China’s CDMO industry covered for the first time: Complex molecules will drive growth in the next decade, WuXi AppTec is the first choice (Bernstein)

Street Signal | China’s CDMO industry covered for the first time: Complex molecules will drive growth in the next decade, WuXi AppTec is the first choice (Bernstein)

Bernstein covers the Chinese CDMO sector for the first time and holds a positive view. Complex new drugs such as peptides and ADCs will bring about 15%-20% industry growth, creating structural opportunities for CDMOs with relevant capabilities.

Covering WuXi AppTec (top choice, outperforming the market), Asymchem (outperforming the market), and WuXi Biologics (market flat), WuXi AppTec's revenue is expected to increase from 45 billion yuan to 100 billion yuan in 2025-2030.

One-sentence conclusion: China's CDMO industry is benefiting from the shift in the global paradigm of new drug research and development. Integrated leaders with complex molecule manufacturing capabilities will enjoy extremely high industry barriers and deterministic growth. Positive/negative: Positive for WuXi AppTec (603259/2359.HK) and Asymchem.

The market has anticipated WuXi AppTec's geopolitical risks, but its leadership and growth potential in complex molecules may be seriously underestimated. Catalysts:

1) New drug launches and volume increases from major customers (such as Eli Lilly and Novartis);

2) Order growth for WuXi AppTec’s TIDES business;

3) Marginal changes in Sino-US geopolitical relations.