Chinese contract research organization (CRO) WuXi PharmaTech is discontinuing its U.S. biologics manufacturing operations as of December 31. As a result, the company will cut about 100 manufacturing and supporting positions at its Philadelphia facility.
“Given the depressed demand and the high cost structure of our biologics manufacturing services, we will focus on expanding our biologics testing, cell banking and cell therapy services in our Philadelphia site instead,” said WuXi CFO Benson Tsang in an investor conference call yesterday.
WuXi acquired the Philadelphia manufacturing operations as part of its January 2008 acquisition of AppTec, a U.S.-based laboratory services provider. Although company executives were initially optimistic about the potential for U.S.-based manufacturing, year-end 2008 forecasts have biologics manufacturing revenues at less than 4% of total expected annual revenue.
A company executive said in Tuesday’s call that the biologics manufacturing business is relatively risky, and when the economy takes a downturn, biotech companies just don’t have the financing for it. He said WuXi doesn’t see a turnaround in the foreseeable future.
The CRO will begin cutting manufacturing operations this month to be completed by early spring 2009. The restructuring will cost the company between $2.5 million and $3.5 million in the next few months, according to Tsang, but it will result in an annual cost-savings of approximately $10 million.
The discontinuation of U.S.-based biologics manufacturing does not eliminate WuXi from the manufacturing business altogether. Tsang told investors Tuesday that the company would begin to test run a large-scale manufacturing facility in China by the end of this year, with plans to provide commercial Active Pharmaceutical Ingredients manufacturing services in 2009.