Wuxi’s Q2 Revenue Jumps as China Lab Services Drive Growth

By Zachary Brennan

- Last updated on GMT

Related tags: Revenue

Wuxi’s Q2 Revenue Jumps as China Lab Services Drive Growth
CRO Wuxi’s Q2 net revenue increased by almost 10% compared to the same quarter last year as its China-based lab services grew by almost 20%.

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.

Future Outlook

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 Upbeat

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. 

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