"7 Years 7 Times Stock" WuXi AppTec's Cycle-Crossing Revelation

As the pharmaceutical industry re-enters the investment spotlight with massive business development (BD) and a sharp rise in stock prices, the CXO giant WuXi AppTec has announced that it has been honored as one of the Top 10 "Most Honored Companies" in Asia by Extel, along with multiple awards in the medical industry subcategories.

In 2024, WuXi AppTec has navigated through its "darkest hour," achieving annual revenue of 39.24 billion yuan, with a year-on-year growth of 5.2% excluding COVID-19 commercialization projects. The adjusted Non-IFRS net profit attributable to shareholders exceeded 10.58 billion yuan, with a record high of over 49.3 billion yuan in orders on hand and nearly 8 billion yuan in free cash flow. Many financial metrics far exceeded the performance guidance set at the beginning of the year. An interesting data point disclosed in the award press release is that over the seven years since its listing, the post-adjusted price of WuXi AppTec's A-shares has yielded a return of 7 times compared to the issue price at listing, while the post-adjusted price of its H-shares has yielded a return of 3 times. These awards from Extel are the highest recognition of this pharmaceutical R&D giant's ability to navigate through cycles.

If WuXi AppTec's strong recovery is solely attributed to the warming of investment enthusiasm in biomedicine and the gradual improvement of the geopolitical environment, then investors will realize that this conclusion is debatable when observing peers still struggling near the breakeven line. Moreover, the current extreme populist sentiments and the chaotic international situation have become a normalized phenomenon, which cannot be easily reversed by simple warming and improvement. Under the fluctuating industry temperature and the unpredictable international politics, the CXO industry is like a sailboat in a vast ocean; apart from praying for favorable winds and weather, it can only firmly grasp the mast in hand and steer the correct course of business operations. Just as the four characters "Do not seek externally" hang high at the gate of Fahai Temple, WuXi AppTec's ability to navigate through cycles lies in its unwavering commitment to internal self-cultivation and the qualities it has developed.

Insight 1: The "Efficiency" and "Reliability" of the CRDMO Business Model

From its inception, WuXi AppTec has aimed to enable "anyone with a good idea can do new drug research and development with just one person, one piece of paper, and one pen; everything else can be entrusted to WuXi AppTec," with the goal of "making it easy to develop drugs and treat diseases." The CRDMO business model has been ingrained in WuXi AppTec's DNA from the very beginning, and in every financial report interpretation, it depicts the latest achievements of the CRDMO model with a funnel chart.

"Efficiency" and "reliability" are the two key words for decoding WuXi AppTec's CRDMO business model and are also the reasons why WuXi AppTec has garnered clients across the entire pharmaceutical and biotechnology industry chain.

Biotech's positioning in the pharmaceutical and biotechnology industry is as an innovation engine for pipeline research and development. Biotech that successfully navigates the technical route will secure pipeline financing ahead of other competitors and enter the commercialization stage, which also determines that Biotech's primary need is "efficiency." The desire for "efficiency" in biotech is reflected not only in shortening R&D cycles but also in saving substantial capital expenditures for building R&D teams and production facilities.

WuXi AppTec is indeed a master at helping biotech improve efficiency.

The Swiss biotech company Alentis Therapeutics, focusing on the novel tumor target CLDN1, has rapidly developed two potential "first in class" ADC drugs. Its Chief Scientific Officer, Dr. Alberto Toso, stated: "I want to thank partners like WuXi AppTec, who are crucial to the development of our ADC therapies. Without their assistance, none of this would have come true."

John Hood, former CEO of Impact Biomedicines, also recalled in an interview: "WuXi AppTec always delivers products on time and with high quality. In earlier years, we needed a large amount of starting materials, and other suppliers estimated it would take 12 to 14 months to produce, while WuXi AppTec completed the project in just four and a half months, more than a month ahead of schedule, and delivered 19 kilograms more than the planned 50 kilograms, with extremely high purity." In his newly founded company, Endeavor Biomedicines, a small firm with only 28 employees, he once again chose WuXi AppTec as a partner.

These accolades prove that WuXi AppTec is one of the best choices for biopharmaceutical entrepreneurs, which is also why it can add 1,000 new clients during the proposed process of the U.S. "Biodefense Act" in 2024.

Compared to biotech companies, large pharmaceutical companies derive their revenue and profits directly from marketed drugs. If production reliability is insufficient, it will directly impact their market share and even jeopardize their brand.

According to media reports, in 2024, a life-saving drug for ALS, Riluzole tablets, experienced supply shortages in several large tertiary hospitals in Shanghai. Sanofi stated that the reason for the shortage was a change in the overseas production address that required re-filing. Professionals speculate that this situation may be influenced by quality issues with Sanofi's CXO supplier, which discovered quality control defects during an internal audit in March 2024, leading to a suspension of production for all active pharmaceutical ingredients.

Even Novo Nordisk, which has swept global orders with its "king of drugs" semaglutide, has faced supply issues due to supplier production line quality problems, forcing Novo Nordisk to choose to directly acquire Catalent for $16.5 billion to ensure the delivery quality of the "king of drugs."

The extreme pursuit of "reliability" by large pharmaceutical companies is essentially an inevitable choice for them to assume end responsibility in the pharmaceutical value chain, and WuXi AppTec, with its 100% pass rate in 802 quality audits in 2024, proves its capability to provide "reliable" support for pharmaceutical giants.

Kumar Srinivasan, CEO of the well-known biotech company Wugen in the CGT field, once described: "Although many service providers claim to offer the same services, it's like making a soufflé; even with the same ingredients, not every service provider can produce a product equivalent to that of WuXi AppTec." Under the "efficiency" and "reliability" CRDMO business model, whether it is entrepreneurs focusing on innovative pipeline research and development or large pharmaceutical companies with a global sales network, WuXi AppTec is their best partner.

Insight Two: Industry Insights, Global Vision

Talent reserves and strong manufacturing capabilities are necessary conditions for new drug research and development, but to truly achieve sustainable development, it is essential to accurately perceive global market demands. Only by mastering a global vision and forming unique industry insights can one better understand customer needs and continuously create value for the industry and customers.

Compared to traditional CDMO, WuXi AppTec's CRDMO model adds an "R." In the past year, it successfully synthesized and delivered over 460,000 new compounds, allowing it to gain early insights into innovation trends, enabling cutting-edge innovative demands to be detected early by backend operations, forming a forward-looking layout, and achieving rapid scaling during the commercialization phase.

The rapid growth of the WuXi TIDES business, primarily focused on oligonucleotides and peptides, over the past two years is an inevitable result of its excellent global vision and forward-looking industry insights. Public materials show that WuXi AppTec's layout in the peptide business can be traced back to 2011, and it officially launched the new molecular business platform WuXi TIDES, which includes peptides, oligonucleotides, and related chemical conjugates, in 2018. In 2019, it put into production key equipment for the scaled synthesis of peptides—a peptide solid-phase synthesis reactor with a capacity of 500 liters.

In hindsight, every step taken by WuXi AppTec has been ahead of industry demand by more than two years. While competitors are rushing to build peptide production capacity, WuXi AppTec's orders have already increased by 103.9% year-on-year, and by the end of 2025, peptide production capacity is expected to increase by more than 100,000 liters.

In addition to the TIDES business, the first PROTAC drug, which is expected to receive FDA approval soon, is a result of WuXi AppTec's early layout of related capabilities and technologies, which began ten years ago. It has successfully supported the development of over 100 PROTAC molecules, with more than 20 molecules advancing to the clinical stage.

WuXi AppTec's ability to capture cutting-edge industry dynamics and accurately match them is also attributed to its excellent global vision. In 2013, WuXi AppTec held the first WuXi Global Forum during the JPMorgan Healthcare Conference in San Francisco, actively building channels for mutual understanding in the biopharmaceutical industry. Today, the WuXi Global Forum has become an important part of JPM, and WuXi AppTec's production capacity and bases are spread across the United States, Germany, Switzerland, Japan, South Korea, Singapore, and Israel. This global layout helps capture cutting-edge startup demands, such as those from the Swiss biotech company Alentis Therapeutics mentioned earlier.

Insight Three: The Management Team's Excellent Execution Ability

Even the grandest narrative needs to start from the details, and even the most perfect business model needs to be implemented by people.

As a research and manufacturing-intensive enterprise with nearly 40,000 employees, WuXi AppTec needs a management team with various experiences and excellent execution ability to steer the ship WuXi AppTec's current board of directors consists of twelve members, including five executive directors, all of whom have experience in R&D management at overseas pharmaceutical companies, and five independent directors. The professional capabilities of the directors cover the pharmaceutical industry, risk management, accounting, and law, with half of the directors holding doctoral degrees. This composition ensures that WuXi AppTec maintains professionalism and prudence in decision-making. The board has established an audit committee, a compensation and assessment committee, a strategic committee, and a nomination committee. Additionally, there is an executive committee responsible for the company's operational management and strategic plan implementation, supervising and analyzing business performance, and regularly reporting to the CEO. Looking at WuXi AppTec's management team, they all possess extensive experience in multinational enterprises.

Using the U.S. "Biodefense Act" as a lens, it can be observed that WuXi AppTec's management demonstrated strong decision-making and execution capabilities during the crisis. In a short period after the outbreak of the crisis, the management team took multiple approaches to address the legislative turmoil: in terms of public opinion and political negotiations, WuXi AppTec maintained ongoing dialogue with congressional members, government agencies, and industry associations, gaining public support from industry associations, legislators, and multiple clients; regarding shareholder rights, WuXi AppTec's management decisively clarified issues while swiftly completing a share repurchase plan and continuously strengthening share buybacks and shareholder dividends; in terms of capacity layout, WuXi AppTec continued to advance its global capacity layout in line with industry and client demands, with capital expenditures doubling by 2025.

In retrospect, even in the worst years, WuXi AppTec was able to efficiently achieve performance guidance, showcasing the excellence of its management and organizational structure under pressure, possessing precise industry insights and resilience in tackling the most challenging situations. This is the foundation of WuXi AppTec's ability to navigate through cycles.

Insight Four: Emphasize Investor Rights and Information Disclosure

While announcing the 2024 annual report titled "The Light Boat Has Passed Through Ten Thousand Mountains," WuXi AppTec provided a double gift to all shareholders who have stood with it: distributing a cash dividend of 2.835 billion yuan for the 2024 fiscal year, while also allocating a special cash dividend of 1.011 billion yuan for shareholder returns in 2025. Subsequently, WuXi AppTec initiated multiple rounds of share repurchase plans, effectively canceling shares to enhance returns for minority shareholders. According to annual report data, in the past three years, WuXi AppTec has returned over 9 billion yuan to shareholders through cash dividends, while the company's free cash flow during the same period was approximately 15 billion yuan, meaning that over 60% of the free cash flow was returned to investors in cash. Since its listing on the A-share market in 2018, WuXi AppTec's cumulative cash dividends and share repurchases have exceeded 19 billion yuan.

A stable balance sheet, repurchasing and canceling circulating shares, increasing dividends, and even providing special dividends are the underlying logic for the continuous rise in the stock prices of the U.S. MAG7, and they are also important reasons for WuXi AppTec's stable recovery in the capital market amid industry and geopolitical fluctuations.

As of May 30, 2025, considering stock price growth and dividend policies, over the seven years since its listing, WuXi AppTec's A-share price has achieved a return of 7 times compared to its issue price at listing, while its H-share price has reached 3 times, far exceeding the pharmaceutical industry index and industry competitors during the same period.

In addition to increasing shareholder returns, WuXi AppTec's information disclosure is also a benchmark among listed companies. Notably, every annual report released by WuXi AppTec provides shareholders with performance guidance for the new year and offers a multi-layered, multi-angle data interpretation to explain the performance structure comprehensively In addition, the reports released by WuXi AppTec during both Investor Day and the JPM Healthcare Conference have become an important observation window for understanding industry trends both inside and outside the sector.

Conclusion

People are eager to foresee the future; although this is impossible, it can be traced, as all fragments and clues about the future are hidden in the past and present. The subtle signs and hidden currents indicate that WuXi AppTec possesses the qualities to transcend cycles, which has been demonstrated to investors from the very beginning: the integrated CRDMO business model, a management team with strong execution capabilities, an excellent global perspective, superb industry insights, and proactive investor relations work... As a company that has withstood the test of cycles, investors' observations of WuXi AppTec should return to first principles—Is the quality of WuXi AppTec still intact? If the answer is "yes," then investors should "not seek outside."