BEIJING - While reporting surging earnings growth for the second quarter of 2008, WuXi PharmaTech said the company would begin transferring biologics testing and manufacturing from recently acquired American AppTec Laboratory Services to China.

"We are ramping up biologics operations to drive future revenue growth," WuXi PharmaTech CEO Ge Li told investors and analysts during an Aug. 14 conference call.

"There is strong interest from several pharmaceutical companies to have us perform biologics manufacturing and testing in China," Li said.

Shanghai-based WuXi is China's leading contract research organization, and since acquiring AppTec in January has been orchestrating training and talent exchanges between its new U.S. subsidiary and its Chinese operations.

"We are leveraging U.S. capabilities in biologics and medical devices to build services in China," Chief Operating Officer Edward Hu explained during the call.

"We are now building a new microbiology lab in Shanghai," Hu said.

WuXi's leaders indicated the company would channel an increasing amount of capital and talent in China into a new biopharmaceutical facility in order to create a new driver for future growth.

Wuxi reported this week that its net revenues for the second quarter of 2008 skyrocketed by 134 percent to $70.8 million, compared with $30.2 million in the corresponding period of 2007.

Net revenues from laboratory services increased 80 percent to $45.2 million in the second quarter while net revenues from manufacturing services advanced by 400 percent to reach $25.6 million in the April to June period.

WuXi reported "non-GAAP net income" for the second quarter of 2008 climbed by 81 percent to $15.5 million, compared with $8.6 million in the second quarter of 2007. Income figures presented on a "non-GAAP" basis exclude share-based compensation expenses, amortization of acquired intangible assets and deferred tax impact on acquired intangible assets.

When these factors are included in the earnings equation, the company posted net income of $8.5 million for the second quarter, a 19-percent rise from the $7.1 million recorded for the second quarter of 2007.

"We maintain our 2008 annual consolidated net revenues guidance in the range from $280 million to $300 million," WuXi's CEO said.

WuXi VP-Corporate Communications Hai Mi said in an earlier interview that the rapidly expanding research organization was stepping up moves to send Chinese scientists to AppTec operations in the U.S. for training in biologics testing and production (Also see "WuXi PharmaTech Launches Talent Flow with Acquired U.S. Firm AppTec" - Scrip, 9 May, 2008.).

WuXi's biologics facility in China will complement rather than replace AppTec's services, and the company will not be closing any U.S. operations, Mi said (Also see "WuXi PharmaTech, Combined with U.S. Firm, Sets Sights on Global Market" - Scrip, 29 May, 2008.).

WuXi also has hired a cell-line expert and intends to establish a cell-line capability, he said, adding that "revenues from biologics are expected to rise by next year."

WuXi is in the final stretch of negotiations with Princeton, N.J.-headquartered CRO Covance on creating a joint venture preclinical testing facility in the east coast Chinese city of Suzhou, CEO Li said (Also see "WuXi PharmaTech And Covance To Partner On Preclinical Testing In China" - Scrip, 26 June, 2008.).

"A small consulting team with members of both sides is working out the final details of the deal," Mi said.

Jinsong Du, an equity research analyst at Credit Suisse in Hong Kong, noted that during a recent earnings conference call with investors, "Covance management said the company expects to sign a contract on the joint venture with WuXi within the next three months.

"Covance is very positive about the joint venture, and said it could start operations in 2009," Du said.

The Credit Suisse researcher told PharmAsia News, "Charles River, Covance and now WuXi have all reported earnings that exceeded expectations; this shows the CRO business is booming" on both sides of the Pacific.

- Kevin Holden (pharmasia@elsevier.com)

WuXi PharmaTech To Transfer Biologics Testing And Manufacturing From U.S. AppTec To New China Lab

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