WuXi PharmaTech Announces First-Quarter 2014 Results - KAUZ-TV: Newschannel 6 Now | Wichita Falls, TX

WuXi PharmaTech Announces First-Quarter 2014 Results

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SOURCE WuXi PharmaTech (Cayman) Inc.

SHANGHAI, May 14, 2014 /PRNewswire/ -- WuXi PharmaTech (Cayman) Inc. (NYSE: WX), a leading research and development services 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 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 in Changzhou, 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 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 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

 

WUXI PHARMATECH (CAYMAN) INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS

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







March 31,
2014

December 31,
2013

Assets:




Current assets:




        Cash and cash equivalents


156,782

88,871

        Restricted cash


5,533

3,145

        Short-term investments


270,488

302,267

        Accounts receivable, net


115,393

126,996

        Amount due from related parties


2,058

1,168

        Inventories


41,480

45,097

        Prepaid expenses and other current assets


24,400

31,436

                    Total current assets


616,134

598,980

Non-current assets:




        Goodwill


31,085

31,087

        Property, plant and equipment, net


274,072

279,254

        Long-term investments


20,304

21,781

        Intangible assets, net


7,014

7,128

        Land use rights


5,520

5,604

        Deferred tax assets


250

251

        Other non-current assets


6,173

4,782

                    Total non-current assets


344,418

349,887

                    Total assets


960,552

948,867





Liabilities and equity:




Current liabilities:




        Short-term and current portion of long-term debt


77,537

67,853

        Accounts payable


32,110

33,477

        Amount due to related parties


510

218

        Accrued expenses


18,881

34,605

        Deferred revenue


33,277

28,149

        Advanced subsidies


13,034

13,958

        Other taxes payable


12,516

107

        Other current liabilities


29,992

15,738

                    Total current liabilities


217,857

194,105

Non-current liabilities:




        Long-term debt, excluding current portion


11,067

11,124

        Advanced subsidies


4,875

2,295

        Other non-current liabilities


6,974

6,594

                    Total non-current liabilities


22,916

20,013

                    Total liabilities


240,773

214,118





Equity:




       Ordinary shares ($0.02 par value, 5,002,550,000 authorized,  572,270,834  and 571,431,578 issued and outstanding as of December 31, 2013 and March 31, 2014, respectively)


11,429

11,445

        Additional paid-in capital


326,422

353,173

        Retained earnings


320,991

303,171

        Accumulated other comprehensive income


60,937

66,960

                    Total equity


719,779

734,749

                    Total liabilities and equity


960,552

948,867





 


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,




2014

2013

% Change


Net revenues:






      Laboratory Services


105,552

97,481

8.3%


      Manufacturing Services


41,164

34,384

19.7%


Total net revenues


146,716

131,865

11.3%








Cost of revenues:






      Laboratory Services


(64,349)

(60,875)

5.7%


      Manufacturing Services


(28,740)

(23,584)

21.9%


Total cost of revenues


(93,089)

(84,459)

10.2%








Gross profit:






      Laboratory Services


41,203

36,606

12.6%


      Manufacturing Services


12,424

10,800

15.0%


Total gross profit


53,627

47,406

13.1%








Operating expenses:






      Selling and marketing expenses


(4,500)

(3,931)

14.5%


      General and administrative expenses


(21,338)

(18,208)

17.2%


      Research and development expenses


(4,378)

(2,270)

92.9%


Total operating expenses


(30,216)

(24,409)

23.8%


Operating income


23,411

22,997

1.8%








Other income (expenses), net:






      Loss from equity-method investments


(766)

(218)

251.4%


      Other income (expenses), net


(5,508)

3,057

(280.2%)


      Interest income (expenses), net


4,550

1,594

185.4%


Total other income (expenses), net


(1,724)

4,433

(138.9%)








Income before income taxes


21,687

27,430

(20.9%)


Income tax expense


(3,868)

(5,719)

(32.4%)


Net income


17,819

21,711

(17.9%)








Other comprehensive income:






Currency translation adjustments


(5,834)

1,620

(460.1%)


Unrealized gains on available-for-sale securities

(190)

-

NA


Comprehensive income


11,795

23,331

(49.4%)








Basic net earnings per ADS


0.25

0.31

(19.6%)


Diluted net earnings per ADS


0.24

0.30

(19.8%)








Weighted average ADS outstanding-basic


71,808,566

70,368,616

2.0%


Weighted average ADS outstanding-diluted


73,578,245

71,915,069

2.3%








 

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,




2014

2013

% Change








GAAP gross profit


53,627

47,406

13.1%


GAAP gross margin


36.6%

36.0%



Adjustments:






        Share-based compensation


1,066

1,038

2.7%


        Amortization of acquired intangible assets


49

98

(50.0%)


Non-GAAP gross profit


54,742

48,542

12.8%


Non-GAAP gross margin


37.3%

36.8%









GAAP operating income


23,411

22,997

1.8%


GAAP operating margin


16.0%

17.4%



Adjustments:






        Share-based compensation


4,412

3,600

22.6%


        Amortization of acquired intangible assets


49

98

(50.0%)


Non-GAAP operating income


27,872

26,695

4.4%


Non-GAAP operating margin


19.0%

20.2%









GAAP net income


17,819

21,711

(17.9%)


GAAP net margin


12.1%

16.5%



Adjustments:






        Share-based compensation


4,412

3,600

22.6%


        Amortization of acquired intangible assets


49

98

(50.0%)


        Deferred tax impact related to acquired intangible assets


(17)

(29)

(41.4%)


Non-GAAP net income


22,263

25,380

(12.3%)


Non-GAAP net margin


15.2%

19.2%









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






Basic


22,263

25,380

(12.3%)


Diluted


22,263

25,380

(12.3%)








Basic earnings per ADS (Non-GAAP)


0.31

0.36

(14.0%)


Diluted earnings per ADS (Non-GAAP)


0.30

0.35

(14.3%)








Weighted average ADS outstanding
   – basic (Non-GAAP)


71,808,566

70,368,616

2.0%


Weighted average ADS outstanding
  – diluted (Non-GAAP)


73,578,245

71,915,069

2.3%








 

WUXI PHARMATECH (CAYMAN) INC.

REVENUE BREAKDOWN

(in thousands of U.S. dollars)









Three Months Ended
 March 31,




2014

2013

% Change


Net revenues:






        China-based Laboratory Services


82,117

74,444

10.3%


        China-based Manufacturing Services


41,164

34,384

19.7%


                    Subtotal


123,281

108,828

13.3%


        U.S.-based Laboratory Services


23,435

23,037

1.7%


Total net revenues


146,716

131,865

11.3%








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:

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

2321778

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

2321778

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: ron_aldridge@wuxiapptec.com

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

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