The acquisition of AppTec Laboratory Services in January helped to drive net revenues at WuXi PharmaTech, the fast-growing Chinese contract research, development and manufacturing company, up by 68.7% to US$57.1 million in the first quarter of 2008.

WuXi completed the acquisition of AppTec, a US supplier of laboratory testing, contract R&D and manufacturing services, on 31 January. The Chinese company’s US-based operations contributed US$11.0 million during the remaining two months of the first quarter.

There was strong growth overall from both laboratory and manufacturing services during the quarter. The former brought in net revenues of US$38.5 million, 77.4% more than in the opening quarter of 2007 and powered by rising demand for WuXi’s core discovery chemistry and process research services as well as testing services from AppTec.

Net revenues from manufacturing services were 53.3% higher at US$18.6 million, mainly due to an increase in the number and scope of projects, WuXi reported.

Gross margins were 49.2% for laboratory services and 28.7% for manufacturing services, with the group margin coming out at 42.5% for the first quarter. “While our laboratory services margin remained robust, the manufacturing services margin was affected by the low utilisation of our biologics manufacturing facility,” WuXi commented. “Looking forward, we expect the utilisation rate to improve in later quarters.”

The operating margin was 20.4%, up from 17.3% in the first quarter of 2007. WuXi attributed the improvement primarily to increased operating leverage. Operating income for the latest quarter was US$11.7 million, nearly double the US5.8 million operating income recorded in Q1 2007.

WuXi has maintained its financial guidance for consolidated annual net revenues of US$280-US$300 million in 2008. The first quarter “marked the beginning of a new phase as a global company following the acquisition of AppTec”, said chairman and chief executive officer Dr Ge Li. “Compared to the first quarter 2007, we delivered solid top- and bottom-line growth, demonstrating our ability to consistently execute on our strategy.”

The integration of WuXi’s US- and China-based operations is progressing as planned, Dr Li noted, adding: “Under a new global organisational structure, all of our business units and support functions have begun implementing initiatives designed to drive business growth by leveraging our global capabilities and resources.”

WuXi has now terminated the planned follow-on US public offering of 10,126,800 American Depositary Shares (ADSs) that it announced in April and subsequently postponed in May as market conditions and the price of the company’s ADSs declined.

The follow-on offering was cancelled due to “stock market volatility and current market valuations and our belief that our cash flows will remain healthy and alternative financing options, if required to meet our funding needs, are available”, the company explained.