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Josie Zhou: Hello, everyone. This is Josie Zhou, Interim CFO at GenScript. Welcome to our 2025 interim results conference call. Joining on the call today are Mr. Robin Meng, Chairman of the Board; Ms. Sherry Shao, Rotating CEO of GenScript; Dr. Ray Chen, President of GenScript Life Science Group; Dr. Aixi Bai, General Manager of Bestzyme; Mr. Allen Guo, CEO of ProBio. During today's call, we will be making statements about future expectations, plans and the prospects as well as any other statements regarding matters that are not historical facts, which may consider forward-looking statements. Actual results may differ materially from those indicated by such forward-looking statements because of various important risk effects and the changing market conditions. We do not undertake any obligation to publicly update any forward-looking statements. Today, Sherry will start with the company overview and our business head will present the first half highlights for each segment. I will then guide you through the financial performance. Following that, Sherry will update our full year guidance and the second half business forecast. We also have a Q&A section at the end of the call. As a reminder, today's presentation materials can be accessed in the Investor Relations section of the company website. Now, I will hand over to Sherry.
Weihui Shao: Thank you, Josie, and thanks to everyone for your ongoing support for GenScript Group. In the first half, GenScript Group delivered rapid growth despite the complex geopolitical environment. The Group's revenue grew about 82% year-over-year. The adjusted profit from continuing operations grew significantly to approximately USD 180 million. Turning to each segment. Our GenScript Life Science business continues to deliver steady growth. Excluding the impact of the collaboration with LaNova, ProBio biologics CDMO business reported a return to revenue growth after the industry headwinds. Since then, our industrial synthetic biology segment continued its industry-leading growth trajectory. For our associated company, Legend Biotech, its best-in-class CAR-T product, CARVYKTI has treated over 7,500 patients. In second quarter, CARVYKTI net trade sales grew 136% to USD 439 million, making it the strongest CAR-T launch to date. In the U.S., more than half of its utilization is in the earlier line setting. Legend anticipates achieving operational breakeven for CARVYKTI by the end of 2025 and company-wide profitability by 2026, excluding unrealized foreign exchange gains or losses. We believe Legend's improved financial performance will benefit the Group's profitability in the long run. By the end of the first half, GenScript Group has a global workforce of over 5,700 members. Our global footprint is expanding rapidly due to automation and digitalization, our manufacturing-related employees have decreased. However, we have expanded our R&D teams to enhance our leading position in the industry. As of the first half, the Group's cash position stood at USD 970 million, funding our global expansion, R&D progress and capacity ramp-up. Before we dive into the business part, let me share an update on our impressive sustainability achievements. In recent years, ESG has emerged as the gold standard for global corporate competitiveness. In the first half, our significant breakthroughs across global ESG ratings brought us to a leading position, including the silver medal from EcoVadis. The MSCI ESG rating upgraded to AA, Standard & Poor Global CSS score elevated to the industry top 7% and inclusion in the FTSE4Good Index series. As a result of years of strategic investment and continuous improvement, these achievements highlight our ability to meet the evolving expectations of our clients and investors. We are also broadening our reach within the global sustainability community by being part of the United Nations Global Compact, UNGC, and the Science-Based Targets Initiative, SBTi, and a supplier partner of the Pharmaceutical Supply Chain Initiative, PSCI. In our operations, our ESG practices have contributed to financial savings through improved operational efficiency. Our strong ESG performance has resonated positively with our stakeholders by helping our clients meet their goals and driving value creation for shareholders. Among others, I'd like to highlight data security as part of our governance practices. All of our 16 global operating entities have been certified to ISO 27001 for information security, ensuring the highest international standards in data security and IP protection. As we look ahead, we remain dedicated to advancing our ESG initiatives, further strengthening our competitive edge and contributing to a more sustainable future. Now, I would like to invite leaders from each segment to present the highlights from the first half of the year. We will begin with Dr. Ray Chen from the GenScript Life Science Group.
Ray Chen: Thank you, Sherry. This is Ray, Ray Chen [indiscernible]. Let's move to the Slide #6. On August 8 this year, which is our 23rd anniversary, we celebrated our 5th [indiscernible] with a successful relaunch of global brand. This strategic investment [indiscernible] of who we are and how we lead in the industry, defined by rapid change and intensifying competition. It underscores our commitment to market leadership, differentiation and value creation. Our customers told us clearly that GenScript is more than a service provider. We are enablers of discovery, co-authors [indiscernible] and trusted partners in possibility. We are very proud to confirm our Net Promoter Score in the industry, validated by a recent robust global study of 660 diverse and influential respondents across the life science ecosystem. At the core of our platform lies [indiscernible] philosophy, Scripting Possibilities. It captures, empower our scientists and partners worldwide to turn possibilities into realities, accelerating innovation and results every single day. For our customers, this means a more intuitive human-centered experience. For our teams, it is a badge of pride and service. This brand relaunch uniquely positions us to capture dynamic opportunities, expand our [indiscernible] and drive sustainable long-term value in an increasingly competitive biotech ecosystem. We are privileged to serve a global community over 42,000 customers in the first half of this year, delivering [indiscernible] high-quality services and products [indiscernible] scientific progresses and more than 112,000 citations in leading journals citing us, GenScript's impact and credibility are undeniable. This achievement validates our leadership and inspire us to relentlessly move forward, Scripting Possibilities together with our customers, driving industry-leading innovations that shape the future of science and healthcare. At GenScript, integrated [indiscernible] is not just a technical advantage. It is our [indiscernible] uniting the world's #1 platform with protein, mRNA and cell and gene engineering, we deliver solutions no single platform competitor can match. This allows us to win on both speed and scope and the market response is very clear. In modern drug discovery, speed is everything, and we set the pace. Our FLASH gene delivers sequence to plasmid in 4 business days. Our TurboCHO moves sequence to antibody in just 5 business days. These timelines R&D cycle for up to 50% faster than competitors and [indiscernible] biotech innovators. Importantly, [indiscernible] complex constructs, bispecifics, multispecifics, those are the areas where many stumble, but GenScript consistently delivers. Our end-to-end fully integrated Gen 2 antibody, Gen 2 protein sequences secures [indiscernible] loyalty, especially in high-stakes projects. The [indiscernible] services revenue grew 52% in the first half of 2025, now approximately representing 30% of our Life Science Group. The TurboCHO high-throughput platform now fulfills [indiscernible] from leading AI drug discovery in the [indiscernible] bispecific and multispecific antibodies. [indiscernible] it's not just a differentiator. It's a repeatable, scalable model [indiscernible] allowing us to penetrate both household [indiscernible] and in-house markets and fulfills sustainable revenue growth. In the first half of 2025, the customers who outsource our TurboCHO delivered [indiscernible]. For the customers who produce protein in-house, we supplied 40% more gene items year-over-year. Also, our AmMag instruments are increasingly embedded in our customers' labs. We installed 154 controllers and 200 modules globally, [indiscernible] 17 out of top 20 pharma core facilities. And we are expanding further the launch of cell-free express and upcoming TurboCHO expression kit [indiscernible] high-performance [indiscernible] worldwide and [indiscernible] importantly at half of the current cost of our [indiscernible]. This will further expand our [indiscernible] significantly drive high-margin product revenue and reap [indiscernible] how protein expression is done in-house [indiscernible]. Moreover, in cell and gene engineering field, while [indiscernible] we accelerate. We are the first to integrate the full workflow from genes to [indiscernible] mRNA in just 3 weeks, including [indiscernible] and the cell mRNA. Our gene CRISPR solution supported 18 approvals across FDA, NMPA and EMA. By delivering industry pioneer and capabilities, GenScript has become the partner of choice for innovators pushing the boundaries of cell and gene therapy, driving cutting-edge scientific advancements today and tomorrow. This is the power of our proprietary platform synergy, providing unmatched speed, multimodal breadth and flawless technical execution, translating directly into the market share gains, larger addressable markets and accelerating revenue. Of course, in today's volatile environment, dependable supply is highly, highly demanded. It's a competitive advantage of GenScript. Our all-weather strategy is to build on [indiscernible] to navigate economic and geopolitical shifts, [indiscernible] growth through flexible production and operations and thrive across turbulent times and diverse economic environment. Over the recent years, we have strategically diversified our global production across key regions to guarantee the speed, reliability and consistent delivery worldwide. By the [indiscernible] middle of '25, 4 out of our major production sites were run as fully automated, AI-driven lights-out facilities, providing 24/7 outputs without -- with minimal human interventions with robust AI scanners and real-time quality control. We will also achieve 60% cost reduction in our U.S. molecular biology facility this year. And by the year -- by the end of the year of 2026, [indiscernible] full automation will cover 60% of our strategic services [indiscernible] greater accuracy and stronger resilience. Diversification drives flexibility. Automation powers operations. Together, they will forge an all-weather supply chain that transforms volatility into strength and disruption [indiscernible] and turbulence into sustainable [indiscernible] and this is our commitment [indiscernible]. And that will wrap up my updates on the GenScript Life Science Group business. Now, I will turn it over to Allen, CEO of ProBio.
Allen Guo: Thank you, Ray. Hello, everyone. I'm Allen, CEO of ProBio. Now let's turn to Page 9. I'm delighted to share ProBio's first half highlights. We are excited to witness a recovery after navigating the industry headwinds over the past 2 years. In the first half, through platform innovation, timeline optimization and quality system enhancement, our antibody and protein and CGT-CDMO benefit have achieved a number of milestones. Our discovery business, we rolled out services tailored to industry trends. For example, one of the challenges in developing TCR-related therapies is the low affinity between targeted TCRs and peptide MHCs on tumor cells with cancer target identification. To address this challenge, we have developed a TCR platform that integrates affinity maturation, in vitro functional characterization and in vivo pharmacological evaluation. In terms of antibody and protein CMC services, we developed a new expression factor, ProMax, featuring exceptional productivity and stability. With this, we launched an industry-leading Express CMC service, which shortened the timeline from gene synthesis to top stack delivery from 6 monthly to 4 monthly, significantly boosting the efficiency of new drug development. Notably, we delivered the first PB2 project in the first half. The BLA is expected to be submitted in the second half, which marks our first non-COVID BLA project. Through collaboration with global pharma, we have upgraded our data integrity system to meet regulatory requirements from FDA, EMA and NMPA. In the CGT business, we launched the Power SDNA stream, which enhanced the yield of DNA drugs and vaccines to 3 gram liter. We have also shortened the timeline for GMP [indiscernible] and GLP-grade plasmid, which will expedite the development of new drugs in this area. On viral vectors, our upgraded AAV CMC platform is equipped with a streamlined process development modules, reducing the overall CMC cost by 30%. On lentivirus, we completed our first pre-approval inspection from the South Korea MSDS with expected approval by the end of 2025. And in response to increasing demand for in vivo CAR-T development this year, we have developed antibody retargeted LV and LNP platform with our patented CD3 and CD7 reagents for which PoC studies have been completed. On the CMC platform, we have delivered 2 IT projects for immuno-CAR-T therapies based on LVB platform and have ongoing CMC project for LNP platform. We anticipate in vivo CAR-T-related services will drive CGT/CDMO business growth in the coming years. On ProBio antibody and protein CDMO business, we continue to accumulate our track record. We added 20 antibody and protein CDMO projects in the first half with 50% from outside of China. We help the clients obtain 9 new IND approvals. Notably, we successfully delivered clinical batches to 2 multinational pharma companies, marking a significant breakthrough for our business. Thanks to years of dedication to platform upgrade, we have observed a substantial increase in projects involving bispecific, multi- specific antibodies and complex proteins, reflecting clients' trust in our technology and platform. On CGT/CDMO business, we added 30 new CGT/CDMO projects, including an integrated in vivo CAR-T CMC project covering VHH, MIA, LNP and completion. We also signed 2 pivotal clinical projects, one of which was transferred from another CDMO to ProBio. Regarding approvals, we helped the client secure 9 new R&D approvals in the first half, including 1 AAV project and 2 MIA LNP projects. These challenging integrated projects are a testament to our capability. Additionally, we successfully delivered several GMP virus batches to a top multinational pharma. Moreover, we assisted one customer to successfully license out their cell therapy project in the first half. In terms of capacity, along with industry recovery, our antibody and protein CDMO facility in Zhenjiang is now at full occupation. We are now expanding new capacity in Zhenjiang, and it will be fully operational by early 2026 to better support global clients and late-stage products. For CGT, we will focus on capacity expansion for our Hopewell facility in the U.S. In the first half, we launched the GMP Plasmid production, and we have already successfully delivered multiple GMP principal orders. For viral vectors, we have launched AAV service in August and have already received our first AAV CMC order from a U.S. client. In the first half, we received upfront payments from LaNova, and on Merck's Q2 earnings call, the company disclosed that the LM-299 technology transfer was completed in July and expected to recognize a milestone payment of $300 million associated with the technology transfer in Q3. Merck also confirmed that the LM-299 project is progressing smoothly. On our agreements with LaNova, Hopewell is entitled to 25% of a technology transfer milestone payment from Merck. As part of our future revenue stream, we are strengthening investment in NME projects. To date, we have accumulated 16 all-licensing projects, 4 of which have entered clinical stages. Depending on partners' research, funding, and R&D efficiency requirements, we offer flexible collaboration models, including fee-for-service, co-development, asset buyout, and licensing out. Currently, we have over 30 pre-development projects with high-value targets. Notably, our proprietary CD3 VHH and CD3 TCE pipelines feature innovative constructs, better developability, and improved efficacy and safety, primarily tasking cancer with potential application in autoimmune disease as well. We are now engaging several multinational pharma companies on molecule licensing out now. Potential collaboration might be achieved by end of 2025 or early 2026. Now, I hand it over to Dr. Aixi Bai, General Manager of Bestzyme.
Aixi Bai: Thank you, Allen. Hello, everyone. This is Aixi Bai. We are at Slide 13 right now. Bestzyme maintained the industry leading growth in the first half. However, due to the holiday season in China, the overall enzyme industry experienced a slower growth in the first half, but we expect a strong recovery in the second half. Thanks to our significant investment in R&D, Bestzyme's patent portfolio is outpacing the industry. Three out of our 5 top-selling enzyme products showed a sustained growth, and we've seen steady increase in purchasing from key accounts as well. Our innovative detergent enzyme, launched in 2023, grew at a 58% CAGR over the past 3.5 years periods, and now ranks among our top 10 best-selling enzyme products. We are optimistic about its continued rapid growth in the coming years. In the first half, we optimized 2 new super acid-resistant amylases, enabling the same efficiency with 13% less enzyme dosage. In downstream alcohol applications, adding our super acid-resistant amylases can reduce the usage of acids and alkalis by over 75%. In the synthetic biology pipeline, our sweet protein has secured the FDA-GRAS status, and we continuously optimize production, product performance, and cost structure. In the second half, we will start the construction of a 5,000-square meter commercial manufacturing facility for sweet protein, targeting completion in 2026. As you may have noticed from our financials, Bestzyme's R&D expenses grew about 62% year-over- year. Now, I'd like to show you how we use this money. Our current R&D focus is on 2 areas. First, we're expanding our R&D teams in enzyme and synthetic biology products to accelerate product innovation. Another focus is on early-stage strain screening. We aim to boost our strain screening throughput by roughly 153% by year-end, which is vital for accelerating new product development. Also, we are increasing small-scale fermentation throughput to boost process development efficiency. We launched 3 new amylases for green processing this year. In the second half, we will upgrade our new fatties and our new proteins for animal nutrition. Going forward, we will focus on improving efficiency, supporting environment-friendly applications, and offering comprehensive enzyme solutions to our clients. Next, I'll hand it over to Josie to introduce the Group's financials.
Josie Zhou: Thank you, Dr. Bai. Now, let's move to Slide 16. I will introduce the Group and each segment's performance in the first half of 2025. Since Legend Biotech was deconsolidated from the Group, the revenue figures I mentioned below will exclude Legend's revenue for 2025. In the first half, the Group's revenue increased by 81.9% year-to-year to about USD 519 million. All 3 segments achieved a growth, among them GenScript Life Science grew by 11.3% to about USD 248 million, ProBio grew by 511% to around USD 247 million, and Bestzyme grew by 8.4% to USD 28.3 million. The adjusted profit from continuing operations grew significantly to about USD 178 million. At the Group level, the net loss was about USD 24.5 million, which was also significantly narrowed compared to the same period last year. The loss in this period was largely affected by Legend Biotech, mainly from 2 parts, Legend's current period loss and the amortization impact of 3.2 billion variation increase when it was deconsolidated in 2024. Legend Biotech's current period loss was mainly caused by non-operational foreign exchange gains and losses. In the second quarter of this year, Legend Biotech achieved adjusted profit. For more details on Legend's first-half performance, please refer to Legend's relevant performance release. With Legend anticipating achieving operating profitable for corrective at the end of 2025 and the company-wide profitability in 2026, we believe Legend will be a sustainable growth driver for the Group's profitability in the long run. Now, let's move to the performance of each segment. In the first half, [indiscernible] Life Science's group's revenue was nearly USD 248 million, an increase of 11.3% year-over-year. Based on recent month trends and seasonal validity, we anticipated stronger growth in the second half. From the perspective of revenue composition, the proportion of protein and antibody business in total revenue is rising rapidly, and it now accounts for more than 30% of total revenue. Revenue from industry customers, particularly pharma customers, further increased, largely due to the development of more MNC companies. The adjusted gross profit of Life Science group lost 5.3% year-over-year to around USD 126 million. The adjusted gross margin was about 51%, which was slight compared to the second half of 2024. Expense-wise, there were no significant fluctuations. The rise in selling expenses was primarily due to our global sales strategy, and the expense accounted for roughly 9% of revenue. Overall adjusted operating profit was USD 46.4 million. Gross margin has been temporarily impacted by a change in product mix. Global capacity expansion [indiscernible] strategy in the past 2 years with anticipated margin resilience to be driven by bold yet smart investment. Through enhanced automation, expanded capacity, and elevated global productivity, margins are on track for improvement. ProBio revenue reached about USD 247 million, with fee-for-service revenue showing double-digit growth. We are excited to see that ProBio has returned to revenue growth after 2 challenging years, with continued order recovery throughout 2025. For fee-for-service, the share of revenue from antibody and protein and the CGT services has no significant change compared to the previous reporting period. By reaching revenue from American and European markets are growing, thanks to the successful execution of our global market strategy, ProBio's adjusted gross profit came in at around USD 182 million. The adjusted EBITDA stood at USD 164 million. The fee-for-service margin was impacted by capacity ramp-up. Excluding the impact of new capacity in the first half, the margin was flat compared to the corresponding period. Expense-wise, I will highlight there was a significant rise in the administration expenses, largely due to our new capacity facility in Hopewell, U.S. As the facility was not yet fully operational in the first half, the associated startup costs have been booked as the administration expenses. We anticipated these costs would be booked to cost of goods sold in the second half once the facility is fully operational. With a cash position of USD 371 million, ProBio is well-positioned to execute its business plan. Additionally, we are on track to receive a maximum payment from LaNova in the second half of this year. Bestzyme's revenue reached to 28.3 million, representing an increase of 8.4% year-over-year growth and nearly 10% growth in constant currency. The adjusted gross profit was 11.4 million while the adjusted operating loss was 0.6 million. Revenue growth in the first half was primarily impacted by the Chinese New Year holiday season. We anticipate a strong rebound in the growth in the second half. The gross margin for industrial enzymes and feed enzymes has experienced some fluctuations due to the market change. We are confident about further improvement in gross margin driven by high margin products and cost optimization. By region, driven by our global strategy, Bestzyme's ex-state China revenue proportion grew to 23%. Increasing revenue from international customers will contribute to and improve the margin. On the expense side, our investment in R&D and the sales team expansion across regions led to a significant increase. As Dr. Bai highlighted earlier, these investments are essential for building our core competencies. I will conclude my financial update here. Our CEO, Sherry, will take you through the full-year guidance and our business focus for the second half of 2025.
Weihui Shao: Thank you, Josie. The slide -- Page 21 shows our guidance for each segment. For GenScript Life Science business, we are revising full-year revenue growth outlook to 13% to 15%, driven by strong demand momentum and deeper penetration into strategic markets. We are maintaining a flat adjusted gross profit despite growth investments. So, we can scale without margin erosion. We expect an adjusted operating profit margin around 18%, reflecting disciplined cost management and ongoing efficiency gains. For ProBio, excluding the impact of the LaNova collaboration, we maintain our revenue guidance. We also expect to recognize a new milestone payment in the second half. For Bestzyme, we anticipate faster growth in the second half due to seasonal factors. As a result, we maintain our guidance about revenue and gross profit rate. To conclude the presentation, I will highlight our business outlook for the Group and each segment. Building on our successful global brand relaunch, GenScript business is well-positioned for the next growth phase. By leveraging integrated proprietary platforms as key differentiators, we will expand market penetration for protein, mRNA, and cell and gene engineering. To support in-house R&D needs, we are accelerating portfolio transformation by launching ready-to-use keys and other [indiscernible] life science reagents, consumables, and instruments. Leveraging newly launched capacity and capabilities at our Hopewell facility, ProBio will intensify its market penetration for CGT in the U.S. market. We are committed to continuously advancing our CDMO platforms to ensure cutting-edge service offerings. Concurrently, we are making substantial investments in the development of NMEs. We aim to identify and advance promising drug candidates, ultimately seeking out licensing opportunities to unlock their full therapeutic and commercial value. On Bestzyme, we will continue to reinforce our competitive advantage through patent applications and IP protection, supporting further international market penetration. In terms of capacity, we will expedite commercial manufacturing capacity for sweet protein, paving the way for its market launch. By leveraging synergy across business lines within each segment, we are able to deliver unique value to our clients with faster speed and a superior quality. The Group also drives synergy across the 3 business segments to address customer demand and redefine the industry landscape. On top of that, globalization, automation, and digital transformation are also key priorities for our 3 segments in the dynamic and ever- evolving environment. That wraps up today's presentation. Operator, please open the floor for Q&A.
Operator: [Operator Instructions] Our first question comes from [ Linhai Zhao ] from Goldman Sachs.
Unidentified Analyst: This is Linhai from Goldman Sachs. I have 2 questions. The first one is for ProBio. Based on the presentation deck, it seems that the fee-for-service in the first half decreased year-over-year, while the cost of 66 million is also higher. Can you share a bit more on the underlying reasons and how should we look at the recovery trajectory in the second half and beyond, given that we are seeing increasing orders? That's the first question. The second question is for Bestzyme. I understood that the impact from seasonality in the first half generated some headwinds. Can you also elaborate a bit more on the product breakdown? The presentation showed that innovative enzymes show strong growth, while the top 5 enzymes are not all growing in a year-over-year basis. Any colors on the breakdowns and how we should look at the growth in the second half would be appreciated.
Josie Zhou: Thank you for your questions. So for the first one about the ProBio, I think we have to separate the revenue from the LaNova piece and to elaborate each. The first one as the previous announcement, as of end of June, we have received a total upfront payment of $213.8 million under the LaNova license agreement, of which $213.4 million was received in the first half of the year. So, due to certain pending matters, we recognize revenue of about $200 million pending in the first half of the year based on the principle of [indiscernible]. Excluding this impact, our fee-for-service business achieved a 2-digit growth. So, the cost of our fee-for-service has been impacted by the capacity run-up, and excluding the impact of new capacity, the margin in the first half was flat compared to the corresponding period. And for the second half of the year, we anticipated that the gross profit will be flat compared to the first half of the year. So, we are on track about the product cost of sales for the fee-for-service. Yes. For the second question about Bestzyme, and as mentioned that the first half-year revenue increase was primarily impacted by Chinese New Year holiday season. And for the breakdown of the business, we noticed that there's no significant change for the industry enzyme and the feed enzyme. But for the second half of the year, we're expecting a stronger rebound, and our gentleman of Bestzyme, Dr. Bai, will share you the business plan for the next half of the next half-year. Dr. Bai, can you share the feed? Thank you.
Aixi Bai: Yes, sure. First, thank you, Linhai, for the question related to Bestzyme. So, looking at that to the second half for both industry enzyme and the feed enzyme, we have already launched, and we will launch new products, including alpha-amylase, phytase, and protease. So, these 3 enzymes, they are best in class. So, we have confidence that this enzyme will help us get more room in the second half. Additionally, our sales personnel now in India have been fully deployed. So, we will promote these products in India, in the U.S., and in China. That's why we expect a better growth in the second half of this year. Thank you, Linhai.
Unidentified Analyst: Just a quick follow-up on the first question. Thanks, Josie, for the answer. May I try to understand a bit more, since you mentioned that after the breakdown, the fee-for-service actually have a double-digit growth for the first half? Is that what I'm hearing?
Josie Zhou: Yes. So for the first half of the year, the revenue from fee-for-service will achieve the double-digit growth, yes. And because of the revenue from LaNova, we recognize that it's around $200 million due to some uncertain matters. So, we just recognize around $200 million in the first half.
Operator: Next, we have Yang Huang from JPMorgan. Please go ahead.
Yang Huang: This is Yang Huang from JPMorgan. I have 2 questions. The first one is it's nice to see the company has received the first upfront payment and also in the second half, the company is going to receive another part of technology transfer fee. So, does management have any kind of color on future milestone payment, like how much and around what time we could see further potential milestone payments from this deal? That's my first question. The second one is given all the segments of the company continue to see global expansion, does the company has any kind of vision in terms of long-term revenue contribution from outside China? And will continued expansion ex-China will affect a long-term margin? I would like to have some color on that.
Josie Zhou: Thank you for your question. So, for the first question about LaNova, Allen, please help to answer.
Allen Guo: Okay. Thank you, Huang, for the question. So, generally speaking, based on the second quarter earning for Merck, we have disclosed that a tech transfer milestone has been reached, right? So, generally speaking, it's expected to recognize our milestone payment of $300 million for this milestone hit. So, from this portion, we shall be entitled to receive 25% of this milestone in the second half. But in the meanwhile, the clinical trial is still ongoing. So, depending on the progress of the clinical trial, then some further milestone payments will be reached. And then ProBio is also entitled to receive 25% of those following milestone payment. However, since there are some uncertainties on those clinical trials, we do not have a very clinical, very clear milestone timeline right now. So, I think -- but generally speaking, Merck has already mentioned that so far the clinical trial is progressing smoothly. So, let's follow on the progress of Merck clinical trial. Thank you.
Josie Zhou: Thank you, Allen. So, for the second question about the capacity in the global, and this is really a very good question. [indiscernible] supplier global is what we are committed to build for our global customers, and this is our greater competitive advantage. No matter from China, Singapore, Europe, or U.S., we always wanted to be close to our customer, providing guaranteed speed, reliability, and consistent delivery worldwide. This robust global and local will keep providing flexibility and resilience for our customers. We will fully leverage this advantage of each product, each production capacity to achieve sustainable business growth. Meanwhile, we continue to reduce costs through R&D-driven innovations, AI-powered automation, digitalization, and the lean operations. We have always achieved a continued improvement in gross profit margin, especially in large size U.S. and Singapore business. And we will be confident in strong growth and healthy profitability both short-term and long-term through this kind of strategy. Yes, so thank you for your question again.
Operator: Next, we have Daisy Cheng from Morgan Stanley.
Daisy Cheng: This is Daisy from Morgan Stanley. I have 2 questions here. The first one is about the tariffs. We understand that GenScript has limited late-stage exposure requiring direct cross-border drug transportation as of now and has a globalization extension plan underway. But given the increasingly complicated global supply chain dynamics, could management help us to quantify a bit what's our current direct China to U.S. route shipping exposure by revenue percentage? And do we have any hedge plan on the way? This is the first question.
Josie Zhou: Okay. So for this question, our CEO, Sherry, will give you an answer.
Weihui Shao: Thanks for -- Daisy for the question. Just as you mentioned, in the first half 2025, tariffs had a low impact on our profit due to the nature of our business, less than USD 4 million. So over the past few years, the proportion of our global capacity has steadily increased across the Life Science business and the ProBio. Bestzyme had a small presence in the U.S., so tariff poses no significant threat. So overall, thanks to our global business footprint, we are confident in our ability to navigate policy fluctuations.
Josie Zhou: Okay, thank you.
Daisy Cheng: And my second question is about ProBio order trends. I noticed that ProBio obtained USD 71 million new order in second half '24, which achieved a double-digit half-on-half growth. So what's the current backlog and new order trend for ProBio in first half '25? Any update here?
Josie Zhou: Thank you for your question. So ProBio CEO, Allen, will have to explain this. Allen?
Allen Guo: Thank you for the question, Daisy. So generally speaking, we have observed steady growth for 2025. So by July, we achieved a 9% year-on-year growth for all fee-for-service order. So generally speaking, we observed a clear recovery for antibody and protein R&D ever since the second half of last year. And for our Discovery, we achieved around 20% year-on-year growth. And for the CMC part, we also achieved significant growth in terms of product number. However, since we saw a big late-stage project in the same period last year, so for value-wise, we achieved about single-digit year-on-year growth so far. And for the CGT segment, as you know, there's still headwind globally. But due to our continuous efforts and also relentless upgrade of CGT platform, we actually achieved more than 20% year-on-year growth for viral vector. But unfortunately, for the plasmid, we are still facing very strong price competition. And so far this year, it's a negative single-digit growth. But in the meanwhile, I think that this year, there's fast-growing interest in developing in vivo CAR-T. And at ProBio, we do have integrated capabilities and also platform for lentivirus, for MI-LNP, and also VHH. We believe this increasing demand for in vivo CAR-T will support our [indiscernible] CGT business growth definitely. And in terms of backlog, since it varies based on clients' plan of the project. And sometimes clients will change the scope and they may cancel the project. So we do not disclose any backlog information anymore. We will pay more attention to active backlog for internal resource and also capacity deployment. Thank you.
Operator: Next, we have Wilfred Yuen from Daiwa.
Wai Chak Yuen: Okay, congrats for the first progress and thank you for taking my questions. My first question is on Life Science. What is the key driver for the guidance upgrade? Can you give more color, more business area, and regional market of driving up the growth? Can you also talk about the reason behind the growth margin drop in the first half and the second half margin outlook? Secondly, on the capital allocation, we have nearly $1 billion cash on hand. Do you have any update on how do you want to deploy your cash?
Josie Zhou: Okay, thank you for your question. Yes, for the first one, for the Life Science, and we noticed that over the past 2 years, our growth margin has taken a temporary hit because of the change in our product mix, expansion of our global capacity and our pricing strategy. But as you can also see on Slide 17, the gross profit margin for the first half of the year keeps stable as it was in the second half of 2024. And we are confident our margin will stay stable and even get better because of the smart and the bold investment we are putting. We are setting up automation and expansion of our capacity and making our global operation model productively. So we are on track to see the margin improvement. And maybe Ray can add more to explain this question. Thank you. Ray?
Ray Chen: Okay, thank you for the question. First, you're asking about which of the growth [Technical Difficulty]. Thank you.
Josie Zhou: Thank you, Ray. For the second question about the capital allocation, our CEO, Sherry, will give you an answer. Thank you.
Weihui Shao: Yes, we have the healthy cash position to support our strategy. Firstly, besides current capacity expansion plans mentioned in the slides for each segment, further CapEx investment globally will be needed for sustainable growth. Secondly, as we outlined, we are transforming our business from traditional focus on fee-for-service and small portion offshore products towards exploring out licensing and collaboration opportunities to boost the R&D benefits. Last but not least, in the long run, the Board and management will actively seek options to maximize shareholder's value. Thank you.
Operator: Next question comes from Wanhua Wu from CICC.
Wanhua Wu: I'm Wanhua Wu from CICC. I have 2 questions. The first one is what are Bestzyme's future blockbuster products? And when are they expected to bring -- to begin mass production? And the second one is, how will the AI-driven protein engineering business achieve growth? And what's the current proportion of AI-based business in Life Science business?
Josie Zhou: Thank you, Wanhua Wu, for your question. For the first one related to Bestzyme, Dr. Bai, the General Manager of Bestzyme will answer this question.
Aixi Bai: Thank you, Wanhua Wu for the question. So actually, in the first half of the year, we launched 2 new amylases. Both of them have already entered mass production, and they are currently being tested by our clients in both China and India. These 2 products delivered the best-in-class performance. They can enable significant process optimization and cost reduction for our customers. And in the second half of this year, we will also launch phytase and protease for our animal nutrition customers. Both of them are also best-in- class in the industry. So for the last several years, since we have been heavily investing in R&D, so we expect to launch a number of best-in-class animal products every year.
Josie Zhou: Thank you, Dr. Bai. And for the next question about the Life Science, our Life Science President, Ray Chen -- Dr. Chen will explain this. Ray?
Ray Chen: The AI-driven [Technical Difficulty]
Josie Zhou: Thank you, Ray. Thank you for your questions and the ongoing support for the Group. We apologize for not being able to address all questions due to the time limitation. If you have additional questions, please do not hesitate to reach to our Investor Relations team. We look forward to contacting you on next call. Thank you.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.