Rising profit at WuXi Biologics underscores drug sector rebound

The provider of pharmaceutical services has joined other flagship companies in the WuXi group in projecting stronger first-half earnings after a couple of lean years 

Key Takeaways:

• WuXi Biologics expects first-half revenue to rise 16% and profit to jump around 56%
• The news follows upbeat earnings guidance from both WuXi XDC and WuXi AppTec, adding to evidence of a robust recovery in the drug services industry

By Molly Wen

China’s WuXi group is on roll. Three leading firms in the drug services family are all coasting to bigger half-year profits, raising investor hopes of a sustained sectoral upswing.

The WuXi trio provide wide-ranging research, development and production services for the global pharmaceutical industry, focusing on active ingredients used in products such as targeted cancer therapies, anti-inflammatory treatments and obesity drugs.

WuXi Biologics (Cayman) Inc. (2269.HK), a provider of outsourced services for large-molecule therapeutics, completed a group hat trick of upbeat earnings guidance with a positive profit alert on July 24.

The company announced that it expected revenue for the first half of 2025 to rise around 16% from the year-earlier period, with profit projected to surge around 56%. After adjusting for non-core items such as equity investments and foreign exchange effects, the non-IFRS adjusted net profit was projected to grow about 11%.

The results would mark a return to a growth trajectory for WuXi Biologics. The firm’s net profit fell 23% in 2023 and 1.3% last year, as vaccine demand waned after the Covid pandemic and potential curbs on federally funded contracts from U.S. partners weighed on business sentiment.

The earnings projection pushed the WuXi Biologics stock price up for two consecutive trading days, for a cumulative gain of 9.57%, leaving the share trading at nearly double its price at the start of the year.

WuXi Biologics attributed the increased profit to its push to assist clients across the molecule product lifecycle, from drug discovery through to commercial production, with its platforms for antibody-drug conjugates and bispecific antibodies generating an increasing range of services.

Another growth driver was increased capacity, including a ramp up at its European facilities, which are based in Belgium and Ireland. A WuXi biologics site in Ireland began operations in 2024 and has completed multiple test runs on production batches of 16,000 liters.

A few days before the earnings guidance, the company announced that five manufacturing plants in its Chinese base at Wuxi had passed pre-licensing inspections by the U.S. Food and Drug Administration, providing a foundation to offer pre-filled syringe manufacturing solutions for global clients. Such tests are a mandatory step towards gaining U.S. marketing approval for a biological product.

The power of three

Earlier in July, another flagship firm in the WuXi group had announced a projected profit surge. WuXi AppTec Co. Ltd. (2359.HK; 603259.SH), which focuses on small-molecule drugs and peptides used in weight-loss products, said it expected its net profit for the six months to double compared with the first half of last year.

Then last week, a Hong Kong-listed affiliate specializing in bioconjugates, WuXi XDC Cayman Inc. (2268.HK), also delivered optimistic earnings guidance, flagging up  revenue growth of more than 60% for the first half of the year and a 50% rise in net profit.

WuXi XDC cited strong demand for antibody-drug conjugates, which are widely used in targeted cancer treatments, and for bioconjugate drugs more broadly. The company said it had captured significant market share in the bioconjugates segment, while increasing its production capacity and improving operational efficiency.

The earnings growth at all three WuXi companies testifies to the group’s technical expertise and expanding capacity, while also pointing to a recovery in the pharmaceutical outsourcing industry as a whole.

But despite the positive outlook, risks remain for investors. The WuXi group’s founder, Li Ge, has repeatedly sold off blocks of shares to take advantage of price peaks, dampening the upward market momentum.

On June 14, a holding company controlled by Li, who also serves as chairman of WuXi Biologics, sold 82.94 million shares in the company at HK$26.6, yielding around HK$2.21 billion ($280 million). After the sale, the WuXi Biologics share price declined for nearly a month, only staging a mild rebound after a broader rally in the innovative drug sector. This year alone Li has sold shares in WuXi companies at least three times to benefit from elevated prices, netting more than HK$6.8 billion.

Those strategically timed sales have raised doubts about the group’s long-term prospects, its corporate governance, and the commitment of its core shareholders.

WuXi Biologics currently enjoys a valuation premium over its sister company, trading at a price-to-earnings (P/E) ratio of approximately 36 times compared with WuXi AppTec’s multiple of 24. Nevertheless, as the innovative drug industry takes off, WuXi Biologics has the potential to deliver sustained earnings growth and consolidate its position within the pharmaceutical services business.

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