics. I think our main theme today is actually sustainable high growth. Joining me here is Christine Lu-Wong, who is going to discuss the financials, and then we'll have a Q&A at the very end. On the slide number four. Most of you have seen this slide before. This is really a snapshot of our current WuXi Biologics business. I think we're very excited to show this slide. We're very pleased to announce that our company has achieved incredible results in the first half of 2019.
We achieved both operational excellence and also exceptional financial performance across all key measures and business lines. Our revenue, record high of RMB approximately 1.6 billion, 52% year-over-year increase. The number of integrated projects increased to about 224, that we added 32 new projects and also including one late phase. Late phase project now increased to 15, demonstrate our success of our Follow the Molecule strategy. In terms of backlog, our total backlog was $4.6 billion, which set up a solid foundation for the group's strong growth in the future. Our manufacturing facility capital expansion is on track. Our total capacity will be approximately more than 280,000 liter after 2022, which is only three years away. We continue to strive for excellence and with efforts, ingenuity, and also dedication of our 4,500 employees.
Our adjusted net profit grew around 76% year-over-year to RMB 521.5 million, and adjusted net margin was 32.4%. Actually, this is our record high for the company, also much higher than the industry. With that, I'm going to go into a little more details. Slide number six. As of June 30th, 2019, we've delivered strong financials and operating results, thanks to the strong growth with the number of integrated projects, very solid cost control, business operation efficiency improvement, and also substantial increase of our milestone payment. To review and to briefly summarize, our revenue grew 52.4% to RMB 1.6 billion. Gross profit increased by around 62% to RMB 671 million. Our gross profit margin was a very record high, 41.8%. Net profit significantly increased by 80% to around RMB 449 million. Our adjusted profit increased by around 76% to about RMB 521.5 million.
Our diluted EPS increased by 79% to RMB 0.34. Again, for the company, this is actually the best record since the start of the company. Slide number seven, I'll give you a little bit more about our current cash positions and CapEx. Our current bank balance, cash and cash deposit amounted to approximately RMB 3 billion. We have no outstanding borrowings, and operating cash flow increased substantially by 82% to around RMB 222 million. Our total CapEx in 2019, the first half of 2019, was over RMB 800 million. We'll probably spend another RMB 3.6 billion in the second half of this year. We recently have made an announcement on the vaccine business, but the vaccine business will have very limited cash needs this year. We have substantial cash and also loans to cover the CapEx for near-term. Slide number eight. Most of the investors are very familiar.
This is our business model. Our mission is to accelerate and transform how biologics are discovered, developed, and manufactured. Our business model is called Follow the Molecule. As a biologics business is very sticky, once we start from the beginning, ideally the project will take it all the way to commercial, from concept to commercial. Our revenue will grow exponentially after each molecule progress. Our business model is to take in as many projects as possible, and allow each project to move through the natural cycle of product development. For each molecule, revenue will grow exponentially and hopefully we'll achieve RMB 5,000 million commercial manufacturing revenue for the programs that are successful. Slide number nine. This is a very familiar slide to those investors who have been working with us for a while, and you can see solid business progress.
We see extraordinary business progress in the first half of this year. The top left chart demonstrates that we have a significant increase in number of projects. You see a CAGR of 44% from 75 projects in June of 2014 now to 224 projects. This probably represents about 15% of global portfolio. Basically about one in six projects now is done at WuXi Biologics. This reflects that we have more and more market share, and we now have more and more trust from our global partners. The number of late phase projects also increased substantially from 10 to 15 in the past year. Our early phase projects now is 102. We have 75 projects in phase I and 27 projects in phase II. Slide number 10 is a different way of describing the current portfolio. This is very interesting.
You're used to see this funnel, this big funnel, basically highlighting our CDMO model. We have the numbers were already highlighted, the total. I think I mentioned to investors, if you wanted to know the progress of WuXi Biologics, you only need to know the three numbers on this page. The first one is total project, 224. As I mentioned, it's about 15% of global portfolio. How many projects we added this reporting period. We added 32 projects, 31 in preclinical, one in late phase. A lot of our competitors, they have been operating for probably 5-10 years, and the total project is probably less than what we added in the first half of this year. Some of our competitors don't even have 32 projects total. We added 32 in six months.
The last number is actually the 15 late phase programs. Late phase programs contribute more and more revenue, this number is very critical. I will share with you later on, these 15 projects amounted to about 28% of the revenue for this year. This basically show a natural progression of the Follow the Molecule, and it showcase our good business strategy. Another number I want to highlight on this slide is, in this last period, we actually have more than RMB 30 million milestone payment, which represent a significant increase of 75.9% comparing to the same period last year. Our net profit margin, our profit margin is highest ever in the business because we have more and more milestone revenue. We continue to expect more and more milestone revenue. We believe the business has very good outlook.
Slide number 11. This is the backlog. For those of you who understand the business, we share with you our backlog so that you can see our near-term revenue is very visible. Backlog is not easy to understand. Also, it's not very easy to grow because a lot of the backlog get consumed. You have to make up the consumed backlog before you can grow. We actually still see very exciting backlog growth. You see our service backlog increased by more than 200% to $1.7 billion comparing to the same period of last year, mainly due to the signing of long-term manufacturing contract. Our upcoming potential milestone fee surged to $2.9 billion, mostly because of IPs such as WuXiBody, that we signed projects with our own IP, and we are able to collect potential milestone fees up to $2.9 billion.
Historically, the service backlog has a 99% conversion to revenue. The potential milestone fees is subject to project success, subject to commercial success, so it's not always converted to revenue. It has very high margin. That's why those two pieces, so it has a very good complementary effect. Service backlog give you how sure we are we can grow. The milestone backlog give us the improvement on the profit margin as the project progress. As I mentioned earlier, the first half of this year, we have more than RMB 30 million milestone payment. That's why our margin is highest in the company's history. Slide number 12 basically showcase our business strategy. I think our Follow the Molecule basically means that we want to collect as many molecules to this funnel as possible.
As the molecule progress, the revenue for each molecule grow exponentially. Once the program hit to commercial manufacturing, we want to build 2 global sites for them. We call it Global Dual Sourcing. This way, we can keep the project from beginning to the end. Our partners, our clients, does not need to go to anywhere else for their biologics need. This is one of the reasons that we are very confident we can achieve that is because biologics are very sticky. When you transfer from company A to company B, it incurs a significant cost. There's a long timeline, and also there is a risk that transfer may not be successful. So far, we have signed 2 exclusive commercial manufacturing contracts using this strategy, and those are the 2 out of the 15 that I mentioned earlier.
For those two, each of them is actually likely more than a billion-dollar revenue in around 10 years of project timeline. Slide number 13. Because we have that very successful, very exciting business strategy, we need to build capacity to accommodate for the needs of those projects, for the portfolio. As we have 224 projects, and we expect about 30 projects will be commercialized within WuXi's platform. That's why we had to build a lot of capacity. Slide number 13 show the capacity progression. Currently, we have about 50,000 liter capacity, and in the next couple of years, every year, we'll be adding more than 50,000 liter capacity. Slide number 14, again, showcase our Follow the Molecule strategy. You can see the number of customers we serviced increased substantially over the years. You can also see the average project revenue grow over the years.
That's because as the molecule moves to the later phase, revenue grow higher and higher. On the bottom left side, you can see our top 10 customer, the revenue growth has a very nice CAGR of 53%. This include two parts. One is that as the customer work with us, they trust us more, they give us more projects. Secondly, each project move to later phase. That's why revenue is higher and higher. The last chart on the slide basically show our business is actually very diversified. We have a very low concentration risk. You can see actually in first half of 2019, our top 20 customers, top 10 customers actually has less than 50% of our revenue. Our concentration risk is much more reduced comparing to the first couple of years. Slide number 15 is very exciting slide.
It actually showcase our business strategy, success of our business strategy. As I mentioned earlier, our CDMO model is basically add many molecules as possible in the earliest stage so that the molecules will convert itself into later stage as the program progress. On the top left side of the slide, you can see our pre-IND revenue has a CAGR of 51% over the past couple of years. Our post-IND revenue, the CAGR is more than 110%. That's because of natural progression over the Follow the Molecule strategy. On the bottom right side of the slide, you can actually see in first half of 2019, our post-IND revenue is already close to 49%, it's almost half of the current revenue. If you look further, the phase III projects amounted to about 28.6% of the revenue.
Again, these are the 15 phase III programs and then the one commercial program. This slide truly show that our business model works very well. We add many projects to the early phase, and as the program progress, the revenue get higher and higher in later phase. Slide number 16 talk about our three regions of exciting growth. U.S. still is our largest market. We see a 52.7% revenue in the reporting period, and the growth is actually still more than 50%. Europe, very exciting. Europe now is only 7% of revenue, but it's growing more than 100%. Over the past five years, the CAGR in European business actually is more than 185%. Very exciting. We continue to believe that we'll have more and more revenue from Europe, and hopefully, eventually, it will be 10%, 20% of our total revenue.
China, over the past couple of years, growth has been around 40%. We see an acceleration of China. This reporting period is 53.7%. The Chinese revenue total contribution is actually a little lower than U.S., but it's still very strong, 35.4%. Slide number 17 talk about our current pipeline. You actually can see the progress of our pipeline. You see more and more ADC projects, more and more bispecific projects. I think this is actually an indication of where the industry is heading. You see our traditional antibody project doesn't grow that fast. In the fusion protein, we see some growth, but a very exciting period is actually the bispecific. We almost doubled. The 10 programs that we accumulated over the past couple of years, we have 10 bispecific programs accumulated over the past couple of years.
Now in this quarter, in this reporting period alone, we added nine programs. Essentially, we almost grow the business by 100% just in six months. We also have 58 first-in-class programs. Those really showcase how solid WuXi is in terms of handling the difficult projects and also helping global companies with their portfolio. Talent has always been a key. On slide number 18, talent has always been a key to help the business growth. You see a steady growth of our employees. As of now, we have approximately 4,500 people. Our retention rate is very, very high, 95%, much higher than industry in China, even in the U.S. Our key talent retention rate is more than 98%. This talent really is our key advantage compared to our competitors. We can hire people, train them to very solid work.
By end of this year, we expect we'll have 5,600 people in the team. That's probably the largest team in the biologics industry. In terms of recent business highlight on slide number 19. Most of you know this already. On the quality side, we have proven ourselves WuXi quality. We have a premium quality system. We passed FDA PAI inspection two years ago. We passed our first FDA routine GMP surveillance inspection this March. We also passed the EMA inspection earlier this year, and those basically showcase how WuXi quality can help global companies. We have two exciting news to report. First of all, we are able to run disposable bioreactor at 4,000-liter scale. For those of you who know our business, currently our largest bioreactor is 2,000 liter.
With the 2,000 liter, we can compete with anyone with a stainless steel bioreactor, let's say, of 12,000 liter or 15,000 liter. With 4,000 liter, we can compete with anyone with 20,000 liter or 25,000 liter. That's why it's a key advantage for us to be able to compete with the industry leaders who use stainless steel bioreactors. We have our first facility with a 4,000-liter bioreactor running, and that's what will be our basis of our future facility design. We also have a facility with a fully automated drug product filling facilities, called DP4. That's also our future growth area. Overall, our capacity expansion is on track. We announced that we'll be building another facility of 48,000 liter in Chengdu, western part of China.
Overall, our goal is to provide a robust and a premier global supply chain that enable our partners to launch their product and come up with manufacture with us and eventually benefit patients worldwide. This go with our Global Dual Sourcing strategy within WuXi Biologics. Slide number 20, I want to give you an update of our speed. We're actually executing in Ireland, which we're building manufacturing 6 and manufacturing 7. You can see in March, this is still pretty much a playing ground. In July, you can actually see the shell of the building. End of this year, the building will be weather-tight, and hopefully, this time next year, we actually have all the equipment in there. This time 2021, we'll already be making GMP materials. WuXi speed actually is fully demonstrated in this progression of this Ireland facility.
In section number 2, I want to share with you where the industry is heading. I think how WuXi can benefit from this industry trend. First exciting area that industry is heading is actually bispecific. I think bispecific is maybe the next growth wave for biologics, and WuXi is right on. We actually have the very exciting platform called WuXiBody. Some of you have been familiar with it. We launched the platform last September. Last year, we have five customers with seven projects. Now another six months later, we have 10 customers with 15 projects. You see the growth. What's more exciting is actually the leads, number of leads you can see. In China, now we're working with potentially 32 projects. In U.S., Canada, we have another 21 programs ongoing in negotiation. Europe, we have 12, and Korea and Japan have another five.
We continue to believe that WuXiBody is maybe the next exciting platform for bispecific because of the reasons shown on slide 23. You can give me 2 sequences. I can make a bispecific for you in 6 months. If you use the competitive technology, you may need to use 12 months, even 24 months. We can actually save you 6-18 months of time working on engineering the molecules. Once the molecule is engineered, we can express it to 5 gram, 10 gram per liter. In traditional technology, probably you'll be lucky if you get 2 gram per liter or 3 gram per liter. We can not only have the differentiation, the time saving, but we also have a huge cost saving.
Because of this, and we have a very strong uptake of WuXiBody, and in the next 2-3 years, the WuXiBody technology alone will probably contribute to RMB 20 million-RMB 30 million profit in the business of WuXi Biologics. Besides WuXiBody as a platform, another exciting feature for WuXi is we can continue to expedite how the program can be developed. Slide number 24 talk about a program that we can take from DNA to IND. Essentially, someone give us a DNA, how they can start a trial. When we start the business in 2012, our average timeline is 24 months. This year, our average timeline is 15 months. In the future, its average timeline is 12 months. 15 months is already the sort of state-of-the-art in the industry. Most of our competitors probably still living with 18 months-24 months.
Working with WuXi, we can save our clients a couple of months. If you are a small start-up company, 12 months versus 24 months make a huge difference. Also, as the current competition is cutthroat, right? Having 12 months of time of edge in timeline really help any company, either a one-person start-up company or a large pharma with $40 billion, $50 billion in revenue. The third exciting technology I want to share with you is actually our manufacturing piece and our productivity improvement. If you use all the three IPs from WuXi, if you have a bispecific program, use a WuXiBody platform, you use our cell line, WuXia, you use our continuous manufacturing platform, we are able to get 35 gram per liter in the industry. This is the highest ever reported in the industry.
As I mentioned earlier, traditionally, if you use someone else's technology, you can get two grams per liter. You're talking about two gram versus 35 gram per liter. This is not something that we only achieve in the lab. We are able to scale this process to the GMP facility, and we actually achieve 20 gram per liter in about a 17-day operation. If you notice this 35 gram per liter is actually 22 days. We are able to scale this technology to GMP manufacturing, and our goal is to have our client file IND end of this year. WuXia is also the next technology that WuXi can help the industry. Currently, we already have 15 projects ongoing, and we expect two of those projects may be BLA approved in China in the next two years.
WuXiUP, our continuous manufacturing platform, continue to be very exciting for WuXi. Slide number 26. Investors keep asking, "Why are you keep gaining market share?" I use these three examples to share with you. We have the best technology. We have the shortest timeline. So far, we have probably one of the best track record in industry in execution, and we have plenty of capacity. That's why we continue to believe that we'll gain market share and to support our growth. Today, as I mentioned earlier, I think I want to convince you that WuXi Biologics will have a sustainable high growth in the near future, and that's the main theme of my discussion. With this, I'm going to hand over to Christine to talk about the financials.
Thank you so much, Chris, for this exciting description, with our current growth and the key driver, Also explaining our theme, the sustainable high growth in the first half of 2019. Going forward, I'm going to explain the financial performance, for the first half of 2019. Slide number 28. The group has achieved outstanding financial results in the first half of 2019. These charts shows the performance of our revenue, growth profit, adjusted EBITDA, and adjusted net profit. In the first half of 2019, the group's revenue increased by 52.4% year on year to RMB 1.6 billion. The major revenue growth drivers were, one, leading technology platforms, competitive timeline, and strong execution track record contributing to more market share and new integrated projects. Two, the group's innovative proprietary technology platforms has been more adopted in the industry. Three, successful implementation of the group's Follow the Molecule strategy.
Gross profit increased by 61.8% year on year to RMB 671 million, with gross profit margin up from 39.3% in the first half of 2018 to 41.8% in the first half of 2019. Mainly due to, one, the group's strong business growth, along with the rapid increase in its number of integrated projects. Two, the improved operational efficiency of the group, in particular, the fast ramp-up of MFG3. Three, more milestone payments with relatively high gross margin received. Our adjusted EBITDA increased from RMB 428 million in the first half of 2018 to RMB 747 million in the same period last year, up 74.5% year on year. Our unadjusted or GAAP net profit surged by 80.1% year on year to RMB 449.5 million in the first half of 2019, with net profit margin up 430 basis points to 28%.
The high net profit margin was contributed to, one, strong growth in revenue as explained above. Two, cost control and business operation efficiency enhancements. Three, other non-operational income recorded partially offset by the increase of administrative expenses and R&D expenses in line with the group's business growth. Excluding the impact of foreign exchange gains and share-based compensations, our adjusted net profit increased by 75.8% year-on-year to RMB 521.5 million in first half of 2019, and adjusted net profit margin went up 430 basis points to 32.4% in the first half of 2019. The reconciling tables are in appendix on slide 40 for your reference. Turn to slide 29. As Chris mentioned before, our three region growth engines continued to excel. We are excited for the booming market across all regions. In the first half of 2019, revenue from China and Europe increased by 53.7% and 112% year-on-year, respectively.
North America delivered 42% year-on-year growth. Out of it, USA grew 51.7%. Turn to slide 30. For the cost of sales as a % of revenue, in the first half of 2019, direct labor cost, raw material, and overhead accounted for 21.2%, 18.1%, and 18.9%, respectively. Even with the ramp-up of new facilities, our adjusted gross profit margin, which excluded share-based compensations, increased from 43.3% to 45.8% year-on-year, reflecting our sales and the improvement of the operational efficiency, and with more milestone revenue received in the first half of 2019. This is the end of the financial section. Chris will conclude our presentation.
Thank you, Christine. I think first actually, I want to summarize with what we want you to remember about WuXi Biologics. We want to be a global company with global operations to enable our partner success. That's why not only we operate in China, we are starting up Ireland site, working in Boston, working in Singapore. We also want to be a company with the best corporate governance, similar to leading global companies. We're very transparent in corporate governance. We're very keen on ESG, environmental social responsibilities. Actually, using disposable technology actually help saving water, saving electricity for making the same biologics product. As a service company, we also help saving the resources to help develop product onto the market. We have critical roles for equality of women in WuXi Biologics, and I share with you more.
We also want to be a company, not only a good company, but a great company. I mentioned several times about WuXi's speed and also WuXi's quality. I think those two will continue to differentiate how WuXi is among competitions. It doesn't matter how big we are, we want to be an entrepreneurial company, we want to be a learning company, we want to be a continuous improving company. That's why we are able to transition from biologics CDMO to a vaccine CDMO relatively quickly, where I can share with you more. To summarize the first half of the year, we have a very strong growth momentum driven by our core competitiveness. Our business model we think is impeccable, very exciting to Follow the Molecule business model, adding more and more projects and allow the projects to graduate by themselves.
Eventually, we have Global Dual Sourcing within WuXi Bio. This business model will actually transform how biologics are discovered, developed, and manufactured. We have very strong technical leadership, expanding capacities, and good track record, continue to allow us gain market share in U.S., Europe, and in China. Because we're gaining market share, we also see strong growth in all the three regions. Even the trade tension between China and the U.S. does not slow us down really. We still see the same momentum in U.S., if not even acceleration in U.S., in the new projects. We continue to attract and retain good talents. We're able to expand globally while hiring is progressing very well in Ireland. The IP from WuXiBody, WuXia, and WuXi UP actually differentiate us from traditional competitors, will drive us into sustainable high growth.
Lastly, we continue to have plenty of capacities. We can start any projects within four weeks, so we don't have capacity bottleneck or limitation. I mentioned vaccines. I want to share with you a little bit more about the vaccines on page 34, as most of you already seen the news announcement. This is actually a historic moment for WuXi Biologics. We started the vaccine business planning part in March of last year. Originally, we believe it will be very exciting for us to achieve a milestone in three years, again, signing our first project. We actually did it in less than 18 months. Hopefully, our plan is actually to secure the vaccine manufacturing contract to sign the agreement by end of this year. This is a 20-year supply agreement for more than $3 billion.
We'll start having some revenue this year and very meaningful revenue next year. In 2022, the revenue can be as high as RMB 100 million. Again, vaccine is a new area for us. Vaccine manufacturing is extremely difficult. Vaccine manufacturing require very high quality. Although, just the phenomenon that we can sign a vaccine long-term manufacturing contract really differentiate us from our global competitors, showing we have very strong technical strength with global premier quality, and our transferable skills from biologics can be used in vaccine manufacturing. Vaccine will be an exciting growth area for us in the next couple of years. Slide number 35. You have seen this before. I believe WuXi Biologics is well-poised to sustainable high growth.
From 2018 and before, starting last year and before, most of our growth come from one area, is antibodies and recombinant proteins. Starting this year, we picked the right timing on bispecific. We see exciting growth of bispecific. As I mentioned earlier, our bispecific projects just doubled. The past 6 months, we added more bispecific projects than we added in the past 3 years. Very exciting growth for bispecific. We also have an opportune timing to launch our WuXiBody platform. We believe WuXiBody platform will generate RMB 20 million-30 million profit in the next two to three years, and because of the IP we invested in the future. Starting next year, we may have product approval in China and globally, and that will start trickling of our royalties coming to WuXi. In 2021, vaccine business will be very significant.
As I mentioned earlier, 2022, we may be $100 million business. I think the key message I want you to take home is WuXi Biologics has been very incredible track record in the past couple years to grow, and we believe we can sustain the high growth in the next couple years. Slide number 36, let me show you the business momentum remain very strong in the second half of this year. We continue to expect we can gain more market share. We added 32 projects first part of the year. We believe we'll add another 20 more in the next six months, and we currently are on track to do that. We continue to expect very exciting backlog growth for both service and upcoming potential milestone payment.
As I mentioned earlier, we expect we'll have no problem or no challenges increase our headcount to 5,600 people by end of this year. That will be the largest team of biologics. We'll continue to invest in R&D to allow us to develop the next platform, such as WuXiBody, to sustain our high growth. Lastly, our capacity expansion is still on track, to make sure we can execute on our Follow the Molecule model and with our Global Dual Sourcing strategy. Slide number 37, talk about the key milestones and catalysts. We have already achieved those milestones for Q1. In Q3, we have a new 4,000-liter bioreactor online. We have the automated robotic filling system online. In the next couple months, the key milestone will be the first IND of WuXiBody, also WuXiUP.
Hopefully in the next six months, we'll also see our partners file one to three BLAs, and that will translate into very significant commercial manufacturing revenue for 2020 and beyond. With that, I would like to thank you for your attention.
Operator.
Certainly, sir. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced. Participants are requested to restrict your questions to two questions at a time to allow everyone to ask their questions. We have the first question from the line of Jinsong Du from GSA Capital. Please go ahead.
Hi, this is Jinsong Du from GSA Capital. Congrats for the results. I just have a question on the CapEx. I understand that you have a guidance on the second half of 2019, if we take a slightly longer-term view, over the next two to three years, how should we think about CapEx? In relation to that, the free cash flow. Given the potential timing difference, should we expect continued positive free cash flow every single quarter, or may that be some period of sizable negative free cash flow?
I think, yeah. This year, we expect to spend approximately RMB 4.4 billion of cash. Next year is probably around the same range. We are still working on our CapEx plan for 2021. I think overall, we build the capacity based on our portfolio needs, and we don't blindly build the capacity and then don't know where the project is. Because of that, we also adjust. If some of the program runs into trouble, we'll actually reduce our capital spending. If the program going even faster than we expected, we actually increase the capacity spending. Overall, I think we believe we have a very strong financials to handle the near-term cash needs. We have about RMB 3 billion of cash. We also generated very exciting cash flow. Lastly, we have about RMB 500 million line of credit.
Near term, we have plenty of cash to fund our operations.
Just one point to add.
Right
before we start. For this two years, as Chris Chen mentioned, it's about RMB 4.4 billion this year and the next year. 2021, as you know that when we built the sites, cash was spent about two years in advance. I anticipate in 2021, the CapEx for building our CIP, the construction in progress chart, 2021, it will come down a little bit on the CapEx spending because the cash were used about two years in advance to build.
Okay. Maybe I'll take a question from the line. Okay. Hey, Jinsong.
Maybe I just quickly follow up on that. Given the CapEx spending and also a diversification of manufacturing locations, we've got Ireland potentially coming up and potentially other locations outside of China as well, how should we think about the margins going forward?
Yeah. The margins in China certainly is highest. In Ireland, will be a bit lower than China, and then U.S. and Singapore probably be lower than Ireland. Overall, I think this is absolutely necessary to sustain our high growth. Also, this is also a way of ensuring our clients stay with us globally, right? Because if all the operations are in China, and they have geopolitical risk. I think if we operate in Ireland, we'll probably have a very similar margin compared to our industry leaders. Right.
Okay. Chris?
Got it. Thank you.
Yeah.
Thank you.
We have a general question about that. What is the size in terms of US dollars for the biological market, the CRO versus CMO, and how fast those markets are growing maybe in China and globally? Also, what is your estimated share of your CRO market as of now, and what are the kind of targets you're setting for yourself?
Yeah, I think Sean's question is very good. Industry general question. Overall, I think you see more and more startup companies, more and more innovation come from smaller companies. The CRO and CMO market has always been growing. Based on Frost & Sullivan numbers, it is growing about 19%, 20%. The industry is growing about 20%. That is why we believe WuXi can grow twice to three times faster than the industry. That is why we believe we can continue to sustain our high growth. Overall, the market size, depending on which number you go with, actually, market size could be as big as about $30 billion-$70 billion in 2025. It is only a couple years from now.
What's your goal of your market share?
I think if you look at our revenue, I think this year we'll probably be globally top three players already. If you look at the number of projects we are adding, we are already number 1 player. We have the largest market share in terms of number of projects. If you Follow the Molecule strategy, eventually we will have the highest revenue. The largest market share will translate into highest revenue in the years to come.
You mentioned that you are now taking one out of every six new projects.
Six projects. Exactly.
Okay.
Yeah.
Operator, next question.
Thank you. We have the next question from the line of Jianing Liu from Flowering Tree. Please go ahead.
Hello. Can I ask this?
Please go ahead, sir.
Yeah. Go ahead.
Yeah. I have two questions. The first one is, in the PPT, and also you mentioned that there are 12 projects being terminated. Can you tell us more, like the reason behind the termination and how shall we expect in the future what percentage of the project in the preclinical stage will be terminated? What will be the long-term trend? That's the first question. The second question is regarding the backlog. Just because we all know that from phase I to phase II to phase III, there is a probability of success. When we calculate the backlog, we already weighted by the probability of success, or we just simply is an arithmetic sum of the potential contract throughout different phase of the project?
A good question. The 12 projects terminated in preclinical, mostly because of technical failures. The program basically does not run into issues and/or run the tox studies. I think if you look at our current success rate, it's still very high actually. It's more than 85%. Traditionally, you go from preclinical to phase I, the success rate is probably about 80%. Right now, ours is still a little higher than the industry just because of the product mix, probably. This is a very typical attrition, actually. On the backlog, on the service backlog, typically the clients or our partners, they will sign the service contract with us in the next 18 months, about 18 months. That's a pure sum of all the contracts signed. It does not represent the potential service revenue. It's only the next 18 months, the service revenue.
So far our service backlogs converting to revenue is almost like 100%. The potential milestones is not risk-adjusted. It's just a sum of all the potential. That's why it's called potential milestones. It will depend on the progressions or if the program is terminated, all the milestones goes away. That is not properly adjusted and does not account for attrition.
Understood. Okay. Thank you very much.
Thank you.
Thank you, sir. Once again, ladies and gentlemen, it is star one to ask a question. We have a question from the line of Scott from CM Kelton. Please go ahead, sir.
Hello, can you hear me?
Yes.
Yes, sir. Please go ahead, sir.
Yeah. Oh, okay. Congratulations to the management team for such a great result. I just want to follow up on the potential new drug filing for the next two years. I noticed you mentioned that there may be 2 projects from China and then one to two from the U.S. Just want to see, do you think WuXi Biologics can get the CMO contract with this drug? Say for example, for the TaiMed case, we see that WuXi Biologics are not the only CMO partner, but they chose Centus Biotherapeutics at the end. Yeah.
Yep. That's a good question. I want to clarify, the TaiMed case is clearly not because WuXi Biologics didn't do well. It's actually clearly purely political reasons. TaiMed want to stay away from China, and this is something that they already shared with us from the get-go. In our capacity planning, we do not include TaiMed product in our portfolio because when we start the project, they already know that they wanted to either manufacture in-house or use a global player to manufacture TaiMed product. That does not indicate anything related to WuXi. It's really the business strategy of TaiMed. For those programs that we have near term, we have product launch, and so far, as I mentioned earlier, we already signed two exclusive manufacturing contract. Each contract is actually probably going to be more than RMB 1 billion for the next 10 years.
For those two programs, every year, we'll probably get to RMB 150 million-RMB 200 million revenue. For the two programs from China, and as in revenue, it's much harder to estimate because of the immunology space, the PD-1 and PD-L1, but we believe we'll be the primary supplier for those two programs as well. Near term for the four programs, we'll be either 100% exclusive suppliers or we'll be a primary supplier. That's the success.
Thank you.
All those program really basically showcase our success of our business strategies for the Molecule. All four program, we started with the DNA, now we want to take it all the way to product approval.
Thank you, Chris. Just to clarify, the revenue number you mentioned is just the CMO revenue without counting the potential royalty from the Chinese projects, right?
Exactly, yes. It's a service revenue.
Okay, great. Thank you. Thanks a lot.
Thank you once again, ladies and gentlemen, it is star one to ask a question.
Maybe I'll just ask a question before anyone else comes up. I have a question actually maybe for Christine. You have RMB 3 billion or so cash on your balance sheet, but you are guiding for RMB 3.6 billion spending in the second half for CapEx.
Right.
Clearly, there's some kind of shortfall there, right?
Yeah. That's a good question. We are planning to borrow some loans in the second half of 2019. I anticipate about RMB 2.6 billion roughly, depends on the progress of our construction. We have plenty of cash, RMB 3 billion, but cash is so resourceful, and it's very useful as a leverage. I will preserve some cash on hand as a leverage anyhow. By borrowing RMB 2.6 billion, please anticipate that in the second half of this year, the interest expense will incur. It's about RMB 20 million in interest expense. I want you to build that in model. Also, the interest income will decrease because first half, we only spent RMB 800 million on the CapEx, and then RMB 3.6 billion more to go in the second half. Cash that decrease with the interest income will decrease.
One more thing is other income this time in the first half, we have AstraZeneca of about RMB 14 million of option fee. Those are non-operational. These are also one-off. In the second half, I wanted to also guide you on some of these one-off item that's important to put there in the model.
Just another question, probably related.
You are aiming to build eventually a facility total capacity of 280,000 liters, right?
Right.
I mean, which kind of number we're looking at in terms of CapEx?
Some people clearly are kind of worried that at a certain point that you may have to do more equity raising.
Some people actually may want you to buy back some shares because you'll be issuing.
kind of stock options
Right.
-to your employees to retain the best.
how would you kind of address some of the concerns from.
-investors?
Okay. First of all, on page 13, the CIP page, that is what I was referring. Out of the 280,000 liter capacity, the cash actually were already spent in 2019 and 2020. That is how it works. For the capacity to be in place, we are spending money right now.
Okay.
Xingxing was asking as well. By 2021, the CapEx expending will drop a lot. It'll be about half because the money spending in 2019 and 2020 is building for the 280,000 liter. That's the first question. Secondly, in terms of cash availability, Chris kind of touched upon on that. Right now, we have RMB 3 billion of cash. We will borrow another about RMB 2.6 billion for the second half. That is RMB 5.6 billion. We have RMB 3.6 billion more to spend. I still have RMB 2 billion left on the bank, right? For next year, right now we already secure $500 million U.S. dollars in the bank loan. Out of it, $300 million were syndicated loan, $200 million are non-syndicated loan. On top of it, we can top up to another $200 million of bank loan already secure.
If we need to, then we can altogether have $700 million US dollars for bank loans. It's already in place. Right now I can tap into it anytime.
We don't have to worry about any immediate kind of everything anytime soon, right?
Right. For the next two years.
Okay.
Unless-
Let me clarify that, I think. When we have a cash need, we always look at either equity or loan. We'll decide as a company management, what's the best way to either borrow or raise equity. I think I also want to clarify that Christine's mentioned the CapEx in 2021 reduced, is actually based on the current scenario. If our business continue to be bullish, we may actually increase spending. CapEx for 2021 is not planned yet.
Okay. There's one question about this. I think probably you would like to address that. What's the estimate for cost per gram for the PD-1s from you and from the competitors or the manufacturers themselves?
That's too confidential information to disclose. We believe we have the technology to produce PD-1 at RMB 50-RMB 100 per gram.
Okay.
Lowest in the industry.
There are other peop-
Other people in China, probably 200 to 400.
Okay. Operator.
Sir, we have a question. Would you like to take it?
Yeah. Go on.
We have a question from the line of Denise Valentine from JP Morgan. Please go ahead.
Hi. I've already had my question answered.
Oh, hey, Denise.
Thank you, Denise.
We anticipated your question.
Thank you.
We know you so well.
We have a next question, sir. Would you like to take it?
Yeah, the last question. Yeah.
All right. This one comes from Naresh Chauhan from Intron Health. Please.
Hi there. Thanks for taking my questions. Just one on the manufacturing rollout. It seems that MFG4 is now up and running. To us, it seems like it's on time and on track. Was that in line with your expectations in terms of timing? In terms of cost, where has that come in relative to expectations? Obviously, you've got a lot more plants set to come on stream, so just trying to get a sense as to whether or not we're still on track for all of those to be on time and on budget. Secondly, you said that you have some spare capacity and can start any project within four weeks, which suggests that there is significant demand, but you're not backed up completely. You're about to add a huge amount of capacity in the coming years.
How are you comfortable that you can fill all of that additional capacity over the next three or four years, given that you already have some vacancy in the network? Thanks.
Yeah. That's a very good question. First of all, I think currently all the projects finished at WuXi is on time, under budget. So far, all the manufacturing 1, 2, 3, 4, they're all on time, under the budget. 5, so far, is on track, on time delivery, on budget. I think we have very good track record. Secondly, in terms of capacity, so because our business strategy is build capacity only when we need it. We can slow down if we don't need the capacity, or we can even pause the project if we don't need the capacity. Our strategy is very different from a traditional CMO, build capacity first and then find the project. We have our portfolio drive for project needs.
Because of that, I would believe our manufacturing-- this year, our margin, this last reporting period, our margin is very high because our MFG3 is almost fully utilized now. Now we're looking at MFG4. Hopefully next year, we'll be very excited to share with you that MFG4 will be fully utilized. We'll talk about manufacturing five. I think the reason we can start any project in about four weeks is because we always reserve in discovery and development. We always have extra capacity because we have a very large R&D team. We can mobilize them to do service work. In manufacturing, we always design 20%-30% extra capacity than our portfolio needs, and that's for optimistic projects to come in. Hopefully that answer your question.
Yeah. That's great. Thank you.
Yeah. Thanks so much.
Thank you.
Okay.
Sir, we do not have any further questions at this point. Back to you.
You want to make a conclusion?
I think overall, as I mentioned in the conclusion earlier, the business momentum in the first half is incredible, and we believe the momentum continues to be very strong in the second half. I think we are very uniquely positioned to benefit from really the booming biologics industry. I think we're also timely right with the bispecific. I think we're very excited about the company and again, the keyword today is actually sustainable high growth. Thank you.
Thank you very much.
Thank you, everyone. Thank you.
Thank you. Ladies and gentlemen, that concludes our conference for today. Thank you all for your participation. You may disconnect now.