Good evening everyone. Welcome to WuXi Biologics 2025 Interim Result Briefing. Today it's our great honor to present you Dr. Chris Chen, CEO of WuXi Biologics, and also Mr. Ming Tu, CFO of WuXi Biologics, and also Ms. Lina Fan, who is the SVP and also the Senior IR Director of WuXi Biologics. Now I will hand over to Dr. Chris to share with us the result. Thank you, Chris.
Thank you Cui Cui. Good morning, good afternoon and good evening. It's really my pleasure to share with global investors about WuXi Biologics interim results. Again, the topic, the theme of my talk is actually accelerating growth and very consistent with the talk I gave during JP Morgan conference. The first slide I want to share with you, I think this is a slide everyone is very familiar with. I think what's striking this time when I present to you during the 2025 interim is actually except a few gross margin, margin numbers, margin rate, all the numbers I present to you are record high for the company. Record high. On the left side are really operational metrics. On the right side are financials. Except the margin, except that during COVID we have higher gross margin, higher EBITDA margin because of a higher utilization rate.
Now, this year I present to you, every metric is record high for the company. That's really the content, the background of my talk today. In terms of going to the left side, we're looking at the project number, a record 864 numbers. 864 projects, new project added for the first six months. 86. This is continuing the strong momentum that we had last year with 151 projects. Last year 151 was already record high, almost on par with during COVID years. Now we continue the strong momentum. Now it's 86 for the first half. This is certainly record high for the first half. Our commercial projects also grow 50%. I always tell investors our business model is very unique, very different. Besides becoming a good CRO CDMO, we will also be a very strong CMO contenders. Our end projects now also grow 50%.
As a result, our backlog also grow as well in a very meaningful way. We're very proud that we hosted 44 regulatory inspections with 100% success rate. This is almost like the best student in the class. No one can beat 100% success rate. If you look at our employee number, it's very consistent and very stable. Our employee retention rate is very high, 98.8%. On the right side is financial numbers. You guys all read them. I just highlight a few. Our revenue is close to CNY 10 billion, our adjusted EBITDA CNY 4.3 billion and our adjusted net profit CNY 2.8 billion. As I mentioned earlier, our margin is slightly lower than during COVID years, but it's actually still one of the best in the industry. You see our gross profit margin grew from 39.1% to 42.7%. Our CFO Ming Tu will talk a lot more details later on.
As a result, our EBITDA margin and our net profit margin all grew significantly, similar to our EPS, with a whopping 56.8% growth. If you look at the revenue breakdown, we actually see a very exciting trend in both early phase and late phase. You see early phase R and early D, we actually grew more than 35%. In the M part, we grew around 25%. Both are very, very exciting for us. In the middle part, the program in phase I and phase II, we see a decline there. The number one reason is actually quite a few large scale projects were in this bucket and now get to manufacturing. This paved the way for our strong manufacturing revenue growth in the near future.
We also hope that this decline, as the program in phase I and phase II evolves, this decline will also be reversed in the near future. You see very strong growth of revenue from R and early D and very strong revenue growth in M. Our M revenue grew almost 25% because of several large scale manufacturing projects. This is what our investors have been very familiar with. This is called the golden funnel. I always tell investors for WuXi Biologics, you only need to know this funnel to be able to predict our financial performance. I already mentioned record high 86 projects earlier for the first six months of the year. Among them, nine of them are for a window molecule. Essentially, even in this year with the first half, we have nine window molecule including two phase III programs.
Among the 86, actually more than half the projects come from us. Among 86, actually more than 70% are ADC and bispecific or multispecific projects. WuXi Biologics is the industry partner of choice for ADC and multispecifics because they are very hard to do and they require a lot of expertise. They also require a lot of experience. We happen to have the largest portfolio of multispecifics. We also have the largest portfolio of ADCs. On the right side now, you see we have 67 phase III programs. If you assume a 70% success rate, that basically means in the next five years we'll have another 50 manufacturing projects. Our commercial manufacturing will grow from 24 to 70 in the next five years. That's assuming a static number based on today. As you know, we'll have more and more projects added later on.
I think that's why I always said our aim will grow as significant as the company evolve in the next couple of years. Right. Then 24 commercial projects I already mentioned in the beginning of the talk. Again, this funnel really gives us plenty of growth in the next few years. Let's continue to reinforce our business model CRDMO. Right. Our R to D conversion is more than 90%. Our D2M conversion is more than 90%. Actually, right now both of them are more than 95%. I have always cautioned investors, saying our backlog is so big, that is so huge that you know, don't expect to see significant growth of a backlog. This time it's anomaly. Right now you see our backlog, we have two parts: one milestone backlog and the service backlog. You see milestone backlog grew from about $7 billion to $9 billion because of significant progress of R, as we mentioned earlier this year. Then our service backlog grew from about $10 billion to $11.3 billion as well. On top of that, we actually convert a lot of them to revenue. This is for the first time we see a significant growth of our backlog.
The similar trend is for three-year backlog, which has been very stable for the past couple of years. Now you see very meaningful growth. This is consistent with the funnel and consistent with the contract we signed and consistent with the project we introduced over the years. As I mentioned earlier, we have the most exciting portfolio of our industry. We have 864 projects. Among them, more than 300 are first-in-class programs. Among them, maybe about more than 60% of global ADCs and global bispecifics or multispecifics are in this portfolio. You see multispecifics grow more than 36%, almost 37% right now. Now we are working on 168 multispecifics. This includes the most exciting programs like the CD3, CD19, C3, C20, CD3, BCMA, CD3, 19, 20, tri-specifics. It also includes P1, VGF, and other bispecific and multispecific programs. We have the most exciting portfolio of multispecifics.
Similar to that, we also have the most exciting portfolio of ADCs. Now you see our ADC program also grow significantly, and now we have more than 225 programs. Those are programs either entering clinic or in the clinic right now. Amazing growth. As I mentioned earlier, ADC and bispecifics or multispecifics now account for more than 40% of our portfolio. Also, early part of this year, it actually accounts for more than 70% of this year's wins. The two exciting segments of the biologics space, we are actually a very strong leader. We are a partner of choice for any company who wants to develop multispecifics or ADCs because of our technology, because of our speed, because of our execution, because of our quality. We always wanted to share with you our regional, you know, in every geography how we fare in that.
North America continues to be the largest market for us. Almost 60% of revenue comes from North America. With that 20% growth, actually very exciting. This will continue to be the strongest area for us with all those noise. We continue to see whether it's early phase or late phase, whether it's R or D or M. We are the preferred partner of choice for North American clients. Europe, we see close to 20% revenue with a modest growth. Because in the past we did a lot of CMO projects, now we are overcoming the CMO projects. Now we are really working on incubating a lot of early phase programs and hopefully you will see more exciting growth later on as well. China, you see now China accounts for 13% of revenue with also a single digit decline in revenue.
If you take into account all of the programs, Chinese company, all licensed to global peers. If you move them and then put them in this bucket, then we actually see a single digit growth in there. I think China's really negative growth or decline is mostly because of quite a few programs get unlicensed global partners. You see very, very exciting growth in Asia, mostly Japan, Korea, and Singapore. I think now it's getting close to 7% revenue with more than double in terms of the growth speed. We continue to foresee this region and maybe getting close to 10% in the next couple of years. We continue to see very exciting development in Japan, in Korea, in Singapore, and in other Asian countries. With that, I'll hand over to our CFO Ming. He will tell you a lot more about the financials for the first half.
Thank you, Chris. Slide 12 will give us the highlights of our financial metrics for the first half of fiscal year 2025. First, revenue. As Dr. Chen just mentioned, despite the uncertainties from tariff, geopolitical headwinds, and also uneven paces of biotech funding recovery, our revenue continued to grow at an accelerated pace. As you can see, our revenue almost reached CNY 10 billion in the first half, a 16.1% increase over the same period last year. We're not just continuing our journey of solid growth over the past five years, but also transitioning into a phase of accelerated growth. Our revenue increase in the first half was primarily driven by the following factors. First is the successful execution of our follow and win molecule strategies as more and more projects advance through our golden funnel towards the later stages.
Now we have 67 projects in phase III and 24 at the commercial manufacturing stage, and the volume of these late-stage projects is ramping up steadily. Win Molecule strategy also added nine projects to our portfolio, with two in the late phases. All post-COVID industry adjustments have been fully absorbed in our financials. Overall, late-phase and commercial manufacturing revenue grew close to 25% and represented over 43% of our total portfolio during this reporting period. On the development side, although the biotech funding recovery is still zigzagging, our share gain in the pre-IND space enabled us to achieve revenue growth over 35% year-over-year thanks to the 151 new projects we scored last year, followed by a record 86 projects in the first half of this year.
Our process optimization and productivity improvements also enabled us to shorten our revenue conversion cycle from DNA to R&D to about six to nine months. The decline in our early-phase revenue year-over-year is largely due to the timing, as three big-scale clinical manufacturing projects progressed from phase II to phase III, creating a gap of close to CNY 0.5 billion, which will be replenished by the projects from the pre-IND phase over time. In our research and discovery services, we are also continuing our momentum from the second half last year thanks to our strong innovative technology platforms on bispecific, multispecific, and ADC. You might recall that during our annual earnings release back in March, we talked about the seven molecular discovery deals that brought us about $140 million of upfront payments.
Half was booked in the second half of last year and the other half, roughly $70 million, was booked in the first half of this year with potentially $2.3 billion of the milestone and royalty incomes in the future years. We also have a full pipeline of the new deals, so the momentum of R will continue in the second half and into the future. From a modality standpoint, our new exciting growth platform such as ADCs, bispecific, and also multispecific contributed significantly to our overall revenue increase during this reporting period. Lastly, with our capacity expansion globally, Dundalk, Ireland, Cranbury, New Jersey contributed close to $100 million of the incremental revenue to our commercial and clinical manufacturing sector in the first half. Moving over to gross profit, which increased about $900 million to approximately CNY 4.3 billion in the first half.
The whopping 27% increase in the gross profit also gave us 360 basis points of the gross margin expansion year-over-year. The margin improvement was primarily attributed to the following factors. First, the solid growth in R, the research sector, gave us a positive mix impact as the upfront payments and milestone incomes grew more than 2x during this reporting period. The margin rate for development sector extended one point largely from the productivity gains and also the profitability from layface, and the manufacturing sector continued to meet or exceed our expectations. Plant utilization rate in China and Ireland continue to improve throughout 2025. The productivity improvement from WBS, our lean manufacturing implementation, also gave us 100 basis points of the margin lift. Lastly, SBC, our share-based compensation, declined $200 million year-over-year as we continue to optimize our CMB structure, giving us 2 points of the GP margin expansion.
Also, I want to mention here that there is no tangible tariff impact to our financials in the first half of this year. Excluding share-based compensation, our adjusted gross profit margin stands at 45.6%, a 120 basis points improvement year-over-year, still one of the leading positions in the global CDMO industry. Moving on to adjusted EBITDA, which is a proxy of our operating cash generation capabilities, increased about 20.6% to CNY 4.3 billion during the reporting period. The adjusted EBITDA margin rate increased 170 basis points to 43.3%, which is also one of the highest in the CDMO industry. Adjusted net profit is the IFRS-based net profit excluding the impact of foreign exchange gain and loss, share-based compensation, and also fair value gain and loss from our investment portfolios or our asset divestitures. This is the proxy for our business profitability under continuous operation.
As you can see, the adjusted net profit exceeded $2.8 billion in the first half, an 11.6% increase year-over-year. The growth in adjusted net profit was less impressive than the top line growth, which was largely due to the SGA increases as we continue to build the standalone capabilities for XDC and invest in our global business development capabilities. Also, the tax expenses in the first half were higher year-over-year due to the one-time DTAD, the deferred tax adjustment in Ireland in our first half 2024 baseline, and also the smaller deduction basis for our share-based compensation in China. Next page please. This slide shows us the profitability metrics over the past years and the first half, including IFRS-based net profit, net profit attributable to owners of the company, earnings per share, and also adjusted earnings per share.
You can see that our IFRS-based net profit has grown at a CAGR of 23.6% between 2020 and 2024 and reached $2.8 billion in the first half of this year, a whopping CNY 1 billion increase over the same period last year. The 54.8% growth is largely driven by the 27% IFRS gross margin increase as we discussed earlier and also the combined gain and loss from investment divestiture and the foreign exchange of roughly CNY 378 million in total, about 22 points of the net profit improvement year-over-year. These gains from investment and divestiture activities will give us more dry powder to enable us for more biotech incubating, global capacity expansion, and also share buybacks in the near future.
IFRS-based net profit attributable to the owners of the company grew 56% in the first half, slightly higher than the IFRS-based net profit as both WuXi Biologics and subsidiary WuXi XDZ grew at a similar pace between 53% and 55%. Hence, the financial impact of minority interest pickup remains proportional to the net profit growth. Basic earnings per share moved in tandem with IFRS net profit attributable to the owners of the company, grew 56.8% to $0.58 per share if we exclude share-based compensation, investment divestiture gain and loss, and FX translation impacts. Our adjusted EPS was about $0.59 per share, 7.3% improvement year-over-year. Next page please. Slide 14 gives us more insights into our gross profit and the cost of sales. In the first half of this year, our gross profit margin was 42.7%, 360 basis points expansion from the same period last year.
Excluding the $300 million of the share-based compensation, our adjusted gross profit was 45.6%, 120 basis points improvement year-over-year. As we discussed earlier, the gross margin expansion was primarily attributed to the takeoff of the research discovery services, which gave us a favorable margin lift from the upfront payment and also the milestone payments. The improved capacity utilization in China and Europe, and also the one point productivity gains from WBS lean manufacturing implementation. You can see the composition of our cost components in the stack bars below, with roughly 16.5% in labor costs, 19.6% in material, and 21.2% in overhead, which includes maintenance, utilities, and the depreciation of the manufacturing facilities. Labor component was smaller than the historical average. As we focus on labor productivity, revenue generation per employee is a crucial KPI for all our business units. Dr. Chen will show you more later.
Our total number of employees did not increase for the past 18 months, while our revenue increased 16.1% year-over-year. The higher overhead costs were primarily driven by the new facilities coming online. As we expanded our global capacity from 150,000 L at the beginning of 2023 to over 300,000 L at the beginning of this year, the new capacity brought on more expansion, more depreciation, utilities, maintenance, and also other fixed overheads. The higher R&D and manufacturing mix in our portfolio will also contribute to a lower labor cost component over time. Next page please. This page is about liquidity. At WuXi Biologics, we have a strong balance sheet and a solid cash position. As of the end of first half, we had $12.5 billion cash on hand, sufficient fund to support our accelerated growth globally. We have a conservative funding strategy. For our $60 billion balance sheet, we only have about $2.7 billion of debt, 30% of which are working capital facilities, and our gearing ratio which is defined as the emergency. Hello? Can you hear me?
Hello?
Yes, May, please continue.
Okay. I just want to say that we have a very conservative funding strategy here. For our $60 billion balance sheet, we only have about $2.7 billion of debt, 30% of which are working capital facilities. Our gearing ratio, which is defined as the interest-bearing debt over equity, is nearly 5.6%. At the same time, we have close to $6 billion of bank credit facilities to tap into if we need to. Our CapEx spending in the first half was $1.9 billion, mainly for our capacity expansion for both Biologics and XDC in Singapore, Biologics facility in the U.S., and also XDC's expansion in China. Subtracting working capital, occupation, and tax payments, our free cash flow in the first half was slightly shy of break even. Adjusting certain timing items, we expect a substantial improvement in our free cash flow in the second half.
For the total year of 2025, we're still committed to delivering positive free cash flow. This will be the fourth year in a row for us to deliver positive free cash flow. Hopefully, this time in a more meaningful way and make a new record in our free cash flow history. Now I'm going to pass the baton back to Chris to share more insights into our business operations.
Thank you, Ming. I think WuXi Biologics has a very unique CRDMO model. Our model is very complex. It's not easy to understand. Often investors just compare us with a typical CMO. That's why I want to use this slide again to highlight the difference of our CRDMO model. Besides the traditional, you know, our business model is called follow the molecule, right? We prepare for the R, we prepare the first, you know, milligram, the first 10 mg of the molecule. For D, we prepare for the 10 gram, for the 100 gram. For M, hopefully 100 kg or even metric ton. As the mass of the drugs increases significantly, our revenue also increases exponentially. That business model is mostly based on cost plus model. Besides the cost plus model, we actually have a very significant IP-driven revenue.
I want to highlight here during our phase, if the program is, if our partner gets one of the programs from WuXi Biologics, typically we receive upfront payment of $30 million or $40 million and milestone payment up to $200 million and then a royalty of 3% - 5% even up as high as 10%. For a billion dollar drug, we may be able to get $100 million of royalties alone. Those are actually very high margin revenue because most of the cost was already absorbed in the prior years. The gross margin could be as high as 80% or even more. Right. This is the IP-driven revenue. Once we get into development, this is a normal part of a business, which is, as I mentioned, a cost plus. Besides that, we actually have a cell line IP as well. This is something we did not mention frequently in the past because we assume everyone will be manufactured with us. If they don't manufacture with us, the cell line IP will actually generate a significant amount of revenue. We have more than 600 projects. We will have more than 600 projects with cell line royalties by end of this year. Let me give you an example. For example, if WuXi Biologics is making 100% of the manufacturing, then my partner, my client doesn't need to pay any cell line royalty.
If they decide to give 50% volume to WuXi Biologics, another 50% in-house or to a third party, then we make money from the 50% of the manufacturing in WuXi Biologics. We also make the money for the products that someone else makes. That's because we have the cell line IP. In terms of the difference of the profit, for example, if I made $100 from the manufacturing ourselves and if my partner manufactured outside of WuXi Biologics, then they have to pay us between $25 - $200 in terms of the royalty. This really showcases the resilience of our business model. Even if someone doesn't manufacture with us, we still get a portion of manufacturing profit. The profit can be even as high as revenue as the manufacturing profit for some of the programs. That's why for WuXi Biologics we have a very unique business model.
Our CRDMO model is very unique in that sense. R leads to D, D to M. Our revenue gets higher and higher. Not only do we have the service-based revenue, we also have IP-driven revenue. Last year the IP-driven revenue was already a significant part of our revenue composition. If you look at the profit from 2024, about 15% of profit actually comes from those IP-driven, either R or D, either cell line royalty or the milestone payment or upfront payment. That's why I always said WuXi Biologics has a very different business model. We are not a CMO, we are not a CDMO, we are a CRDMO. Hopefully that's very clear with this explanation. That's why I spent quite a few minutes on this slide. Talking about R, we actually have more than 50 programs that we are eligible for royalties. We are also eligible for milestone payment upfront.
That's why last year, you know this IP-driven revenue or profit is already significant in our portfolio, right? We have 50 programs like that. Among the 50 programs, a few, let's say two or three, potentially have achieved mega blockbuster sales, $5 billion or even $10 billion sales. If you think about that, if we have a program with $5 billion or $10 billion sales, even 3% or 5% of that royalty becomes very, very meaningful to our top line and the bottom line. I think that at some point WuXi Biologics will be receiving hundreds of millions of dollars of royalties and milestones from those programs, and eventually it will be a billion dollars or more. That's why I always said our CRDMO business model is very different from our peers.
This was, you know, when I IPO'd, I had the same business model, but at that time, it was, let's say, 10 or 15 years away. Now it's not only reaching, now this is already getting too close. Now this is actually already close to $100 million. To go from $100 million to $300 million to $500 million to a billion is foreseeable. Let's say five to eight years later, this will become billion dollar revenue. That's how significant this model is to WuXi Biologics. On the D part, and as everyone knows, that's our stronghold, that's really WuXi's cup of tea, right? We have a very strong market share, as you know. That's why we won 86 new projects early this year. As everyone knows, in our industry there are also a lot of M&As, either a U.S.
biotech being acquired by large pharma or Chinese biotech programs out-licensed globally, and WuXi actually will benefit from all those trends because oftentimes WuXi continues to be the main CMC player behind the scenes, helping either the global acquisition or the Chinese asset out-licensed to global peers. For Chinese assets out-licensed to global partners, we typically have about 70% market share. As the program goes from China to global, our revenue, our service revenue, tends to grow 5x-10x . I have always told some investors this is almost like a pie in the sky for us if a Chinese program gets out-licensed globally to companies like Merck, Lilly, or Pfizer, or J&J, or Roche.
Because a program destined for China, I may receive, let's say, $10 million, $110 million, $10 million to $15 million revenue, but a program destined for global, then I receive $100 million or even $200 million of revenue. There is a 5x - 10x amplification on that. The good news is whether it's a small biotech acquired by large pharma or a Chinese program licensed to global, WuXi always keeps the project. So far, keeping rates is more than 95%. That's why our revenue will continue to grow as the global deals are happening. That's the D part, and then I'll talk about M. At the beginning of the talk, I mentioned already that M will actually be driving a significant part of the growth. PPQ is a key, is almost like a gate for M.
You do PPQ and then you wait for, you file for FDA approval, and then once they approve, you launch your product. That's why PPQ is a very good leading indicator of M revenue. You see, during COVID times, we were able to do 20 PPQ a year. This year, we already have 25. What's more exciting, actually, next year, even as of today, we already see 27 for next year. We still have 12 months to work on additional projects. Hopefully, next time when I share with you 2026, you'll see a lot more PPQs. More PPQ means more revenue. More PPQ means exponential growth of the manufacturing revenue as well. Another fact that I want to share with you is that we have done close to 100 PPQs already. We only have one failure so far, so our track record is at 98% +, almost 99%.
That's why everyone in the industry, our partners, love us because when they do PPQ with WuXi, it's almost like they have insurance. It's going to be successful, and that basically means the BLA filing will be on time. On top of that, as I mentioned earlier, we have a very strong regulatory track record and the product will be approved. With the PPQ success, with the regulatory approval success, our partners can really trust WuXi to deliver the product for them. Over the years, now we have built a very strong global network. We have a strong network in China for R, D, and M. We just finished building up a strong network in the U.S. and Europe for R, D, and M. The R is in Boston, the D is in Cranbury, New Jersey. The M is already in Ireland and will be in Worcester, Massachusetts.
That's the second line, second R, D, M, and the third R, D, M will be in Singapore. To really serve every client in every region, now we have three parallel supply chains to be able to really address the global need of any client from Basel, from London to New York, Boston, San Francisco, Shanghai, and even Tokyo. I want to give you a very quick update on our global site as well. I'm sure you are very interested, very much interested. I mentioned we have a very strong network in Ireland. We have three facilities in Ireland and as of today all three facilities are producing product for us. We have done four PPQs with 100% success. Last week we actually received EMA approval for the first product in this site. That really marked a great milestone.
For this Ireland facility, to remind global investors, this is one of the fastest built facilities in Ireland. This is also one of the most high quality facilities in Ireland. We received ISP award for that. Now we receive the product approval from the site from essentially year five and this is actually an incredible track record. We can deliver this in Ireland. That again demonstrates a strong execution community of WuXi Biologics. Now our mindset, our quality, our operation are all now carried over very well in Ireland. As I mentioned earlier, we have three supply chains. One is in the U.S. The clinical is in New Jersey and the commercial is in Massachusetts. All are progressing very, very well. Lastly on this slide, we are also adding more capacity in China. The facility for the first time now, we have launched a 5k single reactor.
Ten years ago when we started with single use, it's 2k. Now we're going to 5k and in the U.S. next year we're going with 6k. A single reactor now is as big as 6k. I mentioned our third supply chain, really third line that resides in Singapore from R and D and M. I'm having shared with you that we started our drug product facility construction. We are finishing up the design of drug substance facility. What we can achieve in Singapore is actually unbelievable. Our subsidiary XDC is close to finishing up the facility in Singapore. If you are visiting Singapore, I'm more than happy to have someone host you to visit this site.
About February of this year you see still green, you see grass on the line and on March now we start piling and this June actually the facility is ready and now we are doing water runs. By end of this year we'll be doing product runs in there. Essentially from piling to product run is about 18 to less than 20 months. This is for the first time we're able to do this outside of China. This is a very significant way. That's why we are very confident that we can deliver a third supply chain in Singapore. I mentioned earlier that our PBQ success is very, very high. Another very, very essential quality, essential attribute for becoming a manufacturing global leader is quality. I'm very, very happy to say that so far we have 100% success on. That's why I said it's the best student in the class.
No one can beat 100% success. We have 44 already, including 22 from U.S. FDA and from EMA. Almost every day we have been audited by our clients. So far for the first half we already have 139 client audits. That basically translates to a full year, almost 300 audits. As you know, we only have 200 working days. Every day we're being audited by global clients and then for every two client, every three client audits, oftentimes one client doesn't have any finding. Essentially, they send five people to spend three days with us. You're talking about 10 - 15 person-days and then reviewing every document, trying to find any issues that we may have in our manufacturing process, in our QC process, in engineering. About 30% of the time they don't find anything.
If you think about it, if you send 10 people, 10 person-days to visit one facility, 10 person, and then you didn't find anything for that visit. That's how good we are in terms of quality. That's why we can consistently pass FDA inspections and EMA inspections. I think as everyone in our space is getting to digital, WuXi Biologics wants to be a global leader in digital. We have already spent, I think this is already our fifth year, fifth year in digital journey. Even before COVID we started our digital journey. I think end of this year, hopefully we'll be really a global leader in digital as well. DaVinci client portal is a go-to resource for every data, every invoice, every action item that our client needs to work with us is in DaVinci client portal.
Biofoundry is our own system for digitalized lab and then EBR is our own way of digitalized manufacturing, automated manufacturing in there. I think with the WBS, with digital and with our way of improvement, that's why you have seen over the past eight years, over the past eight years our revenue per person grew from $100,000 to almost $250,000. Actually, it's an incredible growth. Every year our per FTE revenue actually grew 11% on average. We continue to foresee this and maybe even higher at an even higher rate in the next couple of years as we go through more digitalization, more WBS, and certainly the high margin revenue from upfront payment, from milestone, and from royalties will help because there's no FTE associated with that because all the FWORK cost was already absorbed in the prior years.
I think, you know, for me, every earning I always have a differentiating factor for us. Differentiating factor for us. I think we have been talking about BioServ for a long time. Back in 2018, we launched WuXiBody and that's the bispecific technology. Back in 2019, we launched a CD3 platform. Now our CD3 platform is being used in more than 10 programs. I think the leading program from Merck, from GSK, from Candid are all using that CD3 platform, our own battery platform. Today I want to highlight a few on ADCs. I think you probably heard that from Jimmy yesterday as well. Now we have our own ADC technology that can either cover linker, payload, and conjugation. This really showcases how WuXi Biologics wants to help our global partners, our global clients, saying if you need a technology, we have something for you.
Hopefully it's also the best in class. When WuXi Biologics was started 14 years ago, we bet that single use technology is the future. Single use is the future. Now looking back, I think we really think we bet on the right track. Everything is so successful in there. Single use technology is not only cost efficient, it's also sustainable. It's actually very efficient. If you look at the next slide, we have already made metric ton level of quantity of mAbs for global clients using our technology. As I said earlier, 10 years ago was 2,000 L. Now it's a 5,000 L. Next year will be 6,000 L. A single reactor. If the reactor volume is not enough, we multiplex them. We can put six 2k reactors, 3.4k. In the future, we can put two 6k together.
We have already made more than 300 batches in five manufacturing facilities in two countries using this technology. Now we have already received more than 20 FDA approvals for this, so it's approved. With single use now, we can deliver not only 100 kg but now 2 to 3 metric ton, 2,000 kg or 3,000 kg. I think this is one way of achieving that, the other way of achieving that. I'm not sure whether some of you guys will follow our own news. WuXi Biologics just achieved 100 g/L using continuous processing technology. 100 g/L using continuous processing technology, which is 20 technology. You know, as you know, it's 3 g-5 g per liter, basically we can achieve a 20x productivity improvement. For our 10,000, our 1,000 L reactor is equal to someone else's 20,000 L reactor using our continuous technology.
That's in two ways how we can really become a manufacturing powerhouse, either using this technology or using continuous processing. As our industry shifts more and more to autoimmune disease, to kidney disease, the convenience, essentially administration at home is more and more and more important. Over the past 10 years, we developed our own formulation technology so that we can, for every biologics, we try to develop it in a liquid formulation and then put it in a syringe so that patient can administer at home. It's so much more convenient, but it also saves a lot of money for the healthcare system. To achieve that, you need to do very high concentration because oftentimes the dose is fixed. For example, if the dose is 200 mg and if you only able to formulate 25 mg /ml , then you have to do 8 ml delivery.
You cannot ask a patient to, you know, to shoot themselves eight times for one, for one, you know, one treatment is too much. Now with technology, we can do 200 mg in one injection, in one mil. This is all this work we have done over the past eight years. Now we have more than 100 projects. Among the 800 projects, now we have more than 100 projects we're able to do this. This is a proven technology for us already and really help the autoimmune patients in a good way. WBS and ESG are always key component of our strategy. I think Ming already mentioned WBS. I think this is already, this is a WuXi way of improving ourselves. Every year we improve our timeline. Every year we improve quality, we improve delivery in regulatory.
I think WBS is financially we are able to achieve 100 basis points improvement on gross margin just because we're doing WBS. That's our goal for every year. Every year, at least from WBS, we want to achieve 100 basis points improvement on margin. I'm also very proud that the global community rate us very high on ESG. We are ranked highest on every metrics on ESG, on 2, on 2 rating agency. We're actually top 1% in one rating agency. Globally, they're rating 800 companies in the pharmaceutical space and pharmaceutical biotech space and supply chain space. We actually, out of 800 companies, we rank number two. We are almost there with, you know, ranking number one as, you know, essentially the most ESG friendly company, the most ESG committed company in the space.
With that I want to summarize, I think from the beginning I said what's unique about WuXi Biologics is our business model is a CRDMO business model. We make the first milligram, first gram, first kilogram, first metric ton, right? Then the revenue grows exponentially. That's only the cost plus model revenue, service revenue. We also have IP revenue from our R and D and R will lead to D. The current conversion rate is more than 95%. The D will lead to M with all those noise, with all those, you know, the challenges now D to M conversion is still more than 90%, more than 95%. Our CRDMO model is really, really unique. That's why we always said we are unique in our industry. For the strong first half 2025 results really reinforce our confidence, right? You see our overall revenue grew 16%.
Our early phase grew a whopping 35%. Our manufacturing grew almost 25%, continuing the momentum. The largest, the highest number of projects of 151 last year. Now this first half will grow 86. A lot of them, 70% of them, are highly complex projects. ADCs and multispecifics with a single ASP higher than traditional mAb projects, right? For manufacturing, I mentioned 25 PPQ now and even more next year, right? I think the first half 2025, we can see this is almost a launch pad for accelerated growth over the past couple of years. Past 18 months we also divested some assets, improved our efficiency. Looking forward for the second half and for 2026 now we really see accelerated growth. That's why I said launching pad right now R, D and M are all on fire.
M, I already mentioned the growth in there on top of the growth on top line. Our margin actually will expand from WBS, from digitalization, from more milestone and royalty revenue from large scale same old projects. Ming already mentioned we are expecting a significantly higher free cash flow this year. As our CapEx will continue to be realized, our free cash flow will be stronger and stronger. Our global expansion, Ireland, Germany, U.S., Singapore are on track. The loss from the global operation is getting reduced and reduced is significant as well. That's also another way our margin will be higher and higher. Lastly, with all the new technology we're launching, it will help us achieve more business. The highly automated DS manufacturing. This is what I mentioned for 15, if we do this manufacturing, we do it for 15 days, we get 100 g/L .
The actual result is actually 110 g/L. 110 g/L for 15 days. If we supply 100% of Ketoda we only need three reactors, three reactors, each one of them 1,000 L. That's the technology, next generation technology we're developing for our industry. With a very strong result in first half we are very confident. That's why we raised our target for revenue from 12-15% to 14-16%. Not only do we have a higher revenue, we also believe our margin will be higher and our free cash flow will be higher as well compared to last year. That's why I said first half. 2025 during launching pad is a launching pad for accelerated growth. Thanks so much.
Thank you so much, Chris and Ming. Now we're heading for the Q& A session. If you want to ask a question, please raise your hand and also unmute yourself. Before we open up the line, I will ask a question on behalf of all the investors. I think on top of our mind, biosecurity is still the most relevant part. Recently, we hear some good news about the Biosecure Act because for the updated version, no WuXi names were on the list. Chris, can you share with us your insights and also takeaway from this? Thank you.
Sure, sure. Thank you. Thank you Cui Cui. As you mentioned, the proposed version of biosecurity will likely be. The proposed version of biosecurity PO is out. It was proposed to be introduced in this year's NDAA. The good thing is with all the industry-wide effort, with lobbying from WuXi Biologics, right now our names are not on it. We continue to lobby the U.S. politicians, saying we are a very compliant company. We help U.S. companies become more successful. We are enabler. We don't compete with U.S. companies. We are enabler of the global biologics industry. I think this message is probably heard and we really, I think, WuXi Biologics now continue to develop our, continue to focus our core business, continue to serve every client in U.S., in Europe, in China, and in Japan.
Thank you very much, Chris. Also, congrats on this progress and on the very solid result delivery. Now we will open up our lines. Our first question is coming from Ziyi Chen from Goldman Sachs, please. Thank you.
Hi, thank you for taking questions. Thank you Cui Cui. I got a couple questions. First is about the CapEx. We saw that WuXi Biologics trimmed the total CapEx for this year by about $700 million. Yesterday, XDC mentioned that the risk capacity is about $160 million, so net-net for non-XDC part, the company has revised down the guidance by $860 million. We try to understand what has been the reason for that. The second question is it has been very encouraging to see the company raise the forecast for PPQ in 2026. Just wondering what has been the contribution of commercial projects to the revenue now because we know that late stage plus CMO is over 40% in the first half, but if we only look at CMO, how much was that, and out of the 24 commercial projects, how many are global projects?
We try to understand a bit more about, for those global commercial projects, what kind of wall share we see WuXi Biologics have gotten in the past few years. My last question is on Chris. You mentioned about the milestone payment, you know, contributed about 10%-15% of the profit last year, and also you illustrate a very promising IP-based income model. We try to understand a bit more in the longer run what will potentially be the contribution from those IP-based income to the earnings, including milestone payment, upfront payment for our projects, cell line royalties for the deep project. Thank you.
Thank you. Yeah, to go back to the CapEx, I think as I mentioned earlier, now WuXi Biologics is improving everything, including also the CapEx timing. If we can buy the equipment next February, we don't need to spend money this November. We're trying to compress the timeline of our own project. The CapEx reduction is a deferral, it's not really a reduction. We will save $700 million. We'll defer CNY 700 million this year, but they will be spent next year. We continue to optimize the CapEx process. It's really not really a CapEx reduction, it's a CapEx deferral. That's the first question. The second question on your CMO, among the 24, I think about 20 are for global. This included bispecifics, bispecific ADC component, antibodies, enzymes. I think several of them are very high potential as well, I think. What's the other question on the M part?
On the M part, what has been the percentage of the revenue contribution coming from Q or CMO projects?
For the follow the molecule, it's actually 100% follow the molecule for window molecule. We have a few, it's actually a window molecule. So far, large pharma in-house is a primary supplier, but they have an intention to transfer to us, make us primary supplier as well. That's why we believe our M will continue to grow. For the follow the molecule, so far we are able to keep 100% of the volume. What a lot of investors fear is actually once the M comes over, they will switch to another company. So far that hasn't happened. I think we are able to retain 100% of the volume for follow the molecule. I think Amicus is a good example. We manufacture in China first. Now we manufacture in Ireland, and GSK PD1, we manufacture them in China. For the other global program, it's the same way as well.
For follow the molecules, so far we are able to keep 100%. For window molecule, we are the secondary supplier right now, and in several years, once we have a steady supply, hopefully we will become primary supplier. We have a couple of examples like that.
The last part of the question is about the IP-based income. What could potentially be longer term contribution?
I think in terms of the revenue percentage wise it's probably only a few percent right now. Hopefully, if we are lucky, it will become 10%, 15% revenue in, let's say, five to six years. By then, if we achieve 10% revenue, that basically means that 25% of profit will come from this. That's how significant this is.
Got it. Thank you very much. Congratulations on the results.
Thank you.
Thank you, Ziyi.
Thank you, Ziyi. Thank you, Chris. Our next question is coming from Yang Huang from JPMorgan. Yang, please unmute yourself. We cannot hear you. Can you unmute yourself? Maybe we'll come back to Yang later. Our next question is coming from Lawrence Tam from Morgan Stanley.
Thanks Cui Cui . I have one question on WuXi High 2.0. Chris, you mentioned that in your press release, WuXi High 2.0 pushed titer up to 230 mg/mL. I just want to understand the business impact of this upgrade because in the same filing you also mentioned that 20% of the FDA-approved antibodies are considered high concentration, meaning titers over 100 mg/mL. That's for the approved biologics on the market, right? What about for drugs that are in the pipeline? How would WuXi High 2.0 expand your addressable market? In the earlier phases of the market, I think you mentioned over 100 programs now are over 150 mg/mL. Can you just quantify for us the business impact of this upgrade?
Yeah, that's a great question. As I mentioned earlier, now the near term focus is autoimmune, basically non-oncology. Even in oncology, now this is happening. I think Merck's PD1 will actually be administered. You will be able to administer PD1 at home with a single injection now, and then Perception has this as well. This is typically, now more and more, absolutely needed for autoimmune, for kidney, for kidney disease, for other chronic disease. It's also interesting getting into the oncology area. As you mentioned, currently about 20% I think approved product in a portfolio, maybe 40% will need this technology, maybe eventually 60% or 80% because this is so much more convenient. Instead of doing a three hour IV, I think Darzalex 3038 antibody from Janssen, it was originally a four hour infusion, now it's one injection.
Essentially, instead of waiting in the hospital four hours, now you just shot yourself in the arm, in the belly for two minutes and it's done. It's very convenient. Behind the scene, this is a technology that enables all those happening. That's why I highlight this is a very powerful technology. Only a few companies have the technology to make this happen. In the meantime, eventually we will collect royalty and milestone on this technology as well because we just launched it. In a way, sort of give the industry some free trial for now. Eventually, company need to pay us for this IP as well and this will become a differentiating factor. If everyone has a PD1 VEGF, this will become a different factor if you can do a one shot instead of four hours in the hospital.
I think Samsung also launched their next generation high concentration platform last October, and they mentioned achieving titers of up to 200 mg. Is that the industry standard now for CDMOs? Above 200, I think the highest is 300. Right, but that's mostly in house.
For this formulation, I think 200 is already very high. There are only a few. That there are only 200 is already very, very high.
Okay, great, thank you.
Thank you, Lawrence. Thank you, Chris. We are now going back to Yang Huang from JPMorgan.
Before you all ask a question, let me clarify. I think the WuXi Biologics High has already been there for us for 10 years. This is a 2.0, right? Samsung just launched theirs last October. We have been using this for the past 10 years. Sorry, yeah.
I think he's maybe got some technical problems. Our next question is coming from Linda Shu from HSBC. Linda, please.
Hi Linda.
Hi Linda.
Hello. Thanks for taking my questions. Thank you, and also sales management for this very great solid results. First of all, I would like to have understanding of the IP part as well. As Dr. Chris Chen has mentioned, this revenue is likely to grow from $100 million from last year into a significant part of revenue in the next few years. Could you share us some color in how we can forecast in next two to three years about the visibility? If I understand it correctly, this would directly contribute to the bottom line increase and also the margin expansion. That will be great for us to understand how we can put it on the visibility on the revenue in the next two years. This is my first question. Next, I would like to understand about the GP margin.
We see several factors to improve the margin, and as mentioned by Mr. Ming Tu, we are about to have gradually increase the GP margin to the record high as 52% from the current stage. How can we forecast or break down the key factors for the margin expansion, and what about the margin level in next two years? Thanks, that's my question.
Yeah, so I think for the IP generated income, it's actually because we are just at the beginning of the phase, so it's harder to predict. Just to give you a rule of thumb, you got to assume maybe 30% - 35% growth a year, and that's why you go from $100 million - $200 million in two years. Hopefully $200 million - $400 million in another two years. That's why it's getting close to a billion dollars in five to eight years. That's what I assume it. Right. I think in terms of margin expansion, we have already mentioned that our global site losing less money will expand our royalty-based or IP-based income higher and higher. There'll be basically more and more higher and higher margin. Oh, I forgot to mention the IP-based revenue.
Typically, the margin is 80%, gross margin is 80%, and that's why the margin will be higher and higher. Global site goes from losing money to making money, and then the IP revenue, and then the WBS. Every year we improve ourselves, and then digital. All those efforts are really contributing to margin expansion. I think our goal is to basically improve our margin from the current state all the way to about close to 50%, that record high we achieved during COVID. Thanks a lot.
That's very clear.
Thank you.
Thank you very much. Due to the time constraint, we will stop here today. Thank you again, Dr. Chris Chen, Ming Tu, and Lina Fan, for your time today. Thank you, everybody, for participating. Thank you so much and congrats again. Thank you.
Thank you Cui Cui.
Thank you, thank you.