GNNSF (GNNSF) Q2 2026 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to GenScript Biotech 2026 interim results conference call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, CFO of GenScript Group -- Biotech Group, Mr. Phil Zhao. Please go ahead.

CFO at GenScript. Welcome to our 2026 interim results conference call. Joining me on the call today are Mr. Robin Meng, Chairman of the Board; Ms. Sherry Shao, Rotating CEO of GenScript; Dr. Ray Chen, President of GenScript Life Science Group; Dr. Aixi Bai, General Manager of Bestzyme; and Mr. Allen Guo, CEO of ProBio. During 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 the 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. Before we begin, please note that the prior period figures presented in this conference call are on a comparable basis, excluding the financial impact of the license transaction with LaNova pursuant to the License Agreement that was recognized in a prior period. We believe this provides a more objective view of the group's underlying business performance. Today, Sherry will provide an overview of our company's performance and growth drivers. I will then guide you through the financial performance. Following that, Sherry will update on our full year guidance. We will also have a Q&A session at the end of the call. As a reminder, today's presentation and recordings will be available in the Investor Relations section of the company's website. Now I will hand it over to Sherry.

Thank you, Phil. Before turning to company performance, I'd like to provide an overview of our company and the core drivers behind our long-term growth. GenScript is a leading global platform for life science services and products. We serve more than 260,000 customers across over 100 countries and regions, supported by an integrated R&D, manufacturing, and commercial network across North America, Europe and Asia Pacific. In the first half of 2026, GenScript delivered a strong set of results that demonstrate both growth momentum and improving business quality. Revenue exceeded USD 400 million, with 27.3% year-over-year growth, while adjusted net profit reached USD 62.5 million, growing more than 200% year-over-year. More importantly, these results reflect the early benefits of a more scalable growth model, AI-driven demand is expanding our addressable opportunities. Our gene-to-protein platform is deepening customer value and competitive moats, and operating leverage is translating growth into stronger profitability. Now let me walk you through key operational highlights across our business for the first half. First, our Life Science Group scaled up high-quality growth. Powered by growing AIDD demand, we achieved both growth at scale and margins improvement. We have further enhanced global delivery, with about 60% of our labs equipped with AI-driven automated workstations, lifting operational efficiency and productivity at scale. Importantly, our gene-to-protein platform continues to change the game by compressing turnaround from digital sequence to model-ready data to as fast as four days, the fastest turnaround in the industry. This is precisely the kind of speed the AI era demands. ProBio maintains steady growth with accelerating order momentum. Increasing top lines moving to downstream driven by AI and in vivo CAR-T is becoming a new growth engine, while improving scale continues to lift profitability. For Bestzyme, rising customer adoption continues to validate the commercial value of our products. We are also applying AI to protein design and engineering to accelerate innovation and the launches in the market with impact. Our growing IP portfolio underpins our long-term successes. As we look ahead, AI is revolutionizing drug discovery. I will highlight how these disruptive trends in AI drug discovery are unfolding and why GenScript is perfectly positioned to leverage this shift and drive this revolution forward. AIDD is approaching a critical tipping point. As summarized by Anthropic's briefing, over the past few years, AI has fundamentally reshaped the software development industry, and life sciences is emerging as the next high-value applications beyond software. We see increasing AI applications in target delivery (sic) [ discovery ], molecule design, and candidate selection. According to another survey by Deloitte, nearly 60% of surveyed biopharma leaders rank AI in research and discovery as a top priority. Indeed, the potential of AI in drug discovery is undeniable. First, AI has the potential to dramatically accelerate early-stage discovery, compressing a traditional 4- to 6-year time line into just 12 to 18 months. Second, AI can enable researchers to explore a much broader range of therapeutic targets, modalities and molecular designs at computational scale. Third, by identifying high-quality, winning candidates early before more costly downstream development begins, ultimately, AIDD models promise higher success rates and a maximized ROI. Here is the structural shift we are tracking: applying AI to the life sciences and drug discovery is fundamentally more complex than pure tech. Biological data is inherently more complicated, and our feedback loops demand rigorous, physical wet-lab experiments. But make no mistake, the AI-driven transformation of our industry is inevitable. Those who can bridge the gap between digital design and wet-lab reality will dominate the market. The key challenge facing AI-driven drug discovery today is no longer generating ideas and designs. It is validating them. AI models can now generate thousands of candidate molecules in hours. However, traditional experimental workflows were not designed for that scale or speed. Validation often takes weeks, involves multiple disconnected steps, and produces data that is not always ready to feed directly back into AI models. As AI accelerates design, the bottleneck is shifting decisively towards experimental validation. We are experiencing a significant opportunity emerging around a new category of infrastructure, validation platform that is fast enough for AI iteration, scalable enough for AI volumes and structured for continuous model learning. That is where GenScript is uniquely positioned. We are here to close the loop. To address this industry challenge, we put forward our 4-day AI-to-biology validation engine. This is an integrated validation platform built specifically for the AI era. And it will continue to improve and evolve. Our platform combines 4 critical capabilities: first, scalable capacity. Our modular gene-to-protein and assay workstations allows us to rapidly add throughput as customer demand grows; second, speed. We can move from digital sequence to model-ready biological data in as short as 4 days, dramatically reducing validation time lines, this is industry leading, world leading; third, integrated execution. Automated and digitally orchestrated workflows reduce manual handoffs, improve consistency and scale efficiency; fourth, AI-ready data. Results are generated in format that can support model iteration and continuous learning. Together, these capabilities allow GenScript to help close the gap between digital intelligence and biological execution, transforming validation from an industry bottleneck into a next-generation solution and our competitive advantage. Here, why this matters commercially. This shift isn't just technological, it's redefining our customer base and our revenue model. AI is changing who buys from us and how they buy. Beyond our core pharma and biotech base, we are increasingly engaging AI-native biotechs, model developers and major technology companies entering life sciences for the first half, a genuinely new commercial category for life sciences industry and for GenScript. AIDD is changing how our customers operate. Their AI models generate more designs, run more experiments and iterate faster, which turns validation from a one-off and a longer cycle project into recurring ongoing stream of demand. That shift the new segment of customers and evolving operating models from our customers is what makes this opportunity structurally larger than a typical cycle. And the result is threefold: a larger customer universe, higher order volumes, faster cycles and deeper, longer-term engagement. Together, they create a larger and more strategic growth opportunity for GenScript over time. For investors who are newer to the AI-for-science ecosystem, this slide illustrates where GenScript sits in the value chain. AI models can generate designs, but those designs must ultimately be translated into biological constructs, validated experimentally, developed into candidates, and ultimately, manufactured at scale. GenScript participates across multiple points of that workflow. Our Life Science Group leads validation through our gene-to-protein and assay platform at an unmatchable speed and scale. We are closely integrated into the AIDD loop. ProBio helps advance promising candidates into development and manufacturing once pipeline advances. Bestzyme leverages innovation and AI-enabled protein engineering to create new opportunities in synthetic biology. Combined with our global operating footprint and strong balance sheet. These capabilities positions GenScript as a critical infrastructure provider, supporting the next generation of AI-enabled biotech innovation. We are not simply participating in the AI-for-science ecosystem, we are actively building the validation infrastructure that enables it. As AI-driven discovery scales, GenScript will continue to strengthen its position as one of the most strategic and valuable points in the biotechnology value chain. Having discussed the strategic drivers shaping our long-term opportunity. I will now hand the call over to Phil to review our financial performance in greater detail.

Thank you, Sherry. Let me now take you through the group's financial performance for the first half. Revenue reached USD 404.2 million, up 27.3% year-over-year, reflecting strong momentum across the group. Growth was broad-based: Life Science services and products grew 28.8% to USD 319 million; ProBio grew 34.2% to USD 61.1 million; and Bestzyme grew 7.4% to USD 30.4 million. Alongside the top line growth, we also delivered higher-quality earnings. Group gross profit reached USD 206.7 million, up 48% year-over-year, significantly outpacing revenue growth. This reflects our improved business mix, operational efficiency and scale benefits. Benefiting from revenue growth and improved operating leverage, adjusted net profit reached USD 62.5 million, up 203.3% year-over-year, a record for any half and the clear guidance, and clear evidence that profitability is scaling faster in the top line. Overall, the group delivered growth across revenue, gross profit and net profit, which is a strong validation of our ability to create long-term value by leveraging our global footprint, innovative platforms and scale. Now let's turn to the Life Science Group or LSG. In the first half, LSG delivered strong revenue growth alongside the meaningful profit expansion and operational efficiency gains. Revenue reached USD 319 million, up 28.8% year-over-year, around 10 percentage points above initial guidance. Growth was driven by sustained global customer demand increase the penetration of the gene-to-protein platform and rapid expansion in AIDD-related demand. We are seeing strong demand for high-quality gene synthesis, protein expression and related research services across pharma and biotech customers and AI-driven companies. More importantly, profitability improved significantly. Adjusted gross profit reached USD 185 million, up 46.1% year-over-year. Adjusted operating profit reached USD 94 million, up 102.8%, surpassing USD 90 million for the first half and effectively doubling. This benefits from our improved operating leverage. Over the past couple of years, we have consistently invested in automation, digital operations, capacity expansion and other global footprints. Alongside the business growth, we see higher operational efficiency and stronger profitability, enabling profit growth to outpace revenue growth. Expense trends were also encouraging. Growth in selling, administrative and R&D expenses remains below revenue growth, reflecting strengthening scale effects and disciplined resource allocation. We also see improved margins. In the first half, adjusted gross margin reached 57.8% or 55.4%, excluding the impact of U.S. tariff refunds, and adjusted operating margin reached 29.5% or 27.1% on a same basis, both improved significantly compared to first half 2025. The operating margin approaching 30% marks an important milestone for LSG, transitioning from investment to growth at scale and profitability. With growing demand from AI-driven drug discovery and expanding global customer base and increasing platform synergies, we believe LSG is well positioned to drive both revenue growth and profitability improvement. This slide shows why LSG's growth is not dependent on single product, region or custom type. LSG's sustainable growth is attributable to its leading platforms, global reach and broad customer base. Looking first at our product mix, gene-to-protein products and services contributed around 2/3 of LSG revenue, making it our most important business area. This reflects both our leadership of gene-to-protein platform and a strong customer demand for integrated R&D solutions. By region, our revenue base remains well balanced. North America contributed approximately 50% of revenue, while Asia Pacific and Europe accounted for 29% and 21%, respectively. This diversified global plans allow us to catch the opportunities across major markets while enhancing our business resilience. Our revenue stream is highly resilient built on a strategically diversified customer base. With over 80% of revenue generated by pharma and biotech, we are deeply embedded in leading R&D engines. Complementing this, our robust presence across global research institutions ensures long-term structural collaboration well beyond our industry segments. Taken together, our gene-to-protein platform, global operating network, and the diversified customer base provides a strong foundation for LSG's continued growth, enabling us to capture opportunities arising from AI-driven life science innovation. Moving on to the opportunities ahead and the key drivers that will support long-term growth, we see 3 engines powering LSG growth in the years ahead. First, our integrated gene-to-protein platform remains the primary engine of our growth. We are tracking the structural shift as customers from transactional, single-product purchases to our comprehensive end-to-end solutions. This transition embeds deeper into their R&D workflows, accelerating top line revenue while directly driving margin expansion and long-term profitability. Second, AI-driven demand has rapidly emerged as massive new growth engine. Unlike traditional discovery, AIDD programs required exponentially higher throughput, continuous engagement and a long-term collaboration. For GenScript, it translates directly into significant larger contract values and exceptional long-term revenue visibility. We expect this momentum to compound aggressively with AIDD orders projected to double in the second half and maintain that hyper-growth trajectory over the next several years. Third, we are seeing stronger returns from our platform investments. The foundational investments we made in automation and the digital capacity are now highly accretive. Driven by climbing utilization rates, our gene-to-protein platform ROI surged 1.5x year-over-year in the first half. Moving forward, as we scale our infrastructure to capture surging demand, this powerful capital efficiency will directly drive margin expansion and superior shareholder value. Overall, the continued expansion of the gene-to-protein, rapid growth in AIDD-driven demand and improving returns on our platform investments underpin LSG's high-quality growth over the next several years. Turning to ProBio. The business continued its strong momentum in the first half, delivering revenue growth, improved profitability, and greater operational efficiency under our end-to-end CRDMO strategy. Please note that all the year-over-year growth rates presented here are on a comparable basis, excluding the financial impact of the LaNova license transaction. Revenue reached USD 61.1 million, up 34.2% year-over-year, continuing the healthy trend of recent quarters, driven by faster order execution, new customer wins and progress across the existing programs. More importantly, that growth is now translating into profitability. Adjusted gross profit reached USD 8.3 million, up substantially from around $2.7 million in first half 2025, as better project mix, higher utilization and manufacturing efficiency all came through. Expense growth remained well below ground growth. We kept investing in R&D and our technology platforms, while tightening organizational efficiency and as revenue scales fixed cost absorbed more effectively. Operating leverage is now clearly reasonable. This show up most clearly in adjusted EBITDA, where the loss narrowed to USD 6.5 million from USD 16.8 million in first half 2025, an improvement of over USD 10 million, and the meaningful step toward profitability. These investments we've made in platforms, global expansion and capacity are now converting into profitability as revenue grows. Looking ahead, we'll stay disciplined on high-quality growth, driving revenue, improving operating leverage, and reinforce ProBio as a leading global CRDMO partner. Beyond revenue and margin, we are focused on the quality and the sustainability of future growth. And on that front, our order intake stood out. On revenue, ProBio grew 34.2% organically. Biologics business grew 44.2% and advanced therapy business grew 16.3%, broad-based strength across both lines. The real headline is orders. New orders grew 54% year-over-year, significantly outpacing revenue growth. Biologics business up 62.1% and advanced therapy business up 34.9%. Our backlog continues to build, further enhancing the visibility of our future revenue. By region, we achieved a steady growth across all major markets. On revenue, China grew 43.1% and international markets grew 30.3%. On orders, China grew 73.8% and international markets grew 55.3% (sic) [ 45.3% ], demonstrating robust demand across both markets and solid [ BD ] outcomes. Overall, ProBio is delivering strong growth across revenue, new orders and market expansion. In particular, orders consistently outpacing revenue reflects customer recognition of our end-to-end CRDMO platform, and reinforces our confidence in growth outlook ahead. Finally, turning to Bestzyme. Despite the market headwinds, Bestzyme maintained steady growth while continuing to invest in innovation and commercial execution. Revenue reached USD 30.4 million, up 7.4% year-over-year, driven by rising demand for core products and growing customer base. Our expertise in the industrial enzymes and biomanufacturing continues to reinforce our competitive position. Profitability also improved. Adjusted gross profit grew 14% year-over-year to USD 13 million, outpacing revenue growth on better product mix and improved manufacturing efficiency. Innovation remains our core driver, with adjusted R&D investment reaching USD 5.6 million in the first half, spanning industrial enzymes, biomanufacturing and synthetic biology, while we apply AI and digital tools to improve R&D productivity and speed commercialization. Alongside that, we continue to strengthening our commercial capabilities and global reach, expanding customer reach as demand grows for high-performance enzyme products and sustainable solutions. On the bottom line, adjusted operating loss was USD 1.3 million compared to 0.6 million loss in first half 2025, a deliberate investment in platform and innovation that positions us to unlock larger growth ahead. Looking forward, with new product commercialization, continued market expansion, and emerging scale benefits, we expect Bestzyme to lift both revenue and profitability.

To conclude, let me share our outlook for the full year. Looking ahead, we are actively capitalizing on the industry tailwinds, the acceleration of AI-driven drug discovery revolution, robust expansion in global biopharma R&D and the next-generation transformation of global biomanufacturing. In Life Science Group, our mandate is clear, we will scale our leading gene-to-protein platform, pushing sequence-to-data delivery, with unmatchable speed and capacity. We will keep digitalizing and automating our global lab network to improve efficiency and reliability. More importantly, we will be directly integrating our wet-lab validating engine into our customers' R&D systems and digital infrastructure to power the future of AI drug discovery. In ProBio, we will continue to benefit from growing biologics demand and emerging opportunities in in-vivo CAR-T and AIDD. We will expand our global footprint, strengthen our platforms, advance more progress from early discovery into clinical and commercial stages, and stay on track for positive EBITDA in 2027. In Bestzyme, we will focus on commercializing sweet protein, accelerating AI-enabled R&D and product optimization, and continuing to expand globally while strengthening our IP position. Supported by our strong first half performance and confidence in the opportunities ahead, we are raising our full year guidance for the Life Science Services segment. We now expect revenue growth of 25% to 30%, adjusted gross margin above 55%, and adjusted operating margin above 25%. For ProBio, we are increasing our revenue growth guidance to 25% to 30% and continue to expect the business to achieve positive EBITDA in 2027. For Bestzyme, we expect revenue growth of 8% to 10% while maintaining an adjusted gross margin of over 43%. Taken together, our platform leadership and continued investments in global reach and innovation, position GenScript to deliver high-quality growth and long-term shareholder value. That concludes today's presentation. Operator, please open the floor for questions.

[Operator Instructions] First question comes from the line of Yang Huang from JPMorgan.

I have two questions. I will first ask first one, then a follow-up. So we noticed a significant upward revision to your 2026 guidance for the Life Science segment compared with the outlook provided earlier this year. So could management discuss the key drivers behind this kind of upgrades and the relative contributions from different areas like AIDD-related demand, customer expansion and project volume growth? And also, if we kind of look ahead, given AIDD demand, and AIDD demand remain very strong, how should we think about the likelihood of further upside to the current Life Science guidance? Are you seeing any signs that such demand from AIDD will continue to outpace your existing assumptions? That's the first one.

Thank you, Yang, for your questions. I'm happy to answer. This is Ray from GenScript Life Science Group. And according to your questions, let me answer in this way. There were 3 things that drove our growth, and they reinforce each other rather than standing alone. First, the AIDD demand itself. As more AI-related biotech foundation model developers and the innovation-focused pharma groups scale their investments in AI-enabled discovery, we're seeing strong growth from gene synthesis to protein expression and candidate validations, especially the sequence-to-data generation solution that we tailored specifically for AIDD. Project sizes are increasing and engagements are becoming deeper and more strategic. Both are showing up directly in order value and revenues. And second, our customer base is compounding and getting higher quality, we're winning new AI-focused accounts while maintaining the healthy demand from our traditional pharma and biotech base. More importantly, our growing share of customers converting from single-project work into multi-stage, multi-service partnership, which is what turns one-time projects into recurring revenue as partnerships. And third, we are now reaping the fruits of our years of platform investments. Sustained spending on automation high throughput capacity building and digitalization is translating into to shorter turnaround, higher utilization and greater scalability. And that operational leverage has become foundational to how fast we can further grow. And for the second part of your question, and we do believe the AIDD is still early. And customers are moving from proof of concept into large-scale validation and iterations and optimization. And that's exactly the phase where demand for high throughput in the protein production and the high-quality data accelerates. We are seeing that in 3 concrete signals. The sizes of the order is growing, the customers' relationships are deepening, and the share of high complexity and structured recurring orders an area that we are uniquely strong is rising. And that last point matters most because it's what gives us confidence and visibility for long term rather than just the momentum. And so we wanted to be clear, this growth isn't the result of one larger customer or one project. It reflects a structural shift in demand and our unique ability to convert that demand into revenue and profitability at scale. Looking ahead, we are continuing to manage guidance prudently. However, the underlying demand signals project volume, size of the order, customer depths, and the growing mix of complex recurring AIDD projects are all pointing the same direction. And big pharmas are evolving and also adopting as well. So it's a fascinating time in the industry. If these trends continue, and our unprecedented execution remains strong, and we're confident about that, too, and we will see a real potential for continued upside versus our current assumptions.

My second one is on competitive landscape. To our understanding, Twist Bioscience is one of our company's primary competitors in the gene synthesis market. So how does management view the competitive landscape between Twist and GenScript in the AIDD space-related business?

Thank you, Yang, for your question. Again, this is Ray. I would like to be a little bit more specific here, because we think the data speaks for itself. At GenScript, we don't compete on commodity volume, we compete on value per delivery results, the speed to data and the data quality that customers can actually rely on. Let me give you some numbers behind that. First, on economics, GenScript capture more than twice the revenue per delivered item versus the company you mentioned. And that gap has continued to widen. On throughput, we're processing in real more than 4,000 designs per day, meaningfully ahead of the publicly reported numbers from the company that you just mentioned, which is in thousands per week. The third about speed. We delivered from digital sequence to binding data in 4 to 7 calendar days, depending on which expression route customer is taking, comparing to more than 2 weeks reported somewhere in the market from the company that as you mentioned. That's -- the number is important here because this is 3 to 5x faster iteration cycle, which matters enormously for customers who is doing AI model depends on the continuous experimental feedback in the loop. And we think the most important edge actually is the data quality in one recent customer round of evaluation, our assay variability that came in under 10%, compared to close to 30% for the company that you mentioned in their workflow. So in the AIDD area, reliable, low variable data is not a nice to have, it's a must to have. And that's where we believe our uniquely strong and clear advantage is most durable. And I can explain a little bit more about our fundamental business model differences as well by comparing the company you mentioned. Much of the competitive landscape, especially, they stop just at DNA or fragments. They couldn't go over, and we delivered the full path from sequence through expression to model-ready data reliably at scale with speed. And we have already built critical downstream capabilities that close the loop end-to-end. Our infrastructure is built differently too. We built a modular intelligent workstations rather than large fixed format systems. And this allows us to add capacity faster with meaningfully lower capital intensity. And eventually, we're targeting doubling the throughput of our capacity every quarter. And we have the confidence to do that. And we have to sustain the industry-leading pace. That's what we have been committing to. So looking ahead, our objective is crystal clear, serving the customers to be the definitive and always industry-leading biology validation engine. Especially for the AI drug discovery era, engineered for the speed, the scale and reliability the industry now demands and requires. And we need to build -- to stay there. Thank you, Yang, for your questions, and allowing me to have the opportunity there to explain.

Next, we have David Shang from Jefferies.

My first one is about the ProBio. We noticed that ProBio has began securing AI drug discovery projects in the first half of '26, could you please briefly discuss the current pipeline of drug discovery related orders and ProBio technology capability? [Audio Gap] It's about we found both Life Science and CRDMO has delivered a meaningful acceleration in the growth. Could the management elaborate on this capital allocation and CapEx plans to support this opportunity and also the investors, we expect any incremental financing requirements or fundraising activities as company continues to expand its capacity and capability.

Thank you, David. So for the first question, Allen, will help address. And for the second one, I'm happy to address some questions. Allen?

Thank for the question, David. This is Allen of ProBio. So for the first half of 2026, ProBio totally signed USD 9.7 million AIDD-related orders, including both for discovery and also CMC project. And actually, we delivered around $2.5 million in revenue. So the AI-generated drug candidate presents a unique development requirement and increasingly demand integrated solutions across discovery and also development. Based on our experience with the AIDD program to date, we have several common characteristics. First, so drug candidates generated or optimized by AI are typical complex molecule, including bispecific or trispecific antibody, which require further validation and optimization to address developability and drugability considerations. Second, the targeted selection and therapeutic applications are becoming increasingly diverse, spanning multiple disease areas and modalities. Third, customers typically require significantly accelerated development time line to maximize the efficiency advantages delivered by AI-driven discovery. And fourth, some customers will advance multiple candidate molecules simultaneously and this creates demand for high throughput and also parallelized development capability. To address this need from AIDD, ProBio has quickly established a specialized solutions across both the discovery and also CDMO value chain based on our extensive experience, know-hows and platforms. First, leveraging our more than 20 years experience in the biologics discovery segment, ProBio discovery provides a comprehensive wet-lab validation platform designed specifically for AIDD program. The key capabilities include: customized data generation, and experimental support for AI model training and optimization; second, highly automated and high-throughput workflows capable of processing thousands of samples per day; and third, integrated in-vitro and in-vivo pharmacology platform across multiple assay formats; and fourth, tailored screening strategies that optimize both biological activity and developability. Through this end-to-end approach, ProBio can help customers advanced AI-generated candidate to PCC within as little as 4 months. And secondly, for our biologic CMC platform, we have introduced a combined developability assessment and Express CMC offering tailored for AI-derived molecule. The key advantages include early-stage developability assessments, leveraging the same host cell system and expression vector employed in downstream CMC development, and rapid identification of sequence liabilities and potential CMC challenges before entering formal development, meaningful reductions of downstream technical and manufacturing risk. And we expanded our accelerated development framework beyond monoclonal antibody, symmetric bispecific antibody to include asymmetric bispecific, trispecific antibodies and also high concentration programs. For even the most challenging molecule format, ProBio can progress from cell transfection to toxicology batch production in as little as 4.5 months, significantly shortening the development time line for AI-driven programs. AIDD is really moving incredibly fast, with ProBio's extensive experience, competitive host cell line system and integrated discovery and CMC platform, we believe ProBio is well positioned for AIDD program, and we will continuously capture this strategic opportunity.

Yes. Thank you, Allen. So David, for your question regarding our capital allocation and CapEx plans. So yes, we will keep investing into match this growth, not just chase it. So expanding capacity, automation and the technology platforms to support a robust growth of both of LSG and the CRDMO business. So our approach to capital allocation stays very disciplined throughout and with a very -- every investment calibrated tightly to customer demand and expected return. So let me give you some numbers. So during the first half of 2026, the group incurred capital expenditure of USD 48.4 million. And based on current business momentum and the project execution in progress, we expect full year 2026 CapEx to remain at a healthy and flexible level, with total CapEx approximately USD 130 million. And importantly, the company continues to maintain a robust balance sheet and a healthy liquidity structure. We currently hold approximately USD 830 million in cash and cash equivalents. And in addition, our disciplined management of capital expenditure, operating costs and the return on invested capital, ROIC, has driven a significant year-over-year improvement in both working capital and free cash flow during the first half of 2026. So given our substantial cash position, our continued ability to generate operating cash flow and a high-quality enterprise credit standing, we are confident that we have sufficient financial resources to support all ongoing expansion initiatives. And therefore, we do not view growth and investment as competing priorities. Our objective is to continue investing aggressively in the highest return opportunities while maintaining disciplined capital allocation and creating long-term shareholder value. So going forward, we will keep advancing our growth strategy with the same financial discipline and [indiscernible] here. So importantly today, we are doing so from a position of increasing profitability, improving return on capital and growing financial strength. So to directly address your second question, we have a sufficient liquidity buffer, so we see no need for equity financing. Thank you, David.

Next, we have Laurence Tam from Morgan Stanley.

First of all, congrats to management on these fantastic results. I have two questions. The first one is that within the AIDD customer base, we have noticed that large AI model companies are gradually becoming a new source of revenue growth. Could you help us better understand the profile of these customers and how their needs differ from those of traditional pharma and biotech companies? That's my first question.

Thank you, Laurence. This is Ray from GenScript Life Science Group again. It's a really, really interesting question, and we're learning as well along the way. This is one of the most important shifts that we're seeing in our customer base, and it's worth being precise about what we have learned and how differently and these customers behave. But let me start about the scale a traditional pharma program typically advance a handful of candidates through a small number of projects, but the AI-related customers operate on an entirely different order of magnitude and their models can generate hundreds, thousands of candidate sequences in a single iteration. And each of those need rapid experimental validation that alone change the order size meaningfully. And second about speed. It's truly different. A traditional design test to learn cycle runs in months, and AI-native customers need continuous fast feedback loop because the model requires a steady stream of experimental data to retrain and improve, which is why the turnaround measures in days now, not weeks. And high throughput expression automated platforms is must to have for those customers. And third, it's about the molecular complexity, and it's different. The traditional pharma projects concentrate heavily on well-validated targets or formats, which -- AI-native customers, and they are pushing the boundaries. They have more complex designs and because the models are explicitly designed to explore molecular space, the traditional discovery won't even attempt. So this -- here's the insight that matters most, we think of how we will further grow for AI-native customers, we're not just delivering a DNA construct or protein itself, we are delivering the data. The data is the end goal. And the expression functional activity, binding stability, developability data or feedback into the model development as input. This means we're not just selling one project or a deliverable. We're becoming part of the customers' AI development infrastructure, which is truly, truly fascinated. And that's what's driving the real upside. So that the customer's lifetime value. The traditional engagement is often a one-off project. And with AI-native relationship can expand the complete workflow in drug discovery, which can also further extend to the clinical and CMC, like Allen just mentioned that with ProBio. This is always one positive. So simply put, AI-native customers and the demand more scale, more speed, more molecules, more designs, more data earlier in the process than traditional programs ever did and the companies built for the high throughput, automated, end-to-end sequence-to-data, quality data delivery are the ones positioned to capture the value. That's exactly the infrastructure we have been building for the past 2 decades and we've built around this for success. So more importantly, that which is more exciting as well, the traditional pharma is evolving as well. They are adopting together along the way. So this is why we see the customer segment is a structural, a long-term growth driver rather than a short-term momentum. And thank you for allowing me to share what we have learned.

Ray, my second question is on Bestzyme. Bestzyme has been extensively integrating AI technologies into its operations under the AI-for-science initiative. Could management provide more details on how AI is being applied at Bestzyme and impact it's having on the business?

Thank you, Laurence, for the question. This is Aixi from Bestzyme. So AI has become deeply integrated into every stage of R&D at Bestzyme. And the business impact comes down to two things: faster R&D at a lower cost. So first, our trained and fine-tuned models let us optimize enzyme performance across multiple dimensions. The enzyme molecules we are getting, say, at performance levels that our old method similarly could ever reach. Second, our AI-driven multi-property optimization has doubled our positive hit rate compared to 2025. In the best cases, we can hit our project goals in just 2 round of variant design with fewer than 150 mutants. This not only improves our project success rate but also significantly increases the number of projects we delivered. For 2026, we expect to deliver 6 to 7 projects which is twice as many as in 2025. Third, we will shorten development cycles. We will launch both the design online platform and the product flow agent platform. They are already cutting R&D time by 20% and on top of that, the agent platform lets more of our scientists design and optimize enzyme simply by using natural language. So it's much more accessible to the team. Fourth, our protein AI models help boost enzyme activity by our DNA-related models help improve our production yields. So put together, they drive significant cost reduction. Over the past year or 2, we have seen meaningful cost savings across more than 3 projects. Take our [indiscernible] and high-temperature amylase as examples, both achieved better performance at a lower cost, with gross margins up by 7% and 6%, respectively, for the single products. Thank you, Laurence.

Next, we have Linhai Zhao from Goldman Sachs.

Congrats on the great results for Life Science Group, in particular. I'm interested to get more color on the improved gross profit margin in the first half. It seems like the AIDD orders came with a higher margin compared to the traditional gene-to-protein orders? Can management share more colors on that? And given that, can we get a better sense on moving forward? How should we think about the long-term AIDD margins? And if the AIDD margins would likely to remain higher how should we think about the entry barriers into this field and the competitive mode of GenScript? And also Dr. Chen also mentioned that increasing utilization to cope with the demand as we're expecting triple-digit growth in the second half and even beyond, what is the utilization rate that we are currently seeing? And how are we preparing for the increased capacity going forward, especially for protein side. Well, I understand that the automation level is lower compared to the gene part?

Thank you, Linhai. This is Phil. I will address your first question regarding the profitability of AIDD orders. And for the second part, utilization, I will defer to Ray to answer. Okay. So AIDD-related orders carry structurally higher margin than traditional protein extraction work. It is worth explaining exactly why, because the drivers are durable, not one time. First, customers typically face/place a large-scale, high-volume orders, which significantly increase the protein expression throughput per project, and that's a portion of the fixed cost across our platform. Second, they normally pay a premium for speed, okay? Rapid turnaround isn't optional for them because the AI models depend on faster experimental feedback to keep iterating, and speed at scale is exactly what our automated high throughput infrastructure is built to deliver. Third, and most important, the deliverables item, it's a different. Customers aren't on just buying protein, they are buying high-quality structured experimental data that feeds directly back into their models, okay? So there's a higher value service than materials alone and they commands the pricing accordingly. Put together, these 3 factors are why AIDD-related projects run roughly 20 percentage points higher in gross margin than traditional protein expression orders. And regarding your question on sustainability, we believe these differential holds and could widen for two reasons: one, the value we are pricing points that is the speed at scale and model-ready data, as Ray just mentioned, becomes more variable and as AI adoption in drug discovery deepens, and because of the cost of validation bottlenecks only growth more painful for customers as their model scale. And second, as our platform utilization increases and automation investments mature, our own cost structure improves in parallel, which means we can defend this margin premium even as the category grows and the competitive intensity increases. So that is a foundational and structural advantage tied to how our business is build and build to last. Ray, for the second one?

Yes. Thank you for your question. I can talk with you for days about how we could scale. The throughput is not only the genes, but also all to the way to protein expression and the further downstream assays and for the validations. So our throughput -- our infrastructure is built, as I mentioned, the modular and intelligent workflows and workstations and which allows us to scale very rapidly with confidence. And the orders, the magnitude that we're getting no one else in the world could accept and deliver. That's what we're doing right now. And we have the confidence to further doubling our support capacities in the coming days and coming months in a very exciting way. Thank you.

Yes. Thank you, for your interest and the questions and ongoing support for GenScript, we apologize for not being able to address all the questions due to time limitations. So if you have additional questions, do not hesitate to reach out to our Investor Relations team, and we will see you on our next call. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.