Earnings: WuXi PharmaTech (WX)

One stock that held up well today (up 12% most of the day, finished up 7%) was WuXi PharmaTech (WX) a recent addition to the fund. Earnings came out post close and earnings still matter, right?

Expectations for the company were $33.4M in revenue and $.09 EPS. The revenue number was a slight beat at $34M but a very good beat on the bottom line at $.12. Gross margins on the research mfg side showed a very nice bump but this is the smaller of the 2 business lines. Overall good results, and good growth - analysts are expecting $0.71 EPS for 2008 but I expect that to be bumped up. If they can achieve $0.80 EPS the stock now trades at pricey 37.5x forward earnings but this could be a premium franchise and as they prove themselves I expect to see a lot more business to come there way.

• Revenue increased 77.8% year over year - Laboratory services were $26.7M up 59%, and research mfg was $7.3M up 211%
  
• "Our strong financial performance over the first nine months of this year leads us to raise our full-year 2007 revenue target to the range of $131 million to $135 million, representing 87% to 93% increase over full year of 2006."
• Overall gross margin was 47.0% in the third quarter of 2007, slightly down from 47.4% in the third quarter of 2006. Laboratory service gross margin was 48.2% in the third quarter of 2007, decreased by 4.1% comparing to the same period of 2006, primarily due to an increase in depreciation as a result of expanded laboratory facilities to support future business growth and the appreciation of Chinese Yuan. Research manufacturing gross margin improved significantly from 12.2% of the third quarter 2006 to 42.4% of the third quarter of 2007 as we started to achieve economy of scale as more and larger research manufacturing projects were carried out in 2007 compared to 2006.

Founded in 2000, Shanghai-based WuXi PharmaTech is the leading China-based pharmaceutical and biotechnology R&D outsourcing company. As a research- driven and customer-focused company, WuXi PharmaTech provides pharmaceutical and biotechnology companies a broad and integrated portfolio of laboratory and research manufacturing services throughout the drug discovery and development process. WuXi PharmaTech's services are designed to assist its global partners in shortening the cycle and lowering the cost of drug discovery and development by providing cost-effective and efficient outsourcing solutions that save its customers both time and money. Its operations are grouped into two segments: laboratory services, consisting of discovery chemistry, service biology, analytical, pharmaceutical development and process development services, and research manufacturing, focusing on manufacturing of advanced intermediates and active pharmaceutical ingredients for R&D use. In 2006, WuXi PharmaTech provided services to 70 pharmaceutical and biotechnology customers, including nine of the top ten pharmaceutical companies in the world, as measured by 2006 total revenues.

Long Wuxi PharmaTech in fund and in personal account