“Revenues from biologics services grew strongly in the second quarter and will be one of the key drivers of revenue and earnings growth for the next several years,” Dr. Ge Li, chairman and CEO of Wuxi said. “Commercial manufacturing has a growing pipeline of products, several of which have received breakthrough designation by the US FDA.”
Revenue growth and gross margin in laboratory services was driven by Wuxi’s improved productivity and the ramp-up of biologics and preclinical services, though that was slightly offset by increasing Chinese labor costs and appreciation of the renminbi versus the US dollar, the company said.
But a revenue decline of 1.1% in manufacturing services was the result of lower demand compared to a record level achieved in Q2 of 2012.
As far as the company’s joint venture with PRA, which recently announced a president, CFO Edward Hu said it’s just beginning to kick off and even if it is able to win a large clinical project today, because China’s clinical trial approval process takes so long, it would take at least six months to get started. “But it has a great pipeline ahead starting from next year,” he added.
Wuxi also raised its revenue and EPS (earnings per share) guidance for the rest of the year
CFO Edward Hu said the company’s China-based lab services typically see its highest margins in Q4 because clients generally want to finish their projects before the end of the year, according to a Seeking Alpha transcript of the earnings call on Tuesday.
“Our strong second-quarter performance gives us confidence to increase full-year 2013 revenue guidance to $572-$578 million and full-year 2013 diluted EPS guidance to $1.38-$1.44 GAAP and $1.61-$1.67 non-GAAP,” Dr. Li said.
Analysts also seem to remain upbeat about Wuxi’s prospects, with Jefferies’ David Windley calling the company “one of the more consistent CRO performers,” and also “the cheapest of the CROs despite its favourable growth outlook.”
William Blair analyst John Kreger added that compared to its Western CRO counterparts, the stock still trades at a significant discount.