China lab services shine for WuXi in Q2

By Nick Taylor

- Last updated on GMT

Related tags: Wuxi, Generally accepted accounting principles

Wuxi PharmaTech’s China-based laboratory services grew by 23 per cent in Q2, outstripping expectations and resulting in the company revising its guidance for the business segment.

China has been identified as a primary driver of growth in the laboratory services sector and this has helped WuXi at a time when other areas of its business have faltered.

Revenues from China-based laboratory services totalled $44.8m (€31.7m) in the second quarter and WuXi now expects growth of 20-23 per cent this fiscal year, up from earlier guidance of 15-20 per cent.

However, WuXi reconfirmed that it expects total revenues to be $265-275m in fiscal 2009. This is because of poor performance in other business sectors, most notably manufacturing services.

Revenues generated by manufacturing fell by 69 per cent in the quarter, totalling $5.5m. WuXi attributed this decline to the inherent variability of the sector, delays, large projects last year that did not recur in 2009 and an increase in the proportion of early-stage contracts.

The fall in manufacturing revenues in the latest financial results follows an 81 per cent decline in the first quarter. WuXi now expects the manufacturing business to have revenues of $20-$30m in fiscal 2009.

US lab services improve

US-based laboratory services performed slightly better than expected, with revenues increasing by four per cent. This meant the sector generated $16.7m in the second quarter and WuXi now projects that there will be a slight year-on-year improvement in fiscal 2009.

For the whole business net revenues fell by three per cent to $67m. However, operating income increased by 22 per cent, totalling $13.6m in the quarter.

This increase is partially because of a decrease in operating expenses, which WuXi believes is a consequence of cost controls and improved operating efficiency.

Gross-margin for the quarter also improved but WuXi expects that it will decline in the second half of 2009 because of an increase in hiring and continuation of investments.

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