Since last year, the one-time high performance growth brought about by COVID-19 commercial orders from leading domestic CXO companies has basically cleared up the valuation disturbance, and endogenous growth potential has once again become an important driver for reshaping the CXO valuation system.

Take Yao Ming Biotech (02269) as an example. According to the latest 2023 annual report, after excluding the impact of the COVID-19 business, the company's revenue still achieved a steady increase of 11.6% over the same period, reaching 17.034 billion yuan; the company achieved gross profit of 6.828 billion yuan, an increase of 1.5% year on year; the adjusted EBITDA was 7 billion yuan, and the adjusted EBITDA profit margin was 41.1%. It can be seen that under many uncertainties, the company has shown strong endogenous growth ability and resilience to risks.

Deconstructing key financial data, investors can easily find that Yao Ming Biotech's mature back-end commercialization projects and stable new business orders have become a strong support for the company to achieve steady growth in a contrarian environment.

In terms of business growth, the total number of comprehensive projects of Yao Ming Biotech increased to 698 in 2023, of which non-COVID-19 revenue increased 37.7% year-on-year. It is worth mentioning that in December of last year, the company added 41 new projects, and the number of new projects added in a single month exceeded expectations, fully demonstrating that even after deducting the contribution of COVID-19 projects, its business growth continues to be strong.

Despite the current increase in market uncertainty, with the support of Follow the Molecule strategy, Yao Ming Biotech can still improve customer stickiness and market share through service quality and efficiency in leading industries, and rapidly boost the number of the company's Phase III and commercialization projects.

Specifically, during the reporting period, there were 339 pre-clinical projects of Pharmacovigilance; the number of early (phase I and II) clinical development projects reached 284; the number of late-stage clinical development projects and commercial production projects increased to 75 (51 late-stage projects and 24 commercial production projects). Furthermore, driven by the win-the-molecule strategy, by the end of 2023, the company had obtained 18 external transfer projects, including 9 clinical phase III/commercialization projects, to increase short-term revenue and target long-term commercial production orders.

According to the data, the company's current post-clinical and commercial production revenue reached 7.73 billion yuan, accounting for 45.4% of the company's total current revenue, of which non-COVID-19 business revenue increased 101.7% year on year.

In terms of order conversion, the company currently has a total of 20.6 billion US dollars of uncompleted orders. Generally speaking, it takes 6-12 months for CXO companies to sign new orders, so in the middle or second half of this year, the company's back-end commercialization and new orders are expected to be released centrally.

In fact, innovative pharmaceutical companies at home and abroad have strong demand for R&D cost control after experiencing a “cold winter of financing,” so from a budget perspective, cost-effective end-to-end service providers such as Pharmaceutical Biotech are irreplaceable to downstream innovative pharmaceutical companies in the supply chain.

It is worth mentioning that in order to guarantee commercial supply to global customers, Yao Ming Biotech has always implemented a “global double factory production” strategy. The strategy allows the company's partners to choose any two bases in China, the US, and Europe for commercial production to guarantee the global supply of products while eliminating the risk of technology transfer between different suppliers.

Judging from the current regional performance distribution, the company's total revenue share in the European and Asia-Pacific markets (excluding COVID-19 projects) reached 52.6% during the reporting period, surpassing the North American market to become the key support for Yao Ming Biotech's global CRDMO service business, which also shows the stability of Yao Ming Biotech at the global production level.

Despite recent fluctuations in the North American market, Pharmaceutical Biotech has not stopped moving forward and is expected to reach 588,000 liters of production capacity in the future. In the capacity expansion plan, almost all of the new production capacity was implemented overseas.

Among them, construction of an integrated CRDMO center in Singapore with a production capacity of 120,000 liters has recently begun. This will be the first time that Yao Ming Biotech has laid out the first large-scale overseas CRDMO base in Asia, further demonstrating the value and resilience of Yao Ming Biotech as a leading global CXO company. With the accelerated implementation of the company's XDC, vaccine, and dual-antibody platforms in the future, it is expected that its long-term market allocation value will continue to rise steadily.