Company overview
Wuxi Biologics is a China-based CDMO (Contract Development and Manufacturing Organization) focused on biologics drug development. With its ~80% mkt share (2019) it is the No.1 player in China biologics outsourcing market.
The biologics CDMO industry is one where the revenue would grow exponentially for the CDMO, when a project advances through the various drug development stages (from drug discovery initially through clinical development to the eventual commercial manufacturing). Wuxi Biologics has >300 integrated project as of 2020, with most of these projects in preclinical / early phase development stages; in other words, the revenue growth potentially from these projects are immense.
Source: Company presentation
Competitive advantage
The core competitiveness in CDMO industry is technology, and Wuxi Biologics has developed its in-house technology to a competitive advantage. WuXi Bio’s four key innovative technical platforms act as engines for its sustainable growth and should help maintain its global leading position. These platforms include the WuxiBody Bispecific platform (a proprietary antibody platform), Wuxia (a cell line development platform), WuxiUp (a proprietary high-productivity continuous perfusion cell culture platform – which is essentially a next-gen biologic manufacturing solution) and Wuxi Bio ADC platform.
Source: Company presentation
Valuation level
Assuming i) 10-15% medium term growth (before lowering to 2% in the long run) and a ~12% WACC, the Discount cashflow model is estimating 25-40% upside to the current price.
Source: Bloomberg
Risk
Not being able to keep up with technological advances, increasing competition, not being to comply with existing regulations, geopolitical risks.
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