By Gareth Macdonald
14-Oct-2008 -
China’s WuXi PharmaTech has reported a below par set of unaudited third quarter results and has cut its full-year expectations blaming the current economic climate’s impact on R&D spending within the sector.
Revenue for the three months ended September 30 reached $66m (€48m), up 96 per cent on the comparable period last year, but shy of the $74m estimate of analysts. The firm now expects full-year revenue in the $260m to $265m range, down from the $300m it had previously forecast.
Wuxi’s CEO, Ge Li, said that the firm had made the change in light of “cancelled or delayed projects from small biotechnology customers,” which are expected to significantly impact on its fourth quarter.
He remained generally upbeat however, arguing that “even with the financial market unrest, we believe the need for outsourced services remains robust,” adding that WuXi would continue to expand and evolve its service offering.
Li cited the example of WuXi’s Chinese laboratory services business, which he predicted would grow by around 40 per cent year-on-year, as the basis for his continued optimism.
WuXi expects to publish fully audited Q3 results on November 12, which will include the impact of its $151m acquisition US-based AppTec Laboratory Services that was completed in January this year.
Collapse of Covance deal
Another factor affecting WuXi’s full-year predictions is the collapse of its deal with Covance, under which it had planned to establish a Chinese contract research joint venture.
When the partnership was announced observers raised questions about the deal from WuXi’s perspective, especially the claims that it would help broaden the firm's client base. The company has been doing well in this regard of late, attracting a rich roster of manufacturing and research contracts from drug developers around the world.
For Covance the benefits of the deal were seen as being more straightforward, with the JV providing it with a foothold in China, with the inherent benefits of lower wages and higher margins the nation can bring.
The JV was intended to be run out of a 323,450 sq ft facility which is currently being constructed by WuXi in Suzhou, China, and is due to be completed in 2009.
Speaking after the collapse of the agreement earlier this year, WuXi insisted that it would press on with the construction of the facility and “plans to offer a full-range of preclinical services and GLP toxicology capabilities ... helping WuXi clients to improve the success of discovery and shorten the time of development.”
