WuXi PharmaTech Announces First-Quarter 2013 Results

SHANGHAI, May 13, 2013 /PRNewswire/ -- WuXi PharmaTech (Cayman) Inc. (NYSE: WX), a leading research and development outsourcing company serving the pharmaceutical, biotechnology, and medical device industries, with operations in China and the United States, today announced its financial results for the first quarter of 2013. 

Highlights

  • Net Revenues Increased 11.7% Year Over Year to $131.9 Million
  • Laboratory Services Net Revenues Grew 12.5% Year Over Year to $97.5 Million
  • China-Based Laboratory Services Net Revenues Increased 15.5% Year Over Year to $74.5 Million
  • U.S.-Based Laboratory Services Net Revenues Increased 3.8% Year Over Year to $23.0 Million
  • Manufacturing Services Net Revenues Grew 9.6% Year Over Year to $34.4 Million
  • GAAP Diluted Earnings Per ADS Grew 7.2% Year Over Year to $0.30
  • Non-GAAP Diluted Earnings Per ADS Increased 7.5% Year Over Year to $0.35
  • Company Reconfirms Full-Year 2013 Guidance

Management Comment

"I am pleased to announce that WuXi began 2013 with a solid first quarter," said Dr. Ge Li, Chairman and Chief Executive Officer.  "We achieved 11.7% year-over-year revenue growth, 7.2% GAAP diluted EPS growth, and 7.5% non-GAAP diluted EPS growth in the quarter, exceeding our previous guidance in all three measures.  This result gives us confidence to reconfirm our guidance for full-year 2013.

"WuXi is succeeding on several fronts at once," Dr. Li continued.  "We are achieving double-digit, broad-based revenue growth, while effectively improving operating efficiency and controlling our costs to maintain stable margins.  We are investing in capabilities and capacity to sustain strong revenue and earnings growth for years to come.  In so doing, WuXi is making progress toward the goal of building an open-access technology platform and integrated services offerings that will enable anyone and any company to discover and develop medicines efficiently and cost-effectively.  And we are returning capital to shareholders through share purchases."

First-Quarter 2013 GAAP Results

First-quarter 2013 net revenues increased 11.7% year over year to $131.9 million.  Revenue growth in Laboratory Services of 12.5% was driven by our comprehensive and integrated discovery and development services, primarily in China.  Revenue growth of 9.6% in Manufacturing Services was driven by increased demand for clinical-trial materials in our small molecule research manufacturing business and process-chemistry services. We also began biologics manufacturing in the first quarter.

First-quarter 2013 GAAP gross profit increased 13.2% year over year to $47.4 million due to 11.7% revenue growth, improved operating efficiency, and effective cost control.  Gross margin increased year over year to 36.0% from 35.5%.  Gross margin in Laboratory Services increased year over year to 37.6% from 37.1% mainly due to improved productivity, partially offset by the effects of increasing labor costs in China, appreciation of the RMB versus the U.S. dollar, investments in new businesses, and lower pricing in synthetic chemistry services.  Gross margin in Manufacturing Services increased year over year to 31.4% from 31.0%.

First-quarter 2013 GAAP operating income increased 11.4% year over year to $23.0 million due to the 13.2% increase in gross profit, offset by a 14.8% increase in operating expenses, particularly selling and marketing expenses and research and development expenses.  Operating margin decreased slightly to 17.4% from 17.5% due to the increase in operating expenses, partially offset by higher gross margin.

First-quarter 2013 GAAP net income increased 3.4% year over year to $21.7 million due to the 11.4% year-over-year increase in operating income, offset by a 39.9% increase in income tax expense primarily due to the increase in taxable income and the one-time benefit of reversal of an uncertain tax provision in the first quarter of 2012.

First-quarter 2013 GAAP diluted earnings per ADS increased 7.2% to $0.30 due to the 3.4% increase in net income and a lower number of outstanding ADSs as a result of the company's purchase of about 5 million ADSs in 2012.  First-quarter 2013 GAAP comprehensive income increased 8.8% year over year to $23.3 million due to the increase in currency translation adjustments and the 3.4% increase in GAAP net income.

First-Quarter 2013 Non-GAAP Results

Non-GAAP financial results exclude the impact of share-based compensation expenses and the amortization of acquired intangible assets and the associated deferred tax impact. 

First-quarter 2013 non-GAAP gross profit increased 11.6% year over year to $48.5 million, mainly due to the broad-based revenue growth discussed above.  Non-GAAP gross margin was flat year-over-year at 36.8%, as the benefits of improved productivity were fully offset by the effects of increasing labor costs in China, appreciation of the RMB versus the U.S. dollar, investments in new businesses, and lower pricing in synthetic chemistry services.               

First-quarter 2013 non-GAAP operating income increased 9.8% year over year to $26.7 million, primarily due to the 11.6% increase in non-GAAP gross profit, partially offset by higher operating expenses, particularly selling and marketing expenses and research and development expenses.  Operating margin decreased slightly to 20.2% from 20.6% due to this increase in operating expenses.

First-quarter 2013 non-GAAP net income grew 3.7% year over year to $25.4 million due to the 9.8% increase in non-GAAP operating income, offset by higher income tax expense primarily due to the increase in taxable income and the reversal of an uncertain tax provision in the first quarter of 2012.

First-quarter 2013 non-GAAP diluted earnings per ADS grew 7.5% year over year to $0.35 due to the 3.7% increase in net income and a lower number of outstanding ADSs as a result of share buybacks in 2012.

Full-Year 2013 Financial Guidance

The company reconfirms the following full-year 2013 financial guidance:

  • Total net revenues of $565-575 million, or 13-15% year-over-year growth
  • GAAP diluted earnings per ADS of $1.26-$1.30
  • Non-GAAP diluted earnings per ADS of $1.49-$1.53
  • Capital expenditures of about $60 million

The company provides the following new full-year 2013 financial guidance:

  • GAAP and non-GAAP gross margin and operating margin comparable to those in 2012

Second-Quarter 2013 Financial Guidance

The company provides the following second-quarter 2013 financial guidance:

  • Total net revenues of $138-140 million
  • GAAP diluted earnings per ADS of $0.34-$0.35
  • Non-GAAP diluted earnings per ADS of $0.39-$0.40

 


WUXI PHARMATECH (CAYMAN) INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS

(in thousands of U.S. dollars, except ordinary share, ADS and par value data)







March 31,
2013

December 31,
2012

Assets:




Current assets:




        Cash and cash equivalents


104,899

54,133

        Restricted cash


2,964

423

        Short-term investments


160,754

175,245

        Accounts receivable, net


98,790

99,578

        Inventories


43,652

47,774

        Prepaid expenses and other current assets


27,326

18,807

                    Total current assets


438,385

395,960

Non-current assets:




        Goodwill


32,566

32,561

        Property, plant and equipment, net


258,992

264,381

        Long-term investments


15,797

14,015

        Intangible assets, net


7,595

7,268

        Land use rights


5,549

5,564

        Deferred tax assets


3,045

3,037

        Other non-current assets


15,726

19,749

                    Total non-current assets


339,270

346,575

                    Total assets


777,655

742,535





Liabilities and equity:




Current liabilities:




        Short-term and current portion of long-term debt


62,283

59,089

        Accounts payable


20,952

21,808

        Accrued expenses


16,937

27,411

        Deferred revenue


20,581

17,052

        Advanced subsidies


10,798

9,265

        Other taxes payable


3,593

1,581

        Other current liabilities


20,790

11,215

                    Total current liabilities


155,934

147,421

Non-current liabilities:




        Long-term debt, excluding current portion


5,643

5,697

        Advanced subsidies


2,050

2,663

        Long-term payables


758

732

        Other non-current liabilities


7,659

7,799

                    Total non-current liabilities


16,110

16,891

                    Total liabilities


172,044

164,312

Equity:




       Ordinary shares ($0.02 par value, 5,002,550,000

authorized,  561,121,002  and 566,540,378 issued and

outstanding as of December 31, 2012, and March 31,

2013, respectively)


11,331

11,222

        Additional paid-in capital


335,662

331,714

        Retained earnings


210,316

188,604

        Accumulated other comprehensive income


48,302

46,683

                    Total equity


605,611

578,223

                    Total liabilities and equity


777,655

742,535

 


WUXI PHARMATECH (CAYMAN) INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands of U.S. dollars, except ADS data and per ADS data)








Three Months Ended
March 31,



2013

2012

%

Change

Net revenues:





      Laboratory Services


97,481

86,650

12.5%

      Manufacturing Services


34,384

31,378

9.6%

Total net revenues


131,865

118,028

11.7%






Cost of revenues:





      Laboratory Services


(60,875)

(54,488)

11.7%

      Manufacturing Services


(23,584)

(21,649)

8.9%

Total cost of revenues


(84,459)

(76,137)

10.9%






Gross profit:





      Laboratory Services


36,606

32,162

13.8%

      Manufacturing Services


10,800

9,729

11.0%

Total gross profit


47,406

41,891

13.2%






Operating expenses:





      Selling and marketing expenses


(3,931)

(3,279)

19.9%

      General and administrative expenses


(18,208)

(16,162)

12.7%

      Research and development expenses


(2,270)

(1,813)

25.2%

Total operating expenses


(24,409)

(21,254)

14.8%

Operating income


22,997

20,637

11.4%






Other income (expenses), net:





Equity in earnings of joint ventures


(217)

-


Other income (expenses), net


3,057

2,740

11.6%

      Interest income (expenses), net


1,594

1,699

(6.2%)

Total other income (expenses), net


4,434

4,439

(0.1%)






Income before income taxes


27,431

25,076

9.4%

Income tax expense


(5,719)

(4,088)

39.9%

Net income


21,712

20,988

3.4%






Other comprehensive income:





Currency translation adjustments


1,620

454

256.8%

Comprehensive income


23,332

21,442

8.8%






Basic net earnings per ADS


0.31

0.29

5.8%

Diluted net earnings per ADS


0.30

0.28

7.2%






Weighted average ADS outstanding -

basic


70,368,616

71,978,914

(2.2%)

Weighted average ADS outstanding -

diluted


71,915,069

74,543,632

(3.5%)






 


WUXI PHARMATECH (CAYMAN) INC.

RECONCILIATION OF GAAP TO NON-GAAP

(in thousands of U.S. dollars, except ADS data and per ADS data)








Three Months Ended
March 31,



2013

2012

%

Change






GAAP gross profit


47,406

41,891

13.2%

GAAP gross margin


36.0%

35.5%


Adjustments:





        Share-based compensation


1,038

1,066

(2.6%)

        Amortization of acquired intangible assets


98

525

(81.3%)

Non-GAAP gross profit


48,542

43,482

11.6%

Non-GAAP gross margin


36.8%

36.8%







GAAP operating income


22,997

20,637

11.4%

GAAP operating margin


17.4%

17.5%


Adjustments:





        Share-based compensation


3,600

3,155

14.1%

        Amortization of acquired intangible assets


98

525

(81.3%)

Non-GAAP operating income


26,695

24,317

9.8%

Non-GAAP operating margin


20.2%

20.6%







GAAP net income


21,712

20,988

3.4%

GAAP net margin


16.5%

17.8%


Adjustments:





        Share-based compensation


3,600

3,155

14.1%

        Amortization of acquired intangible assets


98

525

(81.3%)

        Deferred tax impact related to acquired
          intangible assets


(29)

(195)

(85.1%)

Non-GAAP net income


25,381

24,473

3.7%

Non-GAAP net margin


19.2%

20.7%







Income attributable to holders of ADS (Non-

GAAP):





Basic


25,381

24,473

3.7%

Diluted


25,381

24,473

3.7%






Basic earnings per ADS (Non-GAAP)


0.36

0.34

6.1%

Diluted earnings per ADS (Non-GAAP)


0.35

0.33

7.5%






Weighted average ADS outstanding
   - basic (Non-GAAP)


70,368,616

71,978,914

(2.2%)

Weighted average ADS outstanding
  - diluted (Non-GAAP)


71,915,069

74,543,632

(3.5%)

 

WUXI PHARMATECH (CAYMAN) INC.

REVENUE BREAKDOWN

(in thousands of U.S. dollars)








Three Months Ended
March 31,



2013

2012

%

Change

Net revenues:





        China-based Laboratory Services


74,444

64,452

15.5%

        China-based Manufacturing Services


34,384

31,378

9.6%

                    Subtotal


108,828

95,830

13.6%

        U.S.-based Laboratory Services


23,037

22,198

3.8%

Total net revenues


131,865

118,028

11.7%






 

Conference Call

WuXi PharmaTech senior management will host a conference call at 8:00 am (U.S. Eastern) / 5:00 am (U.S. Pacific) / 8:00 pm (Beijing/Shanghai/Hong Kong) on Tuesday, May 14, 2013, to discuss its first-quarter 2013 financial results and future prospects.  The conference call may be accessed by calling:

United States:

1-866-519-4004

China (Landline):      

800-819-0121

China (Mobile):

400-620-8038

Hong Kong:

800-930-346

United Kingdom:        

0-808-234-6646

International:         

+65-6723-9381

Conference ID:         

35582613

A telephone replay will be available two hours after the call's completion at:

United States:

1-855-452-5696

China (Landline):      

800-870-0205

China (Mobile):

400-120-0932

Hong Kong:

800-963-117

United Kingdom:        

0-808-234-0072

International:         

+61-2-8199-0299

Conference ID:         

35582613

A live webcast of the conference call and replay will be available on the investor relations page of WuXi PharmaTech's website at http://www.wuxiapptec.com.

About WuXi PharmaTech

WuXi PharmaTech is a leading pharmaceutical, biotechnology, and medical device R&D outsourcing company, with operations in China and the United States.  As a research-driven and customer-focused company, WuXi PharmaTech provides a broad and integrated portfolio of laboratory and manufacturing services throughout the drug and medical device R&D process.  WuXi PharmaTech's services are designed to assist its global partners in shortening the cycle and lowering the cost of drug and medical device R&D.  WuXi PharmaTech's operating subsidiaries are known as WuXi AppTec.  For more information, please visit: http://www.wuxiapptec.com.

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts, but instead are predictions about future events. Examples of forward-looking statements in this press release include statements about our second-quarter and full-year 2013 guidance and our goal of building an open-access technology platform. Although we believe that our predictions are reasonable, future events are inherently uncertain and our forward-looking statements may turn out to be incorrect. Our forward-looking statements are subject to risks relating to, among other things, our ability to control our costs and sustain revenue growth, to realize the anticipated benefits of our investments, to protect our clients' intellectual property and to compete effectively. Additional information about these and other relevant risks can be found in our Annual Report on Form 20-F for the year ended December 31, 2012.  The forward-looking statements in this press release speak only on the date that they are made, and we assume no obligation to update any forward-looking statements except as required by law.

Use of Non-GAAP and Pro-Forma Financial Measures 

We have provided the first-quarter 2012 and 2013 gross profit, gross margin, operating income, operating margin, net income, net margin, and earnings per ADS on a non-GAAP basis, which excludes share-based compensation expenses, the amortization and deferred tax impact of acquired intangible assets.  We believe both management and investors benefit from referring to these non-GAAP financial measures in assessing our financial performance and liquidity and when planning and forecasting future periods.  These non-GAAP operating measures are useful for understanding and assessing underlying business performance and operating trends.  We expect to continue to provide net income and earnings per ADS on a non-GAAP basis using a consistent method on a quarterly basis.  You should not view non-GAAP results on a stand-alone basis or as a substitute for results under GAAP, or as being comparable to results reported or forecasted by other companies, and should refer to the reconciliation of GAAP measures to non-GAAP measures for the indicated periods attached hereto.

Statement Regarding Unaudited Financial Information

The financial information set forth above is unaudited and subject to adjustments.  Adjustments to the financial statements may be identified when our annual financial statements are prepared and audit work is performed for the yearend audit, which could result in significant differences from this unaudited financial information.

For more information, please contact:

WuXi PharmaTech (Cayman) Inc.

Ronald Aldridge (for investors)
Director of Investor Relations 
Tel:   +1-201-585-2048
Email: ir@wuxiapptec.com

Aaron Shi (for the media)
WuXi PharmaTech (Cayman) Inc.
Tel:   +86-21-5046-4362
Email: pr@wuxiapptec.com

SOURCE WuXi PharmaTech (Cayman) Inc.



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