WuXi Misses Q3 Forecast, Guides Lower for Year

WuXi PharmaTech (WX) released weaker-than-expected financial Q3 results (unaudited) and, at the same time, lowered guidance for its full year. The company reduced its forecast for 2009 revenue by $20 to $35 million. The new revenue range is expected to be between $260 and $265 million, which still represents a growth rate of 95%. The company issued preliminary unaudited results; a final Q3 report will be announced on November 12, 2008.

About one-third of the shortfall occurred in Q3; the remainder is expected in Q4. The company also said that non-GAAP EBITDA would be between $70 and $75 million for the year.

WuXi said the cause of the shortfall was the troubled economy, which was forcing some smaller biotechs to delay or cancel work on some biologic manufacturing projects. In the conference call, company officials said third quarter biologic manufacturing revenues were higher than Q2’s; nevertheless, they still came in below plan. Biologic manufacturing was a business that AppTec added to WuXi’s suite of services.

In Q3, WuXi PharmaTech saw overall revenues grow by 96% to $67 million (all numbers are unaudited and approximate), well below the consensus estimate of $74 million. Breaking those figures down, $46.5 million came from the Laboratory Services sector, a 74% increase, and $20 million derived from Manufacturing Services, a 177% increase. Non-GAAP EBITDA will be about $18 million for the quarter.

Overall, part of the company’s growth is due to its AppTec acquisition, which occurred early this year. WuXi does not, however, break out separate figures for AppTec, saying the two companies are already integrated. Dr. Ge Li, Chairman and CEO of the company, did say that its China lab services business is expected to grow by 44% year-over-year.

On a GAAP basis, operating income for Q3 is expected to total $7.5 million, which is virtually equal to last year’s number. On a non-GAAP basis, the results looked better for WuXi: they hit $14.5 million, an increase of 61%.

Between now and its final Q3 report, WuXi will determine the amount of its goodwill writedown from the AppTec acquisition.

The company also said its four founders had stopped their pre-arranged sales of stock, presumably because the price of WuXi’s shares is near all-time lows. WuXi was trading in mid-session Tuesday at $7.39, a loss of 29 cents on the day. In the last 12 months, WuXi’s stock price has ranged from a low of $6.37 to a high of $42.08.

Disclosure: none.