No Slowdown for China's WuXi

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China may be slowing down in some areas, but as an outsourcing source for pharmaceutical companies, China still looks strong.

Witness WuXi PharmaTech (NYSE: WX), whose fourth-quarter revenue jumped 62% compared with the year-ago quarter. And keeping costs under control allowed the drug research and manufacturing company to more than quadruple its net income year over year.

The revenue came from more customers -- 80 last year, up from 70 in 2006. More importantly, its top 10 customers all came back for repeat business in 2007 and they more than doubled their spending on WuXi's services. The company didn't say what companies were in the top 10, but had said it has worked with big pharma like Merck (NYSE: MRK) and AstraZeneca (NYSE: AZN) as well as smaller companies such as Pharmacopeia (Nasdaq: PCOP).

There's no major slowdown in sight; revenue is expected to more than double this year, thanks in part to WuXi's acquisition of U.S.-based AppTec Laboratory Services. It's also offering more services in China now that it has more space to take on additional clients: It moved into a building last year and should have new buildings available in both this year and next.

Speaking of the AppTec acquisition, WuXi isn't looking for the combined company to produce a whole lot of cost savings. Instead, the main advantage is that it picked up AppTec's biologics manufacturing services -- making biotech drugs for companies. The other advantage is that it'll now have a U.S. presence, which might help lure even more companies to do research with it.

WuXi's trailing-12-month P/E of 70 seems reasonable if the company can grow revenue as much as it has predicted while keeping costs down. The problem is that the addition of AppTec -- and its higher American wages -- is going to make that very difficult.

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