Wuxi lowers projections for FY 2015 due to CapEx investments, stock takes 10% hit

By Zachary Brennan

- Last updated on GMT

Related tags Revenue

View of the city of Wuxi
View of the city of Wuxi
Aggressive investment in new manufacturing capacity and new initiatives in genomics and cell therapy in 2015 is forcing CRO Wuxi to lower its expectations for 2015, and the lowered projections also seemed to have caused the company’s stock to fall by as much as 10% on Friday.

The company plans to nearly double its capital expansion expenses in 2015 when compared to 2014 – from $108m in 2014 to between $180m and $200m in 2015.

"We continue to invest to strengthen our core businesses, particularly in expansion of capacity​," Dr. Ge Li, Chairman and CEO of Wuxi, said.  "We expect to complete construction of new small-molecule manufacturing facilities in Changzhou in late 2015/early 2016.  We will begin construction of commercial-scale biologics manufacturing facilities in Wuxi city adjacent to our existing clinical facilities in 2015 and complete construction in late 2016​. 

Each of these manufacturing facilities willcost nearly $150m and support strong growth in demand in these businesses,” ​he added. “Two new cell therapy manufacturing facilities in Philadelphia, to be completed in 2015 and 2016, respectively, will cost an additional $40m in total and expand our capabilities in this rapidly developing field​.”

The company’s Suzhou toxicology facility will also see some capacity expansion, with 49 new animal rooms to be added to the current 71 by Q2 of 2015.

The China-based company said these investments are expected to reduce 2015 diluted earnings per share by about 26 cents per share and to earn strong returns in future years. But the company expects new business revenue to rise rapidly in 2016 and 2017.

We really see a tremendous opportunity as a global CRO and for the Chinese healthcare market​,” Dr. Li said.

2014 Results

Last fiscal year’s net revenues increased 16.6% year over year to $674.3m, which was driven by growth in laboratory services of 14.2% and growth of 23.8% in manufacturing services, which was caused by strong demand in both research manufacturing and commercial manufacturing compared to 2013.

Dr. Li noted in a conference call on Friday that the company’s biologics manufacturing business more than doubled between 2012 and 2014, and is expected to grow another 40% in 2015. “This is largely already in the bag​,” Dr. Li told investors in regards to the 40% growth. Revenue for small molecule manufacturing also increased five-fold between 2009 and 2014.

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