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Yangtze Business Daily News●Huang Cong, reporter of Yangtze Business Daily

Not only did WuXi AppTec's (603259.SH) stock price fall, it also released its worst semi-annual report since its listing, but the company's executives' salaries did not decrease.

Recently, the 2024 semi-annual report released by WuXi AppTec showed that the company achieved operating income of 17.241 billion yuan in the first half of the year, a year-on-year decrease of 8.64%; net profit was 4.24 billion yuan, a year-on-year decrease of 20.2%.

A reporter from the Yangtze Business Daily found that this is the first time that WuXi AppTec's revenue and net profit have both declined since its listing in May 2018, six years ago.

WuXi AppTec said that by the end of the first half of 2024, the company had a total of 38,134 employees. A reporter from the Yangtze Business Daily found that WuXi AppTec had lost 6,227 employees in the past year and a half.

Moreover, in the secondary market, WuXi AppTec's share price once reached 170.09 yuan per share in July 2021. However, as of the close of August 2, 2024, the company's share price reached 42.91 yuan per share, a drop of about 75% in three years, and its market value evaporated by more than 370 billion yuan.

Under this circumstance, from 2021 to 2023, the remuneration of WuXi AppTec's Chairman, Executive Director, and President (CEO) Ge Li will be RMB 24.7638 million, RMB 41.969 million, and RMB 41.9686 million, respectively, taking away RMB 108.7 million in three years.

Revenue and net profit both fell in the first half of the year

WuXi AppTec provides integrated, end-to-end new drug research and development and production services to the global pharmaceutical and life sciences industries, with operating bases in Asia, Europe, North America and other regions.

Recently, the 2024 semi-annual report released by WuXi AppTec showed that the company achieved operating income of 17.241 billion yuan in the first half of the year, a year-on-year decrease of 8.64%; net profit was 4.24 billion yuan, a year-on-year decrease of 20.2%.

A reporter from the Yangtze Business Daily found that this is the first time that WuXi AppTec's revenue and net profit have both declined since its listing in May 2018, six years ago.

WuXi AppTec disclosed that in the first half of 2024, the company's revenue from U.S. customers was 10.71 billion yuan, a year-on-year decrease of 1.2% excluding specific commercial production projects; revenue from European customers was 2.22 billion yuan, a year-on-year increase of 5.3%; revenue from Chinese customers was 3.4 billion yuan, a year-on-year increase of 2.8%; revenue from customers in other regions was 910 million yuan, a year-on-year decrease of 17.4%.

In terms of business segments, in the first half of 2024, the revenue of each business segment of WuXi AppTec declined to varying degrees. The chemical business achieved revenue of 12.21 billion yuan, a year-on-year decline of 9.34%; the testing business achieved revenue of 3.018 billion yuan, a year-on-year decline of 2.35%; the biology business achieved revenue of 1.169 billion yuan, a year-on-year decline of 5.17%; the high-end treatment CTDMO business achieved revenue of 575 million yuan, a year-on-year decline of 19.43%; the domestic new drug research and development service department achieved revenue of 257 million yuan, a year-on-year decline of 24.8%.

In fact, WuXi AppTec's performance decline had already begun.

After its listing in 2018, WuXi AppTec's operating income growth exceeded 20% for five consecutive years, including a year-on-year increase of 71.84% in 2022; except for 2019, the net profit growth rate in other years exceeded 50%.

However, in 2023, WuXi AppTec's operating income reached 40.341 billion yuan, a year-on-year increase of 2.51%; net profit reached 9.607 billion yuan, a year-on-year increase of 9%.

In its semi-annual report, WuXi AppTec pointed out that the company may face risks from global operations and international policy changes.

On March 6, 2024, the U.S. Senate Homeland Security and Governmental Affairs Committee voted to pass a "Draft S.3558"; on May 15, 2024, the U.S. House of Representatives Oversight and Accountability Committee voted to pass a "Draft HR8333", which is a revised draft of the proposed "Biosafety Act" previously numbered HR7085. The revisions to the HR8333 draft include but are not limited to removing the previous allegations against WuXi AppTec and adding a non-retroactive clause ("grandfather" clause), which exempts contracts signed before the proposed restrictive clause takes effect.

WuXi AppTec explained that the amendment to add the Biosecurity Act based on the draft HR8333 to the National Defense Authorization Act for Fiscal Year 2025 ("2025 NDAA") failed to be approved by the House Rules Committee and will not currently be included in the House's 2025 NDAA legislative agenda. A similar amendment to add the Biosecurity Act to the Senate version of the 2025 NDAA was proposed on July 10, 2024 and is currently being reviewed by the Senate Armed Services Committee. The legislative path of the proposed bill is uncertain, and its legislative process still needs to go through multiple steps before the bill is enacted. Similarly, the content of the draft (including the part that mentions WuXi AppTec) is still subject to further review and may change.

WuXi AppTec said that the company continues to actively work with consultants to clarify the facts and call for revisions to the draft. The company strongly opposes any presumptive and unreasonable definition of the company as a "biotechnology company of concern" without due process. The company always abides by the laws and regulations of the countries and regions where it operates, and is working hard to communicate and explain with relevant US legislative parties.

The stock price fell 75% in three years

As performance growth slowed or even declined, the number of employees at WuXi AppTec decreased significantly.

In the semi-annual report, WuXi AppTec introduced that as of the end of the first half of 2024, the company had a total of 38,134 employees. The company will continue to retain outstanding talents through recruitment, training, promotion, and incentives to maintain the company's high level of service, industry-leading professional status, and continue to meet customer needs.

A reporter from the Yangtze Business Daily noticed that as of the end of 2023, the number of employees at WuXi AppTec reached 41,116, and the company reduced its staff by 2,982 in half a year.

Not only that, as of the end of 2022, the number of employees at WuXi AppTec reached 44,361, and the company's employee reduction reached 6,227 people in one and a half years.

Despite a large number of layoffs, WuXi AppTec executives still earn considerable income.

From 2021 to 2023, the total remuneration of WuXi AppTec's directors, supervisors and senior executives (including those who have left) will reach RMB 77.9056 million, RMB 100 million and RMB 95.9054 million respectively. Among them, Li Ge's remuneration will be RMB 24.7638 million, RMB 41.969 million and RMB 41.9686 million respectively, taking away RMB 108.7 million in three years.

In the secondary market, WuXi AppTec's share price once reached 170.09 yuan per share in July 2021. However, as of the close of August 2, 2024, the company's share price reached 42.91 yuan per share, a drop of about 75% in three years, and its market value evaporated by more than 370 billion yuan.

As the stock price continued to fall, WuXi AppTec shareholders were also reducing their holdings.

In the first half of 2024, Hong Kong Central Clearing Company Limited reduced its holdings of WuXi AppTec shares by 184 million shares, SUMMER BLOOM INVESTMENTS (I) PTE. LTD. reduced its holdings by 53.527 million shares, HKSCC NOMINEES LIMITED reduced its holdings by 15.4786 million shares, and Industrial and Commercial Bank of China Limited-China-Europe Healthcare Hybrid Securities Investment Fund reduced its holdings by 440,000 shares. The above-mentioned shareholders reduced their holdings by a total of 253 million shares.

It is understood that this is the largest number of shares sold by the top ten shareholders in the semi-annual reports in the past seven years since WuXi AppTec's A shares were listed in 2018.

Not only that, from June 10, 2022 to August 2023 alone, Li Ge and his associates began to reduce their holdings in WuXi AppTec, and the four reductions netted a total of approximately RMB 16.613 billion.