WuXi to acquire U.S. drug-research outsource firm
SHANGHAI (Reuters) - WuXi PharmaTech(WX.N), China's biggest pharmaceutical research outsourcing company, said it will acquire U.S.-based AppTec Laboratory Services Inc to gain new expertise and expand market share.
In its first acquisition, WuXi PharmaTech will pay about $151 million with the assumption of $11.7 million of AppTec debt, according to a regulatory filing.
By purchasing AppTec, WuXi PharmaTech will be able to provide a full range of outsourcing services to pharmaceutical clients, expand its operations in the United States and win more clients overseas, company spokesman Mi Hai said by telephone on Friday.
"We will continue to look for acquisition opportunities," Mi said, adding that the purchase would immediately bolster earnings of WuXi PharmaTech, a contract research organization with more than 2,100 scientific staff members based in the Chinese cities of Shanghai and Tianjin.
The company, whose stock has doubled since its U.S. initial public offering in August, provides drug-discovery and development services to pharmaceutical companies, including nine of the world's biggest 10 drugmakers.
WuXi PharmaTech, which also makes active ingredients of drugs used in clinical trials, in November said it expects its full-year 2007 revenue to almost double to up to $135 million.
"Investors are accustomed to American companies trying to get a (research) foothold in China, but this is a case of a Chinese company acquiring a U.S. foothold," said John Kreger, an analyst with William Blair & Co.
"The big message is that for contract research organizations to win and thrive long-term, you need to be global," said Kreger.
He predicted the AppTec acquisition will allow WuXi to forge more deals and relationships with U.S. drugmakers.
Although it is not a very large financial transaction, Kreger said it could tempt other Chinese research outfits to locate in the United States, and access capital by going public.
He said the companies could eventually become significant rivals to U.S. contract research organizations, which include Covance Inc. (CVD.N) and Quintiles Transnational Corp.
WuXi PharmaTech and other Chinese research outsourcing companies are expanding rapidly as the world's biggest drug makers, such as Roche (ROG.VX), Novartis (NOVN.VX) and Pfizer (PFE.N), are moving more drug development jobs to China to save time and money.
It costs as much as $1 billion and 12 years to discover a new drug. The cost of a researcher in China is as little as 20 percent of that in the United States, and the country has a large population eager to participate in drug testing.
"Drug research outsourcing is a sunrise business in China, and WuXi PharmaTech has a big potential to grow," said Yang Chun, analyst at TX Investment Consulting Co.
(Additional reporting by Ransdell Pierson in New York)
(Reporting by Amulya Nagaraj in Bangalore and Samuel Shen in Shanghai; Editing by Saumyadeb Chakrabarty and Carol Bishopric)
