WuXi PharmaTech, the fast-expanding Chinese company that provides global research and development (R&D) outsourcing services to the pharmaceutical, biotechnology and medical device industries, reported a 93.3% increase in net revenues to US$135.2 million for 2007.
Operating income at WuXi nearly tripled last year from US$10.1 million to US$30.2 million, confirming the headlong momentum of the Shanghai-based company that recently followed up a US$185 million initial public offering in New York with a definitive agreement to acquire US contract research and manufacturing services provider AppTec Laboratory Services for around US$151 million.
“We remain focused on our goal to transform the drug R&D model globally,” said WuXi, founded only in 2000 and now offering “a broad and integrated portfolio of laboratory and research manufacturing services throughout the drug discovery and development process”.
The revenue growth in 2007 reflected strong gains from laboratory services and from the smaller research manufacturing services segment. WuXi’s laboratory service revenues were up by 71.3% over 2006 to US$102.4 million while research manufacturing revenues jumped 222.9% to US$32.8 million.
Growth in both segments was attributed to higher business volume. “Our ongoing commitment to high-quality customer service resulted in a doubling of revenues from our top ten customers over the full year 2006,” WuXi noted.
Gross margins were somewhat tighter than in the previous year, narrowing from 49.1% to 46.5%. According to the company, the lower margins were mainly due to the appreciation of the Chinese currency across WuXi’s cost lines and investment in new services such as formulation and toxicology during the year.
These adverse effects were offset by improved gross margins achieved through economies of scale in research manufacturing as well as the increased number and scope of research manufacturing projects during the year.
In the fourth quarter of 2007 WuXi’s net revenues rose by 62.4% to US$37.1 million while operating income was 122.6% higher at US$9.35 million.
AppTec integration progressing
The acquisition of AppTec Laboratory Services was completed on 31 January and WuXi continues to make progress with integrating the business, it said. All of the key senior managers identified before the acquisition was concluded have decided to stay with the company and have signed employment agreements, WuXi noted.
“The retention of key executives provides continuity of operations and services to AppTec’s existing client base and will help expedite the integration of our complementary service lines,” it added.
On the facility front, WuXi expanded the laboratory space at its R&D facilities by 326,000sq ft last year. Construction is underway on an expansion to the company’s 220,000 sq ft current Good Manufacturing Practices (cGMP)-quality plant in Jinshan District, Shanghai, which is expected to be ready to start production in the second half of this year.
Construction of a Good Laboratory Practice facility in Suzhou, China began in the third quarter of 2007 and remains on track. WuXi still expects this facility to come online in 2009.
For 2008, the company is projecting consolidated revenues in the range of US$280 million and US$300 million.
