Genscript Biotech Corp

HKEX:1548

Earnings Call Analysis

Firm Focuses on Stable Margins Amid Growth

The company's administrative expenses spiked, driven primarily by its U.S. plasmid facility costs. ProBio's projected full-year revenue growth is in the low single digits with consistent gross profit margins. Bestzyme achieved a nearly 9% revenue increase, with expectations for a full-year growth of 20%-30%, and stable gross profit margins around 40%. The firm's cash position reached $1.5 billion after raising $785 million, anticipating sufficient funds for the next two years.

Robust Growth Despite Global Economic Uncertainty

Amid the global economic uncertainties, the Group demonstrated robust growth, showcasing a compound annual growth rate (CAGR) of approximately 30% over the past four years. This year's first-half revenue reached around USD 390 million, marking a significant 26.4% increase compared to the previous year.

Legend Biotech and CARVYKTI's Strong Sales Performance

Legend Biotech, the group's cell therapy business, saw remarkable progress with strong sales growth for CARVYKTI in the second quarter. With a solid balance sheet fortified by the group's overall cash position of USD 2.167 billion, the Group's capital expenditure (CapEx) and R&D plans for the coming years are securely funded.

Innovation and Patent Accumulation

The company continues to advance in R&D with over 240 patents and nearly 1,000 applications. Over 10% of the 6,500 global employees are in R&D, which underpins future sustainable growth through a diverse and prestigious global customer base spanning more than 100 countries.

Life Science Business Sustains Growth

Despite market challenges, the Life Science business achieved robust external revenue growth of 16.6% and a 12% increase in active customer numbers. The strong momentum in molecular biology services reflects the Group's technical prowess and commitment to quality and delivery standards.

Expansion Goals and Revenue Growth of ProBio and Bestzyme

ProBio's external revenue rose by 7%, with ongoing construction of GMP facilities aimed at penetrating the major U.S. GCT CDMO market. Bestzyme recorded an external revenue growth of 8.9% Y-o-Y, expecting to enhance capacity expansion and competitiveness with a focus on synthetic biology.

CARVYKTI's Impressive Sales and Pipeline Developments

CARVYKTI generated sales of USD 189 million in the first half of 2023. Exciting developments include the presentation of positive Phase 3 data and subsequent regulatory submissions to expand use indications. The FDA awarded orphan drug designation for another promising therapy for small-cell lung cancer.

Milestone Payments and Revenue Guidance

The company received milestone payments worth USD 35 million, acknowledging progress with CARVYKTI. ProBio anticipates maintaining low single-digit growth, while Bestzyme forecasts a full-year revenue growth of 20% to 30% in RMB terms, with Legend expecting to continue its strong performance.

Strategic Enhancements Across the Business

Innovation in Life Science allows gene to antibody expression within five days, enhancing the value proposition. Capacity upgrades in nucleic acid and peptide services enable GMP-grade product offerings, while sales growth in overseas regions outstrips declines in Asia due to a differentiated business approach amid price wars.

Future Industry Prospects and Collaborative Strategy

Despite current challenges, the company sees significant long-term potential, with plans for global expansion, competitive product offerings, and optimizing collaborations with Legend and ProBio to improve capabilities for later-stage development and drive cost advantages in cell therapy manufacturing.

Guidance and Outlook Amid Specialized Industry Shift

The industry's trend toward specialization creates opportunities for the Group, particularly in the CDMO segment. Despite short-term challenges, including substantial administrative expense increases and ongoing pricing competition, especially in China, the Group is confident in the mid to long-term outlook for demand and order acquisition.

Earnings Call Transcript 2023-Q2

[Operator]

Hello, and welcome to the GenScript Biotech Interim 2023 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

It is now my pleasure to introduce IR Director, Pengfei.

[Duan Pengfei, IR Director]

Thank you, Andrew. Hi, everyone. Welcome to GenScript 2023 interim results conference call. I'm Pengfei Duan, Investor Relations Director at GenScript. Joining me on the call today are Mr. Robin Meng, Chair of the Board; Ms. Sherry Shao, Rotating CEO; Dr. Patrick Liu, Off-duty Rotating CEO; and Mr. Shiniu Wei, CFO of GenScript. We also have key leaders from subsidiaries and business units joining us.

Before we begin, I would like to remind everyone that on today's call we will be making statements about future expectations, plans and prospects as well as any other statements regarding matters that are not historical facts, which may constitute forward-looking statements. Actual results may differ materially from those indicated by such forward-looking statements. Because of various important risk factors and changing market conditions, we do not undertake any obligation to publicly update any forward-looking statements.

In today's conference call, Sherry, our Rotating CEO, will share with you the business highlights of the company in the first half as well as the group's strategic planning, and our CFO will walk you through our financial performance and outlook. We also have a Q&A session for you at the end of the call.

Now, I would hand over to the floor to our Rotating CEO, Ms. Sherry Shao. Sherry, please.

[Sherry Shao, Rotating CEO]

Good morning. I'm Sherry Shao, the Rotating CEO of GenScript. It's my pleasure to share our latest development with you.

Despite uncertainties of the global economy, the Group's business has maintained a robust growth. Over the past four years, our revenue CAGR is at about 30%. In the first half of this year, our revenue reached approximately USD 390 million, representing an increase of 26.4% over the last year.

Our cell therapy business segment, Legend Biotech, made significant progress this year. We saw strong sales growth in CARVYKTI in Q2 of this year. We also raised capital for three subsidiaries. By the end of first half, the group's overall cash position is at USD 2.167 billion. Our investment plan for CapEx and R&D for the next few years is secured by a solid balance sheet.

At present, we have approximately 6,500 team members globally. Notably, more than 10% of our employees are R&D staff. Thanks to their ingenuity and innovation, we have accumulated over 240 patents and have nearly 1,000 patent applications. We have a diversified global customer base.

The customers we serve span more than 100 countries and regions, including top-tier pharma and biotech companies, research institutions as well as agricultural and personal care companies. Janssen and Legend's CARVYKTI is also helping patients with multiple myeloma. A solid customer foundation gives us a unique competitive advantage and ensures our sustainable growth in the future.

Now let's move to our segment highlights. Life Science Group is at the cornerstone of the group. The Life Science business has maintained steady growth since inception. Life Science also served as the foundation for us to incubate Bestzyme, Legend and ProBio.

In the first half of 2023, despite a challenging market environment, our Life Science achieved robust external revenue growth of 16.6% with an increase of approximately 12% in active customer numbers. Our core business, molecular biology, maintained its strong momentum with over 18% Y-o-Y growth, demonstrating our technical capability and service strength. Regarding our capacity expansion, our focus remains on upgrading quality and delivery standards.

Our life science building in Zhenjiang will provide new GMP-grade capacity. In the biologics CDMO field, a slowdown in biotech funding has a direct impact on our business. ProBio's external revenue grew about 7%. We added 12 CMC projects in protein and antibody CDMO and 21 GCT CDMO projects in first half

Since inception, we have cumulatively helped our customers get 61 IND approvals globally. ProBio is accelerating the construction of GMP plasmid facility in the U.S. and protein and antibody CDMO facility in China. The plasmid GMP facility in the U.S. will help us penetrate into the world's largest GCT CDMO market.

Our 8 by 2,000-liter Protein and Antibody GMP CDMO facility in Zhenjiang also represents a significant milestone for ProBio. This will fulfill our customers' late-stage clinical and commercial production needs. In early 2023, we completed Series C funding of approximately USD 224 million for ProBio. Our industrial synthetic biology products segment, Bestzyme, also delivered a number of achievements.

Bestzyme's external revenue grew about 8.9% Y-o-Y. Revenue in constant currency grew approximately 15.8%. Our innovative product, protease for liquid detergent, has achieved early commercial success. A number of detergent manufacturers have incorporated our products into their supply chains. The capacity utilization of Bestzyme has also increased, allowing us to improve cost structure. In June, Bestzyme successfully completed the Series A financing. The raised fund will be mainly used to further support Bestzyme's capacity expansion and to strengthen our competitiveness in synthetic biology.

Turning to cell therapy. CARVYKTI generated total sales of USD 189 million in the first half of 2023. This year, at the ASCO meeting, we presented new data from our Phase 3 CARTITUDE-4 study investigating CARVYKTI in relapsed and lenalidomide-refractory patients with one to three prior lines of treatment.

In the study, CARVYKTI reduced the risk of disease progression or death by 74% compared to standard-of-care regimens. The data was also published in the New England Journal of Medicine and presented at the EHA 2023 Congress in June. Based on CARTITUDE-4 data, our partner, Janssen, submitted a Type 2 variation application to the European Medicines Agency and an sBLA to the U.S. FDA to expand the indication for CARVYKTI for use in earlier lines of multiple myeloma treatment as early as after first relapse.

Beyond the success of CARVYKTI, we are also advancing our pipeline for solid tumors. This quarter, the U.S. FDA granted orphan drug designation for our investigational therapy LB2102 for small-cell lung cancer. We have opened two trial centers in the U.S. and are preparing for patient enrollment. Thanks to market recognition of CARTITUDE-4 data, we raised a total of USD 785 million funds in the first half of the year.

We also received a USD 15 million milestone payment this quarter as the acceptance of the Type 2 application for CARVYKTI and achieved another milestone of USD 20 million at the U.S. FDA acceptance of the sBLA of CARTITUDE-4. Now I will dive into the details of segment performance.

In the Life Science business, we have enhanced customer value proposition from three key aspects. From innovation perspective, thanks to our continuously enhanced gene synthesis capabilities and upgraded Turbo CHO platform, we can shorten gene to antibody expression timeline to five business days, saving the time for the industry.

In the GCT field, our new offering GenCircle dsDNA, a circular double stranded DNA vector for gene editing, extended our competitive advantage in the non-viral payload sector. We secured China's first GMP level GenCircle order and earned three GMP-grade ssDNA orders in the first half. In terms of our peptide business, we upgraded cyclic peptide processes leading to higher success rates, cost optimization and significant sales growth in cyclic peptides in the first half.

From a capacity and capability perspective, in first half, we upgraded nucleic acid and peptide services. Now we can provide our customers with GMP-grade sgRNA and nucleic acid. Our GMP-grade peptide facility was also put into use, which can support customers with IND filing and clinical manufacturing.

In terms of GCT consumables, we completed the construction of GMP manufacturing facility in Zhenjiang with GMP-grade magnetic beads for T cell isolation and activation. Our automated plasmid preparation instrument, AmMag Quatro, can significantly reduce costs and improve plasmid preparation efficiency. The instrument has generated revenue and received positive feedback from customers.

To better serve our global customers, we are optimizing our capability in Singapore and in the U.S. and improving overall profitability. We are a customer-centric company. Our efforts in capacity and capabilities upgrading are always driven by customer needs. Throughout our journey, we have enhanced our position as the global number one gene synthesis provider and continue to provide our customers with innovative services and products. In first half, we continued to see robust growth in customer numbers. Our active customer count increased by 12%.

In terms of sales by region, Asia Pacific region, which includes China, dropped by 11% due to biotech funding slowdown and macroeconomy. In other overseas regions, sales maintained strong growth. GenScript Life Science Group is a reliable partner for customers in their R&D journey. We continue to receive positive feedback from customers due to our insight into the diverse needs of academic and industrial customers.

In the Biologics CDMO business, we have further enhanced our capabilities in protein and antibody drugs and the GCT platform. In the antibody and protein drug discovery and development business, we have shortened the development time of antibodies using hybridoma platform and further shortening our fully human ab leads generation time to one month. ProBio also introduced a one-stop ADC development platform.

In terms of development and the manufacturing of antibody and protein CDMO, we upgraded our recombinant protein and bispecific antibody titer. Our fast CMC solutions enable us to deliver GMP materials from DNA sequencing to antibody and protein in 3.5 months.

We also launched ProBox, which can help us better utilize our experience accumulated over the years. In terms of GCT CDMO portfolio, we launched proprietary PowerS ITRrs Strain. The turnaround time for linearized plasmid production has been shortened to five weeks. In the viral vector sector, we could deliver a GMP-grade viral vectors from plasmid in 6 months.

ProBio is capable of supplying 50-liter scale lentiviral production and our AAV suspension production can be scaled up to 200 liter as well. ProBio's proprietary PowerS-293 and 293T's brands have completed DMF registration.

In terms of new CMC projects, there have been noticeable change in the project structure. More customers are working with ProBio to explore challenging molecules and emerging GCT projects. In the protein and antibody CDMO area, we added 12 CMC projects, including collaborations with customers on clinical sample production, process characterization, process validation and research, and commercial production of recombinant coagulation factor VIII. This project will help ProBio accumulate commercial manufacturing experience and late-stage project experience. In the GCT CDMO business, CMC projects have steadily increased.

The customers are more focused on non-COVID related project development. In the industrial synthetic biology products business, Bestzyme maintained stable and positive momentum. Our product offerings include industrial enzymes and feed enzymes. We also have an R&D team dedicated to synthetic biology.

In feed enzymes, we mainly serve the agriculture and animal feed industry. In terms of industrial enzymes, our downstream product applications cover ethanol, starch sugar, baking, textiles and daily chemicals. This year, Bestzyme's innovative industrial enzyme business has achieved encouraging market breakthroughs.

Among the others, our detergent protease product, which was launched at the end of last year, has successfully entered the supply chains of household care companies and started to generate revenue. We expect to achieve further breakthroughs in the second half of the year.

In terms of customer service, we are further upgrading our product solutions to ensure our customers can effectively leverage our products during their production process. In terms of production capacity, the utilization rate of our facility continues to increase. In the second half of the year, we will further increase investment to optimize our production efficiency and quality. We are actively pursuing new opportunities in SynBio field. Our first commercial product, gallic acid, has entered the commercial stage, and we are working closely with our partner to optimize cost structure and improve production efficiency.

Our SynBio solution for food and nutrition additives are also making satisfactory progress. Due to modern societies' pursuit of a healthy lifestyle, sweeteners have significant advantage over traditional sugar substance.

Our sweet protein has undergone preliminary sensory testing and has demonstrated satisfactory results. We are further exploring its commercialization model. We are also developing other SynBio pipelines according to our road map. Thanks to the completion of Series A financing in the first half, we have now been able to further strengthen our competitive edge on SynBio by attracting more talents and upgrade our R&D facility.

Turning to cell therapy. We recently announced the submission of the supplemental Biologics License Application to the U.S. FDA to expand the label for CARVYKTI. The application for expansion includes the treatment of adult patients with relapsed and lenalidomide-refractory multiple myeloma who have received at least one prior line of therapy, including a proteasome inhibitor and immunomodulatory agents.

With this filing, we hope to move CARVYKTI into two to four prior lines of therapy settings in multiple myeloma subject to FDA approval. FDA has accepted the sBLA filing and assigned a PDUFA date of April 5, 2024.

On the clinical side, we are on track to complete enrollment of the ongoing Phase 3 CARTITUDE-5 study, which evaluates cilta-cel in newly diagnosed patients for whom transplant is not intended by the end of this year.

Also, we are planning to initiate enrollment of our first-line CARTITUDE-6 study in Q4 of 2023. Our R&D team continues to advance our proprietary pipeline. In the last quarter, we opened our first clinical site for our DLL3 program in the U.S., our second ongoing clinical trial in the U.S.

In addition, another one of our solid tumor brands, LB1908, targeting Claudin 18.2 in gastric cancer is also progressing on track. We recently opened two trial sites in the U.S. for this program as well in the second quarter and we anticipate dosing our first patient soon. A number of patients are being enrolled and dosed in Phase 1 IIT program in China.

That concludes the update on business highlights. Next, I would like to invite Shiniu to share the financial performance.

[Shiniu Wei, CFO]

Thank you, Sherry. Good morning, everyone. I'm Shiniu Wei, Group CFO.

I would like to walk you through our financial performance. And for those of you following us online, we're on Page 17 of the slide deck. In the first half of 2023, the group and its business segments continued to grow. The group's revenue increased by 26.4% year-over-year to about $390 million. Among them, the Life Science segment achieved external revenue of almost $199 million, maintaining a healthy growth rate of 16.6%. Due to a slowdown in biotech funding and macroeconomic conditions, external revenue growth of the CDMO segment was 7%, reaching $65 million.

External revenue for industrial synthetic biology products grew about 8.9% to $18 million. Thanks to rapid increase in sales of CARVYKTI in 2023, especially in the second quarter, cell therapy business recorded a 77% revenue growth in first half '23. In terms of profitability, the Life Science segment maintained a stable profitability with adjusted operating profit increasing by approximately 17% to about $39.2 million. ProBio had an adjusted operating loss of approximately $6 million in the first half.

Bestzyme's adjusted operating profit for the first half of the year was about $0.3 million, a decrease year-over-year, mainly due to one-time IP licensing revenue from last year's base. The cell therapy business is still in clinical development stage. We expect the BCMA program to break even in 2025 and the cell therapy business unit to break even in 2026. Considering the financial outlook of the rest of the business segments combined, we expect the group to achieve an overall breakeven in the second half of 2025.

In terms of R&D expenses and capital expenditures, the company maintained a stable trend in the first half of '23. Total R&D spending was about $207 million. Currently, the largest proportion of R&D expenses is related to clinical research and other non-BCMA projects in the cell therapy business, while the overall R&D expenses in other businesses have not changed significantly compared to last year.

The company's capital expenditure amounted to approximately $130 million. Currently, the two largest areas of capital expenditure are the cell therapy business and the CDMO business. The CapEx for cell therapy business is primarily to support the manufacturing capacity expansion of CARVYKTI to meet patient demand.

The CapEx for Biologics CDMO is focused on 8 by 2,000-liter GMP facility in Zhenjiang and our first GMP plasmid production facility in the U.S. The group has a healthy cash balance with $2.17 billion in cash and cash equivalents, deposits and investments, among which approximately $1.5 billion belongs to our cell therapy business.

Now on Page 19. The Life Science business continued to maintain stable growth. External revenue was nearly $200 million, representing almost 17% growth. The growth at constant currency was approximately 18.8%. The adjusted gross profit increased about 9% year-over-year to approximately $110 million.

The adjusted gross profit margin for Life Science was 54.4%, slightly lower than same period last year, but roughly stable as compared to second half last year. Although gross profit was negatively impacted by product mix, labor cost increase, new capacity ramp-up in recent years, we also note that gross profit benefited from automated production linked projects and labor efficiency improvement.

Revenue composition by business line did not have significant change in first half. The adjusted operating profit of the Life Science business increased by about 17% year-over-year to $39.2 million in the first half. The adjusted operating profit margin was about 19%. For the full year, we expect 12% to 18% growth in Life Science revenue and the gross profit margin for the full year is expected to remain at similar levels or fluctuate slightly compared to the first half.

On Page 20, external revenue of the Biologics CDMO business grew by approximately 7% to around $65 million. Growth was mainly impacted by the slowdown in biotech funding. The adjusted gross profit margin for ProBio increased by about 10 percentage points. In addition to the impact of lower capacity utilization and price adjustments, the gross profit was also affected by a one-time inventory and contract asset impairments.

In terms of revenue structure, the proportion of GCT revenue further increased. Expense-wise, the growth of selling expense was mainly driven by our investment in overseas commercial capabilities. R&D expense did not show significant change over last year.

However, administrative expense increased by over 40% compared to the same period last year, mainly due to costs associated with the construction of the U.S. plasmid facility. ProBio's adjusted EBITDA was $5.3 million. Due to recent changes in the CDMO market, there is still pressure on ProBio's overall profitability in the short term. We expect ProBio's revenue to maintain a low single-digit growth for the full year and gross profit margin is expected to remain at first half level.

On Slide 21, Bestzyme's external revenue was approximately $18.1 million in the first half, representing an 8.9% growth year-over-year. Revenue at constant currency grew approximately 16.8%. Revenue from feed enzyme business rebounded thanks to favorable end market conditions, while revenue from industrial enzyme business grew due to increased sales to major customers and launch of new products. The gross profit margin maintained at around 40% with a gross profit of $7.2 million in the first half.

We did not see significant change in expenses in first half for Bestzyme, but we do expect to increase R&D expenses in SynBio to speed up the pipeline development. We expect Bestzyme's revenue growth in RMB terms for the full year to be around 20% to 30% and the overall gross profit margin is expected to keep stable as compared to first half.

Now moving to cell therapy. In the first half, external revenue was $109.5 million, consisting of $94.4 million in collaboration revenue from the sales of CARVYKTI and $15 million in license revenue from the achievement of milestone during the first half. R&D expenses for first half were about $180.7 million.

The increase is mainly due to higher patient enrollment for Phase 3 clinical development programs for cilta-cel and increases in R&D activities for other pipeline programs. On the heels of our strong CARTITUDE-4 data, we were able to raise $785 million. By the end of first half, Legend's cash position is about USD 1.5 billion, which is sufficient for the next two years. Legend will leverage its cash position to speed up CARVYKTI's commercial manufacturing and clinical trials and further support other pipeline developments.

Now we would like to invite Sherry back to summarize our group strategy and conclude the presentation. Sherry?

[Sherry Shao, Rotating CEO]

Thank you, Shiniu.

First half results are encouraging, and I would like to express my thanks to all GenScript employees and stakeholders. In the Life Science field, we will continue to empower our clients through our service and product offerings and enable our customers' diverse needs in academic and industrial exploration. We will also further upgrade our facilities and capacities to better address new R&D trends.

For ProBio, we will continue to uphold its global expansion strategy by leveraging our comprehensive strengths in R&D as well as commercial manufacturing to accelerate our customers' projects. For Bestzyme, we will continue to optimize our product offerings and launch more competitive enzyme products.

We will also accelerate our synthetic biology pipeline, aiming to bring more value to the market. Also, we will extend our footprint in international markets to pursue a bigger market. For Legend, increasing and promoting manufacturing capacity for CARVYKTI is our priority, and we will speed up our CARTITUDE-5 and - 6 clinical trials for cilta-cell program. Our R&D team will continue to advance other proprietary pipelines as well. We will continue to uphold our company's mission to make people and nature healthier through our tech knowledge and help drive global sustainable growth.

[Duan Pengfei, IR Director]

Thanks, Sherry. This concludes today's presentation. So operator, let's open up for Q&A section, please.

[Operator]

[Operator Instructions] Our first question comes from the line of Wilfred Yuen with Daiwa.

[Wilfred Yuen, Daiwa]

Hello. Thank you for taking the questions. So I got two for the Life Science. First is the adjusted gross margin. I saw that margin decreased by 3 percentage points. So what's the reason behind it? And what's the margin outlook as we expect more capacity ramp-up from the overseas facilities? That's number one. And I have a follow-up.

[Shiniu Wei, CFO]

Good morning, Wilfred. This is Shiniu. I will take your first question. So when you look at our profitability from Life Science business, I would point you towards the operating profit line. So that's where it really counts. And as you can see, our operating profit from Life Science business grew at the same pace or slightly faster than our top line.

And I think that suggests that we are improving our operating profit -- operating efficiencies. And specifically with regard to the gross profit, factors impacting gross profit are our overseas capacity ramp up as well as, as you know, we have put into production more capacity in the China side as well. And also there's a slight difference in terms of product mix. But overall, we think when -- for the full year, we will maintain or even slightly increase our operating profit margin compared to last year.

[Wilfred Yuen, Daiwa]

Okay. Thank you. I've got another question on ProBio. So can you give us more color on the biotech funding to CDMO business or the Life Science segment? And especially for ProBio, do you have updated guidance on the top line and expectation on when do we receive -- when do you arrive at profitability? Thank you.

[Shiniu Wei, CFO]

I will reiterate our top line guidance for ProBio and have Patrick to comment on the business environment. For ProBio's top line, we do give guidance. For the full year, we expect full-year revenue to grow low single digits. Patrick?

[Patrick Liu, Off-duty Rotating CEO]

Actually, in terms of the business itself, I think we do see like slowing down in terms of customer need in the past year. But in the mid-term, long term, we still believe that demand will be strong, because, let's say, overall speaking, we are still facing headwinds in our global basis. Overall needs in healthcare -- we believe the business definitely will remain strong, I mean, in the long run. So on the other hand, we also see a lot of like technology breakthroughs, which drives like more clinical trials going on looking forward.

And so for ourselves and to really compete -- I mean, even for the entire industry, if you want to compete to win on the market -- and those businesses are really time sensitive and also very competitive. To win on this market, no single company can do everything. So I think the industry is becoming more and more specialized. This will give a lot of opportunities for CDMO like us, like ProBio. So just to really summarize, in the short term, we do face a lot of challenges. But in the mid, long term, we still believe that, that a lot of options will go there on the market.

[Operator]

Thank you. [Operator Instructions] And your next question comes from the line of Wanhua Wu with CICC.

[Wanhua Wu, CICC]

Good morning. I'm Wanhua Wu with CICC. And thank you for giving me this opportunity to ask questions. And I have two to confirm. The first one is about the CDMO demand. Actually, we've discussed before. So going into more details, can you guys please compare the demand of domestic and overseas customer demand and antibody and CGT demand? So which segment has the worst price wars? That's my first question.

[Shiniu Wei, CFO]

Patrick?

[Patrick Liu, Off-duty Rotating CEO]

Yes. Okay. I think I just mentioned it. So roughly speaking, in the short term, we do see some challenges and slowing down in terms of need from the customer end. But we believe that this market is slowly recovering.

And from a geography point of view, obviously, China is facing relative big challenges in terms of extra funding. And generally speaking, overseas market is slightly better than that in China. Yes, we do see a lot of opportunities will come in the short term. So in terms of business portfolio, for Biologics, many customers are -- they just reevaluating their pipelines and spending very carefully, which results in a decline in the first order conversion. We do face some severe price competition in China. And for us, we are taking a differentiation approach.

Let's say, for example, in terms of molecular structure, we have taken a lot of projects on complex molecules, which demonstrate a strong recognition from our customers. So based on the track record, we believe and also we are confident to get more orders.

In terms of GCT, GCT project really has a relatively faster conversion cycle. And in the post-COVID era, non-COVID mRNA and plus other traditional GCT now has seen some recovery. Our virus business saw impressive growth in the first half of the year, which is mostly from other users for CAR T and gene therapy. So we're also pretty confident in the GCT field in the long run. In terms of pricing war itself, I think China is worse than overseas regions overall. And also in terms of business portfolio, antibodies are worse than GCT business.

[Wanhua Wu, CICC]

And the follow-up question on ProBio. My question here is will Legend and ProBio cooperate on more business in the future?

[Shiniu Wei, CFO]

Patrick, please comment. And we also have Dr. Ying Huang on the call. So he can also comment from Legend side.

[Patrick Liu, Off-duty Rotating CEO]

Okay. Yes, maybe I can start. So yes, Legend is a very important customer of ProBio and also for the entire group as well. And ProBio has provided some preclinical development services in the past to Legend. And I think the two teams worked pretty well on those projects in the past.

And looking forward, we also see more opportunity to collaborate with Legend. ProBio has invested quite a lot in capacity building and also invested a lot to improve our capability in later-stage development and manufacturing capability. We do see a lot of opportunities to serve Legend's need to really facilitate their both preclinical, clinical and possibly future commercializing needs, in particular GMP plasmids and the Legend drivers' production.

So I think that currently the two teams are actively exploring the feasibility of a future collaboration. Maybe Dr. Huang can give more comment from Legend's side.

[Ying Huang]

This is Ying from Legend. Yes, as Patrick mentioned, we have been collaborating with ProBio and other business units of Janssen Group in terms of some preclinical collaborations. And that includes components such as plasmid and virus supply, including some of our ongoing IIT trials in China.

Right now, the two teams are working closely to explore future collaborations, especially pending CD approval when cilta-cel is approved in China. We're looking to some of the options to localize certain important components for cell therapy manufacturing to give us a cost advantage. So that's what we're exploring. Thank you.

[Operator]

Thank you. And I'm showing no further questions. So with that, I'd like to hand the call back over to management for any closing remarks.

[Duan Pengfei, IR Director]

Thank you. Thanks to all the shareholders, investors and analysts for your continued support and care. If you have any questions, please feel free to contact our IR team. We'll see you on the next call. Thanks.

[Operator]

Ladies and gentlemen, this concludes today's conference call. Thank you for participating, and you may now disconnect.