Wuxi Manufacturing Services Help Increase Quarterly Earnings

By Zachary Brennan

- Last updated on GMT

Wuxi Manufacturing Services Help Increase Quarterly Earnings
Better than expected growth in Wuxi’s manufacturing services has driven the CRO to exceed its earlier guidance in the first quarter of 2013.

With quarterly revenues seeing a more than 11% increase year over year, the company’s manufacturing saw “strong sequential growth in both research and commercial manufacturing​,” with revenue rising almost 10% from $31.4m in Q1 of 2012 to $34.4m this quarter, Wuxi COO and CFO Edward Hu said in a conference call Tuesday.

In addition to manufacturing, the company also expects to ride an uptick in biology and biologics services this year.

We expect substantial revenue and profit growth this year in biology, where WuXi is building a leading technology platform in oncology, infectious disease, CNS, and other areas in China​,” Dr. Ge Li, chairman and CEO of Wuxi, said in the call.

In terms of biologics development, Wuxi spent about $30m through the end of 2012 to construct discovery and development laboratories in Shanghai, as well as a cGMP drug substance manufacturing facility. The company anticipates spending between $16m and $18m this year “to build out a fill/finish facility and purchase lab ​equipment,” Dr. Li said. The company also plans to install 2,000 L bioreactors in the second half of 2013 to allow the production of Phase 3 clinical trial materials.

And despite toxicology businesses slumping worldwide, Dr. Li said the company’s tox business is “growing well​,” and the company expects to ramp up capacity at its Suzhou site from about 60% to 80-85% capacity by year end.

In 2012 the CRO more than doubled its annual tox revenues and this year it is targeting an increase of more than 40%, as more than 30% of revenues are from domestic Chinese clients.

The company also reiterated its guidance for the rest of 2013​, which expects revenue to be up between 13% and 15% from 2012.

Areas of Concern

Synthetic chemistry, which represents 17% of Wuxi’s total revenue, “is becoming commoditized, with competition from many Chinese CROs causing pricing pressure​,” Dr. Li said. To combat this pressure, the company is increasing its synthetic chemistry work at its Wuhan facility, which has slightly lower operating costs, he added.

Another issue is declining margins, but Wuxi expects effective cost control will allow it to maintain flat year-over-year margins throughout 2013, Hu said.

In addition, US-based lab services growth is expected to slow with decreasing demand in biologics testing and difficult comparisons with last year’s strong growth.

However, recently announced drug development partnerships with MedImmune​ and PRA​ will help to expand the CRO’s offerings.

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