The move will affect employees at WuXi’s facility in Philadelphia, which will now focus solely on biologics testing, cell banking and cell therapy services. This facility was acquired in the takeover of AppTec, which gave WuXi biologics capacity and a base in the US.
WuXi says it initiated the change as it anticipates that its US biologics manufacturing operations will account for less than four per cent of total revenues in 2008. The company believes that it will realise $10m in annual cost savings as a result of the move.
The cessation of biologic manufacturing in Philadelphia will be complete by the end of 2008, costing the company an initial $2.5m to $3.5m before savings are realised in 2009.
WuXi’s action comes after disappointing third quarter results that led to the company knocking $20m to $40m off its expected yearly revenues. This downturn affected many of WuXi’s divisions but had not been anticipated by its biologic manufacturing operations.
Speaking during the second quarter conference call Benson Tsang, WuXi’s chief financial officer, said he believed that the biologics manufacturing division’s revenues and margins would continue to grow through 2008.
This growth has been hindered by the global economic climate, with WuXi saying in its third quarter results that a number of small biotechs had delayed or cancelled biologic manufacturing contracts in response to financial pressures.
Although WuXi was previously positive about the fate of the division it has been explicit about its desire to use its biologics knowledge gained from the AppTec acquisition to set up similar operations in China.
Speaking during the second quarter conference call Ge Li, chairman and CEO, said: “We plan to leverage knowledge, know-how we obtained through our acquisitions to replicate our capabilities in biologics, manufacturing, and the process development service in China.”
In addition when a new leadership team was installed at the Philadelphia site Edward Hu, Wuxi’s chief operating officer, said they would play an “important role” in the transfer of biological capability to China.
At this time it is not clear how stopping biologic manufacture at Philadelphia will impact on existing clients or whether WuXi intends to create additional capacity in China.
Staff from the Philadelphia facility assisted in the setting up of WuXi’s molecular biology lab in Shanghai and the company is also planning on constructing a microbiology and packaging testing laboratory in China.