WuXi PharmaTech Announces First-Quarter 2014 Results

SHANGHAI, May 14, 2014 -- WuXi PharmaTech (Cayman) Inc. (NYSE: WX), a leading research and development services company serving the pharmaceutical, biotechnology, and medical device industries, with operations inChina and the United States, today announced its financial results for the first quarter of 2014. 

First-Quarter 2014 Highlights

• Net Revenues Increased 11.3% Year Over Year to $146.7 Million
• Laboratory Services Net Revenues Grew 8.3% Year Over Year to $105.5 Million
• China-Based Laboratory Services Net Revenues Increased 10.3% Year Over Year to $82.1 Million
• U.S.-Based Laboratory Services Net Revenues Grew 1.7% Year Over Year to $23.4 Million
• Manufacturing Services Net Revenues Increased 19.7% Year Over Year to $41.2 Million
• GAAP Diluted Earnings Per ADS Declined 19.8% Year Over Year to $0.24; Excluding Mark-to-Market Loss on Foreign-Exchange Forward Contracts, GAAP Diluted Earnings Per ADS Increased 51.3% to $0.43
• Non-GAAP Diluted Earnings Per ADS Declined 14.3% Year Over Year to $0.30; Excluding Mark-to-Market Loss on Foreign-Exchange Forward Contracts, Non-GAAP Diluted Earnings Per ADS Increased 46.3% to $0.49

Management Comment

"WuXi started the year with a good first quarter," said Dr. Ge Li, Chairman and CEO of WuXi PharmaTech.  "Through strong revenue growth and good cost control, we exceeded our revenue and diluted EPS guidance for the quarter.  We also made strong investment to sustain our growth."

"Our revenue growth was led by small-molecule manufacturing, biologics, and medicinal chemistry," Dr. Li continued.  "We expect year-over-year revenue growth to accelerate in the coming quarters as new projects start to generate revenues across the board.  The favorable biotech funding environment in the U.S. will generate new business throughout our organization in the next few years as our integrated drug discovery and development platform enables biotech companies to utilize our capabilities and capacity to rapidly advance their product pipelines.

"While achieving good revenue growth, we are investing in new capabilities, including talent, laboratories, and technologies, particularly in manufacturing, biologics, genomics, R&D, sales and marketing, and information technology, to drive future revenue growth.  Our largest current investment is a two-year, $100 million expansion of our manufacturing facilities inChangzhou, which will double our current capacity and meet growing demand in both research manufacturing and commercial manufacturing.

"A mark-to-market loss on foreign-exchange forward contracts of $13.9 million in the quarter resulted from the depreciation of the RMB versus the U.S. dollar of about 3%, beginning in February.  This loss was partially offset by operating margin improvement caused in part by the same currency movement, as well as by a $5.0 million gain from the sale by our corporate venture fund of an investment in an IPOed company.  We have revised our full-year 2014 GAAP and non-GAAP earnings per ADS guidance to reflect these events.  Apart from this mark-to-market loss, our financial performance in 2014 is meeting or exceeding our previous expectations.

"The company remains focused on its mission of building the best open-access platform of services and technologies to enable anyone and any company to discover, develop, and commercialize healthcare products to benefit the world's patients," Dr. Li concluded.

First-Quarter 2014 GAAP Results

First-quarter 2014 net revenues increased 11.3% year over year to $146.7 million.  Revenue growth in Laboratory Services of 8.3% was driven by our comprehensive and integrated drug discovery and development services.  Revenue growth of 19.7% in Manufacturing Services was caused by strong demand in both research manufacturing and commercial manufacturing compared to the first quarter of 2013.

First-quarter 2014 GAAP gross profit increased 13.1% year over year to $53.6 million due to 11.3% revenue growth and productivity improvement.  Gross margin increased year over year to 36.6% from 36.0% mainly due to improved productivity and the ramp-up of biologics and preclinical services, partially offset by the effects of increased labor costs in China and business mix, as Manufacturing Services had greater revenue growth and lower gross margin than Laboratory Services.  Gross margin in Manufacturing Services decreased year over year to 30.2% from 31.4%.  Gross margin in Laboratory Services increased year over year to 39.0% from 37.6%.

First-quarter 2014 GAAP operating income increased 1.8% year over year to $23.4 million due to the 13.1% increase in gross profit, partially offset by increased general and administrative expenses, including hiring of senior management, and R&D expenses in biologics, genomics, discovery biology, risk sharing projects, and other areas.  Operating margin declined to 16.0% from 17.4% due to these increased general and administrative and R&D expenses.

First-quarter 2014 GAAP net income decreased 17.9% year over year to $17.8 million due to lower other income primarily due to $13.9 million of mark-to-market losses on foreign-exchange forward contracts and $0.8 million of equity-method investment losses from our joint ventures with PRA and MedImmune and other equity-method investments, partially offset by the 1.8% year-over-year increase in operating income, $1.8 million of realized gains on foreign-exchange forward contracts, a $5.0 milliongain on the sale of an investment by the corporate venture fund, and higher interest income due to higher cash balances and higher interest rates.

First-quarter 2014 GAAP diluted earnings per ADS decreased 19.8% to $0.24 due to the 17.9% decrease in net income and a higher number of outstanding ADSs as a result of vesting and exercise of shares under employee stock option and restricted stock programs. First-quarter 2014 GAAP comprehensive income decreased 49.4% year over year to $11.8 million due to the 17.9% decrease in GAAP net income, unfavorable currency translation adjustments, and small unrealized losses on available-for-sale securities.

First-Quarter 2014 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 2014 non-GAAP gross profit increased 12.8% year over year to $54.7 million due to the 11.3% revenue growth and productivity improvement.  Non-GAAP gross margin increased year over year to 37.3% from 36.8% due to improved productivity and the ramp-up of biologics and preclinical services, offset by increasing labor costs in China and business mix, as Manufacturing Services had greater revenue growth and lower gross margin than Laboratory Services. 

First-quarter 2014 non-GAAP operating income increased 4.4% year over year to $27.9 million due to the 12.8% increase in non-GAAP gross profit, partially offset by increased general and administrative expenses, including hiring of senior management, and R&D expenses in biologics, genomics, discovery biology, risk sharing projects and other areas.  Operating margin decreased to 19.0% from 20.2% due to increased general and administrative and R&D expenses.

First-quarter 2014 non-GAAP net income decreased 12.3% year over year to $22.3 million due to lower other income primarily due to $13.9 million of mark-to-market losses on foreign-exchange forward contracts and $0.8 million of equity-method investment losses primarily from our joint ventures with PRA and MedImmune and other equity-method investments, partially offset by the 4.4% year-over-year increase in operating income, $1.8 million of realized gains on foreign-exchange forward contracts, a $5.0 million gain on the sale of an investment by the corporate venture fund, and higher interest income due to higher cash balances and higher interest rates.

First-quarter 2014 non-GAAP diluted earnings per ADS decreased 14.3% year over year to $0.30 due to the 12.3% decrease in non-GAAP net income and a higher number of outstanding ADSs as a result of vesting and exercise of shares under the employee stock option and restricted stock programs.

Full-Year 2014 Financial Guidance

WuXi PharmaTech announces the following full-year 2014 financial guidance:

• Total net revenues of $660-670 million, the same as previous guidance
• GAAP diluted earnings per ADS of $1.53-$1.58, including mark-to-market losses on foreign-exchange forward contracts of $0.20 per ADS; GAAP diluted earnings per ADS of $1.73-$1.78, excluding mark-to-market gains or losses on foreign-exchange forward contracts
• Non-GAAP diluted earnings per ADS of $1.80-$1.85, including mark-to-market losses on foreign-exchange forward contracts of $0.20 per ADS; non-GAAP diluted earnings per ADS of $2.00-$2.05, excluding mark-to-market gains or losses on foreign-exchange forward contracts
• Capital expenditures of about $85 million, a year-over-year increase of about 50%, driven primarily by capacity expansion in small-molecule manufacturing and investment in laboratories and technology

Second-Quarter 2014 Financial Guidance

WuXi PharmaTech provides the following second-quarter 2014 financial guidance:

 

• Total net revenues of $160-162 million
• GAAP diluted earnings per ADS of $0.39-$0.41
• Non-GAAP diluted earnings per ADS of $0.46-$0.48

 

 

 

 

 

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 May 15, 2014, to discuss its first-quarter 2014 financial results and future prospects.  The conference call may be accessed by calling:

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

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 2014 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, to compete effectively, and to complete the expansion of our manufacturing facilities in Changzhou. 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, 2013. 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 Financial Measures 

We have provided the first-quarter 2013 and 2014 gross profit, gross margin, operating income, operating margin, net income, net margin, and diluted earnings per ADS, and estimated second-quarter and full-year 2014 diluted 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.  The non-GAAP financial measures used in this press release are useful for understanding and assessing underlying business performance and operating trends, and we believe that 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.  We expect to continue to provide such non-GAAP financial measures on a quarterly basis using a consistent method.  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.

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: [email protected]

Aaron Shi (for the media)
Associate Director of Corporate Communications
Tel:   +86-21-5046-4362
Email: [email protected]