WuXi to buy US biopharma company AppTec

• the biggest takeover of a U.S. company by a Chinese one since Lenovo bought IBM's PC business in December 2004.
• Chinese companies expected to eventually become significant rivals to U.S. contract research organizations.

WuXi PharmaTech, a Chinese pharmaceutical research company, said late Thursday that it would buy St. Paul-based AppTec Laboratory Services Inc. in a deal worth $162.7 million.

The Shanghai-based company, which raised $185 million in a U.S. initial public offering in 2007, 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.

Privately held AppTec employs about 400 employees at its St. Paul headquarters and at facilities in Philadelphia and Atlanta. Its 2007 revenue is estimated at $70 million to $72 million. WuXi said that AppTec's annual revenue growth rate has been about 46 percent since 2004.

"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. 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, Novartis and Pfizer, 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.

It also represents the growing buying power and international ambitions of Chinese companies. Bloomberg News reported the acquisition is the biggest takeover of a U.S. company by a Chinese one since Lenovo Group Ltd. bought IBM Corp.'s PC business for $1.75 billion in December 2004.

The deal is expected to close in the first quarter of 2008.

Reuters/Business Journay

About WuXi PharmaTech

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 2007, its 80 customers included nine of the world's top ten pharmaceutical companies by revenue. For more information, please visit: http://www.wuxipharmatech.com .

About AppTec

With over 20 years experience, AppTec is a trusted leader in providing high-value testing, contract R&D, and cGMP manufacturing services for the biopharmaceutical and medical device industries. AppTec offers a fully integrated approach for the development of highly regulated products such as biopharmaceuticals, traditional pharmaceuticals, cellular therapeutics, medical devices, and combination and tissue-based products. Possessing the full set of competencies, facilities, and key personnel necessary, AppTec helps clients take their products efficiently and cost-effectively through the product development process. The company has three state-of-the art facilities, which are located in St. Paul, MN; Philadelphia, PA; and Atlanta, GA. All AppTec facilities are FDA registered and GLP/GMP compliant. Additional qualifications include ISO certification, AAALAC accreditation, FDA registration for HCT/Ps, and accreditation by the American Association of Tissue Banks.