Good morning, everyone. Thanks for coming. I'm Yang Huang, Head of Greater China Research at J.P. Morgan, based in Hong Kong. Today, it's our honor to invite the team at WuXi AppTec to give us a presentation at J.P. Morgan, and now let's invite the Co-CEO of WuXi AppTec to tell us about their most recent updates. Let's welcome.
Thanks, Yang, for hosting us today a nd welcome, everyone, to this early morning session. Thanks for coming in the morning. It's a pleasure to be here again. I would like to, today, I would like to share the background information about our company. A fter that, the full management team here will be happy to address any questions you might have.
So the presentation includes some forward-looking statements. Our final results for 2024 will be disclosed in the annual report, which is scheduled to release on March 18th a nd we will also provide our annual guidance at that time, the guidance for 2025 at that time. So as you all know, our industry has always been inspiring and exciting as technology advancement and science innovations continue to emerge and drive progress in our pursuit of improved health and longevity. At the same time, the industry faces many challenges.
What can we do? Can we do at WuXi AppTec? What can we do to enable the industry and address those challenges? As an integrated CRDMO platform, we provide services in every step of the entire new drug R&D with high-quality, speedy, and cost-effective solutions. We provide these services to our global customers, both biotech companies and large pharma, to help them significantly improve efficiency and accelerate the drug discovery and development process.
During these days at the J.P. Morgan conference, we had the privilege to meet many clients, partners, and investors. Our role actually extends beyond just providing the efficient and high-quality services to the innovative drug companies. We also enable our customers to create substantial equity value, thereby attracting a broader spectrum of investors to get involved.
So this flywheel not only spurs a groundbreaking technology advancement and the innovation of new drugs, but also propels the sustainable growth of the entire ecosystem. So as a leading global CRDMO company, we are fully focused on delivering value to our over 6,000 active customers with our talented 38,000 employees operating across 32 sites in nine countries. Our small molecule CDMO pipeline keeps expanding.
Now we have over 3,300 molecules from preclinical to commercial stage. In addition, since 2018, we have been supporting and producing 18% of all the new molecules approved, small molecules approved by FDA. This translates to one out of every five new drugs approved. One out of five new drugs approved by FDA actually is supported by us. By the end of last year, 2024, our solid phase peptide synthesizer capacity has further expanded to a total of 41,000 liters.
Our capacity will continue to increase in 2025 beyond 100,000 liters. The momentum is very strong and is very strong. To better serve our customers and support future growth, we continue to enhance capabilities and expand our global capacity. In 2025 and beyond, we will accelerate our investment in the U.S., Singapore, Europe, and China to better meet the growing customer demand. As an enabler of innovation and a trusted partner, we actively promote sustainability.
Our outstanding ESG performance continues to be highly recognized by the global ESG community. There are many numbers and recognitions here. I can read through them, but I will skip here. This is important. Since its founding two decades ago, WuXi AppTec has remained steadfast in our unwavering commitment to protecting our customers' intellectual property and adhering to the highest quality and compliance standards.
In the first half of 2024, we successfully completed a total of 404 quality audits and inspections conducted by our customers and the regulatory agency, as well as 38 customer information security audits. So this equates to an average of over two quality audits every day, more than two quality audits every day at our site, and six information security audits every month, always 100% pass rate and zero critical finding. 24 of our main operating sites have been certified under the global standard of ISO/IEC 27001 Information Security Management System.
IP is the lifeline of both our company and our customers. Our approach to IP protection is deeply rooted in our founding principles of integrity, adherence to global quality standards, and a commitment to world-class security. We enforce a zero- tolerance policy towards any form of infringement.
This has been a core value of WuXi AppTec since our founding. We see it as our utmost responsibility, obligation, and commitment to uphold the trust of our customers and prevent any possibility for infringement to occur.
So now let's move on to the highlights of our business. So our unique CRDMO business model begins with an integrated research platform that has WuXi Chemistry, WuXi Biology, and WuXi Testing, three business units. So these three business units work in close collaboration to enable innovation from the early drug discovery through preclinical and IND stage.
So WuXi Chemistry drug discovery unit synthesizes a diverse range of compounds, including both small molecules and new modalities, so it's peptide oligo, et cetera. WuXi Biology supports the customers in targeted discovery and validation, as well as in developing a series of assays and disease models to analyze and demonstrate compound efficacy.
WuXi Testing unit provides comprehensive assessments, such as drug metabolism, pharmacokinetics, and drug safety and bioanalysis. So these three units collaborate seamlessly in a relay-like manner, enabling customers to effectively prepare for IND applications. This integrated research platform continues to enhance our CRDMO model from three perspectives: generate the flow, understand the trend, and achieve synergy among different business units.
For example, over the past 12 months, ending September 2024, WuXi Chemistry's drug discovery unit successfully synthesized 450,000 new compounds to customers. It has grown at a 19% CAGR since 2020. Our integrated discovery preclinical platform continues to contribute over 60% of companies' new customers. This not only generates downstream opportunities, but also creates synergies across our operations.
More than 30% of our IND projects are jointly supported by the one-stop solution provided by our discovery and preclinical platform. We continue to invest in emerging technologies. Over the past decade, we have developed capabilities in many of the most innovative areas. This ensures that we are always prepared in terms of capability and capacity whenever our customer needs us. So our strategy is very clear. So follow the science, follow our customers, and follow the molecules.
So this is the key of our unique CRDMO model, enabling us to stay at the forefront of the industry and deliver value to our customers. WuXi Chemistry, our leading CRDMO platform, continues to grow its small molecule pipeline, driven by the follow-the-molecule and the win-the-molecule strategy. So for the past 12 months, ending September 2024, in the R stage or the research stage, we delivered more than 450,000 compounds.
So that's a 7% year-over-year increase, reflecting the ongoing growth in the industry's early- stage R&D activities and the demand for highly efficient services. So in the development and manufacturing stage, we added 915 new molecules to our pipeline in the first three quarters of 2024. Currently, our small molecule CDMO pipeline has 3,356 molecules with a year-over-year growth of 11% in the development stage and a 17% growth in the manufacturing or commercial stage.
We added 20 new commercial and Phase III molecules in the first three quarters of 2024. So bring our total to 68 commercial projects and 79 Phase III projects in the pipeline. So as a result, we currently support and produce 16% of the global clinical stage small molecule candidates. So that means one out of every six clinical candidates that we support. 18% of the molecules, 18% of the new drug approved by FDA since 2018, are supported by us. So basically translates to one out of five approved by FDA that's supported by us.
So this is strong evidence that our customers have full confidence in our technical capabilities, service efficiency, and quality system, as well as IP protection. So as we enhance our capabilities of our integrated platform, we constantly improve the internal conversion of the molecules across the CRDMO value chain. For example, in the first three quarters of 2024, among the 915 new added molecules to our D&M pipeline, 268 molecules actually originated from our R platform.
Within the development stage, a total of 96 molecules successfully moved to the next phase. Out of the development phase pipeline, six new drugs have been approved and moved to the M stage, becoming the commercial product. So the majority of our 68 active commercial projects in the pipeline are the result of our internal conversion. So it's our follow-the-molecule strategy.
The proven track record of the growth over the past two decades has also enabled us to win the molecule directly from external sources as well. The other thing is, if you look at our Phase III and the commercial pipeline, which we have in Phase III and the commercial, the number of molecules has increased from 107 in 2022 - 147 in 2024. Over the two years, it's 37% growth.
Concurrently, revenue from these molecules actually doubled. This significant growth reflects the significant growth of revenue, reflects the increased complexity and quality of the molecules that we support, as well as the expanded scope and strengthened partnership with our customers. This serves as another fundamental driver to our sustained future growth. Also, some additional data and perspectives to show the quality of the molecules that we support.
Out of 10 best-selling small molecule drugs in 2023, we support and produce four of them. This is 40%. 2024 marked another good year with FDA approving the new drugs. FDA approved a total of 60 new drugs, and among them, 31 of them, about 50% are small molecules. We support and produce six of the 31 small molecules. That's a 19% share of our small molecules, roughly one out of five.
Out of over 10,000 potential candidates, the Drug Hunter Magazine has nominated the most impactful 10 molecules of the year. We produced seven of them. Many investors often ask about our next big project or the blockbuster drug. They will come from one of the seven. GLP-1 is another field that is well-known to many of you.
We are deeply involved in this market, and our GLP-1 project pipeline growth is outpacing the industry. In 2024, the global GLP-1 clinical stage candidate grew from 62 - 85. That's a 37% increase, a nd our project pipeline grew from 13 - 20. So it's a 54% increase, including both small molecules and peptide drugs. To be more specific, for small molecules, we supported 11 out of 38 a nd for peptide drugs, we supported 9 out of 47.
M ore importantly, we supported one out of six commercial drugs now on the market. So with enhanced capabilities and fast-growing capacity, our new modality business, we call it TIDES, means both oligonucleotide and peptide. So that's our new modality business, TIDES, has sustained rapid growth over the past few years. We estimate that TIDES' revenue grow by more than 60% in 2024.
The final result will be released March this year. We estimated it will be more than 60%. Actually, we believe this will be more than 60% again in 2025. In January 2024, our total reactor volume of solid phase peptide synthesizer increased to 32,000 liters. By end of last year, we further expanded into 41,000 liters. This expansion will continue in 2025 and beyond. We expect a capacity of over 100,000 liters by the end of this year.
We continue to invest in capacity to meet customer demand. We believe TIDES' business will bring the next wave of accelerated growth for our company. Now I will further share some of our company's financial performance. Back in 2018, our revenue was close to CNY 10 billion renminbi. Our adjusted non-IFRS net profit was below CNY 2 billion renminbi.
Over the past six years, we have experienced rapid growth, both in revenue and profitability. Now, our revenue is nearly CNY 40 billion renminbi in revenue and CNY 10 billion renminbi in net profit. So that's like 25% of CAGR for revenue and nearly 35% of CAGR for net profit, respectively. As the company continued to develop, economies of scale and operational efficiency are becoming increasingly evident. So our adjusted non-IFRS net profit margin has steadily improved from 17.6% in 2018 to a historical high, 26.9% in 2023.
So we expect this profit margin to remain stable in 2024, despite the many challenges we face. This clearly demonstrates our company's financial resilience throughout the cycles. Earlier, we showed how our unique CRDMO business model enables our customers to simultaneously generate the flow and create the synergy for our business. So this impact is further verified in our backlog trend.
Since 2018, the total backlog has been expanding at a 35% CAGR to a record of over CNY 40 billion renminbi in 2024. So concurrently, our D&M backlog has been surging at a 55% CAGR. So it was used to be 35% of the total percentage. Now, D&M is over 70% of the total backlog percentage.
So business growth and the continuous improvement of operating efficiency has helped us generate a sustained free cash flow, which in turn has enabled us to meet growing customer demand through ongoing investment in capabilities, capacity, and the people.
In the first three quarters of 2024, after excluding one-time collection from the COVID-19 commercial project, our operating cash flow grew more than 10% year-over-year, outpacing the revenue growth of the same period. Consequently, our free cash flow reached CNY 5.6 billion renminbi.
As we accelerate our global capacity expansion, we expect our D&M CapEx to double in 2025. This should be well supported by the robust growth in our operating cash flow. As our CRDMO model evolves, we continue to enhance our profitability throughout the cycle. So our earnings per share have nearly increased five times since 2018. Now, it's CNY 3.3 renminbi per share.
So besides our ongoing investment in capabilities and capacity, we also remain dedicated to maintaining an industry-leading cash dividend payout ratio of 30%. In 2024, we executed four rounds of share buyback in both A and H share market, with cumulative value exceeding CNY 4 billion renminbi. These shares were fully retired, effectively reducing our registered capital. Altogether, we have returned over CNY 7 billion renminbi to our shareholders through a combination of cash dividend, share buyback, and cancellation.
This accounts for nearly 70% of companies' adjusted non-IFRS net profit in 2024. With confidence in our CRDMO model for the long-term growth and profitability, we are also assured in our ability to continue to deliver value and generate return for our shareholders. Finally, I would like to reaffirm our management's confidence in the company's sustained future growth. In spite of external challenges and uncertainties, the company has successfully maintained stable operations throughout 2024.
Many of you know that we face significant external challenges, but our operation has been stable throughout 2024. Our unique integrated CRDM model can effectively meet the growing and evolving demand of customers worldwide. It enables the company to closely follow scientific innovations, develop distinct industry insights, and capture opportunities in new molecules as they rise and continue to drive solid business growth.
For 2024, we reiterated our guidance and expect to achieve revenue CNY 38.3 billion renminbi-CNY 40.5 billion renminbi. So that is a positive growth of 2.7%-8.6%, excluding the COVID-19 commercial project. Adjusted non-IFRS net profit margin will stay at the similar level as 2023, as I mentioned earlier. We expect to achieve free cash flow CNY 6 billion renminbi-CNY 7 billion renminbi, which will continue funding our future ESOP plan for people, for talent reward and retention, and also cover the cash dividend and share buybacks.
Together with our customers and the industry, we are committed to realizing our vision that every drug can be made and every disease can be treated. Thanks a lot for your time, a nd now, we're happy to answer the questions. Thank you.
Yeah. Let's invite a few other management team members on the stage. Yeah. Thanks again, Dr. Chen, for your presentation. Maybe you want to say?
Sure.
Yeah. Before I open questions on the floor and to the audience, I will first ask a few questions myself, kind of burning questions. First of all, so a few days ago, actually two days ago, we saw Lilly reported its 4Q 2024 earnings and slight miss at the top line a nd given you are a very important player for GLP-1 drug supply, so how do you see the demand of GLP-1 supply globally, given Lilly's recent report numbers, and how this could potentially impact WuXi TIDES' business?
Well, first, we're not supposed to comment on specific clients, but the situation globally, yeah, globally.
Yeah.
Currently, the global situation is that's still the shortage of the demand. So whatever you produce will be used for quite a period of time. So I don't think that it will have any impact for now.
Okay. That's good to know, and very quickly, maybe the second question is also yesterday you saw a number of global CRO companies and CDMO companies make presentations. Some of them lowered their guidance, which makes some investors think about what is the current recovery pace for early projects for CRO and CDMO. In your company, how do you look at the recovery of early projects for such business?
Yeah. I'll take this on. I certainly welcome my colleagues for additional comments. First of all, we have demonstrated very strong resilience for our early-stage business throughout last year, particularly fourth quarter.
Second, we continue to see demand for our service from the global market, including the United States. Our capabilities and capacities in many of the exciting new modalities and differentiated capabilities draw strong interest. We are still in the process of finalizing some of our numbers.
While it is hard to generalize the trend we have on some of the business segment and unit on the early part, see some promising trend, but it's too early to generalize. We clearly see our CRDMO's front end of the funnel continue to bring opportunities and customers to the platform.
Okay. Thank you. M aybe very quickly, I think everyone's wondering what you look at for 4Q 2024 number, a nd can you give us any comment or color on 4Q 2024's order flow and what's your expectation? I understand you're giving guidance in March, but can you share any expectation for this year?
Yeah, definitely. So as Dr. Minzhang Chen just reaffirmed, definitely we will meet the expectations and the guidance for 2024, although we are still in the closing and the budgeting process. For the backlog, we do see 2024, especially Q4.
If you remember, as of the Q3, our backlog is around like 35% growth versus last year. So based on our preliminary assessment, we believe the Q4 will continuously carry this very strong growth momentum for backlog. A lso based on the backlog trend and also the CRDMO model, we'll definitely continuously work in next year. A lso our proved track record, excellent execution capabilities, we believe 2025 will be better than 2024.
Okay. That's great to know. N ow I'd like to open the floor for questions. Any questions from the floor audience? If not, actually, I got, oh, yes, please.
Hi there. You mentioned new modalities being an important one for the future. Just wondered what you thought in terms of the comparison between ADCs, oligonucleotides, and peptides, and which ones may be the most promising.
I'm sorry. What's the question?
Capacity for ADC and peptide.
Yeah. So I talked a lot about the capacity on the peptide. So we are continuing to invest in the capacity on the peptide. T he ADC part of the small molecule, we have a huge capacity. And for the conjugation part and for the ADC, actually, now it's done by a different unit called the WuXi XDC under WuXi Group. Yeah. So we have a lot of capacity. Yeah.
Hi. You have had an incredible journey thus far. If you can talk about some of the challenges that you see in the business, both internal and external. W e know that we've had a challenging external environment, but has that had any impact on your business?
Yeah. It had in 2024, definitely because of external challenges. There's some impact, but we see the impact is very limited. It's very limited. I can't give you a specific number, but it's very limited. A lso, the bill didn't pass in the end.
So moving forward, we will continue to communicate and communicate and in a way educate the lawmakers that the value we create and we committed and we focus on providing the value services to our clients and help the industry benefit the patients. Yeah.
Maybe it's early days, but given the bill has not been passed, have you seen any traction from your clients in terms of orders or talks in general?
Well, because like I said, the impact is very limited in the first place. So many of our clients, actually, it's wait and see. So I will say the other because the impact is limited, so the traction is also limited because really not much changed. Yeah.
Okay. Understood. M aybe you can comment on some of the internal challenges that you see in the business.
Actually, internally, we do very well. We execute very well. For example, the TIDES business, the new modality, it takes a lot of execution. So expand the capacity around the new project and do all the process of validation and deliver the product on time. Executed very well. So internally, we continue to improve our operating efficiency, but we are very confident with our operation. Y eah.
Thank you.
I just want to build on that. Obviously, since we have many external uncertainties, some of those are sector-related for the broader capital market and the customer demand. I'm sure everyone has similar visibility of those. Some are rather unique. But in our case, what we have seen is the voluntary turnover for our staff and management team remain very low.
We continue to opt, as Minzhang said, to find efficiency. Many of the new technologies we have deployed to build new capability not only provide differentiated service. Some of those, including automation and intelligence scheduling, has also been widely deployed to increase efficiency and continuously maintain high quality.
We have also continuously strengthened our IP and information security protection system towards the end of last year, successfully recertified what we call ISO/IEC 27001, which is a very important global standard for information security. This is obviously internationally recognized and audited by third parties for a 24-hour major site.
All of this shows, again, a strong resilience, as we mentioned earlier, and also with a high degree of employee engagement, engagement from the management team, and also reflected in operation efficiency and high quality, as Minzhang said in one of the earlier slides with all the audits from our customers, from regulatory agencies. Lastly, specialized audits for information security and IT security, and of course, IP protection and data protection for our customers.
Maybe we'll have time for one more question if there's any question in the back.
I want to continue with a question on GLP-1. I understand it's still in shortage? However, if Lilly's tirzepatide is under price pressure, to what extent it will affect the gross margin of our peptide service? Thank you.
I'm not sure what's the question.
Price pressure for Lilly's GLP-1 price pressure. So how about the margin reflection on all of that?
So I think the cost of goods is still a very small percentage of the overall price, I think. Yeah. So we typically operate on a cost-plus fixed margin to support our sustained business.
A lso, we're continuously adding the capacity with the scaling up of the capacity. That also brings a lot of the economies of scale benefit to the margin as well. So the margin is pretty stable and strong.
All right. I think we're right on time a nd the last-