LB Select
2023.12.04 02:15
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A Quick Look | Why did WUXI BIO drop 20%?

WUXI BIO updated its performance outlook today, significantly lowering its 2023 performance expectations: the annual revenue growth rate has been adjusted from 30% to 10%! Moreover, the company chose to lower the expectations only after the listing of Pharmaron, which has created a negative impression in the market.

On Monday, December 4th, WUXI BIO's stock in the Hong Kong stock market plummeted by more than 23% in early trading, but the decline has since narrowed to around 20%.

What happened?

The main reason is that the company updated its performance outlook today, significantly lowering its 2023 performance expectations. This is mainly due to overly optimistic growth targets in the past, biotechnology funding constraints, and uneven regional recovery. At the same time, it is expected to achieve a break-even point in 2024, one year earlier than previously expected.

Specifically:

The full-year revenue growth for 2023 has been adjusted from 30% to 10%. The growth rate for non-COVID-19 businesses has been revised from 60% to 36%. Analyzing the company's business segments, it is mainly affected by a decline in D-end (down 18% to 20% YoY) and M-end (down 15% to 18% YoY). Calculating in reverse, the overall revenue growth for the second half of the year is 3.7%, and the growth rate for non-COVID-19 businesses is 19.1%.

Further analysis by market insiders suggests:

The company's explanation: First, the overall slowdown in industry growth, with Biotech financing growth expected to be in single digits in the next two years. The decline in the number of projects in the development stage is expected to impact revenue by $300 million.

Second, in the Manufacturing stage, the progress of two commercialized products' listing is slightly behind expectations, expected to impact revenue by $100 million.

Third, on the profit side, short-term profit impact due to the start of overseas factory operations, resulting in a gross profit loss of around $100 million.

——The first point is well-known in the market. However, the second and third points are significantly lower than expected. In addition, the adjustment was not made earlier in order to ensure the smooth listing of Wuxi AppTec. The adjustment was made only after the listing, which has also created a negative impression in the market.