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Yes.
Can you hear me? Okay. Thank you, Zi Zǒng , and thank you to all the investors and analysts for joining today's earnings call. We are sharing our 2025 Third Quarter results presentation, which you can also find on our website. You may also have noticed some changes to our company logo. As we celebrate the company's 25th anniversary this year, it's time to update our logo design. We've modernized our logo with an update that reflects the modern global company that we are today. 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, we 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 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 and 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, or disclosure of such materials by any means without 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 Shanghai Stock Exchange, Hong Kong Stock Exchange, and the company's website. As usual, 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 Third Quarterly Results. Minzhang, please.
Thanks, Ruijia. Good morning and good evening, everyone. Thank you for joining our 2025 third-quarter earnings call. We will begin on slide number five. In the first three quarters of 2025, our revenue and profit achieved strong growth. The company's total revenue achieved RMB 32.86 billion, of which the revenue from continuing operations grew 22.5% year-over-year to RMB 32.45 billion. The adjusted non-IFRS net profit grew 43.4% to RMB 10.54 billion, with non-IFRS net profit margin further improved to 32.1%. Our first three-quarter revenue and net profit both have record highs for the same period. Slide six, please. The company remains focused on enhancing our core capabilities and expanding capacity to better meet customer demand. With the continuous capacity expansion, by the end of September, we again achieved a record backlog for continuing operations of RMB 59.88 billion, growing 41.2% year-over-year. Slide seven, please.
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. Revenue generated from the U.S. region grew 31.9%. Revenue from Europe grew 13.5%, and revenue from China remained relatively flat. Revenue from Japan, Korea, and the rest of the world grew 9.2%. The diversified revenue streams demonstrate our global footprint and the capabilities to enable healthcare innovations, which will also ensure the stability and the resilience of our financial performance. Now, let's move to the segment performance. Please turn to page nine. WuXi Chemistry's CRDMO Business Model drives continuous growth. In the first three quarters, WuXi Chemistry revenue grew 29.3% to RMB 25.98 billion, with continued optimization of the manufacturing process and improvement in capacity efficiency driven by the growth of late-stage clinical and commercial projects.
WuXi Chemistry's adjusted non-IFRS gross profit margin in the first three quarters steadily improved 5.8 percentage points year-over-year to 51.3%. Our small molecule drug discovery business, our business continues to generate downstream opportunities. In the past 12 months, we have successfully synthesized and delivered over 430,000 new compounds to customers. Meanwhile, 250 molecules were converted from R to D in the first three quarters. As we continue to strengthen the capabilities of our integrated CRDMO platform, we consistently enhance the internal conversion of molecules at different stages. Our small molecule D&M business remains strong, and the small molecule CDMO pipeline continues to expand. In the first three quarters, small molecule D&M business revenue grew 14.1% to RMB 14.24 billion. Meanwhile, the company continues to build small molecule capacity. The total react volume of small molecule APIs constructed and put into operation will exceed 4,000 cu m this year.
WuXi TIDES, our new modality business, sustains rapid growth. WuXi TIDES revenue achieved RMB 7.84 billion in the first three quarters, representing a strong growth of 121.1% year-over-year. By the end of September, TIDES' backlog grew 17.1%. The number of TIDES D&M customers increased 12%, and the number of D&M molecules increased 34%. In September 2023, the construction of peptide capacity in Taixing was completed ahead of schedule. The company's total react volume of Solid Phase Peptide Synthesizer has been increased to more than 100,000 L. 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 stage, as I said earlier, over the past 12 months, we have delivered more than 430,000 new compounds, very significant in scale. At the same time, the complexity of these compounds continues to increase, demonstrating the ongoing demand from early-stage R&D customers for high-quality services. With this foundation, we continue to enhance the synergy between R and a D, strengthening the conversion of molecules from R to D, and the new compounds synthesized in the R stage continue to drive downstream demand for our small molecule D&M services. In D&M stage, we added 621 molecules to our pipeline in the first three quarters, including 250 molecules converted from R to D. Currently, our small molecule D&M pipeline has reached 3,430 molecules, including 80 commercial projects, 87 in phase III, 374 in phase II, and 2,889 in phase I and preclinical.
In the commercial and phase III stages, we increased 15 projects in the first three quarters. As this late-stage pipeline grows, 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 11. WuXi Testing revenue reached RMB 4.17 billion in the first three quarters, keeping flat year-over-year. With the development of differentiated capabilities and enhanced operation management, the third quarter revenue of the lab testing service reached RMB 1.08 billion, growing 7.2% year-over-year and 7.5% quarter-over-quarter. Our third quarter adjusted non-IFRS gross profit margin continued to improve quarter-over-quarter. The drug safety evaluation service revenue grew 5.9% year-over-year and 13.2% quarter-over-quarter. For the first three quarters, revenue of lab testing services reached RMB 2.96 billion, growing 2.7% year-over-year. Due to market impact, our first three quarters adjusted non-IFRS gross profit margin declined as pricing gradually reflected in revenue along with the backlog conversion. Drug safety evaluation services revenue resumed positive year-over-year growth and maintained an industry-leading position in the Asia-Pacific region.
We are committed to actively enabling customers' global licensing collaborations and have supported approximately 40% of successful out-licensing deals from Chinese biotech companies since 2022. Our new modality business continues to develop, and we maintain our leadership position in multiple new modality areas. We continue to advance automation technologies. Our DMPK business unit successfully launched a proprietary compound identification software for metabolite ID and spectral interpretation. This greatly enhanced the efficiency of such experiments, particularly for oligonucleotides and peptides, by 83%. During the first three quarters of this year, our Suzhou facility has passed the fourth FDA inspection on- site, and this is a very strong record demonstrating our quality for GLP operation. Revenue generated from the clinical CRO and SMO business was down 6.4% year-over-year to RMB 1.21 billion in the first three quarters. This is largely due to market pricing impact.
SMO revenue slightly decreased year-over-year as backlog gradually converted into revenue. We continue to maintain the industry leadership position in China. In the first three quarters, the clinical CRO business enabled customers to obtain 19 IND approvals and submission for two NDA filings. Our SMO business supported 75 new drug approvals for customers. Our SMO business has supported 331 new drug approvals in total over the past decade, maintaining a significant advantage in multiple therapeutic areas. Let's turn to slide number 12. WuXi Biology continues to follow the science, strengthen the drug discovery capability in emerging areas, and actively grow overseas business. It generates downstream opportunities for the CRDMO model by continuously contributing more than 20% of our total new customers across the company. Through cross-regional collaboration, comprehensive platform integration, and project transformation, we efficiently enable our customers worldwide.
WuXi Biology revenue reached RMB 1.95 billion in the first three quarters, a year-over-year increase of 6.6%. Due to market pricing impact, the first three quarters adjusted non-IFRS gross profit margin of WuXi Biology was down 1% to 37%. We continually improve operation efficiency. Our third quarter adjusted non-IFRS gross profit margin improved 1.5 percentage point quarter-o ver- quarter. We accelerate the advancement of in vitro integrated screening technologies and continue to improve in vivo pharmacology capabilities. This resulted in rapid year-to-year and quarter-over-quarter revenue growth. With our competitive edge continuing strengthening in these areas, the non-oncology business has achieved strong revenue growth, becoming an important contributor to driving overall growth of WuXi Biology. Our new modality drug discovery service continues to perform well, now contributing more than 30% of WuXi Biology's total revenue. Now, I would like to turn the call to our CFO, Florence, to discuss our financial performance.
Florence, please.
Thank you, Steve. Please turn to slide 14. Let's recap on the company's financials. As the best third quarter in the first three quarters in our history, the company delivered strong, more than double-digit growth in revenue, profit, and operating cash flow. 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 strengthens technological expertise and improves operating efficiency. In the first three quarters, our adjusted non-IFRS gross profit reached RMB 15.46 billion, with the adjusted non-IFRS gross profit margin further improved from 41.6% in 2024 to now 47%. Our adjusted non-IFRS net profit of the first three quarters reached RMB 10.54 billion, almost matching the full-year level of RMB 10.58 billion in 2024.
Correspondingly, adjusted non-IFRS net profit margin of the first three quarters further improved to 32.1% from 27% in 2024. The net profit after deducting non-recurring items was RMB 9.452 billion, growing 42.5% year-on-year. Net profit attributable to the owners of the company was RMB 12.08 billion, marking an increase of 84.8% year-over-year. This included an investment income of RMB 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 focus on our unique CRDMO business model and enhance our management capabilities and show the resilience, which have enabled us to achieve strong performance in the first three quarters. Moreover, following multiple share repurchases and cancellations, our diluted earnings per share reached RMB 4.21, growing 87.9% year-over-year. Building on profit growth, this helped to further enhance our EPS performance. Please turn to slide 15.
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 three quarters' operating cash flow achieved RMB 10.87 billion, growing 35% year-over-year, which fully demonstrates the sustainable development momentum brought by our high-quality molecules and projects. We actively advance our global capacity expansion as planned, with CapEx payment reaching RMB 3.57 billion in the first three quarters. Now, I will hand over to Steve and Minzhang to share our recent business update and the company outlook. Steve first, please.
Thank you, Florence. Please turn to slide number 17. To further focus and strengthen our core CRDMO business and invest to accelerate the growth of our global capabilities and capacities, and concentrating on drug discovery, laboratory testing, process development, and manufacturing services, we signed an agreement on October 24th 2025, with Hillhouse Investment Management to sell 100% of equity of our China-based clinical research services business, this including the clinical CRO and the SMO business unit. The transaction has not yet been completed. The completion is subject to all mandatory government approvals and filings by all parties. The business will be classified as discontinued operation in our 2025 annual report. The business collectively contributes 3.5% and 0.07% of our total revenue and total net profit from our first quarter to the third quarter of 2025.
The gain from the completion of this transaction is expected to exceed 10% of our audited net profit for the most recent fiscal year. We have submitted and received approval from the company's board of directors for these transactions. For more details, please refer to our recent announcement on this transaction. Minzhang, please.
Thanks, Steve. Now, let's move on to slide number 18. As we continue to focus on our unique integrated CRDMO core business, we are accelerating the global expansion, capacity construction, and capability development. 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, and making every effort to reduce the potential impact of external uncertainties. With confidence in customers' robust demand for enabling services, our CRDMO business model, and management execution, the company has further reached the full-year guidance for this year. We expect continuing operations revenue to resume double-digit growth in 2025, with its year-over-year growth rate raised to 17% - 18%, up from the prior 13% - 17%.
Correspondingly, the company expects full-year total revenue of RMB 43.5 billio- RMB 44.0 billion, up from the prior RMB 42.5 billion - RMB 43.5 billion. As we focus on the core CRDMO business and continuously improve production and operating efficiency, the company is confident and expects to further improve the adjusted non-IFRS net profit margin in 2025. The company is actively advancing global capacity construction. While due to the longer-than-expected settlement cycles of certain projects, CapEx for 2025 is now expected to be RMB 5.5 billion - RMB 6 billion, adjusted from the prior RMB 7 billion - RMB 8 billion. Together with business growth, efficiency improvement, and considering the timing difference in project payments, free cash flow for 2025 is expected to increase from RMB 5 billion- RMB 6 billion to RMB 8 billion - RMB 8.5 billion. Next page, please.
While continuously enhancing our capacity and capabilities, the company remains committed to rewarding shareholders and actively upholding the company's value. This year, the company has implemented a total of RMB 6.88 billion in cash dividends, share repurchases, and cancellations, representing more than 70% of the company's net profit in 2024. Among these, the company has distributed a total of RMB 4.88 billion in cash dividends, including RMB 2.83 billion for 2024 annual cash dividend, RMB 1.01 billion for 2025 special cash dividend, and RMB 1.03 billion for 2025 interim dividend. Meanwhile, the company also completed the repurchase of RMB 2.8 billion worth of A- shares in total, all of which have been canceled. The company will continue to retain top talents and further enhance the resilience of business operations and management.
This year, the company has completed the acquisition of HKD 2.5 billion worth of H shares for the purpose of the 2025 H-share incentive plan. According to the plan approved by the Annual General Meeting, upon achieving RMB 42 billion revenue, no more than HKD 1.5 billion worth of H- shares will be granted, and upon achieving RMB 43 billion revenue and above, a total of HKD 2.5 billion worth of H- 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, and we are now open for questions.
Thank you, Management Team. Just a reminder, any questions, feel free to raise your hand or put your question into the Q&A box. We're already seeing a couple of hands raised. I'm going to start with two very important questions. We're going to open the line for Q&As. The first question is about the backlog. If you look at the first three quarters, the backlog growth has maintained the strengths. Particularly, if you look at the third quarter, compared to the first half, it's kind of accelerated. We try to understand from two different parts. Number one, from the small molecule part, what really has been driving the backlog, and particularly people calculate back, back calculate at the third quarter, some might get the number 30%+ backlog growth, trying to understand whether that's correct, particularly, there has been a lot of base changes in the past few quarters.
Also, for the TIDES business, how should we understand the new capacity utilization ramping up and what should be the expectation for next year, given the base already getting very high? That's my first question.
Yeah, I think there are two questions here. Let me take the overall company's backlog performance and new order take trend, and then I will pass to Minzhang to address the TIDES capacity question. Overall, I think our on-hand backlog has reached a very new historical high, approaching RMB 60 billion in scale. This growth is mainly driven by the contribution from the small molecule D&M, especially from those late-stage clinical and commercial projects. I think TIDES business, after the fast growth, continues to have a very healthy growth. We do see some recovery from our lab testing business. They're also back to the double-digit backlog growth as well this quarter. That's really benefiting from the overall unique CRDMO business model.
For the new order signed in Q3, because there's a lot of the baseline and also the FX impact, based on the company's calculation, excluding the FX impact, the new order signed up for the continuing operations in Q3 is around 18% year-over-year growth. Hope that clarifies. Minzhang.
All right. Okay. For the TIDES capacity, as you see that the TIDES backlog is continuing to grow. The TIDES capacity, part of that new capacity will be used to deliver those backlogs for next year, and part of the TIDES capacity is ready for the new projects in the future. The TIDES capacity overall is still tight worldwide, and the additional TIDES capacity will bring us more business opportunity, we believe.
All right. Thank you. Thank you. My second part of the question is really trying to understand because the third quarter earnings is definitely above the market expectations, and it was really, really strong. One of the key strong factors is about the margin, right? If we look at single quarter, third quarter gross margin, it's probably getting up to 50% and more. Particularly for WuXi Chemistry, it has been so strong. We're trying to understand what has been driving that and how should we look at the margin outlook in the upcoming quarters?
Yeah. Yes, the margin is very, very high, and the growth increase of the margin is very strong. That is mainly due to one, the continuous optimization and improvement of the manufacturing process, which gives a good margin. The other is because now we have more and more late-phase and commercial projects, especially some large late-phase and commercial projects. That has significantly improved our utilization efficiency. Moving forward, actually, we will continue to share some of the profit with the customer as they are giving us large late-phase and commercial projects, but also share the benefit with our employees as they continue to have a good execution and continue to improve the process.
Thank you, Minzhang. Just a very quick follow-up. What could potentially be the future margin that WuXi AppTec can get? You know, because 50% is already a really high margin. Are we thinking about potentially getting up to mid-50% or potentially even higher?
Like I said, this is currently, it's already a very high margin. We're going to share more future profit with the customer and with our clients and also with the employees.
For sure. Great. Thank you. Next question coming from the line of Laurence Tam, Morgan Stanley. Lawrence, please?
Thanks, Zi. Hi, this is Laurence from Morgan Stanley. I have three questions. I will ask them one by one. First is on the modified version of the BIOSECURE bill. Obviously, this new version that was submitted to NDAA does not mention any Chinese companies under the biotech section. It also offers due process should any company be named in the future as a biotech company of concern. I'm just curious, what do WuXi AppTec's customers in the U.S. think about this new version of the bill? Are you seeing a trend where they require more of their supply to be served out of U.S. facilities? Is this new bill still viewed negatively by the customer base, or do they see a more benign geopolitical environment versus last year? That's my first question.
Yeah, let me take that question. The company has been very closely monitoring all the new legislative proposals in the U.S. We are also aware that there's a proposed amendment related to biotechnology security that has been recently, actually, in early October, included in the standard version of the NDAA for 2026. There's no similar proposal in the House version of the NDAA this year. Neither this amendment nor the other proposed legislation from the Senate or the House actually mention our company's name, WuXi AppTec. The legislative process remains to be very complex and is continuing to evolve. There will be further discussion, clarification, and potential modification to the draft 2026 NDAA by Congress before it can be finalized by the end of the year.
From the company's side, I will continue to closely monitor the legislation movement and maintain ongoing communication with the relevant stakeholders to ensure they have a better understanding of our work for the patient worldwide. There's still uncertainty about how the legislation goes. We will continue to monitor.
Thanks. As a quick follow-up, are the U.S. customers requiring more products to be serviced out of U.S. sites because of these uncertainties?
Yeah, this is Steve. Let me just quickly follow up. Minzhang and I recently had a chance to host many customer visits and interactions, both for big pharma and biotech. Their demand for our service across the board continues to be strong because most of our services are delivered in our worldwide site. Most of those capabilities are currently in China. Those service demands remain very strong. We haven't seen a difference in the pattern of those requests or demands.
Thank you. My second question is on the disposal to Hillhouse. Does the raised guidance for the full year for continuous operations include the clinical research services business, or does it exclude it? How should we think about timing of disposing that clinical research services business? Is it within 4Q, or should we project perhaps early 2026?
By the way, Laurence, given the long queue, we'll probably have to limit to two questions. Thank you.
Okay.
Management, please.
Oh, yes, Zi. First of all, I would answer the second half of the question. I would like to invite Florence to briefly comment on the first part, which is the earning forecast, full-year forecast. First of all, as many of you know, there is a well-established process for transactions of such nature to see government approvals. As we stated in the announcement, we won't be able to forecast the specific timing and the date of such approval. Obviously, both sides are working diligently, trying to both prepare and submit relevant documentation to ensure a speedy approval process. Florence, could you please comment on the full-year earning implications?
Yeah, sure. I think for the, we give the revenue guidance. In our latest revenue guidance on the continuing operations, it has already been excluded the clinical, China-based clinical business because we signed the SPA on 24th October . That happened in Q4. For the total year, if you look at our annual report, which is going to be issued early next year, we will reclassify the overall performance for this clinical business from the continuing operations to the discontinued operations. In the Q3 disclosure, all the actual numbers for the Q3 report, it is still being counted in the continuing operations. Hope that helps.
Okay, great. Thank you.
Next question coming from Michael Luo, CLSA. Michael, please.
Thank you, Zi Zǒng. Thank you, Management, for taking my question. My first question is about the early-stage demand. Given the U.S. has started to cut the interest rate, and we have seen some U.S. drug pricing policy updates in the past few months, from WuXi AppTec's perspective, have you seen your clients being more interested in expanding the early-stage outsourcing demand? This is my first question. Thank you.
We have seen a rise in early-stage demand for our global customers, not only from the U.S., but other territories. We believe this is largely due to our highly differentiated capabilities, especially in high-growth areas and areas that require sophisticated technology. For example, in many of the new modalities for early-stage chemistry, biology, and preclinical testing. We have also held the line and tried to continue to be very selective to take customer orders to maintain a healthy margin and also put our resources and capacities to the customers that have the biggest need and also give us the best financial performance. That being said, we have seen continued growth of interest from U.S. customers. Whether that trend is across the board, that becomes the trend we can generalize. We believe we still need to wait a little bit.
There are promising signs, and we are very eager to really serve those customers using our capacities and capabilities.
Okay. Thank you, Yang Zǒng. My second question is about the small molecule area. Given your small molecule CDMO order growth has been starting to accelerate in the third quarter, does the company have more capacity expansion plan in the small molecule area in China and Mainland China? Could you please share more capacity plans going forward in small molecule? Thank you.
Yes. The small molecule D&M business actually is growing strongly. Currently, we have capacity expansion in our Taixing site. As I mentioned, by the end of this year, we will have a total of over 4,000 cu m capacity for small molecule, which will support the growth. At the same time, we are building an API manufacturing plant in Singapore so that the first plant will be operational in 2027. Also, at the same time, we are building the drug products facility in the U.S., and that will be operational by the end of next year. We are also expanding our capacity in Switzerland, our existing Switzerland facility. Yes, we are expanding both in China and globally. We are in the consideration of building more facilities outside China as well right now.
Thank you, Chen Zǒng. Yeah, that's all from me.
Thank you. Next from UBS, Chen Chen , please.
Thank you for taking my questions. I have a follow-up question on backlog. We see that the backlog remains very strong. Florence just mentioned that this is driven by small molecule D&M and TIDES, etc. Can you please help us understand a bit more on what are the key regions contributing to this growth? We also see that global biopharma funding is recovering amid the salary cut. How do you view the sustainability? How soon do you see it would benefit your business? Thanks.
We have, you know, the backlog grows very, very strong. Year over year, at the end of the third quarter, it's 40% compared to last year. It's across the board, you know, TIDES, small molecule, D&M across the board.
I think because our backlog, we only count for those backlogs customers committed within 18 months. You can expect that most of the backlogs will be converted to the revenue within 18 months.
What are the key regions that are contributing to the strong backlog growth?
I think the backlog growth, backlog geographically speaking, it is pretty aligned with our revenue split by geography. It's pretty consistent.
Yeah, it's aligned with our revenue growth. You see that we have a strong growth in the U.S., a very strong growth in the U.S., but also we have a growth in Europe as well.
Okay. Thanks, Chen Zǒng and Florence. I have a second question. Do you have a CapEx guidance for 2026? And roughly, what is the proportion for domestic and overseas? Thanks.
Yeah. We will have an accurate forecast and give the guidance together with our 2026 earnings guidance first quarter next year, as expected. You will see, we will have the capacity expansions everywhere, and we are also accelerating our constructions outside China, especially in the U.S., Singapore, and Europe. I think next year, definitely the CapEx payment will be much more than this year. I think currently there's around less than 1/3 of the payment outside China. Next year, the proportion will be definitely increased. We will give a much clearer guidance next year after we complete all the budgeting process.
Sure. Thanks, Florence.
Thank you.
Great. We're moving on to the next one. Next one from Jefferies. David, David Shang.
Hi. Can you hear me?
Yes.
Okay. Thanks for taking my question. Yeah, I have two questions. The first one is about our small molecule CDMO business. We see this year the growth is quite solid, which can be like a meeting. Basically, can you tell us some of the key drivers in that business segment, like GLP-1 or what kind of small molecule we see a really strong growth? If we look at our backlog, can you share a little bit more about the growth driver of our small molecule CDMO business? This is my first question.
Yeah, our small molecule pipeline actually has multiple, you know, potential big projects, including GLP-1, but also PCSK9, pain management, neuroscience, you know, autoimmune. We have many, many projects that have big potentials. I also shared many numbers about the high-quality molecules at the investor day. In the end, it's all about our CRDMO business model. Our CRDMO business model can continuously, you know, help us to capture the more late-phase and commercial opportunities. You know, we evolve early and we capture the bigger opportunities in the end.
Okay. My second question is about the tariff. We see the U.S. tariff, but it seems like the impact so far is quite small. Can you share more about the views of our U.S. clients? How do they see this kind of U.S. tariff and our strategy to deal with this?
I think the strategy is very clear for us. We will definitely accelerate our global deployment and build out the capacity and the capabilities outside China in different footprints, right? That is definitely our clear strategy. That is why you will see the CapEx growth. We do have the funding to support this strategy.
are the views about our U.S. clients, how do they deal with this? Between our relationship or our agreement with the U.S. clients, is there any changes after the U.S. tariff?
I think if you look at our performance, definitely you won't see any changes, right? I think our priority is to continuously meet the customer demands, right? Serve customers well. I think the tariff itself is undercurrent in the global trading environment. It's become a systematic challenge affecting everyone, right? Not only for our isolated company or industry. We will closely watch on that. At least currently, we do serve our customers very well. I think everyone is pleased with our quality, efficiency, and also the speed, right?
Okay, thank you. Thank you.
Thank you.
Great. Next, we're going to have Jill Wu from CMBI. Jill , please.
Thank you very much, Zi. I have two questions. My first question is about our domestic city evaluation business. Could management please share some insights on the current pricing trend of this kind of business? If there is a moderate price increase, was it due to recovering domestic demand? Thank you.
First of all, as I reported earlier, our drug safety assessment business clearly picked up momentum. The revenue we reported here reflects the pricing and the orders we signed a few months ago because the cycle from new order conversion to revenue delivery and recognition depends on the nature of the project, ranging from three to six months or even longer, depending on some of the business. There is a phasing effect. We clearly see our resources, our capacities, and the capabilities, and our quality as a highly differentiated factor to continue to attract strong customer interest. We have been more and more selective to cherry-pick customers we want to serve with the deliberate strategy to focus on high-margin new orders and also business that builds a longer-term relationship. We have seen the growth of the domestic business.
While I won't comment on the sector-wide pricing trend, the pricing reflected in our new order in recent months has been improving. We believe this will translate into not only continued growth of revenue, but also better margins.
Thank you, Yang Zǒng. My second question is about the mix of our customers. Could you please provide some color on what is driving the order growth? Was it primarily from biotech clients or pharma clients? Thank you.
Is this a general question company-wide or specific to the?
Yeah, it's a general question.
Florence.
Yeah. I think overall, I think it is pretty aligned with the demand from our diversified customers, right? Definitely, because with the very large base of the total backlog orders, it has already reached close to RMB 60 billion. That will be driven by the late-stage clinical and the commercial projects. Big pharma will contribute the large portion of it. The biotech companies, because the innovation continues. I also mentioned, if you look at our lab testing business, that also recovered back to the double-digit backlog growth. I think the biotech companies also contribute. Value-wise, definitely pharmaceutical, the big pharma will contribute the most value contribution.
Sorry, my bad. Can I follow up on the early-stage or the discovery business? Which kind of clients will perform better than the other kind? Was it biotech or pharma?
In terms of our funnel and our CRDMO model, given the nature of our funnel, the majority of our early-stage business are from biotech. Obviously, the biotech demand and customer needs are tied up with biotech funding. As I mentioned earlier, we have seen some recovery trend, and our service has clearly seen recovery and momentum. Whether the sector-wide growth will, we are hopeful, particularly given the interest rate reduction and other favorable factors. We are very confident that if those recoveries continue, we will continue to gain market share, given our highly differentiated early-stage capabilities.
Thank you very much. That's very clear.
Great. Given the time limit, we have the final question from Jialin. Jialin Zhang , Nomura .
Thank you, Zi. Congratulations for the strong results. I got two questions. The first one is regarding the margins on the clinical CRO. Since the disposal of this business, how do you see this kind of positive contribution to the WuXi Testing business? That's my first question. My second one is on the use of the proceeds. We know this year your disposal of WuXi XDC, you disposed of the clinical CRO. You also have a lower CapEx plan. You will have more cash on hand. How do you plan to use that? That's my second one. Thank you.
I will start and then invite Florence to add her comments. Since we are at the end of our hour, I will be short. The first one, yes, after the divestiture of the clinical CRO business, obviously, the WuXi Testing business overall margin will, the mix will change and also will improve. Secondly, as Florence and Minzhang both mentioned earlier, we continue to have strengthened our CRDMO strategy by building capacities and capabilities worldwide. This will clearly drive further CapEx investment. I'm sure the cash coming from this transaction and other efforts will fuel those global growth and capacity and capability building.
Thank you. It's very clear.
Okay. Now we're towards the end of the call. I'm going to turn the call back to Minzhang to have a wrap-up comment.
All right. Thank you all for joining today's earnings call. The company will continue to stick to its core value, do the right thing, and do it right. We will continue to focus on our unique CRDMO business model. We will accelerate our global expansion. We will continue to improve our operating efficiency as we create values for customers and shareholders and realize our vision that every drug can be made and every disease can be treated. Thank you all.
Thank you.
Great. Thank you. Thank you for joining the call. We're going to wrap up the call here. Have a good day. Thank you.
Thanks.
Thank you.