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WuXi PharmaTech Announces Fourth-Quarter and Full-Year 2008 Results
(Logo: http://www.newscom.com/cgi-bin/prnh/20040705/CNM002LOGO )
Highlights
-- Total Company(1) Full-Year 2008 Net Revenues of $261.8 Million
(Including $8.3 Million of Net Revenues from Discontinued Operations)
and Adjusted EBITDA of $72.2 Million Achieve Company's Financial
Guidance
-- 74% Year-Over-Year Net Revenue Growth from Continuing Operations in
Fourth Quarter of 2008, 33% Organic Net Revenue Growth for China-Based
Businesses
-- 87% Year-Over-Year Net Revenue Growth from Continuing Operations for
Full-Year 2008, 45% Organic Net Revenue Growth for China-Based
Businesses
-- Fourth-Quarter and Full-Year 2008 Net Losses Reflect Non-Cash
Impairment Charges Relating to Continuing and Discontinued AppTec
Operations
-- Construction Completed at Suzhou Toxicology Laboratory and Expanded
Jinshan Manufacturing Plant
-- Company Targets 2009 Net Revenues of $265-$275 Million, Including
15-20% Net Revenue Growth in China-Based Laboratory Services
-- Key 2009 Investments in Laboratory Services, Toxicology, and
Manufacturing Services Expected to Drive Revenue Growth in 2010 and
Beyond
Management Comment
"2008 was a year of extraordinary economic challenges, both in the
worldwide economy and the healthcare industry," said Dr.
"Throughout its history, WuXi PharmaTech has driven growth by adding new
capabilities. In 2008, we acquired AppTec, Inc., to offer our life science
customers a broader range of services. In retrospect, we wish we had foreseen
the unprecedented economic downturn and credit freeze that severely impacted
many of AppTec's customers and, as a result, negatively impacted AppTec's 2008
results, particularly in biologics manufacturing. Faced with the reality that
biologics manufacturing would not recover in the foreseeable future, and
attentive to shareholder interests, we discontinued this operation in
"We look forward to 2009 as a year of continued growth in our Laboratory Services business and of continued investment in building new capabilities to sustain growth in 2010 and beyond. We will concentrate our investment in three areas: First, we are building our talent pool of scientists to support the growing demand for our laboratory services from our customers. Second, we are investing in our toxicology facility in Suzhou, with the aim of starting to provide non-GLP toxicology services in the second half of 2009 and GLP toxicology services in mid-2010. And third, we are investing in the expanded manufacturing facility in Jinshan with the intent of opening it by the end of 2009. We expect this facility to generate significant revenues from commercial-scale manufacture of advanced intermediates and APIs for products in late-stage-development.
"With our highly capable work force, world-class facilities, and strong relationships with the world's leading life science companies, WuXi PharmaTech is well positioned with the capabilities and the strategy to drive longterm revenue and income growth," Dr. Li concluded.
Total Company - Versus Guidance
Total company(1) full-year 2008 net revenues of
Continuing Operations-GAAP Results
Fourth-quarter 2008 net revenues from continuing operations increased 74%
to
With the discontinuation of biologics manufacturing, we now define our
Laboratory Services business as China-based Laboratory Services and all AppTec
testing services, which consist of biopharmaceutical and medical device
testing. Net revenues from Laboratory Services increased 99% to
We now define our Manufacturing Services segment as China-based
manufacturing of advanced intermediates and active pharmaceutical ingredients
(APIs). Net revenues from Manufacturing Services decreased 15% to
GAAP gross profit grew 27% to
Following a strategic assessment of the ongoing AppTec business, we
recorded non-cash charges for goodwill and acquired intangible asset
impairment of
Reflecting losses from both continuing and discontinued operations, we
recorded a GAAP net loss of
Continuing Operations-Non-GAAP Results
The non-GAAP gross margins from continuing operations of 39% in fourth-quarter 2008 and 44% in full-year 2008 were lower than 44% and 48%, respectively, for the comparable periods in 2007, mainly due to the inclusion of financial results for AppTec, which had lower gross margins than our China-based businesses, lower gross margins in our China-based Manufacturing Services business due to changes in project mix, and the timing of certain expense accruals, which were less weighted in fourth-quarter 2007.
Fourth-quarter 2008 non-GAAP operating income and net income declined 19% and 40%, respectively, compared to the prior-year period due to the timing of certain expense accruals, which were less weighted in fourth-quarter 2007, and lower gross profit in both Laboratory Services and Manufacturing Services and higher sales and marketing and general and administrative expenses in fourth-quarter 2008. Full-year 2008 non-GAAP operating income and net income increased 56% and 31%, respectively, versus 87% growth in revenue. The lower rates of growth were due to inclusion of lower-margin AppTec results in 2008 results and lower 2008 margins in the Manufacturing Services business due to changes in project mix. (See the table titled Reconciliation of GAAP to Non-GAAP below).
Discontinued Operations
All results of the biologics manufacturing business are reflected in
Discontinued Operations in fourth-quarter and full-year 2008. We recorded a
Loss from Discontinued Operations, net of tax, of
2009 Financial Guidance
The Company provided the following financial guidance for 2009:
-- Total net revenues of $265-$275 million(2)
-- Net revenue growth in China-based Laboratory Services of 15-20%
compared to 2008 China-based Laboratory Services revenue
-- Manufacturing Services net revenue lower than 2008 Manufacturing
Services net revenue
-- U.S. testing (AppTec) net revenue comparable to 2008 U.S. testing net
revenue on a pro-forma basis(2)
-- Non-GAAP gross profit and operating income lower than 2008 amounts in
dollars and as percentages of net revenues as we invest in new
capabilities and capacities
-- Adjusted EBITDA (excluding share-based compensation charges and
potential mark-to-market gains or losses from foreign currency forward
contracts) relatively flat with 2008 adjusted EBITDA of $72 million
-- Capital expenditures of $50-$60 million
Commenting on financial guidance,
"We expect 2009 adjusted EBITDA to be relatively flat with 2008 adjusted
EBITDA of
"We project capital expenditures of
(1) On December 2, 2008, the Company announced the discontinuation of its
biologics manufacturing operation. As a result, this line of business
has been treated as a discontinued operation in the financial
statements that accompany this press release. Certain results for the
total company, however, have been provided to assist the reader in
understanding the overall results of the company relative to the
guidance for full-year 2008 that was provided by the Company on
October 14, 2008, and reconfirmed on November 12, 2008. As such, the
term "total company" as used in this press release includes both
continuing and discontinued operations.
(2) Our targeted net revenue of $265 million to $275 million in 2009
compare with $258.5 million in 2008 from our continuing operations on
a pro-forma basis (non-GAAP). WuXi PharmaTech acquired AppTec, Inc.
at the end of January 2008, and our reported results for AppTec in
2008 reflect eleven months of net revenues after the acquisition date.
The pro-forma full-year revenues include the January 2008 revenues
from continuing operation of the AppTec business.
WUXI PHARMATECH (CAYMAN) INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. dollars, except ordinary share,
ADS and par value data)
December 31, December 31,
2008 2007
Assets:
Current assets:
Cash and cash equivalents 56,624 213,585
Restricted cash 1,338 5,526
Short-term investment 14,631 --
Accounts receivable, net 36,457 18,199
Inventories 6,926 13,352
Prepaid expenses and other current assets 7,281 11,215
Assets of discontinued operations (Note 1) 6,508 --
Total current assets 129,765 261,877
Non-current assets:
Goodwill 23,956 --
Property, plant and equipment, net 152,704 73,635
Intangible assets, net 9,934 921
Land use rights, net 5,424 5,160
Deferred tax assets 8,807 463
Other non-current assets 5,809 1,719
Total non-current assets 206,634 81,898
Total assets 336,399 343,775
Liabilities and shareholders' equity:
Current liabilities:
Short-term and current portion of
long-term debt 7,558 --
Accounts payable 19,829 7,217
Accrued expenses 14,279 12,279
Deferred revenue 3,373 19,706
Advanced subsidies 3,080 1,077
Other taxes payable 5,742 4,060
Other current liabilities 3,448 1,233
Liabilities of discontinued operations
(Note 1) 1,495 -
Total current liabilities 58,804 45,572
Non-current liabilities:
Long-term debt, excluding current portion 2,305 4,107
Advanced subsidies 1,819 1,529
Convertible notes 35,864 40,988
Other non-current liabilities 6,731 181
Total non-current liabilities 46,719 46,805
Total liabilities 105,523 92,377
Shareholders' equity:
Ordinary shares ($0.02 par value,
5,002,500,000 authorized, 529,385,590
and 492,226,776 issued and outstanding
as of December 31, 2008, and
December 31, 2007, respectively) 10,588 9,845
Additional paid-in capital 324,629 291,020
Accumulated deficit (121,505) (57,302)
Accumulated other comprehensive income 17,164 7,835
Total shareholders' equity 230,876 251,398
Total liabilities and shareholders'
equity 336,399 343,775
Note 1: The biologics manufacturing operations in Philadelphia, which
management decided to close in December 2008, are classified as
discontinued operations. See table below titled Discontinued
Operations of Biologics Manufacturing.
WUXI PHARMATECH (CAYMAN) INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of U.S. dollars, except ADS data and per ADS data)
Three Months Ended Year Ended
December 31, December 31,
2008 2007 % 2008 2007 %
(Note 4)
Net revenues:
Laboratory Services
(Note 2) 57,423 28,845 99% 205,028 102,384 100%
Manufacturing
Services 7,025 8,250 (15%) 48,457 32,821 48%
Total net revenues 64,448 37,095 74% 253,485 135,205 87%
Cost of revenues:
Laboratory Services
(Note 2) (38,591) (15,918) 142% (124,723) (52,416) 138%
Manufacturing
Services (5,583) (5,265) 6% (32,420) (19,931) 63%
Total cost of
revenues (44,174) (21,183) 109% (157,143) (72,347) 117%
Gross profit:
Laboratory Services
(Note 2) 18,832 12,927 46% 80,305 49,968 61%
Manufacturing
Services 1,442 2,985 (52%) 16,037 12,890 24%
Total gross profit 20,274 15,912 27% 96,342 62,858 53%
Operating expenses:
Selling and marketing
expenses (2,156) (650) 232% (7,371) (2,333) 216%
General and
administrative
expenses (14,321) (5,915) 142% (49,400) (30,330) 63%
Impairment charges (60,497) -- * (60,497) -- *
Total operating
expenses (76,974) (6,565) * (117,268) (32,663) 259%
Operating income
(loss) (56,700) 9,347 * (20,926) 30,195 *
Other income
(expenses), net:
Other income
(expenses), net 1,586 1,593 (0%) 1,046 2,435 (57%)
Interest income
(expenses), net 270 2,182 (88%) 913 2,771 (67%)
Total other income
(expenses), net 1,856 3,775 (51%) 1,959 5,206 (62%)
Income (loss) from
continuing operations
before income taxes (54,844) 13,122 * (18,967) 35,401 *
Income tax expenses
(benefits) 5,605 (991) * 4,016 (1,498) *
Income (loss) from
continuing operations (49,239) 12,131 * (14,951) 33,903 *
Loss on discontinued
operations, net
(Note 1)
Loss from operations
of discontinued
component (54,290) -- * (61,665) -- *
Income tax benefit 9,678 -- * 12,413 -- *
Loss on discontinued
operations (44,612) -- * (49,252) -- *
Net income (loss) (93,851) 12,131 * (64,203) 33,903 *
Basic net earnings
(loss) per ADS:
Earnings (loss) from
continuing operations (0.74) 0.20 * (0.23) 0.56 *
Loss on discontinued
operations-net of
tax (Note 1) (0.68) -- * (0.78) -- *
Net earnings (loss)
per ADS (1.42) 0.20 * (1.01) 0.56 *
Weighted average ADS
outstanding-
basic (Note 3) 66,035,918 61,528,350 63,775,220 38,506,277
Diluted net earnings
(loss) per ADS:
Earnings (loss)
from continuing
operations (0.74) 0.17 * (0.23) 0.42 *
Loss on discontinued
operations-net of
tax (Note 1) (0.68) -- * (0.78) -- *
Net earnings (loss)
per ADS (1.42) 0.17 * (1.01) 0.42 *
Weighted average ADS
outstanding-
diluted (Note 3) 66,035,918 72,544,322 63,775,220 64,393,436
* Not meaningful
Note 2: Fourth-quarter 2008 net revenues for Laboratory Services is
comprised of $42.3 million for China-based Laboratory Services and
$15.1 million for U.S. testing. Fourth-quarter and full-year 2007
amounts relate entirely to China-based Laboratory Services.
Full-year 2008 net revenues for Laboratory Services is comprised
of $147.3 million for China-based Laboratory Services and $57.7
million for U.S. testing services.
Note 3: Eight (8) ordinary shares are equal to one (1) ADS. Common share
equivalents are not reflected in calculation of weighted average
ADS outstanding -- diluted for fourth-quarter and full-year 2008
because, given the net loss in the quarter and full year, the
effect of their inclusion would be antidilutive.
Note 4: Financial results of AppTec were consolidated as of
January 31, 2008.
WUXI PHARMATECH (CAYMAN) INC.
DISCONTINUED OPERATIONS OF BIOLOGICS MANUFACTURING
(In thousands of U.S. dollars)
Three Months Ended Year Ended
December 31, December 31,
2008 2008
(Note 4)
Revenues 2,018 8,349
Cost of revenues (6,395) (19,627)
Gross loss (4,377) (11,278)
Selling and marketing expenses (79) (291)
General and administrative expenses (253) (515)
Impairment charges (49,581) (49,581)
Loss before income taxes (54,290) (61,665)
Income tax benefit 9,678 12,413
Loss on discontinued operations (44,612) (49,252)
WUXI PHARMATECH (CAYMAN) INC.
RECONCILIATION OF GAAP TO Non-GAAP
(in thousands of U.S. dollars, except ADS data and par value data)
Three Months Ended Year Ended
December 31, December 31,
2008 2007 % 2008 2007 %
(Note 4)
Total company revenue:
GAAP revenue from
continuing
operations 64,448 37,095 74% 253,485 135,205 87%
Adjustments:
Revenue from
discontinued
operations (Note 1) 2,018 -- 8,349 --
Total company revenue 66,466 37,095 79% 261,834 135,205 94%
Continuing operations:
GAAP gross profit 20,274 15,912 27% 96,342 62,858 53%
GAAP gross margin 31% 43% 38% 46%
Adjustments:
Share-based
Compensation 1,004 349 3,020 2,069
Amortization of
acquired intangible
assets 3,896 -- 11,175 --
Non-GAAP gross profit 25,174 16,261 55% 110,537 64,927 70%
Non-GAAP gross margin 39% 44% 44% 48%
GAAP operating income
(loss) (56,700) 9,347 * (20,926) 30,195 *
GAAP operating margin * 25% * 22%
Adjustments:
Share-based
compensation 3,521 4,454 13,046 10,715
Amortization of
acquired intangible
assets 3,896 -- 11,175 --
Impairment charges 60,497 -- 60,497 --
Non-GAAP operating
Income 11,214 13,801 (19%) 63,792 40,910 56%
Non-GAAP operating
Margin 17% 37% 25% 30%
GAAP net income -
continuing
operations (49,239) 12,131 * (14,951) 33,903 *
GAAP net margin * 33% * 25%
Adjustments:
Share-based
compensation 3,521 4,454 13,046 10,715
Amortization of
acquired intangible
assets 3,896 -- 11,175 --
Impairment charges 60,497 -- 60,497 --
Deferred tax impact
related to acquired
intangible assets and
impairment charges (8,648) -- (11,502) --
Non-GAAP net income 10,027 16,585 (40%) 58,265 44,618 31%
Non-GAAP net margin 16% 45% 23% 33%
GAAP net income -
continuing and
discontinued
operations (93,851) 12,131 * (64,203) 33,903 *
Add back:
Depreciation and
amortization 6,264 2,724 30,587 8,946
Interest income
(expenses), net (270) (2,182) (913) (2,771)
Income tax expenses
(benefits) (15,283) 991 (16,429) 1,498
EBITDA (103,140) 13,664 * (50,958) 41,576 *
Adjustments
Share-based
compensation 3,521 4,454 13,046 10,715
Impairment charges-
continuing
operations 60,497 -- 60,497 --
Impairment charges-
discontinued
operations (Note 1) 49,581 -- 49,581 --
Adjusted EBITDA-
Continuing and
discontinued
operations 10,459 18,118 (42%) 72,166 52,291 38%
Income attributable
to holders of ADS
(Non-GAAP):
Basic 10,027 16,585 (40%) 58,265 31,477 85%
Diluted 10,027 16,585 (40%) 58,265 37,994 53%
Basic earnings per ADS
(Non-GAAP) 0.15 0.27 (44%) 0.91 0.82 12%
Diluted earnings
per ADS (Non-GAAP) 0.14 0.23 (40%) 0.80 0.59 35%
Weighted average
ADS outstanding
- basic
(Non-GAAP) 66,035,918 61,528,350 63,775,220 38,506,278
Weighted average
ADS outstanding
- diluted
(Non-GAAP) 72,679,824 72,544,322 72,896,204 64,393,437
* Not meaningful
WUXI PHARMATECH (CAYMAN) INC.
REVENUE RECONCILIATION BY GEOGRAPHY
(in thousands of U.S. dollars)
Three Months Ended Year Ended
December 31, December 31,
2008 2007 % 2008 2007 %
(Note 4)
Net revenues:
China-based Laboratory
Services 42,286 28,845 47% 147,333 102,384 44%
China-based Manufacturing
Services 7,025 8,250 (15%) 48,457 32,821 48%
Subtotal 49,311 37,095 33% 195,790 135,205 45%
U.S.-based Laboratory
Services 15,137 -- * 57,695 -- *
Total net revenues 64,448 37,095 74% 253,485 135,205 87%
* Not meaningful
Conference Call
WuXi PharmaTech senior management will host a conference call at
United States: 1-866-519-4004
China (Landline): 800-819-0121
China (Mobile): 400-620-8038
Hong Kong: 800-933-053
United Kingdom: 0-808-234-6646
International: + 65-6735-7955
Conference ID: 90240602
A telephone replay will be available two hours after the call's completion at:
United States: 1-866-214-5335
China North: 10-800-714-0386
China South: 10-800-140-0386
Hong Kong: 800-901-596
United Kingdom: 0-800-731-7846
International: +61-2-8235-5000
Passcode: 90240602
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
Use of Non-GAAP and Pro-Forma Financial Measures
The Company has provided the fourth-quarter and full-year 2007 and 2008
gross profit, operating income, net income on a non-GAAP basis, which excludes
share-based compensation expenses, impairments of goodwill and intangible
assets, amortization of acquired intangible assets, and discontinued
operations. In addition, total company(1) revenues for the full year include
revenues from eleven months of continuing and discontinued AppTec operations.
The pro-forma full-year revenues include the
Readers 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 non-GAAP measures to GAAP measures for the indicated periods attached hereto.
Cautionary Note Regarding Forward-Looking Statements
Statements in this release contain "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the Private Securities Litigation Reform Act of 1995, including, among others, expected 2009 operating results (including estimated total net revenue, China-based Laboratory Services and U.S. testing net revenues and related adjusted EBITDA and other trends) and capital expenditure levels; and our planned investments in building our talent pool of scientists, in our toxicology facility in Suzhou and related non-GLP and GLP toxicology service capability by the second half of 2009 and mid-2010, respectively, and in our Jinshan facility with the intent of opening it by the end of 2009.
These forward-looking statements are not historical facts but instead represent only our belief regarding future events, many of which, by their nature, are inherently uncertain and outside of our control. Our actual results and financial condition and other circumstances may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Among other factors, continued uncertainty in the global economy, the pressures being felt by our customers and pharmaceutical industry consolidation may adversely impact our business and the trends for outsourced R&D and manufacturing for longer than expected or more severely than expected; we may be unable to successfully make our planned investments and capital expenditures on a timely basis, these investments may not yield the desired results, and we may need to modify the nature and level of our investments and capital expenditures; pharmaceutical companies may not change their business models as expected or in a manner favorable to us; we may fail to capitalize on the opportunities presented; we may not maintain our preferred provider status with our clients; and may be unable to successfully expand our capabilities to meet client needs. In addition, other factors that could cause our actual results to differ from what we currently anticipate include our limited operating history; failure to generate sufficient future cash flows or secure any required future financing on acceptable terms or at all; failure to retain key personnel; effective integration of continuing products and services from AppTec; our reliance on a limited number of customers to continue to account for a high percentage of our revenues; risk of payment failure by any of our large customers, which could significantly harm our cash flows and profitability; dependency upon the continued service of our senior management and key scientific personnel and our ability to retain our existing customers or expand our customer base. You should read the financial information contained in this release in conjunction with the consolidated and pro-forma financial statements and related notes thereto included in our 2007 Annual Report on Form 20-F filed with and available on the Securities and Exchange Commission's website at http://www.sec.gov . For additional information on these and other important factors that could adversely affect our business, financial condition, results of operations and prospects, see "Risk Factors" beginning on page 10 of our 2007 Annual Report on Form 20-F. Our results of operations for fourth-quarter and full-year 2008 are not necessarily indicative of our operating results for any future periods. Any projections in this release are based on limited information currently available to us, which is subject to change. Although these projections and the factors influencing them will likely change, we undertake no obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this press release, except as required by law. Such information speaks only as of the date of this release.
For more information, please contact:
WuXi PharmaTech (Cayman) Inc.
Ronald Aldridge (for investors)
Director of Investor Relations
Tel: +1-215-218-5515
Email: ir@wuxiapptec.com
Sherry Shao (for the media)
Tel: +86-21-5046-4002
Email: pr@wuxiapptec.com
SOURCE WuXi PharmaTech (Cayman) Inc.
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