WuXi PharmaTech Announces Third-Quarter 2013 Results

SHANGHAI, Nov. 12, 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 unaudited financial results for the third quarter of 2013. 

Highlights

  • Net Revenues Increased 16.6% Year Over Year to $146.7 Million
  • Laboratory Services Net Revenues Grew 9.2% Year Over Year to $108.1 Million
  • China-Based Laboratory Services Net Revenues Increased 10.3% Year Over Year to $85.0 Million
  • U.S.-Based Laboratory Services Net Revenues Increased 5.4% Year Over Year to $23.1 Million
  • Manufacturing Services Net Revenues Increased 43.6% Year Over Year to $38.6 Million
  • GAAP Diluted Earnings Per ADS Grew 40.7% Year Over Year to $0.42
  • Non-GAAP Diluted Earnings Per ADS Increased 29.3% Year Over Year to $0.47
  • Full-Year 2013 Revenue Guidance Revised to $574-$578 Million, Full-Year 2013 Diluted EPS Guidance Increased to $1.51-$1.55 GAAP, $1.73-$1.77 Non-GAAP

Management Comment

"WuXi achieved solid, broad-based revenue growth and stable margins in the third quarter," said Dr. Ge Li, Chairman and Chief Executive Officer.  "As a result, we again exceeded our financial guidance for the quarter. We expect this strong growth to continue throughout the remainder of 2013 and are increasing our full-year 2013 EPS guidance.

"While achieving current growth, we are also making the investments necessary to sustain growth," Dr. Li continued. "In small-molecule manufacturing, we are planning to construct new research manufacturing and commercial manufacturing facilities that will substantially increase our capacity.  In August 2013, we successfully completed a general GMP and Pre-Approval Inspection from the U.S. Food and Drug Administration of our commercial manufacturing facility in Jinshan for the production of an advanced intermediate for a product with an NDA under FDA review, without the issuance of a Form 483.

"Biologics is another area of current investment that will drive future revenue growth. We believe we have built the premier biologics drug discovery, development, and manufacturing business in China, and we expect it will be one of our fastest-growing businesses.

"Genomics is another area where WuXi is demonstrating leadership in China.  We recently received CLIA certification from the Centers for Medicare and Medicaid Services of the U.S. Department of Health and Human Services for our genomics clinical laboratory in Shanghai, the only laboratory in China to receive such certification. Receipt of a CLIA certificate allows WuXi's genomics laboratory to undertake certain clinical trial gene sequencing projects.

"These and other achievements demonstrate that we are succeeding in our mission of building an open-access technology and capability platform that enables anyone and any company to discover and develop therapeutic products to benefit patients," Dr. Li concluded.

Third-Quarter 2013 GAAP Results

Third-quarter 2013 net revenues increased 16.6% year over year to $146.7 million. Revenue growth in Laboratory Services of 9.2% was driven by our comprehensive and integrated discovery and development services, primarily in China. Revenue growth of 43.6% in Manufacturing Services was caused by strong growth in demand in both research and commercial manufacturing compared to the third quarter of 2012.

Third-quarter 2013 GAAP gross profit increased 14.4% year over year to $52.7 million due to 16.6% revenue growth, offset by business mix, as the strongest revenue growth was achieved in Manufacturing Services, which has a lower gross margin than Laboratory Services.  Gross margin decreased year over year to 35.9% from 36.6%.  Gross margin in Laboratory Services decreased slightly year over year to 38.1% from 38.2% mainly due to the effects of increasing labor costs in China and appreciation of the RMB versus the U.S. dollar, partially offset by improved productivity and the ramp-up of biologics and preclinical services. Gross margin in Manufacturing Services decreased year over year to 30.0% from 30.7% due to project mix.

Third-quarter 2013 GAAP operating income increased 26.8% year over year to $27.2 million due to the 14.4% increase in gross profit and lower general and administrative expenses in the quarter.  Operating margin increased to 18.5% from 17.0%, primarily due to lower general and administrative expenses.

Third-quarter 2013 GAAP net income increased 42.7% year over year to $30.4 million due to the 26.8% year-over-year increase in operating income, higher other income primarily due to $3.1 million of realized gains and $2.6 million of mark-to-market gains on foreign-exchange forward contracts, higher interest income due to higher cash balances and higher interest rates, and a reduction in the effective tax rate due to the mix of taxable income, partially offset by $1.4 million of equity-method investment losses associated with our joint ventures with PRA and MedImmune.

Third-quarter 2013 GAAP diluted earnings per ADS increased 40.7% to $0.42 due to the 42.7% increase in net income, partially offset by a higher number of outstanding ADSs as a result of the exercise of shares under employee stock option and restricted stock programs. Third-quarter 2013 GAAP comprehensive income increased 94.7% year over year to $39.3 million due to the 42.7% increase in GAAP net income, the increase in currency translation adjustments, and $6.6 million of unrealized gains from investments by our corporate venture fund in two U.S. biotech companies that had successful IPOs in the third quarter of 2013.

Third-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. 

Third-quarter 2013 non-GAAP gross profit increased 13.1% year over year to $53.9 million, due to the 16.6% revenue growth, offset by business mix, as the strongest revenue growth was achieved in Manufacturing Services, which has a lower gross margin than Laboratory Services.  Non-GAAP gross margin decreased year over year to 36.7% from 37.8%, mainly due to revenue mix of faster-growing Manufacturing Services revenues with relatively low gross margin and the effects of increasing labor costs in China and appreciation of the RMB versus the U.S. dollar, partially offset by improved productivity and the ramp-up of biologics and preclinical services. 

Third-quarter 2013 non-GAAP operating income increased 17.5% year over year to $31.3 million, primarily due to the 13.1% increase in non-GAAP gross profit.  Operating margin increased to 21.3% from 21.2% due to lower general and administrative expenses as a percentage of revenue, partially offset by lower gross margin.

Third-quarter 2013 non-GAAP net income grew 31.2% year over year to $34.5 million due to the 17.5% increase in non-GAAP operating income, higher other income primarily due to $3.1 million of realized gains and $2.6 million of mark-to-market gains on foreign-exchange forward contracts, higher interest income due to higher cash balances and higher interest rates, and a reduction in the effective tax rate due to the mix of taxable income, partially offset by $1.4 million of equity-method investment losses associated with our joint ventures with PRA and MedImmune.

Third-quarter 2013 non-GAAP diluted earnings per ADS grew 29.3% year over year to $0.47 due to the 31.2% increase in non-GAAP net income, partially offset by a higher number of outstanding ADSs as a result of the exercise of shares under the employee stock option and restricted stock programs.

Full-Year 2013 Financial Guidance

WuXi PharmaTech updates its full-year 2013 financial guidance as follows:

  • Total net revenues of $574-578 million, or 15-16% year-over-year growth, compared to previous guidance of $572-578 million
  • GAAP and non-GAAP gross margin and operating margin comparable to those in 2012, the same as previous guidance
  • GAAP diluted earnings per ADS of $1.51-$1.55, compared to previous guidance of $1.38-$1.44
  • Non-GAAP diluted earnings per ADS of $1.73-$1.77, compared to previous guidance of $1.61-$1.67
  • Capital expenditures of about $60 million, the same as previous guidance

Fourth-Quarter 2013 Financial Guidance

WuXi PharmaTech provides the following fourth-quarter 2013 financial guidance:

  • Total net revenues of $153-157 million, or 22-25% year-over-year growth
  • GAAP diluted earnings per ADS of $0.38-$0.42
  • Non-GAAP diluted earnings per ADS of $0.44-$0.48

WUXI PHARMATECH (CAYMAN) INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS

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







September 30,
2013

December 31,
2012

Assets:




Current assets:




        Cash and cash equivalents


145,161

54,133

        Restricted cash


3,506

423

        Short-term investments


180,867

175,245

        Accounts receivable, net


119,384

99,578

        Inventories


41,074

47,774

        Prepaid expenses and other current assets


34,341

18,807

                    Total current assets


524,333

395,960

Non-current assets:




        Goodwill


31,085

32,561

        Property, plant and equipment, net


264,363

264,381

        Long-term investments


23,979

14,015

        Intangible assets, net


6,233

7,268

        Land use rights


5,591

5,564

        Deferred tax assets


2,545

3,037

        Other non-current assets


4,946

19,749

                    Total non-current assets


338,742

346,575

                    Total assets


863,075

742,535





Liabilities and equity:




Current liabilities:




        Short-term and current portion of long-term debt


49,406

59,089

        Accounts payable


30,763

21,808

        Accrued expenses


27,220

27,411

        Deferred revenue


22,527

17,052

        Advanced subsidies


11,435

9,265

        Other taxes payable


7

1,581

        Other current liabilities


14,128

11,215

                    Total current liabilities


155,486

147,421

Non-current liabilities:




        Long-term debt, excluding current portion


5,534

5,697

        Advanced subsidies


1,902

2,663

        Long-term payables


-

732

        Other non-current liabilities


7,149

7,799

                    Total non-current liabilities


14,585

16,891

                    Total liabilities


170,071

164,312

Equity:




       Ordinary shares ($0.02 par value, 5,002,550,000 authorized,  568,513,338 and 569,653,210 issued and outstanding as of December 31, 2012, and September 30, 2013, respectively)


11,393

11,222

        Additional paid-in capital


346,383

331,714

        Retained earnings


270,315

188,604

        Accumulated other comprehensive income


64,913

46,683

                    Total equity


693,004

578,223

                    Total liabilities and equity


863,075

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
 September 30,


Nine Months Ended
 September 30,



2013

2012

% Change


2013

2012

% Change

Net revenues:









      Laboratory Services


108,060

98,925

9.2%


311,444

279,119

11.6%

      Manufacturing Services


38,659

26,919

43.6%


109,467

95,134

15.1%

Total net revenues


146,719

125,844

16.6%


420,911

374,253

12.5%










Cost of revenues:









      Laboratory Services


(66,929)

(61,097)

9.5%


(192,557)

(174,840)

10.1%

      Manufacturing Services


(27,053)

(18,657)

45.0%


(76,456)

(64,938)

17.7%

Total cost of revenues


(93,982)

(79,754)

17.8%


(269,013)

(239,778)

12.2%










Gross profit:









      Laboratory Services


41,131

37,828

8.7%


118,887

104,279

14.0%

      Manufacturing Services


11,606

8,262

40.5%


33,011

30,196

9.3%

Total gross profit


52,737

46,090

14.4%


151,898

134,475

13.0%










Operating expenses:









      Selling and marketing expenses


(3,859)

(3,594)

7.4%


(12,233)

(10,601)

15.4%

      General and administrative expenses


(18,656)

(19,302)

(3.3%)


(56,077)

(52,374)

7.1%

      Research and development expenses


(3,031)

(1,744)

73.8%


(7,707)

(5,637)

36.7%

Total operating expenses


(25,546)

(24,640)

3.7%


(76,017)

(68,612)

10.8%

Operating income


27,191

21,450

26.8%


75,881

65,863

15.2%










Other income (expenses), net:









      Loss from equity-method investments


(1,404)

-

NA


(2,926)

-

NA

      Other income (expenses), net


8,084

3,103

160.5%


18,248

5,263

246.7%

      Interest income (expenses), net


2,500

1,399

78.7%


6,091

4,523

34.7%

Total other income (expenses), net


9,180

4,502

103.9%


21,413

9,786

118.8%










Income before income taxes


36,371

25,952

40.1%


97,294

75,649

28.6%

Income tax expense


(5,992)

(4,669)

28.3%


(15,583)

(12,885)

20.9%

Net income


30,379

21,283

42.7%


81,711

62,764

30.2%










Other comprehensive income:









Currency translation adjustments


2,282

(1,117)

(304.3%)


11,635

(2,719)

(527.9%)

Unrealized gains on available-for-sale securities

6,596

-

NA


6,596

-

NA

Comprehensive income


39,257

20,166

94.7%


99,942

60,045

66.4%










Basic net earnings per ADS


0.43

0.30

41.5%


1.16

0.88

31.4%

Diluted net earnings per ADS


0.42

0.30

40.7%


1.13

0.86

31.5%










Weighted average ADS outstanding - basic


71,142,534

70,507,167

0.9%


70,731,872

71,375,430

(0.9%)

Weighted average ADS outstanding - diluted


73,057,785

72,001,577

1.5%


72,423,827

73,168,508

(1.0%)











 


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
 September 30,


Nine Months Ended
 September 30,



2013

2012

% Change


2013

2012

% Change










GAAP gross profit


52,737

46,090

14.4%


151,898

134,475

13.0%

GAAP gross margin


35.9%

36.6%



36.1%

35.9%


Adjustments:









        Share-based compensation


1,067

979

9.0%


3,247

3,068

5.8%

        Amortization of acquired intangible assets


48

525

(90.9%)


212

1,575

(86.5%)

Non-GAAP gross profit


53,852

47,594

13.1%


155,357

139,118

11.7%

Non-GAAP gross margin


36.7%

37.8%



36.9%

37.2%











GAAP operating income


27,191

21,450

26.8%


75,881

65,863

15.2%

GAAP operating margin


18.5%

17.0%



18.0%

17.6%


Adjustments:









        Share-based compensation


4,052

4,661

(13.1%)


11,700

10,906

7.3%

        Amortization of acquired intangible assets


48

525

(90.9%)


212

1,575

(86.5%)

Non-GAAP operating income


31,291

26,636

17.5%


87,793

78,344

12.1%

Non-GAAP operating margin


21.3%

21.2%



20.9%

20.9%











GAAP net income


30,379

21,283

42.7%


81,711

62,764

30.2%

GAAP net margin


20.7%

16.9%



19.4%

16.8%


Adjustments:









        Share-based compensation


4,052

4,661

(13.1%)


11,700

10,906

7.3%

        Amortization of acquired intangible assets


48

525

(90.9%)


212

1,575

(86.5%)

        Deferred tax impact related to acquired
          intangible assets


(17)

(195)

(91.3%)


(66)

(584)

(88.7%)

Non-GAAP net income


34,462

26,274

31.2%


93,557

74,661

25.3%

Non-GAAP net margin


23.5%

20.9%



22.2%

19.9%











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









Basic


34,462

26,274

31.2%


93,557

74,661

25.3%

Diluted


34,462

26,274

31.2%


93,557

74,661

25.3%










Basic earnings per ADS (Non-GAAP)


0.48

0.37

30.0%


1.32

1.05

26.4%

Diluted earnings per ADS (Non-GAAP)


0.47

0.36

29.3%


1.29

1.02

26.6%










Weighted average ADS outstanding
   – basic (Non-GAAP)


71,142,534

70,507,167

0.9%


70,731,872

71,375,430

(0.9%)

Weighted average ADS outstanding
  – diluted (Non-GAAP)


73,057,785

72,001,577

1.5%


72,423,827

73,168,508

(1.0%)

 

WUXI PHARMATECH (CAYMAN) INC.

REVENUE BREAKDOWN

(in thousands of U.S. dollars)












Three Months Ended
 September 30,


Nine Months Ended
 September 30,



2013

2012

% Change


2013

2012

% Change

Net revenues:









        China-based Laboratory Services


85,000

77,055

10.3%


242,844

211,801

14.7%

        China-based Manufacturing Services


38,659

26,919

43.6%


109,467

95,134

15.1%

                    Subtotal


123,659

103,974

18.9%


352,311

306,935

14.8%

        U.S.-based Laboratory Services


23,060

21,870

5.4%


68,600

67,318

1.9%

Total net revenues


146,719

125,844

16.6%


420,911

374,253

12.5%

Conference Call

WuXi PharmaTech senior management will host a conference call at 8:00 am (U.S. Eastern) / 5:00 am (U.S. Pacific) / 9:00 pm (Beijing/Shanghai/Hong Kong) on Wednesday, November 13, 2013, to discuss its third-quarter 2013 financial results and future prospects.  The conference call may be accessed by calling:

China

4001 200 539

Hong Kong

800 905 927

Singapore

800 616 3222

United Kingdom

0800 015 9725

United States

1855 298 3404

United States - New York (toll)

+1 631 5142 526

Other countries (toll)

+65 6823 2299

Conference ID

5522969

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

China

4001 842 240

Hong Kong

800 966 697

Singapore

800 616 2127

United Kingdom

0800 169 7301

United States

1866 846 0868

Conference ID

5522969

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 fourth-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 as of the date on which 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 third-quarter and nine-months 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 and 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 you should refer to the reconciliation of GAAP measures to non-GAAP measures for the indicated periods in this press release.

Statement Regarding Unaudited Financial Information

The financial information in this press release 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.

For more information, please contact:

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

     Aaron Shi (for the media)
     Associate Director of Corporate Communications 
     Tel:   +86-21-5046-4362
     Email: aaron_shi@wuxiapptec.com

SOURCE WuXi PharmaTech



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