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The Week in Review: WuXi PharmaTech Estimates Q2 Results

publication date: Aug 5, 2007
 | 
author/source: Richard Daverman, PhD
Second Quarter Revenue Lower Than First Quarter

WuXi PharmaTech (WX) released a rough estimate of its financial results for the second quarter. The report gives investors greater understanding of the company in advance of its IPO, scheduled for the upcoming week (see story). In general, the company booked huge increases over the year-earlier period, while showing modest declines over its first quarter.

WuXi expects its revenues in the quarter to hit about $30 million, gross profit of $15 million and net income around $7.2 million. Manufacturing contributed about $5 million, while the remainder was laboratory services. On the revenue side, the second quarter doubles the year-earlier numbers, but represents a 10% slide from the Q1 results.

WuXi PharmaTech blamed the decline on fluctuating results from the manufacturing division, which depend upon customer's schedules. Revenues from manufacturing dropped from $12 million in Q1 to $5 million in Q2. The company said it increased deferred revenue by $7.6 million, primarily because one customer must receive regulatory licenses before accepting delivery of product. WuXi cautioned that manufacturing revenues will always fluctuate, positioning the downturn as a normal aspect of its business, rather than a warning sign for prospective IPO investors. On the other hand, revenues from the laboratory sector showed a steady increase of 15% over Q1.

Share-based compensation costs, which are a sizable item for the company, were $1.2 million, a $2.1 million drop from the first quarter.

The quarter-over-quarter decline is a small hiccup for WuXi, which otherwise seems to be a very strong offering. The explanation is plausible, even though an IPO company is better off if it does not need to explain anything. Because the stock market has become more cautious, the offering may price lower than it might have earlier this summer. But WuXi is a powerful story that investors will find compelling.

In other news from China biotech last week, Sinovac (SVA) entered a co-promotion agreement with GlaxoSmithKline (GSK) for its flu vaccine, Anflu (see story). Bridge Pharma brought in a new CEO, replacing founder Dr. Glenn Rice (see story). The company is integrating its US-side lab, bought from Gene Logic, into its operations, which were established first in China. And China continues to move forward in its fight against food and drug safety problems, closing companies that shipped lethal products (see story), and increasing regulation.

Disclosure: none.




 

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