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机构：申万宏源研究
研究员：周文远/胡梦婷
Rapid growth of the ADC drug market, with active R&D and BD deals. Compared with traditional small-molecule drugs and monoclonal antibody drugs, ADC drugs boast more precise targeting and a wider therapeutic window, hence our prospect of the ADC drug market burgeoning. According to Frost & Sullivan, the global ADC drug market size swelled from US$2.0bn in 2018 to US$11.4bn in 2023E at a Cagr of 42%, which we expect will reach US$64.7bn by 2030E with an estimated Cagr of 28% in 2023E-2030E. With a clear technological path and high commercialisation certainty of ADC drugs, the number of its BD deals worldwide has grown rapidly since 2022. Data from Insight show that the number of global BD deals for ADC drugs in 2023 was 75 (+34% YoY). In addition, the total transaction amount soared from c.US$20bn in 2022 to over US$100bn in 2023 (+440% YoY).
Comprehensive conjugate technology platform with integrated production and supply chain capabilities. The company possesses a comprehensive ADC drug conjugate technology platform, for instance, the patented WuXiDAR4 platform. With an optimised technology platform, rich project experience, and improved supply chain efficiency, the company shortens the length of time between antibody DNA sequence and Bio-conjugate drug IND application to less than 15 months, much lower than the industry average of 24-30 months. As such, the firm can further slash costs and enhance efficiency. In terms of capacity, the company has facilities in Wuxi, Shanghai, and Changzhou (all three bases are located within about two hours’ drive). Among them, the Wuxi base has a globally exclusive dual-function production line that accelerates production with lower costs and greater flexibility. The company plans to establish an overseas production base in Singapore to meet the global demand for bio-conjugate drug CRDMO services, and the Singapore base is expected to start GMP operations in 2026E.
Commercialisation projects on track amid the ADC drug industry boom. Under the strategy of “Enable - Follow - Win”, the company’s number of projects at various stages continues to climb. By end-2023, the company had 59 ongoing post-IND projects, including 21 projects in Phase II/III clinical trials and five Process Performance Qualification (PPQ) projects, which are expected to submit Biologic license applications (BLA) in 2024E. Later-stage projects are expected to drive the company’s business growth in the short term. With active ADC drug BD deals, the company’s total revenue has jumped from Rmb96m in 2020 to Rmb2.12bn in 2023 at a Cagr of 180%. In addition, the company’s adjusted net profit in 2023 resided at Rmb412m (+112% YoY). As projects enter later stages, revenue contribution from post-IND services has expanded from 45% in 2020 to 56% in 2023.
Initiate with BUY. We introduce our adjusted EPS forecasts of Rmb0.51 in 24E (+27% YoY), Rmb0.80 in 25E (+56% YoY), and Rmb1.09 in 26E (+37% YoY). Our DCF model suggests a target price of HK$23.6. With a 31% upside, we initiate coverage of WuXi XDC with a BUY recommendation.
Risks. Fierce competition in the ADC CDMO industry at home and abroad; loss of core employees; risks associated with overseas capacity expansion.