WuXi PharmaTech Puts Squeeze on Suppliers
by Richard Daverman, PhD
ChinaBio Today
WuXi PharmaTech (WX) held a conference yesterday with its suppliers. Following a classic good-news/bad-news theme, the Shanghai-based CRO told its suppliers that it expected to increase spending between 50% and 100%, but at the same time, the company asked suppliers for better terms: longer payment periods, quality guarantees and lower prices. WuXi projects its 2008 spending on equipment and materials will total between 300 million RMB ($45.5 million) and 400 million RMB ($54 million).
The theme of the half-day supplier conference, which was attended by 120 representatives of 70 companies, was “Support Partner Success.” The suppliers provide WuXi with equipment and instruments, raw materials, reagents, consumables, etc. According to Li Ge, Chairman and CEO of WuXi, the goal of the conference was to foster “a win-win cooperation for us and our suppliers."
WuXi awarded Preferred Supplier Awards to Sigma-Aldrich and Alfa Aesar, based on their quality of management systems, the quality of products, on-time delivery, customer service and cost.
In addition, WuXi announced it has centralized supplier buying for its various facilities and for its soon-to-be acquired US division, AppTec Laboratory Services. In early January 2008, WuXi signed a letter of intent to purchase CRO AppTec for $151 million (including debt). Part of the supplier purchases will be to upgrade AppTec so that it can perform the tasks WuXi envisions for it.
In its 2007 fiscal year, AppTec produced $70 million of revenue, while WuXi is on record as expecting its 2007 revenues to be in the $130 million to $135 million range, which would mean the 2007 pro forma revenues of the combined company equal $200 million plus. So far, WuXi has not predicted its 2008 results, but Wall Street analysts have called for the existing WuXi operations by themselves to generate $205 million, an increase of 52%.
WuXi has been growing fast, doubling revenues in the first nine months of 2007 over 2006. It will have difficulty maintaining this level of growth as it gets bigger, and AppTec, though its revenues are also on the upswing, may bring the rate of growth lower as well. WuXi has promised that the acquisition will be accretive from the start, although closing the transaction will cause one-time writedowns.
WuXi has been a rollercoaster of a stock since its August IPO. The company priced slightly above the range at $14, opened at $19, and subsequently traded as high as $45 per share. The shares have backed off from those levels as the speculative fever for stocks has cooled around the globe. Today, WuXi is trading up $1.01 at $24.50.
ChinaBio Today is a regular contributor to BioHealth Investor
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ChinaBio Today
WuXi PharmaTech (WX) held a conference yesterday with its suppliers. Following a classic good-news/bad-news theme, the Shanghai-based CRO told its suppliers that it expected to increase spending between 50% and 100%, but at the same time, the company asked suppliers for better terms: longer payment periods, quality guarantees and lower prices. WuXi projects its 2008 spending on equipment and materials will total between 300 million RMB ($45.5 million) and 400 million RMB ($54 million).
The theme of the half-day supplier conference, which was attended by 120 representatives of 70 companies, was “Support Partner Success.” The suppliers provide WuXi with equipment and instruments, raw materials, reagents, consumables, etc. According to Li Ge, Chairman and CEO of WuXi, the goal of the conference was to foster “a win-win cooperation for us and our suppliers."
WuXi awarded Preferred Supplier Awards to Sigma-Aldrich and Alfa Aesar, based on their quality of management systems, the quality of products, on-time delivery, customer service and cost.
In addition, WuXi announced it has centralized supplier buying for its various facilities and for its soon-to-be acquired US division, AppTec Laboratory Services. In early January 2008, WuXi signed a letter of intent to purchase CRO AppTec for $151 million (including debt). Part of the supplier purchases will be to upgrade AppTec so that it can perform the tasks WuXi envisions for it.
In its 2007 fiscal year, AppTec produced $70 million of revenue, while WuXi is on record as expecting its 2007 revenues to be in the $130 million to $135 million range, which would mean the 2007 pro forma revenues of the combined company equal $200 million plus. So far, WuXi has not predicted its 2008 results, but Wall Street analysts have called for the existing WuXi operations by themselves to generate $205 million, an increase of 52%.
WuXi has been growing fast, doubling revenues in the first nine months of 2007 over 2006. It will have difficulty maintaining this level of growth as it gets bigger, and AppTec, though its revenues are also on the upswing, may bring the rate of growth lower as well. WuXi has promised that the acquisition will be accretive from the start, although closing the transaction will cause one-time writedowns.
WuXi has been a rollercoaster of a stock since its August IPO. The company priced slightly above the range at $14, opened at $19, and subsequently traded as high as $45 per share. The shares have backed off from those levels as the speculative fever for stocks has cooled around the globe. Today, WuXi is trading up $1.01 at $24.50.
ChinaBio Today is a regular contributor to BioHealth Investor
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