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The art of collaboration
April 2010
by David Hutton  |  Email the author


SHANGHAI, China—WuXi PharmaTech, a Chinese R&D outsourcing company, has reached an agreement with Johnson & Johnson Pharmaceutical Research & Development (J&JPRD) to collaborate in the area of preclinical services.
  Under terms of the agreement, WuXi will become a provider of toxicology and other nonclinical services to J&JPRD.
Dr. Ge Li, chairman and CEO of WuXi, says the collaboration with J&J builds on an existing agreement to provide the company with integrated pharmaceutical R&D services.  
"We believe that China, with its high-quality scientific talent and favorable cost structure, is destined to become a major center for toxicology services over the next decade," Li says. "We aim to become a leading provider of these services and to add toxicology to WuXi's broad, integrated platform of laboratory and preclinical services."  
In addition, J&JPRD will provide training and other services, reimbursed by WuXi, to establish the GLP quality system and technical capabilities to meet the international standards at WuXi's toxicology facility in Suzhou, China.   Construction of this facility, the largest in China with 314,000 square feet of space, was completed at the end of 2008. In 2009, the company hired a management team with extensive international experience and made substantial progress in training an initial staff of technicians to perform GLP services.  
The Suzhou facility is currently supplying non-GLP toxicology services as well as client-sponsored GLP validation studies. It remains on target to start offering GLP toxicology studies by mid-2010, WuXi says.   Contract research organizations like WuXi have picked up the slack as big pharmaceutical companies trim their own research operations, but they are still feeling the downturn. Li has said the company's newer services have been "increasingly significant revenue growth drivers."  
What impact the collaboration could have on WuXi's bottom line remains to be seen.  WuXi recently announced it shifted to a profit in the fourth quarter, compared with a year-ago period, when the research and development outsourcing company lost money due to a large impairment charge. The firm expects fiscal 2010 revenue to grow 15 percent to 19 percent to between $310 million and $320 million. WuXi says lab services revenue will rise 13 percent to 16 percent, implying a total of $282.4 million to $289.9 million. The company also says manufacturing revenue will improve from its 2009 total of $20.1 million. Manufacturing revenue fell 58 percent over the past year.  
Analysts on average were expecting revenue of $328.6 million, according to Thomson Reuters. WuXi also expects a decline in its GAAP and non-GAAP gross margin of 2 to 5 percentage points. The decrease, primarily in the second half of 2010, is due to factors such as an increase in labor and depreciation expenses, costs from ramp-up of certain operations and pricing pressure, the company said in a statement.
Code: E041006



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