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$$$MR. MARKET$$$ is a proprietary investor and does not provide individual financial advice. The stocks mentioned on this forum do not represent individual buy or sell recommendations and should not be viewed as such. Individual investors should consider speaking with a professional investment adviser before making any investment decisions.
We’ve all had those moments of complete lack of clarity. You know when you do something insanely stupid, yet you have no idea why you did it, and don’t know for sure that you’ll never do it again. Ineveitably one of your best buds will inquire, “What are you…….on drugs?”
Or how about when you’re in the sports book in Vegas and you bet Akron, Rice and Florida International in a money line parlay. The person at the ticket window says, “What are you……on drugs?”
Now the world is full of all kinds of drugs. There are good drugs which make us better, and bad drugs which make us stupid. Then there are statins which are supposedly good drugs, but still make us stupid. A lot of times, the good drugs become bad drugs because they aren’t utilized the way that they were supposed to be when they were first invented.
Having said all that, drugs are going to continue to be invented. Many of these drugs will make tons of money from the eager drug companies who will push them on the users. I love drugs.
Today I bought stock in Wuxi Pharmatech (WX) at 3713. I will sell it in 4 – 6 weeks at 42.95. Here’s why I like WX:
It most definitely starts with the chart….this one is going up like it is on steroids, or some other drug:
Wuxi PharmaTech (Cayman) Inc., through its subsidiaries, operates as a pharmaceutical, biotechnology, and medical device research and development outsourcing company in China and the United States. It operates in two segments, Laboratory Services and Manufacturing Services. The Laboratory Services segment offers services for small molecules, such as synthetic chemistry, biology, medicinal chemistry, DMPK/ADME, formulation, analytical chemistry, toxicology, clinical development, bioanalytical services, genomics, and research reagent production, as well as services for discovery and development of biologics; and testing services for biologics, medical devices, and combination products. The Manufacturing Services segment engages in the production of manufacturing advanced intermediates and active pharmaceutical ingredients for use by pharmaceutical companies in preclinical and clinical trials of small-molecule products and for commercial products, as well as the production of biologics. The company sells its services directly to pharmaceutical, biotechnology, and medical device companies. Wuxi PharmaTech (Cayman) Inc. was founded in 2000 and is headquartered in Shanghai, China.
So what this means is that these guys don’t sell drugs to people. They help drug companies research drugs so that they can sell these drugs to people. It’s like the guys who sold Levi Jeans to the gold rush people. They didn’t care if the gold rush people found gold or not, because either way they were getting wealthy selling the jeans.
WX is a contract research organization (CRO), allowing global drugmakers to outsource through China everything from drug research and development to management of clinical trials. Why do it in house when you can outsource it for a lot cheaper? If you are the outsourcing company getting the revenue, who cares if what you do doesn’t work? You still get paid.
If you are a big pharma company, you outsourced the accounting, the Information Technology and all of the other stuff, why not outsource your R&D? WuXi’s services are designed to help their worldwide customers shorten the discovery and development time and lower the cost of drug and medical device R&D through cost-effective and efficient outsourcing solutions.
The company built its initial capabilities around discovery chemistry and has further enhanced the integrated services with analytical services, bio-analytical services, process research, process development services, API manufacturing services, DMPK/ADME, discovery biology, pharmacology, formulation, toxicology, genomic services, biologics manufacturing services, antibody and biological research reagent manufacturing and sales, and most recently clinical research and regulatory services.
WuXi AppTec has developed from four founders and a single laboratory in December 2000 to over 7,000 employees and 3 million square feet of laboratory and manufacturing space. The company is actively improving its capabilities and capacity through new expansions in its global business. These guys are legit…and big.
WuXi AppTec provides end-to-end API services from process R&D, to API manufacturing at phase I, II, III and commercial scale. The services also include pre-formulation studies, analytical development, stability evaluation and formulation development, all the way to CMC services. All of these services are integrated to help their clients quickly and seamlessly move NCEs from preclinical stage to patients.
The global pharmaceutical and life science industry is striving to improve its R&D productivity, and an important part of that effort is increased outsourcing and external collaborations of pharmaceutical R&D services. As a leading R&D outsourcing company serving pharmaceutical, biotechnology, and medical device industries, WuXi AppTec is well positioned to benefit from this trend and to play a growing role in helping customers to discover and develop life-saving medicines and products for patients.
This fad took hold in the early 90’s when big pharma looked to cut costs and focus on core strengths. Outsourcing to China was a natural progression, because you had access to billions of people who would glady take a few dollars to be part of clinical trials. Remember when you were in college and you could donate blood or sperm for money? But I digress.
And so it goes….. Many pharmaceutical companies are outsourcing their research to China, which has lower labor costs than rivals in developed countries. These guys are doing some things right, besides just being a cheaper outsource alternative. WX announced that its Shanghai genomics lab received a key certification from the U.S. DHS. The certification gives WuXi the only CLIA-approved facility in China, which will give it a key advantage over its geographical peers in the realm of lab testing with human samples.
How can outsourcing R&D possibly work? WX has been very regimented and vigilant about their company values and strategies, namely:
· Adopt clients' perspective
· Exceed clients' expectations
· Build partnership
· Ownership
· Encourage linking individual job responsibilities to their overall organizational goals and proactively taking more responsibilities.
· Demonstrate accountability
· Be proactive
· Show entrepreneurial spirit
· Respect
· Value self-management and teamwork, which are the foundations of successfully achieving their common goals.
· Demonstrate integrity
· Pursue continuous learning
· Work as a team
· Excellence
· Commitment to continuously optimizing operation processes to deliver excellent results through flawless executions.
· Strive for highest quality
Think this is a bunch of crap? Check out all of their awards and recognitions:
· Top Ten Chinese Outsourcing Enterprise, 2012
· Star Award from Bristol-Myers Squibb, 2012
· Top Ten Chinese Outsourcing Enterprise, 2011
· Chemistry Impact Award from Lundbeck, 2011
· Excellent Collaboration Award from Lilly, 2010
· Excellence Award from Merck, 2010
· Valued Contribution Award from AstraZeneca, 2010
· Special Achievement Award from Vertex, 2010
· Ranked 4th on the Top 50 China Outsourcing Best Practice List, 2009
· Deloitte Technology Fast 500 Asia Pacific, 2009, sixth consecutive year
· Deloitte Technology Fast 50 China, 2009, fifth consecutive year
· Top Ten Pharmaceutical Industry Employers for New Graduates in China, 2009
· No. 8 in Fast Company world 50 Most Innovative Companies, 2009
· CEO Dr. Ge Li among 25 Notable Chinese-Americans from Forbes, 2008
· Top 20 Most Innovative Companies in China
· CEO Dr. Ge Li among Top 10 Most Innovative Leaders of Chinese Enterprises, 2008
· 50 Local Dynamos from the Boston Consulting Group (BCG), 2008
· Top Chemistry CRO from Pfizer, 2007
· Top 103 National Innovative Enterprises in China, 2006
This isn’t Little League where everyone gets a trophy. If you don’t pull your weight, you don’t get to take any more swings. You ride the bench and spit sunflower seeds into the dugout dirt and wish you had tried harder in math class. That’s what you do. This isn’t the case for WuXi..they are stars!
The current WX performance is excellent, with good revenue and EPS growth exceeding expectations. Expect continued strong revenue growth in 2014, driven largely by the same businesses that drove 2013 growth. All of their businesses are growth businesses, benefiting from the continuing outsourcing trend of the health care industry and greater investment in the China lab science industry. Growth is always a result of investments, and they continue to invest behind all of those businesses, particularly their highest-growth business. They believe that their continuing success is a result of their focus on their mission of helping their customers discover, develop and commercialize innovative medicine to benefit patients.
As a matter of fact, WX is evolving to a service and solution provider to big pharma in their mission to create innovative therapeutic products for patients. They have created an open-access technology and operational platform that any health care company, from the largest pharmaceutical company to the smallest virtual biotech company, and any individual can use the platform to realize their dreams of discovering and developing innovative health care products to benefit patients. As a result, they are generating strong current revenue and income growth while making the investments necessary to sustain long-term growth.
There is other pretty good recent news. WuXi PharmaTech announced that its CMO subsidiary, Shanghai SynTheAll Pharma, will produce commercial supplies of Imbruvica, a newly approved treatment for mantle cell lymphoma developed by Pharmacyclics. WuXi has been manufacturing the drug during its clinical trials. Imbruvica was approved by the US FDA as a second-line treatment earlier this week under a Breakthrough program that OK’d the drug after it completed a Phase II clinical trial. Who knows where this vertical integration can lead?
WuXi PharmaTech signed an exclusive license to the Mayo Clinic's collection of patient-derived xenograft (PDX) mouse models of prevailing cancers in the West. This is not Mayo-naise. This is the Mayo clinic! It’s cold at the Mayo Clinic but it is world renowned. WuXi will add these to its PDX collection of more than 500 Chinese patient-derived xenograft models. Putting the two model groups together, WuXi can offer its clients greater support for discovery of personalized cancer drugs that target global markets.
WuXi achieved more than 25% year-over-year revenue growth in the fourth quarter, with accelerating growth rate for each business for the first 3 quarters of the year. Total revenue growth of 15.5% for the full year was driven by excellent growth of 25.8% by Manufacturing Services and very good growth of by the China-based laboratory services business.
Operating income in the fourth quarter grew 24.7%. Full year operating income increased 17.7% year-over-year. Diluted EPS increased 34.5% to $0.45 for the fourth quarter and increased 32.4% to $1.57 for the full year. Net Revenues Increased 15.6% Year Over Year to $578.1 Million
WX is in a very strong financial position with $391 million cash and only $79 million of bank loans. They generated $31 million of free cash flow in the fourth quarter and $125.6 million for the full year. They are building cash on their balance sheet and announced a share buyback program last year. This company loves their own stock. I do too.
Here’s the secret sauce, and why I KNOW this company is going to have a great 2014. Over the past several months, WX hired many executive level senior managers to strengthen their management team. This talent covered wide areas of their business, including chemistry, commercial operations, biologics, laboratory testing services, and business development. If you were a company, why would you hire many more senior managers? They didn’t expand their staffing so that they would shrink revenues. Why do you think they hired all of these people? Doy Doy Doy Doy! Hello?!! McFLy!!!! They are getting ready to GROW LIKE CRAZY!
WuXi PharmaTech provides the following first-quarter 2014 financial guidance:
· Total net revenues of $143-145 million
· GAAP diluted earnings per ADS of $0.31-$0.33
With full year guidance of 665 million and $1.71 per share.
We’ll get to this guidance later. Since the ANAL-ysts merely mimic whatever the company guidance is, without doing the research that $$$MR. MARKET$$$ can do. ANAL-ysts say $669 million of revenue and $1.94 per share. How original.
Too funny.
Now let’s take a look at the historical revenue trend:
2010 $334 million
2011 $407 million
2012 $499 million
2013 $578 million
Given all of the expansion and transformation (and HIRING) that the company has undergone in 2013, it’s obvious that they are perched to really boost the revenues in 2014…much greater than what the trend would indicate. $$$MR. MARKET$$$ sees revenues of easily $722 million in 2014. This revenue blowout will translate to earnings of $2.06 per share. At the existing PE multiple of 23, this will translate to a share price of 23 x $2.06 = $47.38 per share, which is well past my selling target.
Here’s what the boss has to say:
“I am proud of WuXi's accomplishments in the fourth quarter and throughout 2013," said Dr. Ge Li, Chairman and Chief Executive Officer. "We are balancing present and future performance: both achieving strong current revenue and income growth and making the investments necessary to sustain growth for the long term. Through strong revenue growth and good cost control in the fourth quarter, we exceeded our revenue and diluted EPS guidance for the third consecutive quarter. All segments of the company contributed to our fourth-quarter revenue growth, with particularly good performances by small-molecule manufacturing, biologics, and integrated drug discovery services. With such a platform, the biopharmaceutical industry's great minds can realize their dreams of introducing important new therapeutics for patients faster and more cost-effectively."
I really have no idea what he means when he says platform. All I know is he’s hiring. Hey maybe I should get a job in China so I can work with my friend Smelles. Naaaa…I’d rather just buy their stock and make money that way.
I am HUGE!!
$$$MR. MARKET$$$
$$$MR. MARKET$$$ is a proprietary investor and does not provide individual financial advice. The stocks mentioned on this forum do not represent individual buy or sell recommendations and should not be viewed as such. Individual investors should consider speaking with a professional investment adviser before making any investment decisions.
We’ve all had those moments of complete lack of clarity. You know when you do something insanely stupid, yet you have no idea why you did it, and don’t know for sure that you’ll never do it again. Ineveitably one of your best buds will inquire, “What are you…….on drugs?”
Or how about when you’re in the sports book in Vegas and you bet Akron, Rice and Florida International in a money line parlay. The person at the ticket window says, “What are you……on drugs?”
Now the world is full of all kinds of drugs. There are good drugs which make us better, and bad drugs which make us stupid. Then there are statins which are supposedly good drugs, but still make us stupid. A lot of times, the good drugs become bad drugs because they aren’t utilized the way that they were supposed to be when they were first invented.
Having said all that, drugs are going to continue to be invented. Many of these drugs will make tons of money from the eager drug companies who will push them on the users. I love drugs.
Today I bought stock in Wuxi Pharmatech (WX) at 3713. I will sell it in 4 – 6 weeks at 42.95. Here’s why I like WX:
It most definitely starts with the chart….this one is going up like it is on steroids, or some other drug:
Wuxi PharmaTech (Cayman) Inc., through its subsidiaries, operates as a pharmaceutical, biotechnology, and medical device research and development outsourcing company in China and the United States. It operates in two segments, Laboratory Services and Manufacturing Services. The Laboratory Services segment offers services for small molecules, such as synthetic chemistry, biology, medicinal chemistry, DMPK/ADME, formulation, analytical chemistry, toxicology, clinical development, bioanalytical services, genomics, and research reagent production, as well as services for discovery and development of biologics; and testing services for biologics, medical devices, and combination products. The Manufacturing Services segment engages in the production of manufacturing advanced intermediates and active pharmaceutical ingredients for use by pharmaceutical companies in preclinical and clinical trials of small-molecule products and for commercial products, as well as the production of biologics. The company sells its services directly to pharmaceutical, biotechnology, and medical device companies. Wuxi PharmaTech (Cayman) Inc. was founded in 2000 and is headquartered in Shanghai, China.
So what this means is that these guys don’t sell drugs to people. They help drug companies research drugs so that they can sell these drugs to people. It’s like the guys who sold Levi Jeans to the gold rush people. They didn’t care if the gold rush people found gold or not, because either way they were getting wealthy selling the jeans.
WX is a contract research organization (CRO), allowing global drugmakers to outsource through China everything from drug research and development to management of clinical trials. Why do it in house when you can outsource it for a lot cheaper? If you are the outsourcing company getting the revenue, who cares if what you do doesn’t work? You still get paid.
If you are a big pharma company, you outsourced the accounting, the Information Technology and all of the other stuff, why not outsource your R&D? WuXi’s services are designed to help their worldwide customers shorten the discovery and development time and lower the cost of drug and medical device R&D through cost-effective and efficient outsourcing solutions.
The company built its initial capabilities around discovery chemistry and has further enhanced the integrated services with analytical services, bio-analytical services, process research, process development services, API manufacturing services, DMPK/ADME, discovery biology, pharmacology, formulation, toxicology, genomic services, biologics manufacturing services, antibody and biological research reagent manufacturing and sales, and most recently clinical research and regulatory services.
WuXi AppTec has developed from four founders and a single laboratory in December 2000 to over 7,000 employees and 3 million square feet of laboratory and manufacturing space. The company is actively improving its capabilities and capacity through new expansions in its global business. These guys are legit…and big.
WuXi AppTec provides end-to-end API services from process R&D, to API manufacturing at phase I, II, III and commercial scale. The services also include pre-formulation studies, analytical development, stability evaluation and formulation development, all the way to CMC services. All of these services are integrated to help their clients quickly and seamlessly move NCEs from preclinical stage to patients.
The global pharmaceutical and life science industry is striving to improve its R&D productivity, and an important part of that effort is increased outsourcing and external collaborations of pharmaceutical R&D services. As a leading R&D outsourcing company serving pharmaceutical, biotechnology, and medical device industries, WuXi AppTec is well positioned to benefit from this trend and to play a growing role in helping customers to discover and develop life-saving medicines and products for patients.
This fad took hold in the early 90’s when big pharma looked to cut costs and focus on core strengths. Outsourcing to China was a natural progression, because you had access to billions of people who would glady take a few dollars to be part of clinical trials. Remember when you were in college and you could donate blood or sperm for money? But I digress.
And so it goes….. Many pharmaceutical companies are outsourcing their research to China, which has lower labor costs than rivals in developed countries. These guys are doing some things right, besides just being a cheaper outsource alternative. WX announced that its Shanghai genomics lab received a key certification from the U.S. DHS. The certification gives WuXi the only CLIA-approved facility in China, which will give it a key advantage over its geographical peers in the realm of lab testing with human samples.
How can outsourcing R&D possibly work? WX has been very regimented and vigilant about their company values and strategies, namely:
· Adopt clients' perspective
· Exceed clients' expectations
· Build partnership
· Ownership
· Encourage linking individual job responsibilities to their overall organizational goals and proactively taking more responsibilities.
· Demonstrate accountability
· Be proactive
· Show entrepreneurial spirit
· Respect
· Value self-management and teamwork, which are the foundations of successfully achieving their common goals.
· Demonstrate integrity
· Pursue continuous learning
· Work as a team
· Excellence
· Commitment to continuously optimizing operation processes to deliver excellent results through flawless executions.
· Strive for highest quality
Think this is a bunch of crap? Check out all of their awards and recognitions:
· Top Ten Chinese Outsourcing Enterprise, 2012
· Star Award from Bristol-Myers Squibb, 2012
· Top Ten Chinese Outsourcing Enterprise, 2011
· Chemistry Impact Award from Lundbeck, 2011
· Excellent Collaboration Award from Lilly, 2010
· Excellence Award from Merck, 2010
· Valued Contribution Award from AstraZeneca, 2010
· Special Achievement Award from Vertex, 2010
· Ranked 4th on the Top 50 China Outsourcing Best Practice List, 2009
· Deloitte Technology Fast 500 Asia Pacific, 2009, sixth consecutive year
· Deloitte Technology Fast 50 China, 2009, fifth consecutive year
· Top Ten Pharmaceutical Industry Employers for New Graduates in China, 2009
· No. 8 in Fast Company world 50 Most Innovative Companies, 2009
· CEO Dr. Ge Li among 25 Notable Chinese-Americans from Forbes, 2008
· Top 20 Most Innovative Companies in China
· CEO Dr. Ge Li among Top 10 Most Innovative Leaders of Chinese Enterprises, 2008
· 50 Local Dynamos from the Boston Consulting Group (BCG), 2008
· Top Chemistry CRO from Pfizer, 2007
· Top 103 National Innovative Enterprises in China, 2006
This isn’t Little League where everyone gets a trophy. If you don’t pull your weight, you don’t get to take any more swings. You ride the bench and spit sunflower seeds into the dugout dirt and wish you had tried harder in math class. That’s what you do. This isn’t the case for WuXi..they are stars!
The current WX performance is excellent, with good revenue and EPS growth exceeding expectations. Expect continued strong revenue growth in 2014, driven largely by the same businesses that drove 2013 growth. All of their businesses are growth businesses, benefiting from the continuing outsourcing trend of the health care industry and greater investment in the China lab science industry. Growth is always a result of investments, and they continue to invest behind all of those businesses, particularly their highest-growth business. They believe that their continuing success is a result of their focus on their mission of helping their customers discover, develop and commercialize innovative medicine to benefit patients.
As a matter of fact, WX is evolving to a service and solution provider to big pharma in their mission to create innovative therapeutic products for patients. They have created an open-access technology and operational platform that any health care company, from the largest pharmaceutical company to the smallest virtual biotech company, and any individual can use the platform to realize their dreams of discovering and developing innovative health care products to benefit patients. As a result, they are generating strong current revenue and income growth while making the investments necessary to sustain long-term growth.
There is other pretty good recent news. WuXi PharmaTech announced that its CMO subsidiary, Shanghai SynTheAll Pharma, will produce commercial supplies of Imbruvica, a newly approved treatment for mantle cell lymphoma developed by Pharmacyclics. WuXi has been manufacturing the drug during its clinical trials. Imbruvica was approved by the US FDA as a second-line treatment earlier this week under a Breakthrough program that OK’d the drug after it completed a Phase II clinical trial. Who knows where this vertical integration can lead?
WuXi PharmaTech signed an exclusive license to the Mayo Clinic's collection of patient-derived xenograft (PDX) mouse models of prevailing cancers in the West. This is not Mayo-naise. This is the Mayo clinic! It’s cold at the Mayo Clinic but it is world renowned. WuXi will add these to its PDX collection of more than 500 Chinese patient-derived xenograft models. Putting the two model groups together, WuXi can offer its clients greater support for discovery of personalized cancer drugs that target global markets.
WuXi achieved more than 25% year-over-year revenue growth in the fourth quarter, with accelerating growth rate for each business for the first 3 quarters of the year. Total revenue growth of 15.5% for the full year was driven by excellent growth of 25.8% by Manufacturing Services and very good growth of by the China-based laboratory services business.
Operating income in the fourth quarter grew 24.7%. Full year operating income increased 17.7% year-over-year. Diluted EPS increased 34.5% to $0.45 for the fourth quarter and increased 32.4% to $1.57 for the full year. Net Revenues Increased 15.6% Year Over Year to $578.1 Million
WX is in a very strong financial position with $391 million cash and only $79 million of bank loans. They generated $31 million of free cash flow in the fourth quarter and $125.6 million for the full year. They are building cash on their balance sheet and announced a share buyback program last year. This company loves their own stock. I do too.
Here’s the secret sauce, and why I KNOW this company is going to have a great 2014. Over the past several months, WX hired many executive level senior managers to strengthen their management team. This talent covered wide areas of their business, including chemistry, commercial operations, biologics, laboratory testing services, and business development. If you were a company, why would you hire many more senior managers? They didn’t expand their staffing so that they would shrink revenues. Why do you think they hired all of these people? Doy Doy Doy Doy! Hello?!! McFLy!!!! They are getting ready to GROW LIKE CRAZY!
WuXi PharmaTech provides the following first-quarter 2014 financial guidance:
· Total net revenues of $143-145 million
· GAAP diluted earnings per ADS of $0.31-$0.33
With full year guidance of 665 million and $1.71 per share.
We’ll get to this guidance later. Since the ANAL-ysts merely mimic whatever the company guidance is, without doing the research that $$$MR. MARKET$$$ can do. ANAL-ysts say $669 million of revenue and $1.94 per share. How original.
Too funny.
Now let’s take a look at the historical revenue trend:
2010 $334 million
2011 $407 million
2012 $499 million
2013 $578 million
Given all of the expansion and transformation (and HIRING) that the company has undergone in 2013, it’s obvious that they are perched to really boost the revenues in 2014…much greater than what the trend would indicate. $$$MR. MARKET$$$ sees revenues of easily $722 million in 2014. This revenue blowout will translate to earnings of $2.06 per share. At the existing PE multiple of 23, this will translate to a share price of 23 x $2.06 = $47.38 per share, which is well past my selling target.
Here’s what the boss has to say:
“I am proud of WuXi's accomplishments in the fourth quarter and throughout 2013," said Dr. Ge Li, Chairman and Chief Executive Officer. "We are balancing present and future performance: both achieving strong current revenue and income growth and making the investments necessary to sustain growth for the long term. Through strong revenue growth and good cost control in the fourth quarter, we exceeded our revenue and diluted EPS guidance for the third consecutive quarter. All segments of the company contributed to our fourth-quarter revenue growth, with particularly good performances by small-molecule manufacturing, biologics, and integrated drug discovery services. With such a platform, the biopharmaceutical industry's great minds can realize their dreams of introducing important new therapeutics for patients faster and more cost-effectively."
I really have no idea what he means when he says platform. All I know is he’s hiring. Hey maybe I should get a job in China so I can work with my friend Smelles. Naaaa…I’d rather just buy their stock and make money that way.
I am HUGE!!
$$$MR. MARKET$$$
$$$MR. MARKET$$$ is a proprietary investor and does not provide individual financial advice. The stocks mentioned on this forum do not represent individual buy or sell recommendations and should not be viewed as such. Individual investors should consider speaking with a professional investment adviser before making any investment decisions.
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