WuXi acquires AppTec

STORY UPDATE
SHANGHAI, China—WuXi PharmaTech announced earlier this month the completion of its $162-million acquisition of Michigan-based AppTec Laboratory Services Inc., a service provider for the biopharmaceutical and medical device industries. AppTec offers testing, contract research and development, and cGMP biologics manufacturing services from a highly differentiated, fully integrated platform.
 
 
SHANGHAI, China—WuXi PharmaTech, a Chinese pharmaceutical research company, recently an-nounced it reached a definitive agreement to acquire St. Paul, Minn.-based AppTec Laboratory Services Inc. in a deal worth $162.7 million. The deal further strengthens the burgeoning Chinese biotechnology market.

WuXi, which raised $185 million in an IPO last year, will pay about $151 million for AppTec. The company also will assume about $11.7 million in AppTec debt, company officials say.

WuXi officials said the acquisition of AppTec, which provides testing services for the biopharmaceutical industry, would give it additional biologics expertise and build its footprint in the United States. AppTec's established customer relationships with a number of leading pharmaceutical, biotechnology and medical device companies in the United States and worldwide will supplement WuXi's existing client base, which last year extended to 80 companies, including nine of the world's top 10 pharmaceutical players by revenue.

In a statement, Dr. Ge Li, chairman and CEO of WuXi PharmaTech, says the deal was "an important milestone in realizing our vision of becoming the global R&D outsourcing leader."

"WuXi's chemistry services will be complemented by AppTec's biologics testing and manufacturing capabilities to create a fully integrated service platform, from which we will be able to provide more value-added services to our customers," Ge says. "With an expanded geographic footprint, and a broader and deeper scope of services, we are well positioned to drive growth and continue to increase shareholder value."

While WuXi PharmaTech mainly provides drug discovery chemistry services at a preclinical phase, this acquisition will enable the company to soon offer a full range of services for biopharmaceutical companies, pharmaceutical companies and also medical device makers, in the fields of both chemistry and biology.

Along with state-of the-art FDA-registered facilities located in Philadelphia, St. Paul and Atlanta, AppTec brings established customer relationships with leading pharmaceutical, biotech and medical device companies in the U.S. and around the world. AppTec's  2007 revenue is expected to be in the range of $70 million to $72 million.
 
"Combining these two companies creates a single source platform that has the ability to transform the outsourced R&D model globally," says Bonita L. Baskin, chief executive officer of AppTec.

According to a recent Bloomberg report, WuXi Pharmatech will this year overtake Pfizer, the world's largest pharmaceutical company, in the number of chemists it employs—currently the number sits at 2,100.

It may be a sign of things to come, as China expands into a key player in the biotechnology market. The nation's biotechnology market increased to $3.5 billion in revenue in 2005 from $230 million in 1990, according to San Francisco-based venture capital firm Burrill & Co., which is looking to invest in Chinese biotechnology companies.

According to data from the Boston Consulting Group, research personnel and supplies can cost 60 percent less in China than in the United States, while Ernst & Young estimates the cost of a two-month primate study in China at around $20,000, one-tenth as much as in the United States.

A recent report on outsourcing clinical trials by U.S.-based Arrowhead Publishers put China at the top of a location attractiveness index that ranked 31 "ascending" markets for clinical development according to seven measures of attractiveness such as study costs, population/patients and disease incidence. China scored an average index of 6.48 while India was in second place with an average of 5.66.

In December, U.S.-based MPI Research gave a vote of confidence to China's early development capabilities when it announced a joint venture with Shanghai Medicilon to set up a 50,000-square-foot preclinical testing facility in Shanghai's Chuansha Economic Park (see story, Page 6). The new company, Medicilon-MPI Preclinical Research (Shanghai) LLC, is expected to be fully operational by 2009, offering preclinical services to U.S. Good Laboratory Practice (GLP) standards.

 


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