Rise of Chinese pharma helps ShangPharma grow in Q2

Second quarter net revenues from China-based clients grew 203 per cent year-on-year as local firms and multinational companies’ sites in the country increased outsourcing. Sales from China-based clients were $2.7m (€1.9m), close to 10 per cent of total sales, and ShangPharma predicts it will rise.

“We expect to see a high percentage of revenues come from China’s developing pharmaceutical industry as its rapid pace of growth continues​”, Michael Hui, CEO of ShangPharma, told a conference call with investors.

An increase in China-based clients contributed to ShangPharma growing its customer base by 33 per cent in the past six months. Adding China-based clients helps ShangPharma decrease reliance on a small pool of multinational biopharm companies that account for the bulk of revenues.

In the second quarter ShangPharma’s top 10 clients accounted for 62 per cent of total sales, down slightly year-on-year despite growth. Revenue from top 10 clients was up 24 per cent year-on-year as ShangPharma added new services and cross-sold its existing capabilities.

Biologics testing is one of the emerging service offerings at ShangPharma and the company predicts it will employ 100 people in this area by the end of the year. ShangPharma also expects to boost business with big clients as large biopharm consolidate vendor networks.

Pricing and acquisitions​

While revenue growth is mainly being driven by higher volumes ShangPharma is also encouraged by pricing. Higher prices in new deals and renewals have been well received and Hui expects the upwards trend to continue.

Acquisitions may also play a role in future growth. “With our strong balance sheet​ we are well positioned to make tuck-in investments as opportunities arise​”, William Dai, chief financial officer at ShangPharma, said in the conference call. ShangPharma has $41.6m in cash or cash equivalents.

Shares in ShangPharma closed up 1.35 per cent following release of the financial results.