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After months of decline, medical stocks have rebounded with smart earnings prospects, adding the sector that develops or manufactures drugs for the pharmaceutical industry.
WuXi Biologics (Cayman) Inc. ((OTCPK:WXXWY, OTCPK:WXIBF); 2269. HK), leader among the so-called “Contract X Organizations” or CXO, which provide outsourced drug services, is among the notable tops in the market.
The company’s percentage value has risen more than 80% since the beginning of May to exceed HK$80. And last Tuesday, the company provided a dose of positive news to investors, saying its first-half earnings would show strong growth.
The company, which makes ingredients for covid vaccines and antiviral drugs, said it expects its cash inflow in the first half to increase by 61% to 63%. According to the company’s initial calculations, profit is expected to be higher between 35% and 37%. %. In absolute terms, its cash in the first six months is estimated at 7140 million yuan (1060 million U. S. dollars), with a profit of about 2500 million yuan.
Shares of WuXi Biologics rose on the day of the positive cash inflow alert, but up 1. 6%. The rate of profit growth, while rapid, slowed from last year’s breakneck pace, when annual profits doubled to 3390 million yuan from a year earlier and cash rose 83% to 10. 29 billion yuan.
Still, analysts are convinced the outlook is promising, with “buy” ratings in the inventory of several investment banks. Credit Suisse believes earnings and earnings expansion in the first part exceed market expectations, as knowledge indicates that the company overcame pandemic disruptions in the fourth quarter.
Goldman Sachs is also bullish, attributing the first-half profit buildup to immediate delivery of Covid-related projects, higher margins, and higher production capacity utilization. It raised its price target for the company by 5. 7% to HK$117.
WuXi Biologics has sought to expand its production capacity and global source network, to meet pharmaceutical corporations’ developing call for outsourced drug production facilities to combat the Covid pandemic and other medical conditions.
Last Tuesday, it unveiled a plan to build a large-scale hub in Singapore where biopharmaceuticals can be researched, evolved and manufactured on one roof, known as the Contract Research, Development and Manufacturing Organization (CRDMO) model.
It intends to invest around S$2 billion ($1. 44 billion) over the next 10 years in the new base, which it says can create 1,500 jobs in studios and production, expanding its organic production capacity through another 120,000 liters until 2026.
The Singapore facility is not its first investment. As external markets account for a growing percentage of revenue, WuXi Biologics has built production centers in Ireland, Germany and the United States, with a total investment of $1500 million in the U. S. The U. S. and Europe through the end of this year.
A worldwide service chain can help global consumers stay closer to supplies, mitigating the high prices and quality risks of long-distance transportation of key product lines, such as biologics and vaccines.
The company’s visitor base has moved from China to other markets. Last year, North American consumers contributed only 51% of the company’s revenue, while Europe accounted for around 22%. The percentage of Chinese consumers rose from 44% in 2020 to just over 24% last year, according to figures from the 2021 annual report.
The company went public in 2017 after WuXi AppTec ((OTCPK:WUXIF, OTCPK:WUXAY); 2359. HK) separate your biologics business into an independent operation. Biologics are medicines derived from a living source, such as human proteins. , to be chemically synthesized in the laboratory.
The company’s built-in CRDMO style is to offer an R
In terms of revenue, WuXi Biologics now controls 11% of the global CDMO market and ranks third among vendors, according to Haitong International Securities.
The life cycle of a drug, from concept to mass ad production, is long and complex, comprising discovery, preclinical phase and development, clinical trials, end-stage clinical trials, and large-scale manufacturing.
WuXi Biologics aims to complete this entire cycle internally as a component of a strategy it has dubbed “tracking the molecule,” generating more profit through accelerated advertising production in the later stages of the process.
By the end of April, the company had made 18 such assignments that led to an increase in orders and the value of assignments.
In addition, the company also has platforms to expand biological remedies, such as double-acting antibodies that target more than one receptor on the surface of a cell, mRNA vaccines, and a cancer treatment known as antibody-drug conjugates (ADCs).
He also introduced a strategy to get other corporations to move their emergence into WuXi Biologics pipelines to complete the creation and commercialization process, a strategy he calls “winning the molecule. “From 2018 to 2021, it received 40 such transfers in other stages of R
In 2021, its revenue from late-stage clinical trials and ad production exceeded R’s revenue for the first time.
However, WuXi Biologics has been in the shadow of uncertainty since its Chinese services were added in February to an “unverified” U. S. list to examine trade.
The company’s services in the cities of Wuxi and Shanghai were included in the U. S. Department of Commerce’s list of corporations. U. S. companies require special licenses to import goods from U. S. partners, who were also under threat of investigation.
The company said at the time that the two Chinese services had already been built without the need for equipment imported from the US. But its percentage value still fell about 23 percent.
In early July, the company said U. S. inspectors were able to do so. The U. S. had finished reviewing their Wuxi plant and were about to read about the Shanghai plant. finishing.
WuXi Biologics enjoys a valuation higher than the maximum of its peers in the contract medical industry. Its price-to-earnings (P/E) ratio of 85 times is well above the 50 times of CXO’s leader in chemical medicines, WuXi AppTec and ASYMCHEM. LABORATORIES’ 27 times (OTCPK:ASLTY, 6821. HK) or Hangzhou Tigermed Consulting 23-stroke ((OTCPK:HNGZY, OTCPK:HTMDF); 3347. HK).
By assigning such a high value, investors are expressing confidence in the company’s long-term lead as a CDMO leader in the biologics box.
Disclosure: None
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