药明康德：Accelerated growth in 3Q20driven by strong performance in CDMO and China-base lab service

Strong growth acceleration in 3Q20. WuXi AppTec reported third-quarter revenue of RMB4.58bn, up 35.4% YoY, Non-IFRS net profit was up 44.3% YoY to RMB958mn. Attributable net profit decreased 8.1% YoY to RMB651mn, mainly due to foreign exchange loss. Third-quarter has achieved significant growth compared to the first half of 2020, where China-based laboratory services, CDMO services, US - based laboratory services and Clinical research & other CRO services realized 38.9%/ 54.9%/ -13.5%/ 16.8% YoY change in revenue.

CDMO and China-based lab service continue to be major growth driver. CDMO service and China-base lab service recorded a YoY growth of 54.9%/ 38.9% in 3Q20 and 36.5%/ 30.9% in 9M20. Such strong performance offset the challenges faced by the US-based laboratory services due to the COVID- 19 pandemic. Thanks to follow-the-molecule strategy, the Company added 440 new molecules into its CDMO pipeline YTD and total CDMO pipeline has grown to more than 1,100 active projects, including 26 commercialized projects, 42 Phase III projects. During the same period, WuXi AppTec has submitted IND filings for 18 new chemical entities (NCE) for its customers and obtained 20 CTAs in China. Cumulatively, WuXi AppTec has submitted 103 NCE IND filings with the NMPA and obtained 77 CTAs including 1 project in Phase III clinical trial, 9 projects in Phase II clinical trials, and 56 projects in Phase I clinical trials.

Globalization strategy to enable innovation worldwide. YTD, WuXi AppTec added over 900 new customers and provided services to a wide range of over 4,100 active customers, including all the top 20 big pharma companies worldwide. In 9M20, overseas customers contributed 76.4% of total revenue, while China customers accounted for 23.6% of revenue, representing a YoY growth of 25.3% and 34.4%, respectively. Driven by the “long-tail” strategy, “Long-tail” & China customers 67.2% of total revenue, up 28.4% YoY in 9M20.

We lifted SOTP-based TP from RMB131.98 to RMB139.05 to reflect strong long-term growth outlook for WuXi AppTec. We forecast WuXi AppTec’s adjusted Non-IFRS attributable net profit to grow by 35%/33%/32% YoY in FY20E/21E/22E respectively, and attributable net profit to increase 85%/22%/32% YoY in FY20E/21E/22E. Moreover, WuXi AppTec maintained a diversified investment portfolio which will bring significant investment gains over the long term.