CICC released a research report stating that it maintains unchanged earnings forecasts for GENSCRIPT BIO (01548) for 2025 and 2026, and maintains its outperform rating. However, due to the recent upward shift in the valuation center of the pharmaceutical sector, the firm raised its target price by 22.2% to HK$21.50 (based on DCF valuation method), representing 21.3% upside potential from the current stock price.

CICC's main views are as follows:

H1 2025 performance meets expectations

The company announced H1 2025 results: revenue of $519 million, up 81.9% year-on-year. The firm estimates double-digit growth after excluding Lixte-related one-time prepayments; gross profit of $321 million, corresponding to a gross margin of 61.8%; adjusted net profit of $178 million, corresponding to a net margin of 34.3%. Profitability improved significantly, benefiting from continued capacity utilization improvements, economies of scale, and high-end product structure upgrades, in addition to the impact of Lixte prepayments. Net loss attributable to shareholders was $25 million, significantly narrowed year-on-year. The loss was mainly dragged down by $194 million investment loss from associated company Legend Biotech. Excluding this impact, the company achieved a profit of $169 million. Performance met the firm's and market expectations.

Life sciences business maintains steady growth, strengthening global layout and market position

In H1 2025, the life sciences services and products segment achieved revenue of $250 million, up 11.3% year-on-year. Growth was mainly driven by protein business (growth rate of 52%), gene editing platforms, and AI-related R&D demand. Adjusted gross margin was 51.0%, up from 50.6% in H2 2025, which the firm judges was mainly due to platform and automation upgrades and operational efficiency improvements. Adjusted operating profit was $46 million, down slightly year-on-year, mainly because the company increased sales and R&D expenses to build medium- to long-term competitiveness.

CDMO (ProBio) continues recovery trend, Lixte large licensing revenue materialized

In H1 2025, CDMO revenue reached $250 million, up 511.1% year-on-year, of which Lixte-related one-time prepayments of $214 million have been recognized and payment received. Excluding this, growth was double-digit, with the core business continuing its recovery trend, mainly benefiting from successful completion of biologics GMP orders and global expansion of viral vector business. As of H1 2025, ProBio has 16 out-licensed assets (4 of which have entered clinical stage). The company expects to achieve milestones such as CD3 VHH licensing deals by the end of 2025 to early 2026.

Industrial synthetic biology (Bestzyme) focuses on product innovation, R&D investment affects short-term profitability

In H1 2025, industrial synthetic biology revenue was $39 million, up 8.4% year-on-year, with growth coming from increased market share of enzyme products and deepened cooperation with leading customers. Adjusted operating loss was $580,000, turning to loss both year-on-year and quarter-on-quarter mainly due to increased R&D investment. The company's innovative synthetic biology product sweet protein has obtained FDA GRAS certification, and the company expects commercial production facilities to officially commence production in mid-2026.

Risk warnings: R&D risks, demand falling short of expectations, capacity utilization falling short of expectations, policy fluctuations, geopolitics.