Genscript Biotech Reports 2022 Interim Results*

Segment Revenue and Profit Grew Steadily

Gene and Cell Therapy CDMO Maintained High Growth Trend  

• Revenue of the Group for the six months ended June 30, 2022 was approximately US$304.7 million, representing an increase of 32.7% as compared with approximately US$229.6 million for the same period in 2021, among which, the external revenue of non-cell therapy business was approximately US$247.7 million, representing an increase of 26.6% as compared with approximately US$195.7 million for the same period in 2021, and the external revenue of cell therapy business was approximately US$57.0 million, representing an increase of 68.1% as compared with approximately US$33.9 million for the same period in 2021.
• Gross profit of the Group for the six months ended June 30, 2022 was approximately US$175.5 million, representing an increase of 26.6% as compared with approximately US$138.6 million for the same period in 2021, among which, the gross profit of non-cell therapy business before eliminations was approximately US$126.2 million, representing an increase of 16.4% as compared with approximately US$108.4 million for the same period in 2021, and the gross profit of cell therapy business before eliminations was approximately US$52.1 million, representing an increase of 53.7% as compared with approximately US$33.9 million for the same period in 2021.
• Loss of the Group for the six months ended June 30, 2022 was approximately US$225.9 million, whilst loss was approximately US$156.1 million for the same period in 2021.
  The adjusted net loss of the Group was approximately US$130.1 million, whilst the adjusted net loss was  approximately US$135.8 million for  the  same period in  2021, among which,  the adjusted net profit of non-cell therapy business before eliminations was approximately US$30.2 million, representing an increase of 14.4% as compared with  approximately  US$26.4 million for the same period in 2021, and the adjusted net loss of  cell  therapy business before eliminations was approximately US$160.5 million, whilst the  adjusted net  loss of cell therapy business before eliminations was approximately US$162.2 million for the same period in 2021.

• During the Reporting Period, the Group invested significantly in research and development activities as well as talent recruitment, and both of which are key drivers for a sustainable business growth in the long run. For the six months ended June 30, 2022, the Group's research and development expenses was approximately US$177.4 million as compared with approximately US$175.1 million for the same period in 2021.

NANJING, China, Aug. 31, 2022 /PRNewswire/ -- GenScript Biotech, the world's leading biotech company, today announces its annual results as of June 30, 2022.

"In the first half of 2022, GenScript Group has delivered satisfactory results across all business segments," said Dr. Patrick Liu, Rotating CEO of GenScript. "Our life science business reported steady growth while focusing on R&D innovation and leveraging superior technology platforms to get into emerging fields. Thanks to excellent market capabilities and track record, ProBio's macromolecular CDMO and GCT CDMO business maintained strong momentum. In the future, ProBio will focus on medium-sized and large pharma and biotech customers and add value to our service projects. By improving product mix, Bestzyme improved its profitability. Bestzyme will optimize its enzyme product portfolio and industrial-grade manufacturing capability, and capture new opportunities in the synthetic biology field. Legend and its partner Janssen successfully commercialized Carvykti™. As Legend moves cilta-cel into earlier line clinical trials, Carvykti™ will benefit more patients worldwide. 2022 marks the 20th anniversary of GenScript. GenScript has developed a diversified business portfolio over years. GenScript will stay committed to the corporate culture and mission to "make people and nature healthier through biotechnology" and create value for our shareholders and investors."

Results Analysis of the Four Business Segments

As the Group has reallocated back office administrative expenses into each business  segment  following the establishment of Probio legal entities in the second half of 2021, segment operating  profit is not directly comparable to the same period in 2021.

Life-science Services and Products

During the Reporting Period, revenue of life-science services and products amounted to approximately US$176.0 million, representing an increase of 15.8% over the same period in 2021. The gross profit was approximately US$99.8 million during the Reporting Period, representing an increase of 8.8% as compared with approximately US$91.7 million for the same period in 2021. The gross profit margin decreased from 60.3% for the same period in 2021 to 56.7% this Reporting Period. The operating  profit of life-science services and products during the Reporting Period was approximately US$26.0 million.

The increase in revenue was mainly attributable to the (i) continued growth in molecular biology, protein  and  antibody  business,  (ii)  successful  commercialisation  of  innovative  platforms  such    as sgRNA, and partially offset by  (iii)  the  decrease  in  sales  in  COVID-19  related  products  and the negative impact on sales due to pandemics in Shanghai, China. Production efficiency gains contributed positively to gross profit margin while (i) loss from  overseas  production  during  the initial capacity ramp-up, (ii) increased freight and duty costs, and (iii) decreased price and volume of COVID-19 related products all had negative impacts on gross profit margin. The operating profit was positively impacted by growth in revenue and gross profit while negatively impacted by (i) increased expenses brought by operation and depreciation of overseas production capacity, and (ii) increment in labor costs brought by research and development.

Biologics Development Services

During the Reporting Period, revenue of biologics development services amounted to approximately US$62.7 million, representing an increase of 99.0% over the same period in 2021. Total backlog    for biologics development services reached US$228.0 million as at June 30, 2022. The gross profit was approximately US$16.2 million during the Reporting Period, representing an increase of 62.0% as compared with approximately US$10.0 million for the  same period in  2021. Adjusted gross profit was US$23.9 million during the Reporting Period, representing an increase of 125.5% over   the  same period in  2021. Adjusted gross profit margin expanded from 33.7% for  the  same period  in 2021 to 38.1% this Reporting Period. Adjusted operating profit during the Reporting Period was approximately US$3.2 million.

The growth of revenue was mainly attributable to the (i) significant increase of customer projects from overseas business, (ii) expanded capacity and productivity of pre-clinical and clinical development, and(iii)          shorter delivery time for antibody discovery and process development. The adjusted gross profit and adjusted operating profit were positively impacted by higher capacity utilization and production efficiency gains.

Industrial Synthetic Biology Products

During the Reporting Period, revenue of industrial synthetic biology products amounted to approximately US$16.8 million, representing a decrease of 6.7% over the same period in 2021. The gross profit was approximately US$7.2 million, representing an increase of 41.2% as compared with approximately US$5.1 million for the same period in 2021. The gross profit margin increased from 28.3% for the same period in 2021 to 42.9% this Reporting Period. The operating profit of industrial synthetic biology products was approximately US$0.4 million during the Reporting Period, whilst the operating loss was approximately US$0.7 million for the same period in 2021.

The decrease in revenue was mainly due to the (i) active pruning of low or negative profit products,  (ii) the feed industry in China downturn which led to reduction of  use  of  feed enzymes, and  (iii)  the situation in Ukraine and Russia which caused the decrease of orders in Eastern Europe. The increase in both gross profit and operating profit was primarily attribute to the (i) adjustment of product portfolio and enhancement of the promotion of high-margin products, (ii) improvement of production process and workflow, and (iii) profit from the license of patents.

Cell Therapy

During the Reporting Period, revenue of cell therapy amounted to approximately US$57.1 million, representing an increase of 68.4% over the same period in 2021. The gross profit was approximately US$52.1 million during the Reporting Period, representing an increase of 53.7% as compared with approximately US$33.9 million for the  same period in  2021. The  operating loss of  cell therapy was approximately US$180.1 million during the Reporting Period, whilst the operating loss was US$168.9 million for the same period in 2021.

The increase in both revenue and gross profit was primarily attributable  to  the  additional  milestones achieved in 2021 and 2022, and thus the further recognition of contract revenue from collaboration with Janssen on  developing cilta-cel. The  operating loss was  primarily attributable    to the (i) investment in clinical trials resulting from higher patients enrollment and more pipelines, (ii) cost for commercial preparation activities for the launch of cilta-cel, and (iii) expansion of administrative functions.

FINANCIAL REVIEW

Revenue

During the Reporting Period, the Group recorded revenue of approximately US$304.7 million, representing an increase of 32.7% from approximately US$229.6 million for the same period in  2021. This is mainly attributable to (i) the continued increase of non-cell therapy products and services from major strategic customers and new competitive services and products, especially in biologics development services, and (ii) the increase of contract revenue derived from Legend's collaboration with Janssen with new milestones achieved.

Gross profit

During the Reporting Period, the Group's gross profit increased by 26.6% to approximately US$175.5 million from approximately US$138.6 million for the same period in  2021.  This  is mainly attributable to the (i) rapid growth of revenue, and (ii) operational efficiency improvement.

The increase in gross profit was partially offset by (i) increased share-based compensation expenses to production teams, particularly in biologics development services, and (ii) increased shipping cost. Adjusted gross profit increased by 31.4% over the same period in 2021.

Selling and distribution expenses

During the Reporting Period, the Group's selling and distribution expenses increased by 49.1%       to approximately US$86.9 million from approximately US$58.3 million for the  same period in  2021. This increase is mainly driven by (i) more investment on talent with recruiting experienced personnel with competitive packages, (ii) increased expenses, primarily attributable to the global expansion of our business, and (iii) increased marketing expenses related to Legend's collaboration with Janssen. Adjusted selling and distribution expenses increased 45.3% over the same period in 2021.

Administrative expenses

During the Reporting Period, the Group's administrative expenses increased by 41.4% to approximately US$79.6 million from approximately US$56.3 million for the same period in 2021. This is mainly attributable to (i) more investment on talent with recruiting experienced personnel with competitive package and share-based compensation expenses for  all  business segments, and  (ii) the reinforcement of some key administrative functions to support the Group's overall business expansion and compliance. Adjusted administrative expenses increased 31.0% over the same period in 2021.

Research and development expenses

During the Reporting Period, the research and development expenses kept stable and increased by 1.3% to approximately US$177.4 million from  approximately  US$175.1  million  for  the same period in 2021. This is mainly attributable to (i) the continuous investment in talents with competitive package and share-based compensation expenses, and (ii) continuous investment in new products and services, which will significantly strengthen our competitiveness. Adjusted research and development expenses decreased by 1.4% over the same period in 2021. 

*For reference only. Please refer to Company's 2022 Interim Results Announcement dated August 31, 2022 for more details.

SOURCE GenScript Biotech Corporation