Steve Yang, Co-CEO, Florence Shi, CFO, Howard Wu, General Counsel, Min Han, the Board Secretary, and Ruijia Tang, IR Director. Now, let me turn it over to Ruijia. Please, Ruijia.
Okay, thank you, Lawrence. Thank you to all the investors and analysts for joining today's earnings call. We are sharing our 2025 interim results presentation, which you can also find on our website. During today's call, we will make forward-looking statements. Although we believe that our predictions are reasonable, future events are uncertain, and our forward-looking statements may turn out to be incorrect. Accordingly, you are strongly cautioned that reliance on any forward-looking statements involves known and unknown risks and uncertainties. In addition, to supplement the company's consolidated financial statements presented in accordance with IFRS, we provide adjusted non-IFRS financial data.
We believe the adjusted financial measures are useful for understanding and assessing our core business performance, and we believe that investors may benefit from referring to these adjusted financial measures by eliminating the impact of certain unusual or non-recurring items that are not indicative of the performance of our core business. However, these adjusted measures are not intended to be considered in isolation or as a substitute for the financial information under IFRS. All IP rights and other rights pertaining to the information and materials presented are owned by WuXi AppTec. Audio recording, video recording, and disclosure of such materials by any means without the prior consent of WuXi AppTec is prohibited. This call does not intend to provide a complete statement of relevant matters.
For relevant information, please refer to the company's disclosure documents and information on the Shanghai Stock Exchange, Stock Exchange of Hong Kong, and the company's website. In today's call, there will be a Q&A session after our presentation. Please kindly share with us your name and institution before asking questions. With that, please allow me to introduce our Co-CEO, Dr. Minzhang Chen, to present our 2025 interim results. Minzhang, please.
Thanks, Ruijia. Good morning and good evening, everyone. Thank you for joining our first-half 2025 earnings call. We will begin on slide number five. In the second quarter and the first-half of 2025, our revenue and profit achieved strong growth. For the first-half, the company's total revenue achieved CNY 20.8 billion. Of which the revenue from continuing operations grew 24.2% year-over-year to CNY 20.4 billion. The adjusted non-IFRS net profit grew 44.4% year-over-year to CNY 6.31 billion. With non-IFRS net profit margin further improved to 30.4%. Our first-half revenue and net profit both reached record highs for the same period. Next slide, please. The company remains focused on enhancing our core capabilities, expanding capacity to better meet customer needs. With the continuous capacity expansion, by the end of June, we achieved a record backlog for continuing operations of CNY 56.69 billion, growing 37.2% year-over-year. Next slide.
Slide seven shows our revenue streams of continuing operations from customers worldwide. Revenue by region is based on the country or region where our customers' parent company is based, of which revenue generated from U.S. companies grew 38.4% year-over-year. Revenue from European companies grew 9.2% year-over-year, and the revenue from Japan, Korea, and other regions grew 7.6% year-over-year. China experienced some decline. These diversified revenue streams demonstrate our capabilities to enable global healthcare innovations, which will also ensure the stability and the resilience of our financial performance. Next slide. As an enabler of innovation and a trusted partner and a contributor to the global pharmaceutical and life science industry, the company actively advanced sustainability and has been extensively recognized by global rating agencies.
The company has achieved the highest AAA rating from MSCI for the first time, which is the first Asia-listed company in the life science industry to reach this milestone. In addition, the company's near-term emissions reduction targets have been validated by SBTi, which marks an important milestone in the company's journey toward sustainability. Our accomplishments have also been acknowledged by major global rating agencies, including EcoVadis, CDP, UNGC, Sustainalytics, and Fujitsu. As we continue to advance our sustainability strategy, we embrace our commitment to the social responsibility. To social responsibilities. Okay, now let's move on to the segment performance. Please turn to page 10. WuXi Chemistry's CRDMO business model drives continuous growth. In the first-half, WuXi Chemistry revenue grew 33.5% year-over-year to CNY 16.3 billion.
With continued optimization of production processes and improvement in capacity efficiency driven by the growth of late-stage clinical and commercial projects, first-half adjusted non-IFRS gross profit margin improved 5.2 percentage points year-over-year to 49%. Our small molecule drug discovery R business continues to generate downstream opportunities. In the past 12 months, we have successfully synthesized and delivered over 440,000 new compounds to customers. Meanwhile, 158 molecules were converted from R to D in the first-half. As we continue to strengthen the capabilities of our integrated CRDMO platform, we constantly enhance the internal conversion of molecules at different stages. Our small molecule DNM business remains strong, and the small molecule CDMO pipeline continues to expand. In the first-half, small molecule DNM business revenue grew 17.5% year-over-year to CNY 8.68 billion. Meanwhile, the company continued to build small molecule capacity.
In March, both our Changzhou and Taixing API manufacturing sites successfully passed FDA on-site inspections with no single observation. The total reactive volume of small molecule manufacturing capacity will exceed four million liters by the end of this year. WuXi TIDES's new modality business sustains rapid growth. With the ramping up of new capacity released sequentially each quarter last year, WuXi TIDES achieved CNY 5.03 billion revenue in the first-half, representing a strong growth of 141.6% year-over-year. By the end of June, TIDES's backlog grew 48.8% year-over-year. The number of TIDES's DNM customers increased 12% year-over-year, while the numbers of TIDES's DNM molecules increased 16% year-over-year. We continue to build peptide capacity in Taixing. The total volume of solid-phase peptide synthesizers will exceed 100,000 liters by the end of this year. Next page, please.
Driven by follow-the-molecule and win-the-molecule strategies, WuXi Chemistry's small molecule CRDMO pipeline efficiently converts and captures high-quality molecules, delivering sustained business growth. This is also a testimony to our customers' full confidence in our technical capabilities, service efficiency, and the quality system. In our R stage, over the past 12 months, we have delivered more than 440,000 new compounds. Very significant in its scale. At the same time, the complexity of these compounds continues to increase, demonstrating the ongoing demand from early-stage R and D customers for high-quality services. We continue to enhance the synergy between R and D, strengthening the conversion of molecules from R to D phase, and the new compounds synthesized in the R stage continue to generate opportunities for our small molecule DNM services. In the DNM stage, we added 412 molecules to our pipeline in the first-half, including 158 molecules converted from R to D.
Currently, our small molecule DNM pipeline has exceeded [3,400] molecules, including 76 commercial projects, 84 in phase III, 368 in phase II, and 2,081 in phase I and the preclinical. In the commercial and phase III stages, we added eight projects in the first-half. As these late-stage pipelines grow, the complexity and the quality of the molecules we support continue to improve, and our collaboration with customers is deepening. Together, these factors will drive sustained business growth in the future. Now, I will hand over to Co-CEO Dr. Steve Yang to talk about WuXi Testing and WuXi Biology. Steve, please.
Thank you, Minzhang. Please turn to slide number 12. WuXi Testing revenue slightly declined to CNY 2.69 billion in the first-half of the year. In the second quarter, our lab testing revenue reached CNY 1 billion, growing 5.5% year-over-year and 13.2% quarter-over-quarter, of which drug safety evaluation services revenue grew 3.4% year-over-year and 10.2% quarter-over-quarter. For the first-half, revenue of the lab testing services reached CNY 1.89 billion, almost flat year-over-year. Due to market impact, the first-half adjusted non-IFRS gross profit margin declined as pricing gradually reflected in revenue, along with backlog conversion. Drug safety evaluation services revenue was down 2.2% year-over-year, maintaining an industry-leading position in Asia-Pacific. We are committed to actively enable customers' global licensing effort. In particular, we have supported approximately 40% of successful out-licensing deals from Chinese biotech companies since 2012. New modality business continues to develop.
While we maintain our leadership position in areas including nucleic acid, conjugate, and mRNA, and multi-specific antibodies, and peptides. During the first-half, the Suzhou facility has successfully passed four consecutive FDA on-site inspections. Revenue generated from clinical CRO and SMO business was down 4.7% year-over-year to CNY 0.8 billion in the first-half due to market pricing impact. The SMO business revenue grew 1.5% year-over-year, maintaining our industry-leading position in China. In the first-half, our clinical CRO business enabled customers to obtain 10 R&D approvals and the submission for two NDA filings. Our SMO business supported 61 new drug approvals for customers. The SMO team has supported 317 new drug approvals in total over the past decade, maintaining significant advantages in multiple therapeutic areas. Let's turn to slide 13, please. WuXi Biology follows the science and continues to strengthen the drug discovery capabilities in emerging areas.
We generate downstream opportunities for our CRDMO model by continuously contributing more than 20% of new customers. Through platform integration and cross-regional collaboration and comprehensive service transformation, we enable our customers in drug discovery across the wide range of modalities and therapeutic areas. WuXi Biology revenue reached CNY 1.25 billion in the first-half of the year, a year-over-year increase of 7.1%. Due to market pricing impact, the first-half adjusted non-IFRS gross profit margin was down 0.7 percentage points to 36.4%. We accelerate advancement of in- vitro integrated screening technology offering and in- vivo pharmacology capabilities, driving continuous rapid year-over-year revenue growth. The constantly improved competitive advantage in therapeutic areas beyond oncology has laid a solid foundation for sustainable growth throughout the year. Our new modality drug discovery services continue to perform well, contributing to more than 30% of WuXi Biology's total revenue.
Now, I would like to turn the call to our CFO, Florence Shi, to discuss our financial performance. Florence, please.
Thank you, Steve. Let's turn to slide 15. We are going to recap on the company's financials as the best second quarter and the first-half in our history. We delivered robust, more-than-double-digit growth in both revenue and profit. This was driven by the gradual release of new production capacity since the second quarter of last year, which timely supported the growing demand from late-stage clinical and commercial projects. Meanwhile, the company consistently developed and leveraged new technologies and capabilities, optimized production processes, and improved production and operating efficiency. In the first-half, our adjusted non-IFRS gross profit reached CNY 9.26 billion, with the adjusted non-IFRS gross profit margin further expanded from 41.6% in 2024 to now 44.5%. Our adjusted non-IFRS net profit reached CNY 6.31 billion, with the adjusted non-IFRS net profit margin further improved from 27% in 2024 to now 30.4%.
The net profit after deducting non-recurring items was CNY 5.58 billion, growing 26.5% year-on-year. The growth rate was lower than that of adjusted non-IFRS net profit, mainly due to the impact of exchange rate fluctuations on the book value of U.S. dollar-denominated net assets across different quarters. Our net profit attributable to the owners of the company was CNY 8.56 billion, marking an increase of 101.9% year-over-year. This included an investment income of CNY 3.2 billion from the partial sale of shares in an associated company. Hence, this growth rate outpaced that of our adjusted non-IFRS net profit. We continue to enhance our management capabilities and resilience, which has enabled us to achieve strong performance in the first-half despite external uncertainties. Moreover, following multiple share repurchases and cancellations, our diluted earnings per share reached CNY 2.99, growing 106.2% year-over-year.
Building on profit growth, this helped to further enhance our earnings per share performance. Please turn to slide number 16. With the continued business growth, particularly the rapid growth in late-stage clinical and commercial projects, combined with the company's improved operating efficiency and financial management capabilities, our first-half operating cash flow achieved CNY 7.07 billion, growing 49.1% year-over-year. Again, this fully demonstrates the sustainable business growth momentum brought by our high-quality molecules and projects. We continue to accelerate global capacity expansion as planned, with CapEx reaching CNY 2.1 billion in the first-half. As construction progresses, CapEx spending will continue to increase in the following quarters, and we maintain our full-year CapEx forecast at CNY 7 billion-CNY 8 billion. Now, I would like to hand over to Minzhang to share the company outlook. Minzhang, please.
Please turn to slide 18. Okay. As we are facing a very dynamic and complex global macro environment with many uncertainties. This sets even higher standards for the management team. The company will continue to focus on the CRDMO business model, with an emphasis on the O for operations. As we continue to focus on our unique integrated CRDMO core business. We are accelerating the global expansion and the capacity building, leveraging our customers' ongoing demand for enabling services. We provide highly efficient and exceptional services, benefiting patients worldwide and driving long-term growth. At the same time, the company is promoting lean management and operations, continuously improving production and operational efficiency. Making every effort to reduce the potential impact of external uncertainties. With confidence in customers' ongoing demand for enabling services, our CRDMO business model and the management execution, the company has raised the full-year guidance despite external uncertainties.
We expect continuing operations revenue to resume double-digit growth in 2025, with its year-over-year growth rate raised to 13%-17%, up from the prior 10%-15%. Correspondingly, the company expects full-year total revenue of CNY 42.5 billion-CNY 43.5 billion, up from the prior CNY 41.5 billion-CNY 43 billion. As we focus on the core CRDMO business and the continuously improved production and operating efficiency, the company is confident and expects to further improve the adjusted non-IFRS net profit margin in 2025. As we are accelerating our global expansion and the capacity construction, CapEx is expected to reach CNY 7 billion-CNY 8 billion in 2025. Together with business growth and the efficiency improvement, free cash flow is expected to increase from CNY 4 billion-CNY 5 billion to CNY 5 billion-CNY 6 billion.
The company will closely monitor the changes and the developments in the global macro environment, and we will communicate any changes in a timely manner. Next page, please. While continuously enhancing our capacity and capabilities, the company remains committed to rewarding shareholders and actively upholding the company's value. In the first-half of 2025, the company distributed a total of CNY 3.84 billion in cash dividends, including CNY 2.83 billion for the 2024 annual cash dividend and CNY 1.01 billion for the 2025 special cash dividend. Meanwhile, the company also completed the repurchase and cancellation of CNY 1.1 billion worth of A-shares in the first-half. An additional previously announced CNY 1 billion worth of A-share repurchase and cancellation plan is currently being executed, with approximately CNY 0.5 b illion worth of A-shares repurchased as of now.
Moreover, the company's board of directors approved WuXi AppTec's first interim dividend plan, distributing CNY 3.5 cash dividend for every 10 shares to shareholders, which is approximately CNY 1 billion in total. The cash dividends, together with the share repurchases and the cancellations mentioned above, will amount to nearly CNY 7 billion in total, which accounts for more than 70% of the company's net profit attributable to the owners of the company in 2024. In times of uncertainties and challenges, our continued business growth relies heavily on our management team with strong capabilities and determinations. The company will continue to retain top talents and further enhance the resilience of business operations and management. In the first-half, the company has completed the acquisition of HKD 2.5 billion worth of A-share for the purpose of the 2025 A-share incentive trust plan.
According to the plan approved by the annual general meeting, upon achieving CNY 42 billion revenue, no more than HKD 1.5 billion worth of A-shares will be granted. Upon reaching CNY 43 billion revenue and above, a total of HKD 2.5 billion worth of A-shares will be granted. This aims to continuously attract and retain top talents, strengthen the collective capabilities of the management team, and enhance the resilience of the company's business operations and management. With this, there will be no dilution to existing shareholders. Thanks for your attention. We now open for questions.
Thanks, Dr. Chen. This is Lawrence from MS. Let me just go over the format for Q&A. For investors who have dialed in through the web meet, you can type your questions into the window. We have lots of questions, so I apologize if we cannot get to all of them. First, let me ask two questions. My first question is AppTec's second quarter revenue and earnings both vastly exceeded expectations. What are the key drivers for that? Have you noticed customers front-loading their orders due to worries about tariffs? That is my first question. My second question is the company raised its full-year guidance. What are some considerations for that? If revenue growth in the first-half was over 20%, this higher guidance would imply a single-digit revenue growth for the second-half. Is there room for higher growth in the second-half? That is my second question. Thanks.
Let me first answer one by one. Okay. First of all, I appreciate you recognized our first-half outperformed the performance. I think this outperformed the first-half performance was not driven by any customer request to accelerate the shipments because of the tariff concerns. It purely reflects our high-efficiency execution, not only on the project deliveries, but also on our new capacity validation and the ramp-up schedule is smoother and quicker than what we expected. That is why this operational momentum led us to raise full-year guidance, even though there is still a lot of the external uncertainties in the second-half. Your second question is about the second-half performance, right?
Actually, if you observe the second quarter last year, we went through a very quick capacity ramp-up phase, which results in a sequential growth of nearly 30% in the second-half of last year compared to the second-half of first year. This is a really historical high sequential growth. However, today, our capacity is approaching full utilization in the first-half of this year, and the validation of new capacity will require some time. Even with this limited capacity expansion, we still guide and expect business revenue in the second-half to achieve near double-digit growth, both sequentially and year-on-year. Also, as a reminder, discontinued operations contributed around CNY 800 million revenue in the second-half of last year. These divestitures have already been fully completed, so there will be no further contributions from discontinued operations going forward.
I also recommend all the investors to focus on our continuous business operations growth momentum. Hopefully, that answers your questions.
Yes, thank you very much. Now let's move on to investors from other sell-side analysts and investors. First, let me ask two questions from Zhiyi Chen of Goldman Sachs. Zhiyi wanted to know, firstly, in the first quarter, management mentioned new order growth was around 25%. Based on his calculation, second quarter new order growth would look slower. Is that the case? If yes, how should we interpret it? The first question is on backlog. The second question is excluding TIDES, which still saw very robust growth. The rest of the small molecules business in DNM grew only 20% plus in the second quarter. What has been the key driver? Is there any color on what has been the contribution from oral GLP-1 products?
I will take the first question, and Minzhang can take the second question. Actually, there are some U.S. dollar depreciations in the first-half. If we exclude for exchange impacts, actually, our new orders signed in Q2 still increased by approximately 12% year-over-year. Sequentially, compared with first quarter, our new orders intake actually grew close to 35% compared to first quarter. Yeah, I think it is still a very strong growth momentum on our new order intake.
All right. I will comment on the small molecule revenue growth in DNM. We have a very strong and big pipeline, CDMO pipeline, as I mentioned in the presentation. Currently, we have over 200 late-phase and commercial projects. Many of the projects, especially late and commercial projects, contributed to the revenue growth. Of course, the oral GLP-1 small molecule is a key driver in the Q2 and the first-half small molecule DNM revenue.
Okay, great. The next questions will come from Michael Luo of CLSA. Let me ask these questions one by one. His first question is, how should we think about the margin improvement in the second-half? Should we assume second-half adjusted non-IFRS net profit margin would be similar to the first-half?
Yeah, I think if you look at our first-half margin contribution, I think our large late-stage and commercial order actually significantly improved the equipment utilization and the production use. With increased proportion of large late-stage and commercial order delivery, it will further expand our margin. Also, at the same time, as I mentioned, we completed some divestiture of discontinued business. Those business, if you look at the historical margin, they are loss-making business. The divestiture will also expand our margin as well. I also want to remind everyone, we also need to manage a very large new capacity ramping-up progress. I have the confidence our team always has the very excellent executions. At the same time, we are keeping watching out the uncertainty of the US dollar depreciation trend.
Okay, and his second question is, on top of GLP-1 or TIDES, is there any other potential blockbuster CMO project in AppTec's portfolio that we could expect in the future? Any color would be very helpful.
Okay, yes. As I mentioned again, we have quite a few, actually, very projects with great potentials. For example, PCSK9, for example, pain medicine, for example, the autoimmune program. We do have quite a few very promising big potential projects in the pipeline. Go back to, I mentioned earlier, we have a very, we have a unique CRDMO business model, and we have a strong pipeline. This CRDMO business model allows a lot of molecules to convert internally from R to D to M. This allows us to be involved in all those projects at a very early stage and work with many of our customers on the pipeline. No matter what will be the next big product, we have a very good chance we will be involved very early and have the opportunity to work on it.
I think, yes, to ensure, yes, we have those big potential molecules in the pipeline. This actually is a result of our unique CRDMO business model. Thank you.
Thank you. His last question is, although global biotech funding in the first-half was weak, a few U.S. clinical CROs mentioned in their second quarter earnings call that they have seen a marginal demand recovery from their biotech clients in the second quarter. How should we think about the early-stage projects' demand in the second quarter versus the first quarter second-half outlook on early-stage demand?
Yeah, we also noticed those increases from the clinical CROs. They usually represent clinical stage business. Our early stage is in discovery and lab-based service. The short answer is our early-stage lab service from discovery and preclinical are still in a stabilized pattern. We have not seen a sharp increase. That being said, because of our differentiated capability in new modality in many of the high-demand therapeutic areas, we still have robust demand and new orders. We do notice that the funding situation overall, based on third-party public source, remains challenging. We anticipate that this period of uncertainty on early-stage biotech funding will continue for some period of time. That being said, we believe we continue to maintain a strong market position regarding those attracting the continued interest of biotech companies overseas.
Okay, great. Thank you. Our next question comes from Chen Chen of UBS. The question is, China biopharma out-licensing is currently hot and trending up. Are there any cases that your China customers outlicensed a drug candidate and the overseas partner continues to ask CDMO for ex-China markets? Do you think that this China- BD momentum could benefit you in the longer term?
The short answer is yes, yes. It has benefited us now in the near term and the short term, and it has benefited us in the past. As I mentioned earlier, for the last three years, we have enabled 40% of such collaborations. This demonstrated our differentiated capability and also high quality. Those high quality are clearly recognized by the multinational pharmaceutical companies and overseas companies that license those products as part of their due diligence. They think high-quality preclinical and discovery data is essential for their due diligence efforts. For your question, Lawrence, going forward, we anticipate those trends will continue and that will attract more and more China-based biotech companies and customers elsewhere to use our service.
It will also help us convert overseas customers that otherwise have not tried our preclinical testing service or discovery service in the past, and then give them another chance, a different perspective to get to know our platform. Some have done that, and they are very pleased to see what they have experienced, and they are now actually starting to work with us. Finally, we do anticipate those strong demands not only benefit from our discovery service and preclinical service. Some of those products are actually manufactured in our CRDMO platform on Minzhang's team. As those products continue running global clinical trials, moving along the pipeline, they will also drive demand for our CRDMO and DNM business, first in development and then hopefully in manufacturing in late stage, even commercialization.
Great, thank you. Our next question has come from CMBI, Mr. Wang Bin Chen. His first question is on the impact of tariffs. Do we see any changes in customer behavior in placing orders to WuXi AppTec and other China-based CDMO companies?
We have not seen the significant changes because the tariffs still are a systematic challenge in the current global trade environment, and it is moving pieces, right? Also, the global pharmaceutical supply chain is highly complex. As an enabling service provider, our shipping destination is determined by our clients' global footprints. The customers, they are responsible for clearance and tax reporting by the customers. Our focus still remains on delivering the high-quality enabling services. In this evolving and uncertain external environment, we prioritize the certainty of client demand for our enabling services. Our sustainable growth comes from the competitive advantages of our unique integrated CRDMO business model, as well as our capabilities in quality, speed, and efficiency, not just from the price competition alone.
Okay, thanks. His second question is, can you talk about the reasons why the U.S. regional growth outpaced other regions? Did out-licensing deals from Chinese companies contribute to the growth in the U.S. market?
Maybe I will start on the second-half of your question. The out-licensing deals originated from Chinese biotech companies. First of all, those Chinese biotech companies used our service. They were booked as revenues from China. The short answer is it does not. Secondly, many of the work they work with us happens, there is a phasing element. Those work done in discovery and preclinical done. Certainly sometime before they have clinical data and announcing out-licensing. There is not a direct within the quarter or within short time difference conversion. To answer your question, the strong driver of the business growth in the United States, driven by our CRDMO businesses in U.S. customers, particularly large multinational customers, obviously, Minzhang can elaborate more. That is, as he has already nicely demonstrated in his presentation.
Yes. The major, like I said, right now, the major contribution to the revenue growth is from late-phase and commercial projects. The few high-potential projects that I mentioned earlier, in addition to the GLP-1, small molecule, they are all from multinational companies that have had a quarter in the U.S. That is why the U.S. region has a strong growth in revenue in CDMO business.
Great, thanks. The next question comes from Citigroup's Zoe Bian. What is your latest TIDES revenue growth guidance in 2025? Is there any color on 2026?
Yeah, we think we have a strong revenue growth from TIDES for the past two years. We think this year will be somewhere, growth will be somewhere 80%. 80%. Yeah. We will give you the guidance for the growth next year at a later time. Yeah.
Okay, that's very positive. The next question comes from David Shang of Jefferies. He would like to know your CapEx in 2026 and TIDES business capacity expansion plan in 2026.
Yeah, let me just comment on the TIDES CapEx expansion plan. Most of the TIDES expansion plan actually will be completed this year, 2025. We will focus on the process validation and the ramping up and start using the new facility next year, 2026. In addition to that, all our current capacity for the TIDES is in China. We are actually in the process of building a new plant, a TIDES new plant in Singapore. It is part of our Singapore manufacturing site. Yeah, Florence, please.
Yeah, company-wise, as Minzhang just mentioned. Not only the TIDES capacity expansion company, also look for the overall more global footprints and the CapEx expansions. With the new capacity planning and also the current capacity expansion approaching to the late stage of construction, I believe the CapEx spending will be gradually increased year -over- year. The exact number we will give to the investors along with our annual outlook early next year because that depends on the order schedule planning and also the payment schedule finalized this year.
Okay. The next question comes from Megan Zona of Boston Partners. Are competitors of the testing business discounting prices to win share? What is driving the pricing impact?
Our competitors for testing business obviously have a different market segment. Those overseas, which is a significant part of our business, have also been more aggressive in pricing. We believe that we still have highly differentiated capabilities, and we continue to maintain not only competitive pricing, but maintain good margins. Now, for China domestic market, you may have heard a word called involution, where there has been very fierce price competition and discounting. We realize and recognize and also communicate to our customers that premium high-quality service does require substantial investment in people, facility, and the quality system. We have maintained a very competitive but still premium pricing to demonstrate our differentiation. The impact on our margin, which particularly resulted in those price competition from 2024, was reflected in our gross profit margin decline.
We have adjusted our strategy to stabilize that and anticipating that they will gradually recover in the next period.
Great, thanks. The next questions will come from Wan Hua Wu at CICC. He has three questions. The first is reasons for the increase in gross profit margin and future expectations and room for improvement.
I think everyone noticed the gross margin is mainly driven by our CDMO, late stage, and commercial large orders. With the increased proportion of this order delivery, I believe the margin expansion momentum will be there. At the same time, for the bottom line, we also have the divestiture business, which is loss-making business. second-half, this business revenue won't be there anymore. That helps us to improve the overall company's bottom line as well. At the same time, I think we are still working very hard to manage the new capacity ramping up. Of course, I have the confidence to our operation team. I think another uncertainty is about the US dollar depreciation trend. We need to continuously monitor that one.
Great, thanks. His second question is, what is the impact of exchange rate fluctuations and how should we expect overall gross profit margins?
I think the expectation I just gave to everyone. Just now. For FX, it's very hard to do the forecast, right? That's the uncertainty. Every company should watch out very closely. If you just look at the first-half performance, the MOR rate, I mean the average US dollar RMB FX rate, is pretty close, first-half versus last first-half. There is not much impact from the FX benefit or loss for the first-half performance. second-half, I think currently, the FX between US dollar and RMB still fluctuates between the reasonable range like 7.1-7.2. If it's still in the reasonable range, we have the high confidence to deliver our performance. Of course, if we see any unreasonable or very significant dynamic changes, we will keep reporting to the investors if there's any big changes.
Okay, and his last question is, considering you raised cash flow guidance, what is the future repurchase and capital allocation plan?
Yeah, I think we keep evaluating the most optimal capital deployment, right? Normally, we look through the three dimensions. One is our global footprint capacity to meet extending customer needs, how much we need to expand for our CapEx. At the same time, to maintain the sustainable growth, we need to keep track and retain the critical talents. Also, the shareholder returns is also very important for us. If I walk you through our capital deployment first-half this year, that demonstrates our strategies evaluating from these three dimensions. You will notice that we have already completed CNY 3.8 billion cash dividend distribution in first-half, which is actually much earlier than the previous years. CNY 1 billion A-share repurchase and cancellations has already been completed. Another round of CNY 1 billion A-share repurchase has already completed in halfway.
Yesterday, Board also approved our first CNY 1 billion interim cash dividend. We repurchased HKD 2.5 billion shares from the secondary open market, which is not going to dilute any investors' interest for our 2025 ESOP program. If you add them all together, we spend more than CNY 9 billion in total to return shareholders, retain our critical talents, while we also expect to spend CNY 7 billion-CNY 8 billion for CapEx payment this year to accelerate our global capacity expansion. I hope everyone appreciates the efforts from the company.
Our next question comes from Danlei Yan of GSAM. His question is, can management break down the different components of TIDES growth?
Okay.
Customer numbers grew by 12%, molecule numbers up 16%. What were the other moving parts?
Okay, so I don't know exactly the question, but I'll try to answer. We have a TIDES business. We mainly have four parts. Two big parts. One is oligo business and one is peptide business. The oligo we have from discovery all the way to development manufacturing, same as peptide discovery and development. We experienced strong growth in all these sections in TIDES business. Of course, for the development peptide, it's part of a DNM of peptide, which we are working on a GLP-1 product which has the strongest growth. It's also the major revenue, contributed the major revenue to the TIDES business. All other sections all have strong growth as well.
Great. Our last question is from Jaypreet Chadha at Coatue Management. Can you give a little bit of perspective on what is happening in the China biopharma market today? Activity seems to be very robust. What has changed in 2025 leading to this heightened activity?
Let me try to give a little bit of micro view. First of all, we have seen, like everyone else, continued increasing very robust demand for out-licensing. Transactions and collaboration announced between Chinese biopharma and biotech with global Western-based biotech and pharma companies have demonstrated the quality of the research and the authenticity of the data. Most importantly, the differentiation of those products. Those have been very positive for the sector in terms of both sentiment, equally important on the upfront cash payment and potential milestone payment. Secondly, we have noticed certainly a strong interest in the capital market, particularly from Hong Kong Stock Exchange, with many biotech companies eager for potential raising capital through the Hong Kong market and elsewhere. That is also promising for the sector. As long as they have more and more capital, that will fuel continued demand for our service and service for the sector.
Finally, from macro environment and the policy, there have been some encouraging signs from policies regarding reimbursement at the macro level. Those are still in the early stage, but at least the government recognized the importance of the sector. There are at least various announcements or signals of a support policy for the sector. The ecosystem is quite vibrant and with lots of buzz and also, again, driven particularly by the strong interest on global collaboration.
Great. Thank you very much. With that, let me turn it over to management for closing remarks.
All right. Thank you all for joining today's earnings call. The company will continue to focus on our unique CRDMO business model, enhancing our core capabilities, expanding capacity, and improving operating efficiency. This enables us to provide highly efficient and exceptional services to our global customers, better supporting them in bringing innovative therapies to patients around the world. This, as a result, will drive the company's long-term growth and create sustained value for our shareholders. Thank you all.
Thank you.
Thank you.
Thank you. Thanks, everyone.
Thank you.