Research and development expenses downward, capital expenditures upward — WuXi AppTec's multiple-choice question

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Not long ago, Weiminkangde (603259), the “No. 1” CXO (pharmaceutical contract outsourcing services) player on the A-share market, turned in a set of 2025 performance results that exceeded market expectations. During the reporting period, the company achieved total operating revenue of 45.46B yuan, up 15.84%, with revenue growth returning to two digits after two years; attributable net profit came in at 19.15B yuan, up 102.65% year over year, setting a new record high for the increase since 2017.

In addition to the “explosive” profitability, the two pieces of data—one up and one down—in this report have also sparked widespread discussion in the market. In 2025, despite revenue and net profit both growing, BeiKangde’s R&D expenses fell by about 120 million yuan versus 2024, down 9.61% year over year. At the same time, its capital expenditures rose by 1.54B yuan from the same period last year, up more than 38%.

Between these increases and decreases, what is BeiKangde planning?

R&D expenses hit “three consecutive declines”

In recent years, the pharmaceutical and bio industry has been plagued by factors such as capital pullbacks and disruptions from geopolitical risks. Against this backdrop, BeiKangde delivered a performance results report full of resilience—one that even surpassed market expectations. Even when measured by non-recurring item adjusted attributable net profit, the company still achieved 32.56% growth in 2025, placing that growth rate among the top five in the past decade.

After the annual report was released, multiple securities firms spared no praise and issued “Buy” ratings for BeiKangde. However, the decline in the company’s R&D expenses has raised investor concerns—since it is a key link in the innovation drug industry chain, why doesn’t BeiKangde like to do R&D?

BeiKangde’s R&D expense data has been declining for three years in a row. After rising to a historical peak of 1.61B yuan in 2022, the figure has dropped to different degrees each year. From 2023 to 2025, they were 1.44B yuan, 1.24B yuan, and 1.12B yuan respectively. Compared with the peak, the latest figure is already down by about 30%.

For the reduction in R&D expenses, BeiKangde did not elaborate much in its periodic reports. It only said, when referring to the “three expenses,” that it was “mainly due to the company’s continuous optimization of operating efficiency.”

Worth noting is that the number of R&D personnel, closely tied to R&D staff compensation data, has kept in sync with the declining trend in BeiKangde’s R&D expenses in recent years.

From 2022 to 2025, BeiKangde’s number of R&D personnel continued to decline, dropping from 36,678 to 25,983—“shrinking” by roughly 30% as well. In 2025 alone, the net reduction in R&D personnel was the largest, reaching 5,836 people. Meanwhile, over the same period, the share of R&D personnel in the company’s total workforce fell from 82.7% in 2022 to 76.8% in 2025.

For the phenomenon of the share of R&D personnel in the company’s total headcount declining, BeiKangde stated in its financial report that this was “due to the divestiture of some business segments.”

And from the perspective of the age structure of R&D personnel, among these four years, the net reduction in the number of R&D personnel under 30 years old was the largest, reaching 13,048 people—down by more than 50% from the number in 2022. In the same period, the combined net reduction for the 50-and-over age group was 74 people, while the combined net increase for the 30–49 age group was 2,427 people.

With such a large net reduction in the number of younger R&D personnel, does this kind of data change align with the development patterns and trends of the CXO industry? In response to this question, the reporter called and sent a letter to BeiKangde’s securities department. As of the time of publication, the company had not responded.

In addition to the wages and compensation of R&D personnel, BeiKangde also mentioned in its financial report that the scope of R&D expenditures includes materials consumed in R&D activities and other expenses. The company further stated that expenditures during the research stage are generally recognized in current profit or loss when incurred. Expenditures during the development stage, depending on the conditions met, will be recognized as intangible assets or included in current profit or loss.

The financial report shows that BeiKangde’s intangible assets mainly include land use rights, trademark use rights, software and others, customer relationships, and patents and proprietary technology, among others. From 2022 to the present, the company’s data for patents and proprietary technology, software and others, and trademark use rights show no addition of any amounts related to internal R&D.

Capital expenditures rise again

BeiKangde’s core strategy is to continuously focus on and strengthen its “integrated, end-to-end” CRDMO model. That is, by integrating research (CRO), development (D), and manufacturing (M) capabilities, it provides customers with end-to-end services—from target discovery to commercial manufacturing.

This model, pioneered by BeiKangde itself, has a core competitive advantage in covering end-to-end production scale and technological capabilities. As a result, continuously increasing capital expenditures has become an important part of BeiKangde’s development strategy. As early as the beginning of last year, at JPMorgan’s JPM healthcare annual conference (JPM), BeiKangde disclosed that its 2025 D&M (research and manufacturing) business capital expenditures would double.

In 2025, BeiKangde’s capital expenditures increased by more than 1.5 billion yuan from the prior year, with a growth rate of 38%. In that year, the company accelerated global expansion and capacity building, continuously enhancing its capabilities and scale. For example, in small-molecule capacity construction, in 2025, BeiKangde’s raw material drug (API) bases in Changzhou, Taixing, and Jinshan successfully passed FDA on-site inspections with zero defects. In addition, the company completed the Taixing polypeptide capacity construction ahead of schedule in September 2025. According to the company’s disclosure, as of end-2025, the overall volume of small-molecule API reactor vessels exceeded 4,000 kL, and the overall volume of polypeptide solid-phase synthesis reactor vessels exceeded 100,000 L.

With continued expansion of capacity, the related businesses have maintained a strong growth momentum. In 2025, BeiKangde’s small-molecule D&M business generated operating revenue of 19.92 billion yuan, up 11.4% year over year. Over the full year of 2025, the company’s small-molecule D&M pipeline cumulatively added 839 molecules. By end-2025, the total number of molecules in the small-molecule D&M pipeline reached 3,452. Of these, 83 were commercialized projects, 91 were Phase III clinical projects, and 22 new projects were added across the full year for commercial and Phase III clinical projects.

As a business segment under BeiKangde focused on the R&D and production of oligonucleotide and polypeptide drugs, its TIDES business recorded operating revenue of 11.37 billion yuan in 2025, up 96% year over year. As of end-2025, TIDES’s outstanding orders increased 20.2% year over year.

BeiKangde seems poised to press forward into 2026. There is also news that the company’s capital expenditures for 2026 could reach as high as 7.5 billion yuan.

Although increasing capital expenditures has brought decent growth in performance and also reflects BeiKangde’s confidence in future development, this move has still prompted investors to take a prudent view of the investment payback cycle for the company’s huge expenditures.

Does the speed at which BeiKangde is expanding its asset scale count as “aggressive”? The answer lies in the data.

The ratio of capital expenditures to depreciation and amortization reflects the relationship between a company’s investment intensity in fixed assets and the rate at which those assets age. Typically, investors use it to judge how much a company’s assets are aging, and whether it may face pressure to maintain and replace fixed assets in the future. If this ratio is high, it indicates the company is actively updating or expanding production capacity, but the maintenance funding pressure will also increase. Conversely, it suggests the company faces the risk of asset aging.

Measured by the ratio of capital expenditures to depreciation and amortization, in recent years BeiKangde has in fact slowed the pace of asset-scale expansion. Behind this is the development approach of seeking stability among relevant companies in the complex pharmaceutical and bio industry environment in recent years.

Wind data shows that from 2020 to 2025, BeiKangde’s ratios of capital expenditures to depreciation and amortization were 2.65, 4.69, 5.20, 2.20, 1.33, and 1.55, respectively. Over the past two years, this data has stabilized below 2.00. In 2024, among A-share CRO concept stocks, the median of this metric was 1.41 and the average value was 1.55. The “No. 1” player in the industry, BeiKangde, has not reached the median, and 12 stocks are ahead of it.

In its financial report, BeiKangde previously mentioned that, in order to advance the construction of capabilities and scale, the large amount of capital and resources invested comes with risks, including unforeseen delays due to issues related to construction and regulation, or the company failing to achieve expected growth.

However, for 2026, which has already completed one quarter, BeiKangde remains optimistic. It expects the company’s overall revenue this year to be between 51.3 billion yuan and 53.0 billion yuan, with revenue from continuing operations expected to grow year over year by 18% to 22%.

As for the reporter’s question about “what basis the company has used to make decisions related to capital expenditures, and how it will ensure that related investments can bring long-term stable, and even above-expected, returns,” BeiKangde did not provide a reply.

Reporter: Chen Zhi