SHANGHAI, Nov. 17 /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 third-quarter 2009.
(Logo: http://www.prnasia.com/sa/2009/04/01/200904011147.jpg )
Third-Quarter 2009 Highlights
-- Net revenues grew 10% year over year to $70.0 million
-- Laboratory Services net revenues increased 20% year over year to $64.3
million
-- China-based Laboratory Services net revenues grew 29% year over year to
$48.0 million
-- U.S.-based Laboratory Services net revenues decreased 1% year over year
to $16.3 million
-- Manufacturing Services net revenues decreased 44% year over year to
$5.7 million
-- GAAP diluted earnings per ADS grew 96% year over year to 19 cents
-- Non-GAAP diluted earnings per ADS grew 32% year over year to 24 cents
Management Comment
"WuXi PharmaTech continued to achieve strong financial and operational performance in the third quarter of 2009, while making the investments necessary to sustain our growth in 2010 and beyond," said Dr. Ge Li, Chairman and Chief Executive Officer. "We achieved double-digit year-over-year revenue and EPS growth in the quarter, driven by a strong performance in our
China-based Laboratory Services business. We achieved our target of 3-5% sequential growth in net revenues in the quarter, coming in at the upper end of that range. Profit margins were strong in the quarter, and as a result our earnings performance exceeded our expectation.
"This strong performance gives us confidence that we will achieve our guidance for full-year 2009 revenue of $265-$275 million. Our China-based Laboratory Services business is performing better than previously expected, and we are increasing our full-year 2009 revenue guidance for that business to 23-26% from our previous guidance of 20-23% growth. We continue to expect that full-year 2009 Manufacturing Services net revenues will be $20-$30 million, depending on delivery schedules. As a result of better than expected profitability in the third quarter, we are increasing our full-year 2009 guidance for adjusted EBITDA to $86-90 million from our previous guidance of $80-85 million.
"Our confidence in the continued success of our business model leads us to continue to make investments to build our capabilities and capacities. We increased our total company headcount by about 400 people in the third quarter from college recruiting, mainly in Laboratory Services, as demand for our broad range of laboratory services continues to grow. Our total company headcount was 4,135, including 3,230 scientists, at the end of September 2009. We continued to make strong capital investment, which we expect to be about $55-60 million for full-year 2009, with capital investment through September 30 totaling $33.4 million.
"We continue to make progress in building our capabilities in two new businesses -- toxicology and large-scale manufacturing. In toxicology, we have initiated non-GLP studies as well as client-sponsored GLP validation studies, both of which are intended to develop our capability to conduct GLP studies. We remain on target with our previous timetable to offer GLP toxicology services by mid-2010. In our recently completed large-scale manufacturing facility, we are undertaking test runs in the fourth quarter. The timing of initial revenue in large-scale manufacturing depends on the progress of our customers' products in clinical trials. As a result of these investments, we expect Laboratory Services, toxicology, and large-scale manufacturing each to be major contributors to the company's growth in revenues and earnings over the next several years," Dr. Li concluded.
GAAP Results
Third-quarter 2009 net revenues increased 10% year over year to $70.0 million due to 20% growth in Laboratory Services net revenues, partially offset by a 44% decline in Manufacturing Services net revenues. Laboratory Services net revenues in third-quarter 2009 benefited from stronger demand for our integrated drug discovery and development services. Manufacturing Services net revenues are inherently variable due to fluctuating demand and customer delivery schedules and are also being impacted by lower demand.
Third-quarter 2009 GAAP gross profit increased 18% year over year to $28.8 million, mainly due to an increased contribution from Laboratory Services, driven by both revenue growth and gross-margin improvement, offset by a decline in the gross-profit contribution of Manufacturing Services from lower revenues. Third-quarter 2009 GAAP gross margin improved year over year to 41.1% from 38.4%, mainly due to lower amortization expenses for acquired intangible assets as a result of a lower balance for these assets following impairment charges taken in fourth-quarter 2008. In addition, GAAP gross margin benefited from a larger contribution from our higher-margin Laboratory Services business and improved profitability of newer downstream laboratory services, offset by higher expenses related to the start-up of the Suzhou toxicology facility. Gross margin from Laboratory Services improved year over year to 42.9% from 40.6% for the same reasons. Partially offsetting this benefit, gross margin declined year over year in Manufacturing Services to 21.1% from 26.8% due primarily to unfavorable project mix and lower demand.
Third-quarter 2009 GAAP operating income increased 35% year over year to $14.6 million due to the 18% increase in gross margin and only a 4% increase in operating expenses. Operating expenses consisted of an 8% increase in general and administrative expenses mainly due to increased staffing, partially offset by a 21% decrease in selling and marketing expenses, mainly due to reduced staffing and cost-control efforts.
Third-quarter 2009 GAAP net income from continuing operations increased 72% year over year to $14.5 million due to the 35% increase in operating income, a favorable change in other income (expenses) net, and lower taxes. Other income (expenses) net in third-quarter 2009 included losses from foreign-exchange forward contracts of $0.5 million, compared to losses of $2.3 million on such contracts in third-quarter 2008. Taxes in third-quarter 2009 were $0.9 million, compared to $1.5 million in third-quarter 2008.
Third-quarter 2009 GAAP net income grew 97% year over year due to the 72% increase in net income from continuing operations and lower losses from discontinued operations. Third-quarter 2008 GAAP net income included a loss from discontinued operations of $1.2 million related to the biologics manufacturing business. The loss from discontinued operations in
third-quarter 2009 of $0.2 million resulted from a write-off of certain obsolete assets. Third-quarter 2009 GAAP diluted earnings per ADS grew 96% year over year to 19 cents, compared to 10 cents in third-quarter 2008, due primarily to the 97% increase in net income.
Non-GAAP Results
Non-GAAP financial results excluded the impact of share-based compensation expenses, amortization and the deferred tax impact of acquired intangible assets, and losses from discontinued operations.
Third-quarter 2009 non-GAAP gross profit increased 8% year over year to $30.2 million, mainly due to the favorable impact of higher gross profit in the Laboratory Services business driven by 20% higher revenues, partially offset by a decrease in Laboratory Services gross margins from 46.9% to 45.0% and a decline in the gross-profit contribution from Manufacturing Services due to lower revenues and lower gross margins. Third-quarter 2009 non-GAAP gross margin declined year over year to 43.2% from 43.7% due to higher expenses from the Suzhou toxicology facility, which more than offset the favorable impact of the larger contribution of our higher-margin Laboratory Services business and improved profitability of services downstream from discovery chemistry.
Third-quarter 2009 non-GAAP operating income increased 8% year over year to $18.0 million primarily due to the 8% increase in non-GAAP gross profit, offset by a 10% increase in operating expenses mainly due to increased staffing in general and administrative functions.
Third-quarter 2009 non-GAAP net income grew 33% year over year to $17.6 million due to an 8% increase in non-GAAP operating income, a favorable change in other income (expenses) net, and lower taxes. Changes in other income (expenses) net and taxes are discussed above for GAAP results. Diluted
non-GAAP earnings per ADS from continuing operations grew 32% year over year to 24 cents compared to 18 cents in third-quarter 2008, mainly due to the 33% increase in non-GAAP net income.
(See the table titled Reconciliation of GAAP to Non-GAAP below).
2009 Financial Guidance Update
We update our full-year 2009 financial guidance as follows:
-- We reconfirm our expectation for total net revenues of $265-$275
million
-- We now anticipate growth in net revenues of China-based Laboratory
Services of 23-26%, compared to our previous guidance of 20-23%
-- We continue to project that full-year 2009 net revenues of U.S.-based
Laboratory Services will increase slightly compared to 2008 net
revenues on a pro-forma basis
-- We continue to project full-year 2009 Manufacturing Services net
revenues of $20-$30 million, with the outcome within that range subject
to client delivery schedules
-- We expect adjusted EBITDA (excluding share-based compensation charges
and potential mark-to-market gains or losses from foreign-currency
forward contracts) of $86-$90 million, compared to previous guidance of
$80-85 million
WUXI PHARMATECH (CAYMAN) INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. dollars, except ordinary share,
ADS and par value data)
September 30, December 31,
2009 2008
Assets:
Current assets:
Cash and cash equivalents 85,467 56,624
Restricted cash 1,262 1,338
Short-term investment 21,965 14,631
Accounts receivable, net 45,567 36,457
Inventories 13,727 6,926
Prepaid expenses and other current assets 9,225 7,281
Assets of discontinued operations (Note 1, 2) 1,905 6,508
Total current assets 179,118 129,765
Non-current assets:
Goodwill 23,956 23,956
Property, plant and equipment, net 180,148 152,704
Intangible assets, net 7,487 9,934
Prepaid land use rights 5,336 5,424
Deferred tax assets 10,304 8,807
Other non-current assets 5,926 5,809
Total non-current assets 233,157 206,634
Total assets 412,275 336,399
Liabilities and shareholders' equity:
Current liabilities:
Short-term and current portion of long-term debt 47,196 7,558
Accounts payable 26,778 19,829
Accrued expenses 13,727 14,279
Deferred revenue 3,284 3,373
Advanced subsidies 2,095 3,080
Other taxes payable 3,067 5,742
Other current liabilities 4,167 3,448
Liabilities of discontinued operations (Note 1) -- 1,495
Total current liabilities 100,314 58,804
Non-current liabilities:
Long-term debt, excluding current portion 2,179 2,305
Advanced subsidies 1,762 1,819
Convertible notes 35,864 35,864
Other non-current liabilities 7,582 6,731
Total non-current liabilities 47,387 46,719
Total liabilities 147,701 105,523
Shareholders' equity:
Ordinary shares ($0.02 par value, 5,002,500,000
authorized as of September 30, 2009 and
December 31, 2008, respectively; 548,450,566
and 529,385,590 issued and outstanding as of
September 30, 2009 and December 31, 2008,
respectively) 10,969 10,588
Additional paid-in capital 317,309 324,629
Accumulated deficit (80,758) (121,505)
Accumulated other comprehensive income 17,054 17,164
Total shareholders' equity 264,574 230,876
Total liabilities and shareholders' equity 412,275 336,399
Note 1: The biologics manufacturing operations in Philadelphia, which
management decided to close in December 2008, were classified as
discontinued operations.
Note 2: Assets of discontinued operations included assets held for sale
of $ 1,905,395 as of September 30, 2009.
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 Nine Months Ended
September 30, September 30,
% %
2009 2008 Change 2009 2008 Change
(Note 3)
Net revenues:
Laboratory
Services 64,284 53,563 20% 182,369 147,604 24%
Manufacturing
Services 5,757 10,224 (44%) 13,774 41,433 (67%)
Total net
Revenues 70,041 63,787 10% 196,143 189,037 4%
Cost of revenues:
Laboratory
Services (36,731) (31,828) 15% (105,790) (86,133) 23%
Manufacturing
Services (4,540) (7,484) (39%) (11,184) (26,837) (58%)
Total cost of
revenues (41,271) (39,312) 5% (116,974) (112,970) 4%
Gross profit:
Laboratory
Services 27,553 21,375 27% 76,579 61,471 25%
Manufacturing
Services 1,217 2,740 (56%) 2,590 14,596 (82%)
Total gross
profit 28,770 24,475 18% 79,169 76,067 4%
Operating expenses:
Selling and
marketing
expenses (1,571) (1,988) (21%) (5,318) (5,214) 2%
General and
administrative
expenses (12,567) (11,623) 8% (35,309) (35,080) 1%
Total operating
expenses (14,138) (13,611) 4% (40,627) (40,294) 1%
Operating income 14,632 10,864 35% 38,542 35,773 8%
Other income
(expenses), net:
Other income
(expenses), net 861 (1,067) * 7,229 (541) *
Interest income
(expenses), net (139) 149 * (45) 644 *
Total other
income
(expenses), net 722 (918) * 7,184 103 *
Income from
continuing
operations before
income taxes 15,354 9,946 54% 45,726 35,876 27%
Income tax (expenses)
benefit (853) (1,527) (44%) (4,805) (1,593) 202%
Income from
continuing
operations 14,501 8,419 72% 40,921 34,283 19%
Loss on discontinued
operations, net
(Note 1)
Loss from
operations of
discontinued
component (313) (1,853) (83%) (313) (7,375) (96%)
Income tax benefit 139 701 (80%) 139 2,740 (95%)
Loss on discontinued
operations (174) (1,152) (85%) (174) (4,635) (96%)
Net income 14,327 7,267 97% 40,747 29,648 37%
Basic net earnings
(loss) per ADS:
Earnings from
continuing
operations $0.21 $0.13 63% $0.60 $0.54 11%
Loss on discontinued
operations - net of
tax (Note 1) (0.00) ($0.02) * (0.00) ($0.07) *
Net earnings per ADS $0.21 $0.11 86% $0.60 $0.47 28%
Weighted average
ADS outstanding
-basic 68,334,657 64,531,068 67,759,562 63,010,497
Diluted net earnings
(loss) per
ADS:
Earnings from
continuing
operations $0.19 $0.12 71% $0.55 $0.47 18%
Loss on
discontinued
operations-
net of tax (Note 1) (0.00) ($0.02) * (0.00) ($0.06) *
Net earnings per ADS $0.19 $0.10 96% $0.55 $0.41 36%
Weighted average
ADS outstanding
-diluted 73,529,129 72,931,421 73,439,494 72,859,672
* Not meaningful
Note 3: Financial results of AppTec were consolidated as of January 31,
2008.
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 Nine Months Ended
September 30, September 30,
2009 2008 % 2009 2008 %
GAAP gross profit
-continuing
operations 28,770 24,475 18% 79,169 76,067 4%
GAAP gross margin
-continuing
operations 41% 38% 40% 40%
Adjustments：
Share-based
compensation 690 672 1,844 2,016
Amortization of
acquired
intangible assets 764 2,730 2,292 7,280
Non-GAAP gross profit 30,224 27,877 8% 83,305 85,363 (2%)
Non-GAAP gross margin 43% 44% 42% 45%
GAAP operating 14,632 10,864 35% 38,542 35,773 8%
income-continuing
operations
GAAP operating 21% 17% 20% 19%
margin-continuing
operations
Adjustments：
Share-based
compensation 2,590 3,128 7,248 9,526
Amortization of
acquired
intangible assets 764 2,730 2,292 7,280
Non-GAAP operating
income 17,986 16,722 8% 48,082 52,579 (9%)
Non-GAAP operating
margin 26% 26% 25% 28%
GAAP net income
-continuing
operations 14,501 8,419 72% 40,921 34,283 19%
GAAP net margin
-continuing
operations 21% 13% 21% 18%
Adjustments:
Share-based
compensation 2,590 3,128 7,248 9,526
Amortization of
acquired
intangible assets 764 2,730 2,292 7,280
Deferred tax
impact related (296) (1,070) (888) (2,854)
to acquired
intangible assets
Non-GAAP net income 17,559 13,207 33% 49,573 48,235 3%
Non-GAAP net margin 25% 21% 25% 26%
GAAP net income 14,327 7,267 97% 40,747 29,648 37%
Add back:
Depreciation and
amortization 6,620 8,798 17,247 24,324
Interest (income)
expenses, net 139 (149) 45 (644)
Income tax expenses
(benefit) 714 826 4,666 (1,146)
EBITDA 21,800 16,742 30% 62,705 52,182 20%
Adjustments：
Share-based
compensation 2,590 3,128 7,248 9,526
Mark-to-market
losses (gains)
on foreign-
exchange forward
contracts 513 2,299 (1,706) 2,132
Adjusted EBITDA 24,903 22,169 12% 68,247 63,840 7%
Income attributable
to holders of ADS
(Non-GAAP):
Basic 17,559 13,207 33% 49,573 48,235 3%
Diluted 17,559 13,207 33% 49,573 48,235 3%
Basic earnings per ADS
(Non-GAAP) 0.26 0.20 26% 0.73 0.77 (4%)
Diluted earnings per
ADS (Non-GAAP) 0.24 0.18 32% 0.68 0.66 2%
Weighted average
ADS outstanding
- basic (Non-GAAP) 68,334,657 64,531,068 67,759,562 63,010,497
Weighted average ADS
outstanding - 73,529,129 72,931,421 73,439,494 72,859,672
diluted (Non-GAAP)
WUXI PHARMATECH (CAYMAN) INC.
REVENUE BREAKDOWN
(in thousands of U.S. dollars)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 % 2009 2008 %
Net revenues:
China-based Laboratory
Services 47,976 37,064 29% 134,435 105,046 28%
U.S.-based Laboratory
Services* 16,308 16,499 (1%) 47,934 42,558 13%
Subtotal 64,284 53,563 20% 182,369 147,604 24%
China-based Manufacturing
Services 5,757 10,224 (44%) 13,774 41,433 (67%)
Total net revenues 70,041 63,787 10% 196,143 189,037 4%
* Only eight months of revenues (February to September 2008) were included
in 2008 for U.S.-based Laboratory Services because that business was
acquired on January 31, 2008.
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 Tuesday, November 17, 2009, to discuss its third-quarter 2009 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: +65-6735-7955
Conference ID: 38748238
Web PIN: 8656
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: 38748238
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 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 Financial Measures
We have provided three-month and nine-month 2008 and 2009 gross profit, operating income, net income and earnings per ADS on a non-GAAP basis, which excludes share-based compensation expenses, amortization and deferred tax impact of acquired intangible assets, and discontinued operations. We also provided three-month and nine-month 2008 and 2009 adjusted EBITDA, which is the GAAP net income adjusted by adding back depreciation and amortization, interest, income taxes, share-based compensation and mark-to-market gains (losses) from foreign-currency forward contracts. We believe both management and investors benefit from referring to these non-GAAP 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 providing gross profit, operating income, and net income 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 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, anticipated full-year and fourth-quarter 2009 operating results (including estimated total net revenues, China-based Laboratory Services net revenues, Manufacturing Services net revenues, adjusted EBITDA, gross margins, and other trends), planned capital expenditure and investment levels, and the anticipated benefits of those efforts and the planned expansion of our service offerings and areas of related revenue growth.
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 and 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; 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 we 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; 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 and pro-forma financial statements and related notes thereto included in our 2008 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 6 of our 2008 Annual Report on Form 20-F. Our results of operations for third-quarter 2009 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.
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
Stephanie Liu (for the media)
WuXi PharmaTech (Cayman) Inc.
Tel: +86-21-5046-4362
Email: pr@wuxiapptec.com
