WuXi PharmaTech, the international outsourcing company based in Shanghai, China, turned an operating loss of US$56.7 million into a US$13.6 million operating profit between the fourth quarters of 2008 and 2009.
The company reported fourth-quarter net income in line with the analyst consensus, although revenues fell a little short of expectations. WuXi also disappointed with its revenue guidance for 2010, which was below analysts’ forecasts.
The dramatic turnaround in the operating result for the quarter ended 31 December 2009 was largely due to the US$60.5 million charge taken by WuXi in the fourth quarter of 2008. This was for goodwill and acquired intangible asset impairment following a strategic assessment of the AppTec business acquired in January 2008.
In December of that year, WuXi announced it was shedding the US biologics manufacturing capabilities it acquired with AppTec Laboratory Services, which also provided laboratory testing and contract research and development services. Instead, the WuXi AppTec facility in Philadelphia would focus on the Chinese company’s growing biologics testing, cell banking and cell therapy services.
Operating income for the latest quarter also benefited from a 44.2% increase in gross profit, to US$29.2 million, and a 5.0% fall in selling, general and administrative expenses, to US$15.7 million.
Fourth-quarter net income was US$12.1 million compared with a net loss of US$93.9 million in the year-before period. The net loss for Q4 2008 included a loss from continuing operations of US$49.2 million and an after-tax loss from discontinued operations of $44.6 million, related to the closure of WuXi’s biologics manufacturing operation in Philadelphia.
Diluted net earnings per American Depositary Share (ADS) for the fourth quarter of 2009 were US$0.16, matching the consensus estimate of analysts polled by Thomson Reuters. The fourth quarter of 2008 saw a net loss of US$1.42 per ADS.
Net revenues for the latest quarter were US$73.9 million, up by 14.6% over Q4 2008 but lagging behind the analyst consensus of US74.5 million. Revenues from laboratory services were 17.6% higher at US$67.5 million while manufacturing services revenues dropped by 9.8% to US$6.4 million.
In the full year, net revenues came in at US$270.0 million, up by 6.5% on 2008 and within WuXi’s own forecast range of US$265-US$275 million. Adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) of US$92.3 million were 23.1% ahead of the previous year and beat the company’s forecast of US$86-$90 million.
“We expect another good year in 2010,” commented chairman and chief executive officer Dr Ge Li. “We are targeting 2010 revenues to grow 15-19% above 2009 levels, driven by 13-16% growth in revenues of our China-based Laboratory Services business and an improving Manufacturing Services business. We believe that these rates of growth remain at or near the top of our industry.”
At the same time, he added, 2010 would be “a transition year, as we continue to invest in our China-based Laboratory Services, large-scale manufacturing, and toxicology businesses”. In spite of these investments, operating income in 2010 would “grow by up to 10%. We expect these investments will drive accelerating growth in revenues and operating income in 2011 and beyond”.
WuXi’s guidance is for net revenues of US$310-US$320 million in 2010, whereas analysts had penciled in revenues ofUS$328.6 million.
