WuXi PharmaTech Secondary Filing Pressures Stock (WX)

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WuXi PharmaTech (Cayman) Inc. (NYSE: WX) has filed for a secondary offering of ADR’s in the US for 10,126,800 shares, or 11,645,820 if the overallotment option is used.  The underwriting managers are listed as Credit Suisse and JPMorgan.

WuXi PharmaTech is a Chinese outsourced medical development company for biotech, pharmaceuticals, and medical devices.  It does research and development with operations in China and in the U.S.  More specific services are as follows: laboratory services consisting of discovery chemistry, service biology, toxicology, pharmaceutical development, analytics, device testing, and other related contract R&D services.  It also provides manufacturing services that focus on advanced intermediates, active pharmaceutical ingredients, and biologics-based manufacturing, testing and related services.  The company acquired AppTec Laboratory Services, Inc., in January 2008, and had previously focused primarily on chemistry operations, providing services to more than 80 pharmaceutical and biotechnology customers.

Some shares are being sold by shareholders and some will be used for existing factory expansions and for general corporate purposes.

Facilities in China are as follows:

  • primary China-based facilities include a 630,000 square-foot R&D center in Shanghai Waigaoqiao Free Trade Zone;
  • a 220,000 square-foot process development and cGMP-quality manufacturing plant in Jinshan area of Shanghai;
  • and a 130,000 square-foot R&D center in Tianjin, which is mainly focused on discovery chemistry services.

The AppTec acquisition gave a U.S. presence and know-how in biologics, including three FDA-registered, U.S.-based facilities as follows:

  • a 63,000 square-foot R&D and manufacturing facility in St. Paul, Minnesota;
  • a 46,000 square-foot testing facility in Atlanta, Georgia;
  • and a 75,000 square-foot R&D, testing and manufacturing facility in Philadelphia, Pennsylvania.

Its net revenues and income increases follows:

  • 2005 showed $33.8 million revenues and $6.1 million net income;
  • 2006 showed $69.9 million revenues and $8.9 million net income;
  • 2007 showed $135.2 million revenues and $33.9 million net income;
  • unaudited post-AppTec acquisition results would show revenues of $205.5 million and net income $34.7 million.

WuXi Pharmaceuticals stock is trading down 5% today at $22.30 in early afternoon trading.  Its 52-week trading range is $18.27 to $45.65, and the current market cap is listed as $1.37 Billion.  As of last look on the NYSE short interest, we show the March 2008 short interest listed as just over 2.7 million shares.

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Jon C. Ogg
April 4, 2008