GNNSF - Genscript Biotech Corporation (GNNSF) Q2 2022 Earnings Call Transcript
Genscript Biotech Corporation (GNNSF)
Q2 2022 Earnings Conference Call
August 31, 2022, 6:00 PM ET
Company Participants
Shiniu Wei - Chief Financial Officer
Robin Meng - Chairman of the Board
Patrick Liu - Rotating Chief Executive Officer
Ying Huang - Chief Executive Officer, Legend Biotech
Brian Min - Chief Executive Officer, GenScript ProBio
Ray Chen - President, GenScript Life Science Group
Aixi Bai - General Manager, Bestzyme
Conference Call Participants
Linda Shu - Haitong International
Jay Lee - Morningstar
Presentation
Operator
Good day, and thank you for standing by. Welcome to the 2022 GenScript Biotech Interim Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions]
Please be advised that today’s conference is being recorded. I would now like to hand the call over to your first speaker today, Mr. Shiniu Wei. Thank you. Please go ahead.
Shiniu Wei
Thank you, Desmond. Good morning, everyone. Welcome. I am Shiniu Wei, CFO at GenScript. We also have the following management team members attending today’s call. Mr. Robin Meng, Chairman of the Board; Dr. Patrick Liu, rotating CEO of GenScript, Dr. Ying Huang, CEO of Legend Biotech; Dr. Brian Min, CEO of GenScript ProBio; Dr. Ray Chen, President of GenScript Life Science Group; and Dr. Aixi Bai, General Manager of Bestzyme.
Before we begin, I would still remind everybody to the obligatory forward-looking statements. Please take a second to read them. In today’s conference call, Patrick will give an opening remark and present a business update of 2022 first half. Then I will walk you through the company’s financial performance. After that, Patrick will outline our company’s future strategies and second half focus. Our Chairman, Robin will give a summary, followed by a Q&A session at the end.
Now I will invite Dr. Liu to highlight our business achievement in 2021 -- 2022 first half. Patrick?
Patrick Liu
Good morning or good evening, everyone. I am very excited to share with you our business update in the first half of 2022. First of all, on behalf of the management team and all team with employees, I would like to thank all its shareholders, investors and analysts for your long time support.
2022 is an eventful year. We witnessed dramatic international geopolitical events, ongoing impact of COVID and summer due to the climate chain. This makes us more aware of our social responsibility and commitment embodied our company’s mission to make people and nature healthy through by technology.
We just celebrated 20th anniversary on August 15. Going through numerous changes over the years, we now have well-established business portfolio in place. And our teams are working in a highly effective way.
We are impressed and inspired by our dare to win as demonstrated by our employees in the first half of this year, given the COVID resurgence in Shanghai, our Shanghai navigate difficulties to live and work on site, both of our magic and overseas logistics teams, try to do this role in a very short time to ensure our business continuity, and power restrictions lasting for almost half a month this summer.
Our manufacturer team took swift action to meet the production schedule. I believe with the effort of our ambitious team, our company will continue this very strong growth momentum and become a post-tier biotech company in the world. On behalf of the management team, I would like to intend our thanks to everyone at GenScript, and I expect to achieve long-term success together with shareholders, investors and analysts as well.
Now I would like to walk you through our business highlights for the first half of this year. Slide #5. So for our License segment, the lifetime business have grown very fairly. Thanks to our solid expertise in life science, we have incubated three subsidiaries over the year, diversifying our presence across different business segments.
Revenue from the license business grew by 16.5% year-over-year demonstrated 20 years of continuous growth. As of the end of the first half, our Life Science business has a global footprint spanning more than 100 countries and regions with over 200,000 customers.
Our extensive sales network and well established global business have built a foundation for our future growth as COVID impact is starting to diminish in Europe with our fastest sales recovery in European region. Our sales in China and the U.S. are also growing very fast as well.
In the emerging field of gene and cell therapy, we have launched a series of services, raw materials and consumables to meet the market demand, while setting the standard for the industry. We will continue to improve our business and upgrade our CMP capacity to ensure safety, efficacy and complex retired for the product.
We are also commercializing instrument and resin business. We launched a CytoSinct isolation platform, which was the first cell isolation solution in China. Also, we started to commercialize magnetic fees for cell isolation in the first half of this year.
Our cell solution instrument is also under testing. This June, we launched the impact system, which is augmented preparation instrument that supports automation throughput, the preparation process and demand for the high throughput needs.
We further invested in capacity expansion of life science facilities in China, Singapore and the U.S. are operational successfully, including capacity expansion for our molecular biology, protein, TCT related raw materials and TRT-grade instrument in rating business line. In addition, we also introduced our proprietary automated production process in those new facilities as well.
So since we provide, continue to have very strong momentum in the first half of this year. Robust external revenue were over 94%, grew 57%. Our sales increased by 70% year-over-year. Revenue growth was attributed to revenue growth of downstream antibody CDMO business and a new GCT-related CDMO project as well. By the end of the first half, we have served about 1,600 global biotech and biopharma customers.
Our new project, our CMC orders are growing rapidly. In the first half, we added 21 CMC antibody project and the 39 CTS MC project, obviously due to the total project number of 2021. We are also a community that R&D projects. In the first half, we helped the customers of the obtain 11 domestic and international R&D approvals.
Our revenue growth is also attributed to our candidate base. As of now provides nearly 1,000 employees with 40 of them holding the Master degree or above. We will continue to grow the tentative base and our business growth and provide competitive incentives to our employees.
We are also pushing ahead with our capacity plan, some more as information very shortly. Back then in the first half, investment revenues declined by 17% due to the negative impact of COVID and a downturn in the field and market.
However, gross margin and net margin significantly improved, mainly due to the product mix chain by actively pruning low-margin business. Despite external difficulties, customer business has been improving as gross margin grew to 43%. We launched a number of optimized product and a new management product for home care detergent to address diversified needs and get into high-margin areas.
In the first half, we also worked with a partner to develop and commercialize chemical materials with our proprietary technology. This preparation generated about RMB 8 million in revenue in the first half.
In a synthetic biology field, our project in the pipeline are well on the track has where also is currently new applications as well. So the bio, sale with a brand name CARVYKTI received regulatory approval from the U.S. FDA and the European Commission for the treatment of adults with relapsed or refractory multiple myeloma.
CARVYKTI has been launched in the U.S. in the first half. As China’s first CAR-T product commercialized overseas, CARVYKTI’s success is very strong validation of China’s universal products.
That is efforts from R&D to commercial approval provides a path to global commercialization or drugs. On behalf of the management team, I want to thank Ladin and James team for this great achievement.
As of the second quarter of this year, CARVYKTI generates about 24 million sales. We believe that -- with and especially into early line medical trials, promise in commercialization. It is also moving CARVYKTI into early line trials, where conducting Phase III clinical trials or at 4, 5 and 6 programs, includes the potentially used to treat a patient in early lines of multiple myeloma. In vision, also pushing ahead with other pipelines in arrangement, the U.S. FDA cleared at application for our stock consumer, having relapse of reflectively gastric and pancreatic cancers.
Next slide, Slide #6. In the first half, Life Science business continues to pursue innovation. On the platform side, we continue to automate our production lines. We have over 60% of genes from the automation platform, which have significantly improvement in production efficiency.
We also stopped implementing article and other automated production lines as well. To develop our business and shorten the turnaround time, we will launch a plasma automation platform in the U.S. later this year.
We believe this will support our local production in the U.S. and better meet customer needs for GenScript services. In the first half, we launched a semiconductor chip platform with the world’s highest throughput for cell, which features low cost and high throughput.
Based on this platform, we launched a 18 million unique molecules reaching 2.5 million per square centimeter. This technology can also be supplied industrial gene genome editing, protein antibody engineering, molecular diagnostics and synthetic technology.
This platform may also be applied to other expectations including this story. Our capacity expansion for DCT business is larger and initiate production line and to provide a material such as SSD and SCA.
Capacity expansion in Xinjiang is also underway to meet demand on raw materials or the development of nonviral vectors, we leveraged our R&D expertise to develop a safe raw material for non-viral and cell therapy, including test new places in MRA or protein from 160 more CRAs and different such as single and double, which can help our customers, ensure precise target hedging not being with improved safety profile.
Protein ability, we developed a proprietary expression system last year and launched the system in the first half of this year. The actual system significantly increased the protein productivity resulting to the turnaround time, it enables mitigant of brand reductions in a single place -- this system makes our protein expression level and a time line more competitive within the industry. On peptide business, we have become China’s largest customized peptide service providers.
Our peptide synergy feature high throughput and automation in the world. This platform can synthesize about 18,000 peptides in a month. On product innovation, increased demand for technology in drug development, we launched the one-stop IO MRA solution this June, including a property optimization platform or MR scan design, platinum prep automation platform by a high throughput screening, proprietary translational firm catching analogue and genetically modified stream, placebo.
In this, we will be able to provide the fastest and most reliant delivery of MI therapy materials with superior performance. On GCT-related instrument and consumables, we launched the isolation platform to address high cost of cell isolation process in the development of cell therapy.
We launched the best for sales activation and cell isolation, given encouraging testing results from our customers. We have completed three validation batches for GMP-grade of this manufacturer, and we also plan to start a GMP grade business manufacturing in the third quarter of this year. Also, we are building GMP grade facility in to meet industry-grade manufacturing needs.
Next slide. In 2022, we are excited our capacity expansion for life science business, supporting our revenue and business planning in the next three to five years, our molecule building covering about 20,000 square meter has been filed. Our license building coming of about 20,000 square meters has also been to completion this year.
Our life science building of about 35,000 square meters in a 250 site will also be completed for the first phase by the end of this year. In 2023 and 2024, will be expected to be closing capacity expansion.
Next slide, turning to, we continue to make care by business, continue to build up a solid customer check for antibody in the first half added two antibodies to projects, 27 cell and development projects and 31 to be project as it helps our partner get two R&D approval. In business provide our ability in the first half, we are about 51 pre-clinical, 39 CMC and 38 clinical project and also helped our customers get net R&D approvals.
Antibody drug capability, thanks to our aggressive investment and accumulation of its parent in this area in the past several years, our capability has significantly improved. While on has been shortened about 10% to 25%. Our CMC turnaround from has been shortening to six months, benefiting from upgrade of cell line and vector platform of antibody yield higher gram per liter right now.
On the plasma platform, we have now become the #1 GMT supplier in China. In the first half, standing the prospectives of financial efficiencies and process to support large-scale execution. We also successfully delivered the first cell therapy project with a partial line -- our planned 500 liter production capacity, which is the largest in China is entitled commercial production this year. This can meet the diverse active needs of our customers. We do that as we continue to and upgrade technology probably have more in the two.
Next slide, we start looking at year provide a track record. Our business shifting to higher rising stable business, and we are also building up about CMC batches experiments in helping our customers get their R&D approvals on TCT business.
We have had our TCT customers in line related R&D approval in the three years. We have set a number of signals on the plasma and as selling in the global gene and cell therapy industry development.
Next slide, capacity expansion. For other CDMO, we remain a top priority for ProBio. In the next three years, we will also do capacity expansion of biology therapy business and process development to meet the increasing customer demand in this area.
We also expect commission of our 16,000-liter GMP facility in 2023. On TCT, we are focused on expanding plasma virus capacity. Our TCT facility covering over 3,000 in the U.S. is also on construction, which will be used to from international asset.
Next slide, turning to Bestzyme, in the second quarter, launched a new protein product, 1.0 which is used in discharging to break down the protein strength on that, launch of this product in the first half by the expansion of companies. On feed, we upgraded our product and launched new product, new response market demand.
We also optimized low-margin products, improved our gross margin significantly. We also upgraded the existing strength and processes to improve our production intensity and reduce cost as well. Specified by R&D, we now focus on functional proteins and master in the replacement of chemical investors.
Next slide, turn to Legend. In 2022, received last line commercial approval of the lead product CARVYKTI for the treatment of multiple myeloma from the U.S. FDA and also received initial marketing authorization from the EU on May 26. And had the potential to address a worldwide challenge multiple myeloma best-in-class cell therapy with FDA approval focuses solid encouragement of China’s universal drug we stated global commercialization.
Legend’s concept success will also serve as an ideal reference to Chinese Universities drug industry. And we are conducting global data sales studies, along with our synergy. Legend are connecting three global randomized Phase III clinical trials, the first one being aptitude, for our first Phase II trials in the summer and this is evaluating patients with 1, 2, 3 prior lines of therapy and also refractory to Revlimid.
We completed enrollment of more than 400 patients in October of 2021 and now we are in the follow-up. Well, we also started our first Phase III trials in early line multiple myeloma and this is a Phase III open label study of that. We plan to enroll 650 patients.
We are compared to active, where the patients are being treated with standard of care and reality for the RD maintenance. This is actually the first Phase III trial for NAV targeting CAR-T in a setting of multiple myeloma.
It was initiated early this year, another Phase III trial in frontline aiming to complete efficacy of followed by several sales versus [inaudible] in newly diagnosed multiple myeloma patients analogy [inaudible]. Based on the promising data we have generated in the quarter and the clinical development plan, we are very confident in that partially.
Next slide. In the commercial capacity expansion will be one of our best business priorities. While clinical supplies, we have GMP clinical supply side of just the U.S. and emerging China. In addition with the launch of complexity, our facility in riveting has been done on fleet operation, and it is currently or both clinic and commercial manufacture worldwide.
On Global business presence, we are also building commercial sites in Belgium and in Nanjing, China to meet future commercial demand, J&J and Legend is building the Belgium facility. And upon completion, it will be able to supply globally together with that site. In China, we have one GMP operational facility in Nanjing, which has served as our clinical and also first last side of our Chinese market.
At the same time, we are building a large commercial manufacturing site in Nanjing. So we believe that Legend is able to build commercial capacity as scheduled to meet changing urgent need for cells. So I think I now will turn it back to Shiniu again to cover the financial results. Shiniu?
Shiniu Wei
Thank you, Patrick. We are on Page 16, for those who are on the webcast. GenScript continues to grow steadily in the first half of 2022. Group adjusted external revenue grew 32.7% year-over-year to about $305 million.
Group adjusted gross profit reached about $188 million, 31.4% higher year-over-year. The adjusted gross margin was about 61.6%.
Group consolidated net loss was about $226 million and adjusted net loss was about $130 million.
Non-cell therapy business continued its growth in first half. External revenue grew 26.6% to about $248 million. Non-cell therapy revenue [Audio Gap] benefited from new product launch, stronger business development capabilities and capacity expansion in all three business units. The adjusted non-cell therapy gross profit was about $135 million, 22.4% higher year-over-year. Adjusted net profits for non-cell therapy in this was $30.2 million, 14.4% higher year-over-year
Our cell therapy revenue was $57 million, 68% higher year-over-year. This represents continued upfront and milestone payments with J&J collaboration. Adjusted net loss for cell patients about $16 million, mainly due to increased clinical studies of FL and other R&D activities. I often note that cell therapy profit loss figures reported at the group level maybe slightly different from Legend’s own numbers into intercompany elimination.
On Slide 16, as we can see, we continue to invest into R&D in the first half. Excluding share-based compensation, our total R&D was $168 million, down about 2% year-over-year. In first half, due to our strategic investment across non-cell therapy business lines, R&D expenses of non-cell therapy business grew significantly, which is in line with our strategic expectations. We expect R&D spending to further rise as we increase investment in life science business, biologic CDMO and synthetic biology.
We expect R&D for non-cell therapy business overall account for over 10% of revenue in the long run. We also made significant capital expenditures in first half, CapEx was about $82.5 million. Major areas of CapEx included capacity expansion for life science business, CDMO business and production to support commercialization of states.
The group has a very strong balance sheet. As of the end of first half 2022, total cash position including cash and cash equivalents, time deposits and wealth management products stood at $1.26 billion. Cell therapy business has a cash position of $789 million, while non-cell therapy business cash position stood at about $474 million.
Now let’s turn to financial performance of each units. On Slide 17, we reviewed the life science products and services financial performance. In first half, on top of our high achievement last year, our life science business continued to grow steadily. External revenue was about $171 million, up 16.5%.
Life Science business has also further diversified. Excluding the impact of COVID-related products, revenue of life science business would have grown to over 20% due to the impact of long-term projects and the growth in first half for life science will be slower than what we expect in the second half.
And adjusted gross profit grew 8.6% year-over-year to about $101 million. Increased shipping costs due to COVID had a negative impact on our business which cost about 1.5% of gross margin for life science business, but also we expect this impact to narrow in second half. In addition, we have been investing in overseas production capacity in Singapore and U.S. as we ramp capacity there.
This will have a negative impact on our gross profit margin. In the first half, launch of the two new facilities had a negative impact of 3.3% on gross margin. These products such as has also declined in the first half with lower gross margin as well. Overall cost up 12.8% on gross margins in life science business.
On the partner side, we have continued to gain our production efficiency. Therefore, overall gross margin has decreased about 3.5% in this business. We believe with further logistic optimization, overseas capacity ramp-up and a normalized COVID environment, our gross profit in second half, gross profit margins in the second half will stabilize and is capable to what we have achieved in the first half.
Also, I would like to note, as ProBio has been established as an independent legal entity in the second half of last year, the group’s back-office expense has been allocated to the life science and ProBio business segments this year. Now due to the allocation of back office expenses, R&D, selling and administration expenses and operating profit for segment cannot be compared to last year’s number directly.
As we can see, the adjusted operating profit of the Life Science business was about $33.2 million in first half and adjusted operating net profit was about -- net profit margin was about 20%. Excluding the impact of COVID related products, we expect the Life Science business for the full-year to still grow 20% to 25%.
On Slide 18, let’s look at biologic CDMO performance. In first half, our biologic CDMO business, ProBio continued its robust growth. ProBio’s external revenue grew about 94% year-over-year to $6.4 million. Revenue growth was attributed to successful delivery of ongoing projects and fast growth of gene and cell therapy CDMO demand.
Within ProBio, gene and cell therapy CDMO service revenue saw explosive growth, up 168% year-over-year. Revenue for antibody and protein drug CDMO grew 77.5%. As we focus on overseas business over the years, ProBio’s domestic and international businesses are growing in parallel.
Our China-based and international revenue split is nearly half and half. In the future, we will continue to pursue a global strategy to diversify our revenue footprint. Based on our existing backlog, we expect ProBio to continue robust growth and maintain a CAGR of 50% to 60% in the next two to three years.
As of second half total backlog right now is about $228 million, up 57% year-over-year. This significant backlog buildup had resulted in rapid increase in project numbers, we expect to convert this backlog into revenue in the next one to two years. As ProBio grew its revenue, gross profit also grew significantly, up 125% to $24 million.
ProBio’s gross margin continued to grow fast driven by higher capacity utilization, substitution with domestic raw materials and R&D platform optimization and a higher labor efficiency. In first half, adjusted operating profit for ProBio was about $3.2 million, and we expect ProBio’s gross profit to further rise in the future. This gross profit increase in operation optimization, we believe ProBio’s financial performance will continue to improve. For the year of 2022, we expect ProBio’s revenue to grow about 60% to 70%.
Turning to Industrial biology products, revenue declined 7% year-over-year to $16.6 million in the first half. This is mainly driven by product mix optimization. We actively pruned low and negative gross margin products, therefore, gross profit and gross margin significantly improved.
Revenue decline was also contributed by negative impact from the feed industry in China, which is experiencing a downturn. Also, Russia and Ukraine war had a negative impact on our overseas business for ProBio. However, we have noticed a recovery of customer demand in Q3. We do not think this onetime decline in revenue in first half will impact our long-term revenue growth outlook for Bestzyme.
Excluding revenue from -- also in the first half, we had licensed out a patent to our partners and received patent royalty in first half. Excluding this impact, our gross margin was over 40%. This represents an increase of about 10 points year-over-year and benefiting from improved gross profit, we also achieved operating profit in first half for Bestzyme. For the full-year of 2022, we expect Bestzyme’s revenue to grow between to grow in high single digits within 10%.
On Slide 20, cell therapy, external revenue was $57 million. R&D expenses were slightly lower year-over-year. R&D expenses at Legend include costs for conducting clinical trials in the U.S. and China for cell program, which was $89.6 million. R&D expenses for other pipelines were up $60.5 million.
As Legend continued to invest in R&D, adjusted net loss was about $163 million. At the end of first half, Legend has a cash position of $789 million. Also, we had just finished a follow-on offering in Q3 for Legend. So accounting for that, Legend reached another $402 million. Overall, we believe Legend has a very strong cash position to support cell to cell clinical trials and investment into other pipelines.
Now I will hand back to Patrick for him to share our major business and management focus in second half. Patrick?
Patrick Liu
Thank you, Shiniu. Overall, I think our business growth in the first half is -- in line with our business timing, and we believe that the momentum will continue in the second half and the years to come as well. So on Life Science business, we will continue to invest in services and products to tap into the rapid evolving market.
We will also upgrade automation capabilities of the Life Science business and increase the throughput of synthesis, molecule protein, peptide business lines and focus on the global capacity expansion to support our global business growth. ProBio is also growing very fast.
We will further strengthen our business development for large biopharm to seek high-quality business growth. Also we will also stick to our global strategy, build a solid international business and scale up our CMT capacity. In the GCT CDMO field, we will strive to maintain our CDMO leadership position in China while also expanding our presence in the international market.
On Bestzyme, we will synergize R&D with downstream industrial-grade production and a leverage of large-scale industry fermentation capability accumulated over the years. We will continue to optimize our product portfolio, launch more competitive products and accelerate R&D in the synthetic pipelines. For international business, we will strengthen our presence overseas to diversify our revenue stream.
On Legend, with last-line commercial approval for our first drug, CARVYKTI, we will also more commit into early line clinical trials, expecting to make these innovative products available to most patients. On other pipeline, let we also focus the product for solid tumor, regulate tumor and the infectious disease, reshaping the landscape of the cell therapy.
Now I think I would turn it to our Chairman, Mr. Robin Meng to give a summary. Thank you.
Robin Meng
Thanks, Patrick. And thanks to all shareholders, investors and analysts for your continued support. This August marked the GenScript’s 20 th anniversary. Over the past decade, the group has evolved from a team of three Co-Founders only to over 5,000 employees worldwide. I’d like to express my thanks and gratitude to our Founders, management teams and all the employees. It’s my privilege to work with them and share the constant success at GenScript.
On the way much into the future growth, we see quite a strong headwind, climate change, global pandemic outbreak and energy shortage pose immense challenges to the society. We are also facing challenges from intensified competition, rising geopolitical complexity and the regulatory changes to the biotech industry.
However, as the gene of innovation has been embedded in our group companies. I believe that we are able to convert to the challenges into developing opportunities where the joint commitments of the group, our GenScript employees stick to our mission to make people and the nature healthier through biotechnology and the shape girth and the most trustworthy biotech company in the world.
Thanks again, and best wishes to all the participants of the conference. Shiniu?
Shiniu Wei
Thank you, Robin. Desmond, we can open up for Q&A.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] Your first question comes from the line of Linda Shu from Haitong International. Please go ahead.
Linda Shu
Thank you very much for taking my questions and thank you very much for Patrick and Shiniu’s very clear introduction on the business segments. I have two questions. One is that for the life science research services, we noted that the trading margin actually had decline and -- can you actually explain that one of the reason is that the sharing cost increase and also contributes about 1% of the margin decline. And I would like to understand, is it possible to add end price given the increased cost on the labor and energy global-wise. And what do you see margin outlook for the second half of this year? This is my first question. My second question actually is also related to the margin. That is for the industrial synthetic biologic business. And we noticed that actually this business has turned into profit this year and the margin increased significantly to 43%. And I would like to understand what is key reasons and how do we expect the stabilized GP margin of this business and also the sales growth of this segment in the next two years. Thank you.
Shiniu Wei
Thank you, Linda. So for your first question, in terms of gross profit margin impact for Life Science, I will first elaborate a bit on the numbers, and I will have Ray, our President of Life Science Group to give you further color.
So as you had mentioned, shipping cost increase had a negative impact on our gross margin in this business, which was about 1.5 percentage points on GP margin. As you remember, we had started to increase our shipping charges from the second half of last year, and we continue to optimize that this year.
So we believe in the second half impact from this particular area should be normalized when you compare year-over-year. And also impacting gross profit margin for Life Science was the capacity ramp-up for overseas site as well as reduction in COVID-related products.
Overseas site had a negative impact of about 3.3% and COVID-related products had a negative impact about 1.8 percentage points for gross margin. But on the positive side, we have continued to optimize our product portfolio mix change and production efficiency gains had contributed a positive about 3% on gross margins in this business. So Ray, perhaps you can comment more on the outlook.
Ray Chen
Sure. And thank you, Linda, for your question. This is Ray from GenScript Life Science and just wanted to echo Shiniu on the numbers. Yes, the cost of shipping logistics has increased significantly during the pandemic. But we believe that we have optimized and built very robust and logistic routes and systems and that will ensure a reliable delivery for our global customers. This is lot of efforts we have made.
And also that, as Shiniu mentioned, we kept innovating and upgrading our platforms with automation to further reduce costs and improve reliability. And for example, the automation coverage of our plasma platforms now reached 50% comparing with 40% last year, which is quite remarkable as well.
And most -- and more importantly, we are expanding aggressively and strategically not only is the global production capabilities and the capacities, but also in our portfolio capabilities further to GMP in some selected areas that we are pioneering, which means more profitable versus the conventional GMP area. So with all those efforts, and we are confident that all we will surely drive our revenue growth in a steady and profitable way. Thank you, Linda, for your question.
Shiniu Wei
Thank you, Ray. And Linda, for your second question about Bestzyme’s gross margin, First of all, as you can see in our presentation, we had in this first half significantly pruned our low-margin business by purpose.
So as we have been growing in this business, we want to focus on profitable growth and low or negative gross margin products in first half now represents a much smaller portion of the overall revenue from Bestzyme.
So that’s the biggest driver of our margin improvement. And on top of that, we have been optimizing our projection and also with more new and innovative products, we can command a better market premium for these products. Those all helped margin in the first half. So I will also ask Dr. Bai to give you more color in the outlook.
Aixi Bai
Yes, thank you, Shiniu. Thank you, Linda, for the question. So for the next two years, I think we are confident that we -- our overall business will continue to maintain our growth 25% to 30% because we will continue to improve our streams and processes. And we will also continue to launch new products through existing and new application areas. So also, we are strengthening our overseas market. And this is another growth driver for our business. That’s my answer. Thank you, Linda.
Linda Shu
Okay. Thank you all for your answers and that is very clear [inaudible]. Thank you.
Operator
Thank you for the questions. Our next question comes from the line of Jay Lee of Morningstar. Please proceed.
Jay Lee
Robin, Patrick, Shiniu and the other management on the line, thank you for taking my questions. So congratulations on these excellent results despite the tough operating environment in the first half. And also the successful launch of CARVYKTI in the U.S. and approval in Europe. So I have two questions today. To go a little bit further on the question on Bestzyme on the industrial enzymes business, I think you talked a lot about the topics I wanted to know about. But I just wanted to get a better sense about the downturn in the domestic feed industry. Is this expected to turn around in the near future? Or could this be prolonged. And also another question just about the -- to clarify on the gross profit margin. I think we -- you mentioned that the adjusted gross profit margin after taking into account some licensing of patent was around 40% mostly attributed to the pruning of your product offerings. Can we say that this will be the stabilized margin? I think you had also mentioned that you will be launching products overseas, and I was wondering if that could potentially drag down the GPM going forward. And then my second question is regarding ProBio for the CDMO segment. I think CapEx for this segment was around $39 million and $35 million for 2020 and 2021. The first half of this year, it’s been -- sorry, $23 million. So I want to know, can CapEx be expected to accelerate going forward for this segment? And then also given that the customer base is split 50-50 between China and international customers, are there any plans to expand capacity overseas as we have seen with other -- some of the other CDMOs out there? Thank you, those two questions.
Shiniu Wei
Okay. Thank you, Jay. So for your first question on Bestzyme’s performance, I will first answer the gross margin part. Yes, it’s going to take a review of gross profit margin in this business. We do not think the licensing income will be a regular contributing part. So we took -- if we took that away, that’s impacting about two to three points on gross margin reported in the first half. So without that, we still achieved around 40% gross margin.
And going forward, we will continue to launch higher-margin products and also keep a very keen interest on growing profitably. So yes, we do think gross profit margin should stabilize around this level in the next year. And for the feed industry outlook, I will have Dr. Bai answer that.
Aixi Bai
Yes. Thank you. For the first question, actually, the weakness of the fixed market has a negative impact on our business, the decrease in our feed enzyme income. Our customers demand from enzyme is decreasing and the only several products, they think necessary such as [inaudible].
However, we see a slight improvement trend in the second half of the year. So we think our gross margin will continually improve because I think the list and the loss of the feed market is temporary, and we can continue to increase our -- or improve our gross profit margin. Thank you.
Shiniu Wei
And Jay, for your second question related to ProBio, first of all, thank you for paying very keen attention to the CapEx numbers. Yes, from a cash outlay standpoint, CapEx was less for ProBio year-over-year. However, we do have actually a larger number of projects that are ongoing.
This is -- and we do expect an accelerated cash outlay as we pay for these projects in the second half of this year. Overall, we think ProBio’s CapEx for the year would be around $150 million. And with overseas expansion, I will let Brian to comment.
Brian Min
Yes. Thank you for the question. I do think that our CapEx expansion is not slowing at all. We are -- as Shiniu mentioned, we are expecting to invest $150 million this year, which would be the peak and also we are continuing to work on gene and cell therapy facility in the United States.
And also, we are looking at other facilities in an opportunistic way so that if there is a right facility, then we will have a chance to acquire depending on the market conditions. We will always look at the market demand before we think about facility. That is my question -- that is my answer. Thank you.
Jay Lee
Thank you, Brian.
Operator
Thank you. There are no further questions at the time. I would like to hand the call back to the management for closing.
Shiniu Wei
Okay. Thank you, Desmond. And thank you, everyone, for participating. As we have mentioned, we will continue to work hard for our shareholders and drive business performance in the second half and the years to come. Thank you.
Operator
That does conclude today’s conference call. Thank you for your participation. You may now disconnect.
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Genscript Biotech Corporation (GNNSF) Q2 2022 Earnings Call Transcript