Recently, WuXi AppTec held an investor open day event called "CRDMO Ultimate Empowerment Journey". At the event, WuXi AppTec executives mentioned the word "far ahead" many times. Although they said it with a calm face, the message they conveyed was "low-pitched and high-profile", which won many applause and laughter from the audience.

Why can they say that?
Where does the confidence come from?
If you really achieve "far ahead", what is the secret?

I just came back from WuXi AppTec's investor day event, and I will highlight the key points for you.

Both quantity and quality, the industry contribution is "far ahead"

From the perspective of molecular types, the current research and development of small molecules is still the "main force" of current research and development and listing. Whether it is the number of drugs approved by the US FDA or the number of molecular pipelines under development, small molecules account for more than 50%.

Data presented at WuXi AppTec's Investor Day showed that of the 96 new drugs approved by the US FDA from 2023 to the first half of 2024, small molecules accounted for 53; the number of molecular pipelines under development in 2023 exceeded 21,000, of which more than 11,000 were small molecules.

Among them, how many did WuXi AppTec support?

According to data given by Dr. Minzhang Chen, co-CEO of WuXi AppTec, among the clinical projects currently under development in the world, projects of WuXi AppTec's chemical business platform account for 16%, that is, one out of every six clinical projects in the world is supported by WuXi AppTec; and of the 14 small molecule drugs approved by the US FDA in the first half of 2024, 3 were supported by WuXi AppTec's chemical business platform, accounting for 21%.

More important than quantity is quality.

WuXi AppTec often uses a funnel to show its CRDMO model. The so-called CRDMO seems to have only one more R (drug discovery and research) than the traditional CDMO, but this gives the company the opportunity to enter the upstream of the industry and undertake the most cutting-edge innovation needs.

According to the 2024 semi-annual report, at the front end of the CRDMO funnel, that is, the "R" end, WuXi AppTec has successfully synthesized and delivered more than 450,000 new compounds to customers in the past twelve months, and it has continued to grow, with a year-on-year increase of 7%.

It is worth mentioning that with the breakthroughs in science and technology and the continuous emergence of innovations, the molecules are getting bigger and bigger and more difficult to synthesize. This requires the company to have more capabilities in all aspects of synthesis analysis and purification, and customers are more dependent on and sticky to high-quality head CXO.

The most innovative therapies in the pharmaceutical industry often have higher value returns, so revenue can be used as a side proof of molecular quality. In terms of profit quality, data from Evaluate Pharma shows that among the top 10 small molecule drugs in global sales in 2023, 4 are produced by WuXi AppTec's chemical business platform services, with total sales of US$30 billion.

And these figures are expected to grow even higher.

Earlier this year, the industry-renowned website Drug Hunter selected the top 10 small molecules of 2023 from tens of thousands of molecules, 7 of which were supported by WuXi AppTec's chemical business platform. The selection criteria for this list include the drug's technological achievements, scientific contributions, potential clinical impact, and originality, which means that these drugs enabled by WuXi AppTec are more likely to lead technological innovation in the future, bring breakthrough therapies to patients, and bring rich rewards to its customers and itself.

Deep insight into the industry, with a layout speed “far ahead”

When molecules enter the market, they are likely to face the challenge of large-scale production.

WuXi AppTec's production capacity is another "far ahead" highlight that has attracted much attention from the market. Taking the peptide drugs that the market is concerned about as an example, according to the information disclosed by WuXi AppTec's WeChat official account, at the beginning of this year, the company announced that the peptide production workshops at its two bases in Changzhou and Taixing were officially put into production, and the total volume of the peptide solid phase synthesis reactor was increased to 32,000 liters, an increase of 20,000 liters in just 12 months. By the end of this year, it is expected to increase to 41,000 liters. This expansion scale and speed are rare in the world.

What do these numbers mean? Take GLP-1 (glucagon-like peptide-1) as an example. This type of drug has become "hot" around the world with the approval of its weight loss indication. At this time, many people have noticed that WuXi AppTec has taken over the production orders with its huge production capacity reserves and rapid construction. However, if carefully analyzed, this result is not "accidental", but rather has a certain degree of "uniqueness".

First of all, building production capacity is not a matter of one day or one night. It requires companies to have early insight and preparation for trends.

Here we have to talk about WuXi AppTec's CRDMO model. WuXi AppTec introduced at the Investor Day that its "R" end captured the innovation trend many years ago and established peptide research and testing capabilities many years ago; and through the integration of R, D, and M links, the projects introduced by the R end can be efficiently promoted at the D and M ends, so that the cutting-edge innovation needs can be detected by the "back-end" business as early as possible.

Secondly, even if the company makes a decision to expand production capacity, it is not easy to achieve a leap in these innovative production capabilities in a short period of time. On the one

hand, the leap in production capacity is not just about expanding the synthesis production line, but also behind it is a huge supporting demand for separation, purification, and a solid all-round commercial supply chain; on the other hand, the establishment of these production lines actually requires long-term experience accumulation and resolute execution. It sounds a bit "soft", but in fact it is also a "hard power" that is difficult to catch up.

Dr. Chen Minzhang introduced at the Investor Day that long before the popularity of peptide drugs, WuXi AppTec had been deeply involved in the innovative drug industry for more than 20 years. It has not only established a quality system that meets global standards, accumulated rich experience in small molecule research and development and production, but also established long-term and deep trust with many global new drug development partners, all of which are indispensable for seizing opportunities.

So, will these production capacities be oversupplied because they are built too much? Dr. Chen Minzhang responded in his speech that this is a question that has been asked since the first workshop of the Changzhou base was put into use in 2016, but so far, WuXi AppTec's scale expansion has been "built while using", and it has always maintained a high utilization rate, and there are bases in many countries and regions in Asia, Europe, and America that are continuing to expand to better meet customers' innovation needs.

For example, the Changzhou base, where the investor day event was held, was not fully put into use until the beginning of this year, and more than 10,000 batches were produced in 2023; in Taixing, across the river, 6 of the 9 workshops in the first phase have been put into use, and the second phase construction has begun.

In addition, in May of this year, WuXi AppTec's Singapore production base has started construction, and the first workshop is scheduled to be put into use in 2027; the Middleton base in Delaware, USA is also under construction, and the production and packaging capacity of the Kuwei base in Switzerland will be doubled this year, and spray drying, sterile preparation production and LNP will be added in the future... After seeing such a layout, it is not difficult to guess that WuXi AppTec's future business focus should also be spread all over the world.

Finally, let me mention an impressive number. If a platform-based company wants to develop at a long-term high speed, a very important point is whether it can continue to deliver what customers need in a stable, efficient and high-quality manner and continue to gain the trust of customers. Although he just passed by the scene, Dr. Chen Minzhang also mentioned such a set of numbers. WuXi AppTec's chemical business platform "has produced more than 900 batches of commercial peptide products so far, with a failure rate of zero, and every batch is a success."

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