WuXi PharmaTech Announces Second-Quarter 2012 Results

SHANGHAI, Aug. 13, 2012 /PRNewswire-Asia/ -- 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 second quarter of 2012.

Highlights

  • Net Revenues Increased 28.9% Year Over Year to $130.4 Million
  • Laboratory Services Net Revenues Grew 24.7% Year Over Year to $93.6 Million
  • China-Based Laboratory Services Net Revenues Increased 27.2% Year Over Year to $70.3 Million
  • U.S.-Based Laboratory Services Net Revenues Increased 17.7% Year Over Year to $23.3 Million
  • Manufacturing Services Net Revenues Grew 41.2% Year Over Year to $36.8 Million
  • Net Revenues from China Operations Exceeded $100 Million for the First Time on a Quarterly Basis
  • Share Repurchases Totaled $10.2 Million
  • GAAP Diluted Earnings Per ADS Grew 13.4% Year Over Year to $0.28
  • Non-GAAP Diluted Earnings Per ADS Increased 12.3% Year Over Year to $0.33
  • Company Increases Full-Year 2012 Revenue Guidance to $488-$498 Million

Management Comment

"WuXi's strong operational performance continued in the second quarter," said Dr. Ge Li, Chairman and Chief Executive Officer. "Year-over-year revenue growth accelerated to 28.9%, driven by solid demand for our broad, integrated platform of services. This revenue growth was broad-based, with each of our businesses achieving double-digit growth. I'm especially proud that this was the first quarter in which our China-based operations generated more than $100 million in net revenues. I'm also pleased that WuXi's GAAP diluted earnings per ADS increased 13.4% year over year. With these results, we met or exceeded all of our guidance for revenues and margins for the second quarter. While we produced these strong results, we continued to invest in new facilities and talented employees to drive future growth. We also returned capital to shareholders by repurchasing $10.2 million of our ADSs in the second quarter. We expect the remainder of 2012 to be successful, and we are pleased to raise our full-year net revenue guidance to the range of $488 to $498 million.

"WuXi continues to build a comprehensive and integrated technology platform and service offerings that will enable anyone and any company to discover and develop new products efficiently and cost-effectively," Dr. Li concluded. "By building high-quality operations to better serve our customers, WuXi has become the leader in the Chinese pharmaceutical R&D services industry. We are well-positioned to take advantage of the trend of increasing pharmaceutical research and development outsourcing."

Second-Quarter GAAP Results

Second-quarter 2012 net revenues increased 28.9% year over year to $130.4 million due to strong growth in both Manufacturing Services and Laboratory Services. Manufacturing Services revenue growth was driven by robust demand for clinical-trial materials from our research manufacturing business and for advanced intermediates in our commercial manufacturing business. Revenue growth in Laboratory Services was driven by our comprehensive and integrated discovery and development services, with particularly strong growth in analytical development services, DMPK/ADME, biology, formulation, toxicology, and bioanalytical services in China and increased demand for testing services in the United States for both biologics and medical devices.  

Second-quarter 2012 GAAP gross profit increased 20.4% year over year to $46.5 million mainly due to 28.9% revenue growth. Second-quarter 2012 GAAP gross margin decreased year over year to 35.7% from 38.2%. Gross margin in Laboratory Services decreased year over year to 36.7% from 40.6% mainly due to the effects of appreciation of the RMB against the U.S. dollar and increasing labor costs in China, partially offset by improved productivity. Gross margin in Manufacturing Services improved year over year to 33.1% from 31.2% due to improved capacity utilization and project mix. 

Second-quarter 2012 GAAP operating income grew 10.5% year over year to $23.8 million due to the 20.4% increase in gross profit, offset by increased operating expenses related to the hiring of new senior staff and sales and marketing personnel and R&D investment in developing capabilities in biology, biologics, genomics, and other areas. Operating margin decreased to 18.2% from 21.3% due to the lower gross margin and the increased operating expenses.

Second-quarter 2012 GAAP net income increased 9.9% year over year to $20.5 million due to the 10.5% increase in operating income, higher interest income on short-term investments that carried higher interest rates, and lower income tax expense due to income mix and a tax benefit from the deductibility of 150% of last year's R&D expenses, offset by a loss on foreign-exchange forward contracts of $0.9 million.

Second-quarter 2012 GAAP diluted earnings per ADS increased 13.4% to $0.28, mainly due to the 9.9% increase in net income and a lower ADS count caused by the repurchase of 722,431 ADSs, at an average price of $14.14 per ADS.

Second-quarter 2012 GAAP comprehensive income decreased 21.2% year over year to $18.4 million due to the decrease in currency translation adjustments, partially offset by the 9.9% increase in GAAP net income.

Second-Quarter 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. 

Second-quarter 2012 non-GAAP gross profit increased 20.1% year over year to $48.0 million mainly due to broad-based revenue growth. Non-GAAP gross margin decreased to 36.8% from 39.5%.  Non-GAAP gross margin in Laboratory Services decreased year over year to 38.2% from 41.3% due to the appreciation of the RMB against the U.S. dollar and increased labor costs, partially offset by improved productivity. Non-GAAP gross margin in Manufacturing Services slightly improved year over year to 33.5% from 33.0% due to strong revenue growth, increased capacity utilization, and project mix.             

Second-quarter 2012 non-GAAP operating income increased 9.7% year over year to $27.4 million, primarily due to the 20.1% increase in non-GAAP gross profit, partially offset by the increase in non-GAAP operating expenses driven by the hiring of new senior staff and sales and marketing personnel and R&D investment in developing capabilities in biology, biologics, genomics, and other areas. Operating margin decreased to 21.0% from 24.7% due to the lower gross margin and increased operating expenses.

Second-quarter 2012 non-GAAP net income grew 8.8% year over year to $23.9 million due to the 9.7% increase in non-GAAP operating income, higher interest income on short-term investments that carried higher interest rates, and lower income tax expense due to income mix and a tax benefit from deductibility of 150% of last year's R&D expenses, offset by a loss on foreign-exchange forward contracts of $0.9 million.

Second-quarter 2012 non-GAAP diluted earnings per ADS grew 12.3% year over year to $0.33, mainly due to the 8.8% increase in non-GAAP net income and a lower ADS count caused by the repurchase of 722,431 ADSs, at an average price of $14.14.

Full-Year 2012 Financial Guidance

The company provides the following full-year 2012 financial guidance:

  • Total net revenues of $488-498 million, or 20-22% year-over-year growth, compared to $468-$488 million, or 15-20% growth, previously
  • Growth in net revenues of China-based Laboratory Services of 23-26% year over year, compared to 18-24% previously, on a pro-forma basis reflecting the classification of Process Chemistry in Manufacturing Services for both years
  • Growth in net revenues of U.S.-based Laboratory Services of 12-13% year over year, compared to 6-9% previously
  • Growth in net revenues of Manufacturing Services of 18-21% year over year, compared to 13-18% previously, on a pro-forma basis reflecting the classification of Process Chemistry in Manufacturing Services for both years
  • Operating income margin of 17.0-18.0% on a GAAP basis, 20.0-21.0% on a non-GAAP basis, compared to 17.5-19.0% on a GAAP basis, 20.0-21.5% on a non-GAAP basis previously
  • Capital expenditures of about $70 million, the same as previous guidance
  • GAAP effective tax rate of about 17.5%, the same as previous guidance

Third-Quarter 2012 Financial Guidance

The company provides the following third-quarter 2012 financial guidance:

  • Total net revenues of $121-$124 million, up 16-19% year over year
  • Laboratory Services net revenues (not including Process Chemistry) of $97-$98 million
  • Manufacturing Services net revenues (including Process Chemistry) of $24-$26 million
  • Operating margin of 16.5-17.0% GAAP, 20.0-20.5% non-GAAP
  • Effective tax rate of about 19.5-20.0%

 

WUXI PHARMATECH (CAYMAN) INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS

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




June 30, 2012

December 31, 2011

Assets:




Current assets:




        Cash and cash equivalents


55,211

71,368

        Restricted cash


7,391

2,458

        Short-term investment


127,933

128,054

        Accounts receivable, net


84,053

72,736

        Inventories


42,917

45,351

        Prepaid expenses and other current assets


14,114

15,133

                    Total current assets


331,619

335,100

Non-current assets:




        Goodwill


34,696

34,701

        Property, plant and equipment, net


264,000

245,694

        Long-term investment


5,972

4,335

        Intangible assets, net


9,712

10,568

        Land use rights


5,400

5,488

        Deferred tax assets


6,429

8,499

        Other non-current assets


19,383

19,469

                    Total non-current assets


345,592

328,754

                    Total assets


677,211

663,854





Liabilities and equity:




Current liabilities:




        Short-term and current portion of long-term debt


44,248

28,661

        Accounts payable


23,925

22,803

        Accrued expenses


18,700

20,913

        Deferred revenue


13,328

15,881

        Advanced subsidies


7,733

6,417

        Other taxes payable


3,308

2,196

        Convertible notes


-

35,864

        Other current liabilities


13,374

10,018

                    Total current liabilities


124,616

142,753

Non-current liabilities:




        Long-term debt, excluding current portion


1,543

1,646

        Advanced subsidies


1,446

3,215

        Long-term payable


2,099

3,944

        Other non-current liabilities


6,379

6,570

                    Total non-current liabilities


11,467

15,375

                    Total liabilities


136,083

158,128

Equity:




       Ordinary shares ($0.02 par value, 5,002,550,000 authorized, 
         570,489,352 and 569,937,290 issued and outstanding as of
         December 31, 2011, and June 30, 2012, respectively)


11,399

11,410

        Additional paid-in capital


342,505

345,832

        Retained earnings


143,501

103,159

        Accumulated other comprehensive income


43,723

45,325

                    Total equity


541,128

505,726

                    Total liabilities and equity


677,211

663,854


 

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 June 30,


Six Months Ended June 30,



2012

2011

% Change


2012

2011

% Change

Net revenues:









      Laboratory Services


93,544

75,026

24.7%


180,194

145,334

24.0%

      Manufacturing Services


36,837

26,087

41.2%


68,215

49,334

38.3%

Total net revenues


130,381

101,113

28.9%


248,409

194,668

27.6%










Cost of revenues:









      Laboratory Services


(59,255)

(44,546)

33.0%


(113,742)

(87,258)

30.4%

      Manufacturing Services


(24,631)

(17,938)

37.3%


(46,281)

(34,086)

35.8%

Total cost of revenues


(83,886)

(62,484)

34.3%


(160,023)

(121,344)

31.9%










Gross profit:









      Laboratory Services


34,289

30,480

12.5%


66,452

58,076

14.4%

      Manufacturing Services


12,206

8,149

49.8%


21,934

15,248

43.8%

Total gross profit


46,495

38,629

20.4%


88,386

73,324

20.5%










Operating expenses:









      Selling and marketing expenses


(3,729)

(2,547)

46.4%


(7,007)

(4,505)

55.5%

      General and administrative expenses


(16,911)

(13,608)

24.3%


(33,073)

(25,782)

28.3%

      Research and development expenses


(2,080)

(961)

116.4%


(3,893)

(1,684)

131.2%

Total operating expenses


(22,720)

(17,116)

32.7%


(43,973)

(31,971)

37.5%

Operating income


23,775

21,513

10.5%


44,413

41,353

7.4%










Other income (expenses), net:









      Other income (expenses), net


(580)

149

(489.3%)


2,160

1,776

21.6%

      Interest income (expenses), net


1,425

975

46.2%


3,124

1,806

73.0%

Total other income (expenses), net


845

1,124

(24.8%)


5,284

3,582

47.5%










Income before income taxes


24,620

22,637

8.8%


49,697

44,935

10.6%

Income tax expense


(4,128)

(3,986)

3.6%


(8,216)

(8,060)

1.9%

Net income


20,492

18,651

9.9%


41,481

36,875

12.5%










Basic net earnings per ADS


0.29

0.26

8.6%


0.58

0.52

10.5%

Diluted net earnings per ADS


0.28

0.25

13.4%


0.56

0.49

14.9%










Weighted average ADS outstanding—basic


71,660,086

70,859,356

1.1%


71,816,806

70,516,975

1.8%

Weighted average ADS outstanding—diluted


72,984,759

75,329,493

(3.1%)


73,761,502

75,373,691

(2.1%)










Other comprehensive income:









Currency translation adjustments


(2,056)

4,739

(143.4%)


(1,602)

8,195

(119.5%)

Comprehensive income


18,436

23,390

(21.2%)


39,879

45,070

(11.5%)

 

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 June 30,


Six Months Ended June 30,



2012

2011

% Change


2012

2011

% Change

GAAP gross profit


46,495

38,629

20.4%


88,386

73,324

20.5%

GAAP gross margin


35.7%

38.2%



35.6%

37.7%


Adjustments:









        Share-based compensation


1,023

1,005

1.8%


2,089

1,980

5.5%

        Amortization of acquired intangible assets


525

355

47.9%


1,050

710

47.9%

Non-GAAP gross profit


48,043

39,989

20.1%


91,525

76,014

20.4%

Non-GAAP gross margin


36.8%

39.5%



36.8%

39.0%











GAAP operating income


23,775

21,513

10.5%


44,413

41,353

7.4%

GAAP operating margin


18.2%

21.3%



17.9%

21.2%


Adjustments:









        Share-based compensation


3,090

3,109

(0.6%)


6,245

6,046

3.3%

        Amortization of acquired intangible assets


525

355

47.9%


1,050

710

47.9%

Non-GAAP operating income


27,390

24,977

9.7%


51,708

48,109

7.5%

Non-GAAP operating margin


21.0%

24.7%



20.8%

24.7%











GAAP net income


20,492

18,651

9.9%


41,481

36,875

12.5%

GAAP net margin


15.7%

18.4%



16.7%

18.9%


Adjustments:









        Share-based compensation


3,090

3,109

(0.6%)


6,245

6,046

3.3%

        Amortization of acquired intangible assets


525

355

47.9%


1,050

710

47.9%

        Deferred tax impact related to acquired intangible assets


(195)

(137)

42.3%


(390)

(275)

41.8%

Non-GAAP net income


23,912

21,978

8.8%


48,386

43,356

11.6%

Non-GAAP net margin


18.3%

21.7%



19.5%

22.3%


Income attributable to holders of ADS (Non-GAAP):









Basic


23,912

21,978

8.8%


48,386

43,356

11.6%

Diluted


23,912

21,978

8.8%


48,386

43,356

11.6%










Basic earnings per ADS (Non-GAAP)


0.33

0.31

7.6%


0.67

0.61

9.6%

Diluted earnings per ADS (Non-GAAP)


0.33

0.29

12.3%


0.66

0.58

14.0%










Weighted average ADS outstanding –

basic (Non-GAAP)


71,660,086

70,859,356

1.1%


71,816,806

70,516,975

1.8%

Weighted average ADS outstanding – diluted (Non-GAAP)


72,984,759

75,329,493

(3.1%)


73,761,502

75,373,691

(2.1%)


 

WUXI PHARMATECH (CAYMAN) INC.

REVENUE BREAKDOWN

(in thousands of U.S. dollars)












Three Months Ended
June 30,


Six Months Ended
June 30,



2012

2011

% Change


2012

2011

% Change

Net revenues:









   China-based 
     Laboratory Services


70,294

55,268

27.2%


134,746

106,499

26.5%

   China-based 
     Manufacturing
     Services


36,837

26,087

41.2%


68,215

49,334

38.3%

Subtotal


107,131

81,355

31.7%


202,961

155,833

30.2%

   U.S.-based Laboratory
      Services


23,250

19,758

17.7%


45,448

38,835

17.0%

Total net revenues


130,381

101,113

28.9%


248,409

194,668

27.6%

 

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, August 14, 2012, to discuss its second-quarter 2012 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:         

10406942

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

United States:

1-866-214-5335

China (Landline):      

10-800-714-0386

China (Mobile):

10-800-140-0386

Hong Kong:

800-901-596

United Kingdom:        

0-800-731-7846

International:         

+61-2-8235-5000

Conference ID:         

10406942

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

Use of Non-GAAP and Pro-Forma Financial Measures 

We have provided the second-quarter 2011 and 2012 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 and 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.

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, our financial guidance for full-year and third-quarter 2012 (including, as applicable, estimated total revenues, Laboratory Services revenues, Manufacturing Services revenues, operating margins and other trends), pharmaceutical research and development outsourcing trends, our ability to take advantage of increasing pharmaceutical research and development outsourcing, increased customer demand for our services, investment in various new businesses, investment in expanding our existing business, building a comprehensive and integrated technology platform, the ability of this platform to enable anyone and any company to discover and develop new products efficiently and cost-effectively, and our share repurchase program.

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, the state of the global economy may continue to be uncertain; 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; the pressures being felt by our customers and pharmaceutical industry consolidation may adversely impact our business and the trends for outsourced and offshored R&D and manufacturing for longer than expected or more severely than expected; we may not enjoy the anticipated benefits of the Abgent and MedKey acquisitions or other planned investments and capital expenditures (including investments made through our corporate venture fund) on a timely basis or at all; we may need to modify the nature and level of our investments and capital expenditures; we may not maintain our preferred provider status with our clients and may be unable to successfully expand our capabilities to meet client needs; we may face increased margin pressure as a result of renminbi appreciation and increased labor inflation in China and the company's investment; and we may not repurchase our ADSs as anticipated for market or other reasons. In addition, other factors that could cause our actual results to differ from what we currently anticipate include failure to generate sufficient future cash flows or to secure any required future financing on acceptable terms or at all; failure to retain key personnel; our reliance on a limited number of customers to continue to account for a high percentage of our revenues; the risk of payment failure by any of our large customers, which could significantly harm our cash flows and profitability; our dependence 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 financial statements and related notes thereto included in our 2011 Annual Report on Form 20-F filed with the Securities and Exchange Commission 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 6 of our 2011 Annual Report on Form 20-F. Our results of operations for second-quarter 2012 are not necessarily indicative of our operating results for any future periods. All 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.

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 year end audit, which could result in significant differences from this unaudited financial information.

Incorporation by Reference

WuXi PharmaTech hereby expressly incorporates by reference into its registration statement on Form F-3 (File No. 333-161757) the discussions contained in "GAAP Results", the unaudited consolidated balance sheets, the unaudited condensed consolidated statements of operations, and the revenue breakdown by geography, from this press release.

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

     Web site: http://www.wuxiapptec.com/

SOURCE WuXi PharmaTech (Cayman) Inc.



RELATED LINKS
http://www.wuxiapptec.com

More by this Source

Best of Content We Love 2014 


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

 

PR Newswire Membership

Fill out a PR Newswire membership form or contact us at (888) 776-0942.

Learn about PR Newswire services

Request more information about PR Newswire products and services or call us at (888) 776-0942.