What underpins the CRDMO industry growth outlook?

  • WuXi AppTec management maintained a positive view of the industry, citing active biotech financing, pharmaceutical companies’ R&D spending doubling over the past decade, and a rising rate of drug out-licensing. Frost & Sullivan forecasts a compound annual growth rate of more than 12.8% for the global pharmaceutical CRDMO market from 2025 to 2030; this is an industry forecast and is not equivalent to WuXi AppTec’s own revenue growth rate.
  • The out-licensing rate is expected to rise from 54.5% in 2025 to 64.6% in 2035. Management views these trends as supporting demand for outsourced R&D and manufacturing. Thus, a favorable industry environment provides a backdrop for the company to secure projects, but does not directly guarantee its performance.

Why is WuXi AppTec able to take on projects?

  • Management said that, through its “follow-the-molecule” and “win-the-molecule” strategies, WuXi AppTec participated in 14 of the 33 synthetic drugs approved by the US FDA in 2025, and manufactures 4 of the world’s best-selling synthetic drugs. This indicates that it has become involved in a number of important drug projects, but does not directly show how much those projects contribute to revenue.
  • The company currently has capacity for 5,000 cubic meters of small-molecule reactors and 137 thousand liters of peptides. Management also said that a new TIDES plant was built in 14 months. Capacity expansion and a relatively rapid construction timeline demonstrate the ability to take on R&D and manufacturing demand. Management also noted that WuXi Biologics serves AIDD/AI4S customers and has plans to expand capacity.

How have the scope of customer service use and profitability changed?

  • Management disclosed that the proportion of customers using the company’s R+D+M services rose from 22% to 41% in the first half of 2026. Customers’ adoption of services across more stages means the company has an opportunity to broaden the service coverage it provides to each customer; this proportion reflects customer usage and is not equivalent to revenue growth.
  • Management said the company’s revenue is expected to expand to about 8 times its 2018 level by 2026. Gross margin and adjusted net margin rose from 39.5% and 18%, respectively, in 2018 to 54.2% and 40% in the first nine months of 2026. The revenue forecast and the reported nine-month margin figures cover different periods; the latter reflect operating performance through that period.

Why does Nomura maintain its Buy rating, and what factors could weigh on its view?

  • Nomura maintained its Buy rating and HK$235.90 target price. The target is based on a DCF valuation using a weighted average cost of capital of 10.1% and a perpetual growth rate of 3.5%. The report lists a closing price of HK$204.40 on 5 November; Nomura calculates that the stock trades at 21.4 times its fully diluted FY2026 earnings per share of RMB8.80.
  • Nomura’s listed downside risks include slower growth resulting from intensifying competition or weaker demand, as well as geopolitical tensions: WuXi AppTec was included on the US Department of Defense’s updated 1260H list and has filed a lawsuit. These factors affect project growth expectations and the external operating environment, and are the main constraints on its positive view.