{"text":[[{"start":7.78,"text":"This article only represents the author's own views."}],[{"start":12.98,"text":"Shares in China’s pharmaceutical sector enjoyed a sharp rise this year, but the overall rally masked a divergent performance by two parts of the industry."}],[{"start":23.009999999999998,"text":"Companies focused on pioneering research did especially well on the stock market, with the Hang Seng innovative drug index rising more than 60% so far this year, while providers of generalized pharmaceutical services struggled to keep pace."}],[{"start":41.839999999999996,"text":"That is, until WuXi AppTec Co. Ltd. (2359.HK; 603259.SH) released a better-than-expected projection for its first-half earnings last week, sparking renewed investor enthusiasm for the outsourcing partners that offer a range of pharmaceutical services."}],[{"start":65.16999999999999,"text":"After the market closed on July 10, WuXi AppTec released a revenue forecast of 20.80 billion yuan ($2.9 billion) for the six months to the end of June, a year-on-year rise of 20.64%. Revenue from continuing operations was projected to rise 24.24%. Net profit for the half year was forecast to double to 8.56 billion yuan. Even after deducting a one-off windfall of 3.21 billion yuan from the sale of shares in WuXi XDC (2268.HK), the firm’s net profit was expected to rise 26.47%."}],[{"start":113.80999999999999,"text":"The drug services giant credited its core business as a contract research, development and manufacturing organization (CRDMO) as the main factor in the estimated results, saying it was continuing to optimize capacity and efficiency to meet customer demand and drive business growth."}],[{"start":134.45,"text":"The projected earnings for the first half indicate the company is on track to achieve its goal set at the beginning of the year to return to double-digit growth in continuing operations of between 10 to 15%."}],[{"start":148.35,"text":"This time last year the company was grappling with falling revenue and profit. Pandemic-related projects had been winding down but, more importantly, uncertainty over proposed U.S. biosecurity legislation was exerting heavy pressure. The Biosecure Act, which aimed to restrict federally funded business with Chinese biotechs, stalled at the end of last year, but only after taking a heavy toll on market confidence and the short-term business outlook. WuXi AppTec’ s stronger performance in the first half suggests the company has withstood the strain and is back on a high-growth trajectory."}],[{"start":190.25,"text":"Positive outlook"}],[{"start":191.79,"text":"The release did not include details about the company’s order book, but the first-quarter figures give an indication of momentum. By the end of March 2025, continuing business orders stood at 52.33 billion yuan, a year-on-year jump of 47.1%, providing a platform for further growth. One of its most important business divisions, WuXi Chemistry, has steadily expanded its small-molecule R&D and production activities, adding 203 molecules in the first quarter of 2025, a 32.87% rise from the year-earlier period. The TIDES business of producing peptides and oligonucleotides grew 187.6% year on year."}],[{"start":242.57,"text":"Peptides are key ingredients for GLP-1 diet drugs and provide the linking material for antibody-drug conjugates (ADCs), while oligonucleotides are often used in genetic testing and research, as well as serving as a tool for targeting RNA sequences to modulate gene expression. As the global weight-loss market keeps on growing and more ADC drugs are developed, the TIDES business looks set to become a powerful growth engine."}],[{"start":273.37,"text":"Meanwhile, the geopolitical situation has shifted. U.S. President Donald Trump signed an executive order on May 12 aiming to bring down drug costs for average Americans, saying U.S. prescription prices could fall 30-80%. Investors expect the decree to face stiff obstacles to implementation, but U.S. pharmaceutical companies are likely to seek greater cost controls, potentially increasing their reliance on outsourcing partners. In that case, WuXi AppTec, with its extensive overseas operations, could get more orders from U.S. companies, further driving its earnings."}],[{"start":314.8,"text":"The market reaction to the unexpectedly strong half-year numbers was swift. In early trading on July 11, the company’s Hong Kong shares surged, ultimately closing with a gain of more than 10% at HK$88.15. In Shanghai the stock went limit-up for the day, closing at 77.15 yuan. The enthusiasm spilled over into the sector as a whole, lifting prices of the so-called CXO firms that provide wide-ranging drug research, development and manufacturing services. Contract organizations listed in mainland China and Hong Kong such as Hangzhou Tigermed Consulting (300347.SZ, 03347.HK) and Pharmaron Beijing (300759.SZ, 03759.HK) rose more than 10% last week."}],[{"start":374.65000000000003,"text":"WuXi AppTec, China’s leading CXO, is trading at a price-to-earnings (P/E) ratio of 21 times, much lower than the 30 times for Asymchem Laboratories (6821.HK). That differential, despite WuXi AppTec’s promising results, means the stock is worth tracking in the longer term."}],[{"start":405.97,"text":""}]],"url":"https://audio.ftmailbox.cn/album/a_1752762502_6878.mp3"}