WuXi’s growth slows
pharmafile | March 17, 2010 | News story | Research and Development |Â Â CRO, China, WuXiÂ
WuXi Pharmatech, one of China’s leading contract research organisations, has been motoring ahead in recent quarters while its western counterparts have struggled, but seems to be finally experiencing the drag factor of the recession.
The firm saw its fourth quarter 2009 revenues advance 15% to $74 million and swung to a profit of $12 million from a $94 million loss in the same period of 2008. However, fourth-quarter revenues and 2010 forecasts of another 15%-plus increase did not meet analyst expectations.
For 2009 as a whole revenues were up 7% at $270 million, led by WuXi’s lab services business, and the firm expects that figure to rise to $310-$320 million in 2010. Operating profit improved to nearly $53 million in 2009 from a loss of $21 million in the prior year.
Those growth figures may seem buoyant compared to some of the top line numbers generated by the multinational CROs in 2009, but come in the context of several years in which an annual doubling in turnover at the company has not been uncommon.
The remainder of 2010 will see WuXi’s margins squeezed by “an increase in labour and depreciation expenses, expenses from the ramp-up of the toxicology and large-scale GMP manufacturing operations, and pricing pressure”, according to the firm’s chief financial officer Edward Hu.
Lab services raced ahead 26% in China on the back of strong gains for newer services such as discovery biology and bioanalytical, but were fairly flat in the US. In total the division brought in $250 million in the year.
Manufacturing services, on the other hand, came in at the lower end of expectations with revenues of just $20 million, a fall of nearly 60%.
Impacting the manufacturing services unit was the closedown of a Philadelphia biologics facility, as well as weaker demand. The division should benefit in 2010 from improved demand and a ramp-up of WuXi’s large-scale manufacturing capabilities, according to the company.
Meanwhile, WuXi’s new toxicology facility at Suzhou will put pressure on margins during the second half of the 2010, as the ongoing costs are relatively high and the company does not expect the lab to contribute meaningful revenues during 2010.
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