The company was founded in 2000 and is headquartered in Shanghai, China. 2007 WuXi PharmaTech NASDAQ listing. U.S. time on December 10, 2015, the Chinese stock WuXi PharmaTech (WX.NYSE) announced after the close of trading that $3.3 billion to complete the privatization of the delisting.
In May 2015, WuXi AppTec spun off its subsidiary Hequan Pharmaceuticals, which is mainly responsible for the small molecule innovative drug research and development and production services business, and announced that it would be listed on the New Third Board; in June 2017, WuXi Biologics, a subsidiary that is mainly responsible for part of the business of biologics, announced that it would be listed on the Hong Kong Stock Exchange; on May 8, 2018, WuXi AppTec was listed on the Shanghai Stock Exchange, and to this point "One split three" return completed.
The company is mainly based on the U.S. market, and its business revenue in the U.S. market has maintained stable growth from 2015 to 2017, and its revenue in China and Europe has grown faster, with a gradually increasing share , in the process of the pharmaceutical R&D and production services industry's shift to emerging countries represented by China, superimposed on the improvement of the domestic policy and environment for the research and development of new drugs, the company's business focus is gradually shifting to the domestic market, the proportion of domestic business revenue increased from 17.19% in 2015 to 18.16% in 2017, the proportion of U.S. business revenue decreased from 64.63% in 2015 to 58.99% in 2017, and the Company has been increasing its investment in the European market in recent years, and the business revenue increased from 14.07% in 2015 to 18.38%.
WuXi PharmaTech's business revenue grew from 4.14 billion yuan in 2014 to 7.765 billion yuan in 2017, with a CAGR of 23.33% from 2014 to 2017, and a year-on-year growth of 27.64% in 2017.
1. Company Business
WuXi AppTec's main business spans across two areas: research and development outsourcing (CRO) and manufacturing foundry (CMO).
CRO business can be further divided into preclinical CRO and clinical CRO business: Preclinical CRO company's fixed assets and employee compensation are higher, the business is also the core of WuXi AppTec. The field line domestic first for WuXi AppTec.
CMO business is the production of drugs on behalf of pharmaceutical companies, and the fixed assets of biopharmaceutical CMOs are more invested. Biological drug CMO bargaining power is higher, the future development prospects of the industry is better. The company's chemical CMO business (Harmonic Pharmaceuticals) belongs to A-share WuXi Kande in the body and about 87%, biological CMO business belongs to WuXi Biotechnology in the Hong Kong stock listed independently.
Most companies only cover part of the CRO, CMO business, WuXi AppTec can do the whole process coverage. It is the only domestic and foreign company that can provide the whole process of services from molecular screening, synthesis, clinical trials, to the production of OEM services.
2. Sales model
Overseas customers are matched by WuXi AppTec's overseas sales, Matching overseas customers + business development + project input. The cooperation of domestic pharmaceutical companies by WuXi AppTec's sales to dock, docking domestic customers + cooperation in R & D risk * * * * share .
Currently, our main customers include Pfizer, Johnson & Johnson, Novartis, Roche, Merck Sharp & Dohme, and other top 20 global pharmaceutical companies and various new drug research and development organizations, with more than 3,000 customers.
3. Industry Space
Industry Chain Diagram:
CRO, full name "Contract Research Organization", is to say that through the contract order, for the large pharmaceutical companies to provide new drug clinical research related services. It is essentially an R&D outsourcer for pharmaceutical companies, which sounds a bit shabby, but is actually a talent- and technology-intensive industry.
Due to the global shift of industry and the comprehensive impact of domestic innovation demand, policy, talent and other factors, the domestic CRO industry will realize rapid development.
The CMO field has a huge market, and has a growth rate far exceeding the global pharmaceutical average of about 5%.
From a revenue perspective, the global pharmaceutical CMO industry is relatively decentralized, with a high degree of marketization. Domestically, there are mainly Hequan Pharmaceuticals (a subsidiary of WuXi AppTec), Kelaiying, and Boten .
Thanks to the rapid development of the domestic pharmaceutical market, friendly policies, a large population, the aging trend, all of which predicts that the domestic CMO market growth potential will far exceed the global average .
According to the statistics and forecasts of the South Institute, China's CMO/CDMO market increased from 27 billion yuan to about 52.8 billion yuan from 2016 to 2020, with a CAGR of 18.27% from 2016 to 2020.
Internationally, LabCorp with Covance and Chiltern and IQIVA *** together occupy the absolute leading position in the industry, Syneos, Charlesriver and WuXi PharmaTech and other 7 companies volume equivalent, forming the second echelon.
Drug discovery is at the top of the global tier.
WuXi PharmaTech has an absolute competitive advantage among local companies. First, the volume of Kanglong Chemical and Rui Zhi Chemical is relatively small; second, WuXi AppTec's drug discovery business has better growth. 2015-2017, Kanglong Chemical drug discovery business CAGR is 18.76%, while WuXi AppTec the business CAGR reached 27.74%.
Medium-term gradual transformation
WuXi PharmaTech developed a "long-tail strategy" a few years ago, expanding its customer base from big pharma and biotech companies to entrepreneurs and university professors. From the perspective of short-term profitability, this is not cost-effective or economical, in the case of the same customer acquisition costs, the head of the multinational pharmaceutical companies to bring the marginal revenue is far greater than the long tail of entrepreneurs, university professors. But breakthrough innovation is likely to happen in the long tail.
Long-term strategic planning
WuXi PharmaTech's upstream and downstream expansion of its business around preclinical CROs, clinical CROs, and CMOs is still bottlenecked, and there are limits to its market share. WuXi AppTec's breakthrough can learn from Huawei's development path: become the customer's customer, directly facing the consumer.
Huawei, as an equipment supplier, is China Mobile, Vodafone and other network operators of the B side, the operators face the end consumer. Through smartphones, tablets, and personal computers, Huawei has successfully cut into the consumer electronics field. Consumer electronics business and the original customer does not form a competitive relationship, and even synergistic effects can occur for the former customer infusion.
WuXi AppTec's transformation is similar to that of the existing business model is that scientists study the mechanism of disease, CRO to assist pharmaceutical companies to develop innovative drugs, innovative drugs listed on the patent belongs to the pharmaceutical companies, pharmaceutical companies to educate the doctor, the doctor diagnosis, education of patients with medication. Is there a possibility to realize "scientists + doctors" directly facing "patients"? It depends on how WuXi AppTec and WuXi AppTec collaborate in the future.
The company's vision for the future: "Let the world have no difficult medicine, no difficult disease". We believe that the first goal "no hard to do drugs" company through WuXi AppTec, WuXi Biotechnology two platforms have basically realized; the second "goal of no hard to cure disease" need to be realized through the platform of the WuXi AppTec, focusing on accurate The second "goal of no hard-to-treat disease" needs to be realized through the platform of WuXi AppTec, focusing on accurate "diagnosis".
Risk of lockout: The company has 614 million shares in lockout on May 8, 2019; 323 million shares in lockout on May 10, 2021, resulting in lockout pressure.
Employee Turnover Risk: WuXi PharmaTech may have difficulty retaining key employees or may have increasing difficulty hiring high-quality employees. The company may be forced to significantly increase employee compensation, including equity incentives, in order to reward and retain key employees.
Regulatory risk: WuXi AppTec may fail to comply with existing regulations and industry standards, may be slow to respond to adverse policy changes, or may fail to obtain/renew certain licenses and permits, all of which could adversely affect the company's reputation and business, financial condition, results of operations and prospects.
IP Protection Risk:Early suspension of service agreements with customers in the event of project failure or material breach of contract; lower than expected number of projects renewed into commercial production; slower than expected execution of production capacity and clinical trial capacity expansion;
Overseas Investment Risk:In October 2018, the U.S. Department of the Treasury implemented the 2018 Foreign Investment Risk Review Modernization Act (FIRRMA) in part, authorizing the Committee on Foreign Investment in the United States (CFIUS) to review non-controlled overseas investments in 27 industries, including healthcare. WuXi AppTec has invested in a number of different countries and regions, and such investments may be subject to strict regulatory or governmental scrutiny in specific countries or regions, increasing the uncertainty and transaction costs of WuXi AppTec's future overseas investments.
Foreign exchange risk : Approximately 80% of WuXi AppTec's revenues come from overseas customers and are denominated in US dollars. Meanwhile, its cost base is mainly denominated in RMB.
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