Good evening, good afternoon, good morning, depends on where you are. Welcome.

Uh, this is Yang, China Healthcare Analyst at JPMorgan. It is my pleasure to host the WuXi Biologics 2026 interim results conference call.

Uh, WuXi Bio just reported a very strong first half with revenue up 18.4% year-over-year, with total backlog increase by 30% year-over-year, and gross margin also expanded to six- 46.2. Uh, this is, we are expecting uh, the company give us, more colors on their uh, strong first half.

Join us today are Dr. Chris Chen, CEO; Mr.

Ming Tu, CFO; and Dr. Lina Fang, Head of IR.

Following prepare mark- remarks, we will move to Q&A session. For Q&A, please type your questions in the Q&A box, and uh, we'll read out your questions.

Now, I will turn the call over to WuXi Bio management team.

Thank you, Yang. Uh, good morning, good good afternoon, good evening, global investors.

The title of our talk is uh, Innovation, Execution, and Global Scale driving sustainable high growth. I think uh, I want to highlight uh, all three aspects, the innovation, our innovation on multispecifics, on ADCs, our execution, our uh, speed to deliver projects, our quality, and we can quickly scale from 200 projects to 300 projects for our D programs.

Global uh, scale, we see more and more manufacturing coming to our uh, site uh, in global in global, in Ireland, in Germany, in uh, US. Our dual-site, they use in China to launch the product and then uh, have us uh, our global site as a backup uh, as a secondary supplier now really works for our global clients.

This is following standard uh, um, uh, deck that I think the I always want to open up the slide with this, um, just one uh, one uh, page. Highlight all the business met- uh, key metrics.

We see a number of projects, uh, one of the key metrics for our growth uh, um, is growing 23%. This is unbelievable number.

I I think uh, uh, uh, now we actually have uh, more than 1,000 projects, 1,064 projects. When I start the company, I was uh, dreaming, if we get 500, 800 projects it'll be unbelievable.

Now we have more than 1,000 projects. The look at the pace we're going right now, uh, it took us 15 years go from 0 to 1,000 projects.

It probably only take us next 4 to 5 5 to 6 years. Next 5 to 6 years to achieve another 1,000 assets.

The first 1,000 assets took us 15 years, the next 1,000 assets may only be 5 to 6 years. That's the pace of our uh, our growth.

Uh, look at the um, organic projects growth uh, fro- from 86 first half last year to 123. A 40 again a 43% growth.

Among them, a majority of them are new modality, like ADCs and multispecifics. Right.

Uh, I have always saying that commercial manufacturing will be key growth driver. We have seen uh, a 17 gross 17% growth on the number of products from 24 to 28.

As we have more and more PPQs uh, and Phase 3 programs and the commercial manufacturing, our backlog also grow very nicely. Historically, always said our backlog is so big, it's very hard to grow.

Our backlog only move when we sign $100 million, $500 million deals um that can move the needle, because it's so big already. As I mentioned earlier, that uh we actually were increasing the capacity to 300 INDs a year.

This is a 5 to 10 times the capacity of our peers. This show we really can scale our business.

We can capture all the uh the tailwind from the new modalities, from ADCs, from bispecifics, from the new AI-enabled the molecules, and from the mRNA modalities. Right.

On the manufacturing side, we can do to uh 40 PPQs. That b- essentially means 20 BLAs uh a year.

For the past 3 years, we have grown our revenue in the teens without a meaningful addition of a headcount. That's why our per-person productivity increased by about 10% a year.

As our team are fully booked, both in D and MM. In D right now, we are already more than 120% booked.

In manufacturing next year will probably be 100% booked. As a result of this tight uh labor um usage already, we are increasing our headcount significantly.

You see, year-over-year, our headcount increased by about 17%. Certainly, a majority come from the X- XDC business, but the WuXi Bio the uh the other business also adding headcount seriously.

That again show our confident for our accelerated growth. Our key talent retention rate is still very strong uh 98% .7%.

That be That's That's one of the key reason we can scale our business, from 200 INDs to 300 INDs in about 2 years. Right now we want to do uh we can do 20 BLAs.

If our industry need us to do 30 BLAs, give us a year or 2, we can scale the business. As Yang mentioned, we have very, very strong revenue growth.

Our revenue growth in uh RMB terms uh about 18.4%. Uh, but uh as the US dollar has a US dollar um uh versus RMB has a quite uh quite a change this year of uh our impact is about 500 bps.

If you use US dollar terms, or constant currency terms, our growth is actually 23.4%. For the past 4 years, this is the first time we see a a growth more than 20%.

That's really shows um uh what what I promised to in global investors at the JPMorgan 3 years ago. I said, "WuXi Biologics is poised poised for accelerated growth.

We grow from low-teens to high-teens, now hopefully to the fine- 20s." Our uh revenue growth is significant.

Our profit growth is even more phenomenal, right. Look at adjust EBITA growth, um profit growth.

What's more striking is actually a margin uh growth. Our adjust gross margin grow 100 280 bps.

Um as uh as I mentioned already, RMB also appreciate 500 bps. Um that translate into a 300 bps downturn down downward impact to our adjust gross gross profit margin.

Had the RMB did not appreciate, our margin growth would actually be almost 600 bps. That's how um uh impactful, our uh first half of business is.

Um as you most of second half last year, we have a very strong R growth and that actually make our margin significantly better. This time, R was actually uh right um um uh in in in right on on target.

The this uh margin expansion not not come from R, but come from our execution, come from our business product mix, come from um our uh WBS. You see, our man- our more thorough, much better management, I think Ming was uh he'll highlight all those uh margin um growth drivers in his talk uh in the next 20 minutes also.

Looking at now, our profitability is already already um at record high in in near record high of of the common history. It's comparable to the uh 5 years ago when we had a very high utilization high utilization rate because of COVID.

The difference is now we are we have a global site, we have site in Ireland, we have site in US, that's actually much more uh uh higher cost base. Essentially, this can demonstrate even with uh with carrying US site, Ireland site, and future German site, Singapore site, our margin can still be as good as um were fully were were uh our peak time in the in the past couple years.

As company the company continued to evolve, I also still prom- promise investor our margin will continue to improve by about 100 uh 100 to 150 bps last year. We promised 100 bps last year, we delivered um uh 500 bps.

In this year, we delivered another 250 280 bps, despite the 300 uh bps negative pressure from the uh from the currency wind. I think uh as the company is actually doing very well in terms of managing our uh our growth.

Like we our growth is actually were very with uh we continue to grow very fast with actually improving margin profile. All investors are familiar with this uh a good funnel.

I call this funnel gold funnel. Uh a golden funnel, a gold funnel.

Today, I'm actually going to call it diamond funnel. Because our our funnel already reached 1,000 molecules, it's unbelievable.

Right? You you see um uh we added 123 projects um uh organically, and then through acquisition, we added another 46.

Among the project added, actually 2/3 actually are come from US and Europe. We are a lot more selective uh in uh in China in term of uh adding new projects.

As I mentioned ear- earlier, our D uh team is already swamped. They are already 120% booked.

As a result, we're actually very selective in China. We only pick in very uh profitable, very uh very um uh promising projects in China.

Uh among the among the new projects signed, 2/3 come from US and Europe, 1/3 come from China. Among the all the project we signed, actually 70 more than 70%, more than 2/3 are actually new modalities.

Is that they are ADCs and multispecifics. Where we have higher margin, where they're um a lot a lot less competitive, where we actually our technology can really help make a huge difference.

Our market share on complex modalities are actually much higher than our traditional overall our traditional all overall traditional mAbs or overall portfolio. As the uh more and more projects are newer modalities, look at the overall portfolio, with this 1,000 assets, actually more than 50% are ADCs and multispecifics.

Again, that basically means our per-project pricing is higher, our profit margin is higher, and um we have a higher op- opportunity to capture this to keep the programs in the portfolio because they're much tougher to work on. The D to M conversion ratio is also higher.

Our funnel, our diamond funnel is getting healthier and healthier, and stickier and stickier. That basically means the projects once they come into the funnel, they don't leave.

Right. Win-the-molecule has always been our strategy.

We have seen almost an 80% growth of the winner win-the-molecule projects. We won 16 projects in first half, including four late-phase and one commercial directly.

Right. I think what those so uh among the late stage, uh am- among them, two of them are actually biosimilars.

I will talk about a biosimilar later on. This will be a new driver for our manufacturing growth.

Overall, with this funnel, now we have 78 late-stage program, 28 CMO project. It's already comparable to the global peer global leaders in uh CMO uh in in CMO.

The other way the other reason to call this uh diamond funnel now, if you uh we have 500 program more than 500 program in preclinical, 300 program in Phase 1, 130 program in Phase 2. Um if you do a probably the adjust, amazingly, almost every um every every uh line give us about 60 commercial programs when their fate was determined.

Essentially, for the 525 preclinical program, after 6, 7, 8 years when all some of them failed, some of them become approved. That will give us about 60 60 uh to 70 uh commercial program.

For the 300 Phase 1, give us the same, 60. 130 give us a 6- 60.

78 with 80% of success rate give us a 60. It's actually amazing.

Almost every line here give us uh about 60 commercial program. If you add those together, it become almost 280 commercial projects.

Right. That's why I call this a diamond uh funnel.

We only Currently, we only have 28, but in when all those fate of those molecules are determined, our our commercial project will grow by 10x. Right.

Um, even if you are um That's a normal uh basis. Even you assume a worst case, uh industry failure rate is is higher and some project did not um uh leave us for other uh manufacturing CMO, we still be at at bottom 200 manufacturing projects.

It's unbelievable. Right?

If you think this is a 200 manufacturing project, if you think um every manufacturing project give us a 500 million RMB revenue, which is not very high, which is uh $70 million, $80 million US dollars, that means this will be a a 100 billion RMB revenue. 100 bi- 100 billion RMB revenue, $15 billion revenue when all the manufacturing are are real- realized.

Again, as as biologic has a lifecycle of 30, 40 years. The program we're manufacturing today, 10 years uh 20- 10, 20 years uh 10 years from now when every program when their fate was determined, all the program will still stay.

Our manufacturing will go from 28 programs to 200 programs, and even 280 programs with the current portfolio. That's how powerful this funnel is.

That's how powerful our CRDMO model is. I think that's why for our That's why I have uh told investors even back in 2017 when we IPO-ed, I said, "Everything you want to know about WuXi Biologics, you only look need to look at the funnel.

The funnel tells you everything." That's the beauty of the CRDMO model.

Again, I want to highlight this. With this funnel and with our stickiness of the funnel, we actually can really see a strong, sustainable, high growth that uh inherent in the WuXi Biologics business model.

I already mentioned the project growth. That's just give you a number.

Right? During COVID, we our project additions is is very strong, and post-COVID it's a sort of uh dipped a little bit, but now it's actually going to all-time high, all-time high.

The first half of this year, the overall project grow by 43%, win-the-molecule grow by 78%. Why uh why we are so successful with win-the-molecule?

Win-the-molecule is traditionally very difficult. Um biologics manufacturing, biologics development is very hard.

I use marriage as an example. Uh almost as a as a uh analogy.

Right? It's almost like getting married.

Someone when someone work with us, it's almost like getting married. Is it it's a long-term relationship.

Uh we want to manufacture the drug, development takes what 8 years, manufacturing another 30 years. You're talking about 40-year relationship.

That's why I use marriage as an example. The uh stickiness is basically that's basically, that marriage of stickiness.

The The reason why we see we are still able to win the molecule is sometimes our peers actually stumble. Then uh our client need to divorce them, and then remarry, and then the the new the new um uh the new choice they have is actually WuXi Biologics.

That's how how hard it is to win the molecule. Over the past 8 years, we have won more than 128 programs.

Win-the-molecule is also very difficult because it's not your cell lines, not your uh format, it's not your process per se. You have to learn about them.

Um in in another analogy, it's almost like adopted a child. You don't know about the they have their own character.

You have to be very careful with them. Win-the-molecule is actually very, very difficult.

Far, I'm very pleased to share with the global investors, we have won 128 projects. Every project come to WuXi, we delivered.

As I mentioned, some most of the project actually, those are global peers stumbled, they failed the the program. Then they they pick WuXi, WuXi delivered.

Some of other programs are actually large pharma do them in-house, and then they want to find a best home for their program when they have a limited in-house capacity. They actually come to WuXi.

The 128 win-the-molecule program is a strong demonstration of our capabilities. Among the win-the-molecule program, we already contributed to 13 manufacturing projects.

We only have 28 so far. Almost half of them come from follow-the-molecule, half of them come from win-the-molecule.

Last year, we announced our new cell line, which is a truly uh revolutionary change to our industry, right. We can we can uh do the cell line faster, do the make the productivity twice as as good as our industry standard.

Now our cell line is actually become a differentiator, help us win the more programs. If if uh if my client if my potential client have a program that only get 1 g/L or 2 g/L, or even 3 g/L at a competitor, we can tell them to come to WuXi, will give you 8 or 10.

Your cost of goods of manufacturing will be 50% or less. Now your drug will be a lot more competitive in the market, your margin will be significantly higher.

I think that's how, technology can really translate into technology advantage, now it's translating into commercial advantage, because we want to use our technology to actually win more programs. Win win-the-molecule is the same.

Follow-the-molecule is definitely the same as well. Now, every follow-the-molecule client started with the best technology in the industry.

I want to share with you that the overall revenue growth. Um let's see if you look at the revenue growth of the different segment on the R uh R and early D uh is actually uh amazing.

Um is uh 27% growth, year-over-year growth. Um uh in US dollar terms, 32%.

The Phase 1 and Phase 2 program, the past 2 years, because of a few big program moved from D to M, we see a dip. I promise investor it will come back.

This this time, it will it already come back. Um and then the uh PPQ and commercial will grow 11% in in uh in uh RMB, and then 16% in uh in US dollar term.

Um the reason the growth is slower is because last year there were a significant inventory build, last year basis was very high. Then we only added uh two programs early this year.

As we add more program, as the program uh move move forward, our manufacturing growth will still accelerate. I still anticipate next 3 years our manufacturing growth CAGR will be 30%.

That basically means next year will grow much faster than this year. The year after, uh in '28, will be even faster.

I think that's the the growth dynamics of the of the company. If you look at the region, um is actually um uh very very uh is actually very exciting that we see China and the rest of the world now have the fastest growth.

Traditionally North America has been where largest market, very strong growth. This year continue to be the same.

In North America about almost 60% revenue, 14% growth, very very uh decent. 14% because the base is so big, right, is already 60% revenue.

Europe, uh 17% of revenue, as big as China. Um and with a flat growth this year mostly because we are we divest uh divested our Ireland site.

Um uh China, as I said, in the past years is like a flat, sometimes even negative growth. Now we see a 51% growth.

This is actually uh in the condition under the conditions we are picking projects in China. We are very selective.

We're only identifying high-promising project in China will work with them. China Chinese market now is uh contribution is as strong as Europe.

Then as I mentioned earlier, rest rest of the world, we see a significant growth. It's now getting close to 10% revenue.

We have four uh engines, all firing at a different rate and that'll give us a very strong, uh balanced growth. I have already mentioned um years after years, backlog our backlog is so is so big, is actually very hard to grow.

Fortunately, as we sign more and more R&D projects, the milestone backlog will grow. As we sign more and more manufacturing projects, our um our our service backlog will grow.

The for the first time, we see a significant growth of the service backlog and the uh backlog within 3 years, all because of manufacturing projects, because we have 78 um PPQ 78 Phase 3 program and 28 commercial programs. The backlog growth give us more assurance.

Um, again, you look at the funnel, you know our manufacturing will grow, but backlog give you more assurance that near-term the growth is already there, right. Look at the distribution of the different projects, as you see, uh bispecific growing at very fast uh very fast, a 32% rate, but ADC growing even faster at 46%.

Now, bispecific and ADCs are already more than half of the company portfolio. Again, that's that's uh because they're harder to do, they have less competitions.

That basically means we our project is even stickier. Once they get into the funnel, they don't leave.

I have been telling investor, for traditional mAb, maybe there are 10 companies that as as good as us, but once you go to ADCs, maybe only four to five, but you go to multispecific, only two or three. The multispecific and ADCs, globally there are only two or three uh two to five players that as good as us.

That's why it's less comp- competition. That's why it's higher uh uh uh premium pricing.

That's why it's also better margin. Um as um That's one of the main drivers for us to continue to to um to improve our margin, because the the margin profile for those new modalities are significantly better than the traditional um traditional uh [quote-unquote?]

commodity mAbs, or vanilla mAbs. Mentioning bispecifics, now this is already 30% per- uh 20% of company revenue.

Uh, it it grow from a few percent to ser- to 20% in about 3 years. It still, uh, last year, we'll see more than doubling of the screw growth, more than 100% growth, right?

That's why it grow to about 18% last year. Now, this year is almost 20% of revenue and it's still growing at 30%.

Multispecifics really show the entire strength of WuXi's CRDMO model. I've tell uh I've been telling you over and over again, we have a very strong uh CD3 platform, that will give us upfront payment, milestone, royalties.

On our part, our our our multispecific um platform is is strongest. On the D part, we have the largest portfolio.

Even in manufacturing part, we have three projects already. That's already Globally, there are only 20 commercial programs approved.

We expect these three to be generating um for all three programs to be generating $100 million revenue for us next couple years. The earliest one maybe even as early as next year.

One of the bispecific will achieving $100 million revenue for us starting in 2027, and hopefully the other one will be 2028 or 2029. Essentially, all the current three programs will be generating $100 million revenue for us at each.

That to us is a very large volume manufacturing projects. We have three PPQs scheduled this year.

I think I already mentioned that uh multispecifics is very, very hard to do. On the right side is all the technical details, I don't want to highlight because I already mentioned that to global investors last year.

With that, I'll hand over to Ming for more detailed financial review.

Thank you, Chris. Now, I'm going to present our financial results for the first half of uh 2026.

Uh this slide here gives us the highlights of our financial performance in this reporting period. First, revenue.

Thanks to the strong biotech funding environment, and also our share gains, our revenue continued to grow at an accelerated pace. As you can see that our revenue reached 11.8 billion RMB, 18.4% increase over the prior reporting period.

The average US dollar to RMB conversion rate declined from the 7.18 in the first half of last year to about uh 6.83 in the first half of this year. If we adjusted the 5 points of the FX impact, our revenue growth on constant currency basis reached 23.4%.

Our revenue increase in the first half were driven by R, D, M, all the three cylinders. In R, our research and di- discovery services segment, we were able to sustain the momentum from last year, continue to reap the fruitions from our innovative platforms of bispecific, multispecific, and ADC.

Milestone income from the past discovery projects almost reached $40 million in the first half. At the same time, uh our research protein production services delivered 40% of the growth year-over-year.

We also have a full pipeline of the new discovery projects ongoing. The momentum of R will accelerate in the second half of this year and continue into the foreseeable future.

On development side, thanks to the strong biotech funding environment, and also our share gain, we achieved the revenue growth for about uh 32% year-over-year on constant currency basis. Thanks to the 123 new projects we scored in the first half, among among which 107 were the pre-IND phase.

This is a new record for any of the half-year reporting period, representing over 60% of the global presence in the space. Our process optimization and the productivity improvement also enabled us to shorten the DNA-to-IND conversion cycle to about 6 months.

The early-phase uh revenue also increased the 15% year-over-year on US dollar basis as more pre-IND projects moving through the diamond funnel at an accelerated pace. On manufacturing side, with the successful execution of our follow and win the molecule strategies, more and more projects were advancing into the later stages.

Win-the-molecule strategy also added 16 projects to our portfolio with about five in the late stage, including uh one CMO project from a global big pharma, and also a couple of the biosimilar projects. Now we have uh 78 projects in Phase 3 and 28 in commercial manufacturing stage.

The volume of these late-stage projects are ramping up steadily with the growth of our clients' drug sales. Overall, late-phase and commercial manufacturing revenue grew over 16% in the reporting period and now representing over 40% of our total portfolio in the first half.

From a modality perspective, bispecific, multispecific, and ADC continue to be the key growth pillar in our portfolio, contributed 55% of our overall revenue in the first half and over 70% of our new orders. Moving over to gross profit, which increased about uh 1.2 billion to over 5.4 billion RMB in the first half.

The whopping 28.1% growth in GP also give us a 350 bps of uh the lift in the IFRS GP margin and also 280 bps expansion in the adjusted GP margin. We have been talking about FX headwind since the second half of last year.

US dollar continues its precipitous fall in the first half of this year. For every percentage point of the US dollar devaluation, we'll see roughly about 60 bps of the gross margin impact.

We absorbed the roughly 3 points of the FX headwind. On a constant currency basis, our GP margin could have expanded over 6 points in the first half.

The key drivers behind the GP margin expansion were from uh volume leverage. Uh as we increased our top line by 23.4% while we still keep our headcount increase at a slower pace.

We continued to tap into our existing capacities uh with much improved the u- utilization in the first half. The 4 points of the volume leverage here more than offset the 3 points of the FX-induced margin compression.

Secondly, uh the productivity improvement from WBS, our lean manufacturing implementation, also gave us about 150 bps of the margin improvement. The margin rate uh from uh development sector also expanded 1 point, largely driven by the productivity improvement and also the higher margins uh delivered by the complex modalities as bispecific and ADC now represent more than half of the pre-IND portfolio.

At the same time, uh the profitability from late-phase and manufacturing sector continue to meet or exceed our expectations as the overall plant utilization continue to improve throughout the first half of 2026. Excluding uh share-based compensation, our adjusted gross profit margin stood at uh 48.4%, 280 bps improvement year-over-year, defying the 3 points of the FX headwind, retaining our leading positions in the global CDMO industry.

Moving on to adjusted EBITDA, which is a proxy of our operating cash generation capabilities, increased about 24.9% to about uh 5.4 billion RMB during the reporting period. This together with our working capital and CapEx management enabled us to generate 1.5 billion of the positive free cash flow.

The adjusted EBITDA margin rate also expanded by 230 bps to 45.6%, one of the highest in the global CDMO industry. Adjusted net profit is the IFRS-based net profit, excluding the impact of foreign exchange gain and losses, share-based compensation, fair value gain and losses from our investment portfolios.

This is the proxy for our business profitability under continuous operations. As you can see from the chart that our adjusted net profit increased a whopping 38.6% year-over-year, exceeding 3.9 billion, which also give us a margin expansion of almost 5 points to 33.4%.

The adjusted net profit margin expansion was largely driven by the 1.2 billion of the adjusted GP increases, partially offset by the increase in SG&A as we continue to expand our global coverage in business development, and also uh invest in R&D and digitization. Chris, next page, please.

Uh this slide here shows our strong profitability growth over the past 5 years and also in the first half of this year. As you can see that all these financial metrics are improving year-over-year despite of the unprecedented FX headwind.

Our IFRS-based net profit has grown at a CAGR of 13.1% during the past 5 years and now exceeded 5.7 billion in this uh in 2025. In the first half of this year, IFRS net profit increased the 5.8% to reach 2.9 billion.

There are several crosscurrents here. First, uh we recorded 600 million of the gain from our investment in a biotech company of its IPO uh in April last year.

This give us a very difficult comparison year-over-year. Secondly, we also had about half a billion of uh unrealized FX loss in the first half due to the US dollar devaluation, which negatively impacted the translation of our US dollar cash and also US dollar-denominated accounts receivable.

On the flip side, our gross margin increased the 1.2 billion year-over-year, more than offset the negative comparisons on the investment gains from last reporting period and also the unrealized FX translation losses and still enabled us to deliver 5.8% of the IFRS net profit growth. IFRS net profit attributable to the owners of the company grew uh by 4.3% in the first half, slightly lower than the IFRS net profit, uh due to the minority interest pickup from XDC and also our 51% subsidiary, BestChrom.

Basic EPS grew from uh $0.58 to $0.60 per share, 340 bps increase, largely in line with the IFRS net profit attributable to the owners of the company. The quantum leap here is in the adjusted EPS, which grew 37.3% year-over-year from uh $0.59 in the first half of last year to $0.81 in the first half of this year.

After we excluded share-based compensation, investment gain and losses, and also unrealized FX translation impacts. Here, the most important uh metric is uh the adjusted EPS, as it strips out the one-time, non-cash impacts, and it is the best profitability indicator of our continuous operations.

Next page, please, Chris. Uh this slide here gives more detail into our gross profit and the cost components.

As we talked about, in the first half of this year, our gross profit margin was uh 46.2%, a 350 bps expansion from the same period last year, a multi-year high post-COVID. Excluding the 300 million of the share-based compensation, our adjusted gross margin stood at uh 48.4%, 280 bps improvement year-over-year.

All these gross margin metrics were reported on RMB basis with 3% of the FX headwind fully absorbed. In other words, our GP and also adjusted GP margin could have expanded by 6 points on constant currency basis.

As we discussed earlier, the remarkable uh gross margin expansion in this reporting period was primarily driven by the operating leverage from the 30- 23.4% top line growth on US dollar basis, uh improved the capacity utilization, and also the ongoing productivity gains through WBS and digitization initiatives. You can see the composition of our cost components in the stacked bars below, with roughly 16% in labor costs, 19% in material, and 18.8% in overhead, which includes maintenance, utilities, and also depreciation of the manufacturing facilities.

Labor cost component continues its downward trends as uh uh was a was a a couple of the percentage point lower than our historical average, as we focus on labor productivity improvement. Per capita revenue generation has been a crucial KPI for all our business units.

As I mentioned earlier, uh the total number of the employees incre- increased at a slower pace in this reporting period than our top line growth year-over-year. The material cost as a percent of revenue also improved the 60 bps due to the productivity gains, yielding improvements, and also the mix impact from the higher growth from the development sector in our portfolio.

The composition of overhead component decreased about 240 bps year- year-over-year, largely due to the impact of volume leverage, as we grew our top line by 23% by tapping into our existing capacities with a much-improved utilization rate. Hence, the overhead composition within our revenue decreased year-over-year.

Also, uh in 2025, as part of our ongoing initiatives to optimize our global manufacturing footprint to improve the return on assets, we divested our vaccine facility in Ireland and also our DP facilities in Germany. These divestitures also helped us to reduce the fixed overhead costs uh in the first half.

Next page, please, Chris. Um page 18 here is about liquidity.

At WuXi Biologics, we have a strong balance sheet and a solid cash position. As of the end of first half, we had about 13.7 billion cash on hand, sufficient funds to support our accelerated growth globally.

Compared to the beginning of the year, our overall cash balances decreased about 2 billion in this reporting period, largely due to the 1.3 billion of the share buyback program as a return to our investors, XDC's acquisition of BioDeals for 1.2 billion, and also XDC's retirement of 700 million of the onshore loans. All these cash outflows were partially covered by our 1.5 billion of the free cash inflow from the operation cycle.

In the second half of this year, we are going to have more cash inflows from our balance sheet optimization, such as the the divestiture of the BestChrom uh that Dr. Chen will present later.

Uh so all these cash inflows here will also let us focus more on our core CRDMO business to support our global capacity expansion, share buybacks, and potentially M&A activities. At WuXi Biologics, we also always have a conservative funding strategy.

For our 65 billion RMB balance sheet, we only have about 700 million of the debt, most of which are working capital facilities, and our gearing ratio, which is defined as the interest- interest-bearing debt over equity, is merely 1.2%, 80 bps lower than the end of last year. At the same time, we have close to 7 billion of the bank facilities to tap into if we need to.

Our CapEx spending the first half was about 2.8 billion, mainly for our capacity expansion in Singapore and in the US, and also XDC's new facility in China. Subtracting working capital occupation and also tax payments, our free cash inflow in the first half was 1.5 billion, a new record in our history in the first half of any fiscal year.

Overall, our capital projects in this year are still on track. With some optimization here, our CapEx spending for the fiscal year 2026 will be about 7.1 billion, but to meet the surging demands, we will allocate more capital to capacity expansion next year.

Our CapEx projection in 2027 will be approximately 8 billion. With our operating cash generation capabilities from the business growth, our focus on working capital management and CapEx prioritization, we are committed to delivering positive free cash flow in a meaningful way in 2026 and also in the foreseeable future.

Now, I'm going to pass the stage back to Chris to share more insight into our business operations and the technology innovations in the first half.

Yep. Um yeah, thank you, Ming.

I really I want to give uh global investors an update on R, D, and M, right. On R, the most exciting part business is essentially is uh the uh our licensing business.

We're where we receive upfront payment, milestone uh payment, and royalties. I think this uh total payment already reached more than $100 million last year.

It will probably it will still be more than $100 million this year. As I also mentioned that this was one of the main reason our margin improved significantly in second half of last year.

The first half of this year, margin improved come from the uh product mix, come from the uh better utilization of the asset, and come from our own management, WBS, right. Look at