Highlights

• During its Investor Day, WuXi AppTec highlighted how it is leveraging its operational excellence to capture the tremendous market opportunities arising from the AIDD and AI4S trends. 
   

• Its end-to-end CRDMO platform precisely bridges the gap from AI design to physical implementation. The company has started to address AIDD/AI4S demand, and expects to further expand service capacity and enhance operational excellence to meet the strong market demand. 
   

• Maintain BUY with a target price of HK$220.00.
   

Analysis

• Expecting AIDD trend to boost market demand in the long term. During its Investor Day, WuXi AppTec noted that AI-based drug discovery and development (AIDD) and AI-for-science (AI4S) are driving exponential growth in drug metabolism and pharmacokinetics (DMPK) assay throughput demand. AI can design molecular structures efficiently but still requires wet lab capacity, such as WuXi AppTec’s, to perform complex synthesis delivery and biological validation. Moreover, AIDD/AI4S clients are showing increased demand for DMPK services and generating high-quality, high-throughput experimental data for training AI models and achieving wet-dry lab closed loops has emerged as a new application. WuXi AppTec believes AIDD is playing a growing role in the evolution of drug discovery and development, and will support strong long-term service demand for the company. 
   

• Seeing strong demand from AIDD customers. WuXi AppTec's biology business has started to address AI4S/AIDD demand, by providing high-throughput, diversified, customised, and integrated wet lab services to respond swiftly to AIDD/AI4S clients’ needs. The company believes its end-to-end CRDMO platform precisely bridges the gap from AI design to physical implementation. WuXi AppTech has seen the monthly assay plate requirement from a leading AIDD client reach 5,000 compared with around 10 from a traditional biotech. Management notes that service demand from AIDD customers, while still small in scale, is growing rapidly.