WuXi Reports Another Improved Quarter

WuXi PharmaTech Inc. (NYSE: WX) reported Q1 revenues were 69% higher than year-earlier numbers at $57.1 million. However, this year’s revenue includes an $11 million contribution from the AppTec acquisition, which was closed on January 31, 2008. Revenues from AppTec were included for two months of the quarter. Without AppTec, WuXi’s revenues grew by 36%.

For WuXi, the big winner was laboratory services, a division that saw its revenues rise by 77% to $38.5 million. By comparison, manufacturing services was higher by 53% at $18.6 million. Manufacturing services is always volatile as customers have some control over when product is delivered and booked. WuXi did admit that low utilization in this division during the quarter dragged overall margins lower. The company also said it expected the utilization rates to improve in the remainder of the year, though it did not provide any explanation of its projections.

With the higher revenues, net income jumped 132% to $13.9 million, which works out to an earnings per ADS figure of 19 cents. Non-GAAP net was up 85% at $17.3 million or 24 cps.

The company reiterated that it has shelved its plan for a secondary offering because valuations are so low. However, some shareholders, including Chairman and CEO Ge Li, remain anxious to sell shares covered by options. New tax rule 409A of the US code takes effect at the end of 2008. After that date, performance-based stock options are considered deferred income and must be taxed as such. In the secondary offering, Ge Li put 1 million shares of WuXi up for sale. Those shares, or some portion of them, will now be sold under a Rule 10b5-1 planned disposition. Other officers of the company may also participate in these regular sales of shares.

The company reiterated its guidance of 2008 earnings in the range between $280 million and $300 million dollars. To reach that number, WuXi must average revenues of between $70 million and $75 million per quarter, which is higher than the $57 million it reported in Q1. If AppTec had been consolidated for all three months, the acquisition would have contributed another $5.5 million to the total, a consideration that makes the quarterly goal seem easier to accomplish.

Although the results beat analysts’ expectations (revenue was $.5 million higher and eps were ahead by 4 cents), WuXi traded lower following the report. In mid-session, WuXi has down $1.12 or 5% at $20.64.

Disclosure: none.