Wells Fargo Downgrades WuXi PharmaTech (WX) to Market Perform; Valuation Call - Questioning Acquisition Target

Wells Fargo downgraded WuXi PharmaTech (NYSE: WX) from Outperform to Market Perform, price target range $14-$15.

Wells analyst says, "Unsubstantiated speculation of a takeout has driven the stock price up 30% since January 1 compared to about 7% for the S&P 500. The company has declined to comment. Bloomberg ran an article on 2/2/2012 speculating that WX and other Chinese preclinical CROs could be acquisition targets. In the case of WX, we think the article overreaches. As we have stated before, large strategic M&A in the sector seems unlikely at this time. As for a financial bidder, the argument is primarily one of valuation. We think WX is not as inexpensive as the Bloomberg article implies, and any bid would likely need to be at an about 60% premium to the current price to get past the board given Charles River (NYSE: CRL) 2010 bid for the company. Finally, weaker-than-expected Incivek sales for Vertex could be a headwind for WX over the next 12-18 months (see research on Vertex (Nasdaq: VRTX) by Brian Abrahams)."

For an analyst ratings summary and ratings history on WuXi PharmaTech click here. For more ratings news on WuXi PharmaTech click here.

Shares of WuXi PharmaTech closed at $14.81 yesterday.

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