Chinese contract research, development and manufacturing company WuXi PharmaTech reported net revenues of US$70.8 million for the second quarter of 2008, 134.2% more than in the same period last year.

The impressive revenue growth was helped by the acquisition of AppTec, a US supplier of laboratory testing, contract R&D and manufacturing services, at the end of January. WuXi did not separate out the AppTec contribution, however, and the Associated Press reported Jefferies analyst David Windley as saying it had been disappointing. According to Windley, WuXi is having difficulty integrating AppTec into its business.

The cost of the acquisition was reflected at the profit level, with operating income just 2.9% ahead at US$7.73 million and the operating margin shrinking to 11% from 25% in the second quarter of 2007. WuXi said this was mainly due to amortisation of acquired intangible assets. Net income of US$8.52 million, up by 19.2% on Q2 2007, included US$5.9 million in non-cash expenses related to the amortisation of intangible assets acquired with AppTec, the company noted.

Diluted earnings per American Depositary Share (ADS) were US$0.12 compared with US$0.11 one year previously. Analysts polled by Thomson Financial had been expecting earnings per ADS of US$14 on average, although their revenue forecast (US$68.3 million) was below the reported US$70.8 million for the latest quarter.

WuXi’s net revenues from laboratory services increased by 80.0% to US$45.2 million. Highlights of the quarter included a three-year collaboration agreement with AstraZeneca, expanded full-time equivalent (FTE) programmes with five existing clients and the addition of four new customers for FTE work. WuXI also opened new US animal facilities in St Paul, Minnesota (where AppTec was based) late in June to drive revenue growth during the second half of the year.

Manufacturing services generated net revenues of US$25.6 million during the second quarter, a rise of nearly 400% on the year-before period. WuiXi’s “efforts to build a world-class manufacturing operation are paying off”, commented chairman and chief executive officer Dr Ge Li.

According to WuXi, industry trends such as continuing growth in R&D spending and outsourcing, as well as the increasing importance of biologics and expanding demand for biosafety testing services, favour the company’s integrated service business model. “We remain agile to meet and anticipate customer needs, expanding and evolving our services to enable integrated total solutions to a broader pharmaceutical, biotechnology and medical device customer base,” Li said.

Wu Xi is also “confident that the thesis underlying our acquisition of AppTec remains intact as we are committed to our long-term vision of being the partner of choice to our customers, offering services along the continuum of drug discovery and development to help our partners improve the success of discovery and shorten the time of development”. he added.

The company has maintained its guidance for consolidated annual net revenues of US$280 million to US$300 million in 2008.