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WuXi PharmaTech Co., Ltd. Announces Third-Quarter 2012 Results


11/13/2012 9:22:31 AM

SHANGHAI, Nov. 12, 2012 /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 financial results for the third quarter of 2012.

(Logo: http://www.newscom.com/cgi-bin/prnh/20040705/CNM002LOGO)

Highlights

  • Net Revenues Increased 21.0% Year Over Year to $125.8 Million
  • Laboratory Services Net Revenues Grew 25.5% Year Over Year to $98.9 Million
  • China-Based Laboratory Services Net Revenues Increased 32.4% Year Over Year to $77.0 Million
  • U.S.-Based Laboratory Services Net Revenues Increased 6.0% Year Over Year to $21.9 Million
  • Manufacturing Services Net Revenues Grew 7.0% Year Over Year to $26.9 Million
  • Share Repurchases Totaled $19.8 Million in the Third Quarter, Completing the Current $30.0 Million Authorization
  • GAAP Diluted Earnings Per ADS Grew 7.8% Year Over Year to $0.30
  • Non-GAAP Diluted Earnings Per ADS Increased 18.4% Year Over Year to $0.36
  • Company Updates Full-Year 2012 Guidance

Management Comment

"I'm very pleased that WuXi delivered another solid quarter with strong revenue and earnings growth in the third quarter," said Dr. Ge Li, Chairman and Chief Executive Officer. "Year-over-year revenue growth of 21.0% was driven by increasing demand for WuXi's broad platform of integrated services. China-based laboratory services achieved 32.4% revenue growth, driven by growth from our integrated drug discovery and development services and rapidly growing new services, including toxicology and biologics development services. We also achieved solid EPS growth of 7.8% GAAP and 18.4% non-GAAP. We met or exceeded all of our third-quarter financial guidance, and we expect to deliver our business and financial goals for the full year.

"To sustain the company's growth, we are continuing to invest in talent and facilities in both our ongoing businesses and in newer businesses, such as biologics and genomics," Dr. Li continued. "In laboratory services, our continuing investments, particularly in integrated drug discovery and development capabilities leading to IND filings, are driving excellent revenue growth. We made significant progress in the quarter in building our biologics business, as we signed major deals with MedImmune, TaiMed, and Open Monoclonal Technology. We have also now opened our cGMP drug-substance biologics manufacturing facility in Wuxi city, the first such facility in China. Our small-molecule manufacturing business has a growing pipeline of products in all phases of development. In spite of our investments, we continue to achieve substantial free cash flow, a portion of which we have used to repurchase our ADSs, reflecting our confidence in our future. We have also instituted a company-wide Lean Sigma program to drive efficiency and cost savings."

Third-Quarter GAAP Results

Third-quarter 2012 net revenues increased 21.0% year over year to $125.8 million. Revenue growth in Laboratory Services of 25.5% was driven by our comprehensive and integrated discovery and development services, including the new biologics business, and increased demand for testing services for both biologics and medical devices in the United States. Revenue growth of 7% year over year in Manufacturing Services was driven by increased demand for clinical-trial materials in our research manufacturing business, which more than offset lower demand for advanced intermediates in our commercial manufacturing business.

Third-quarter 2012 GAAP gross profit increased 13.6% year over year to $46.1 million due to 21.0% revenue growth, offset by lower gross margin. Third-quarter 2012 GAAP gross margin decreased year over year to 36.6% from 39.0%. Gross margin in Laboratory Services decreased year over year to 38.2% from 41.0% mainly due to the effects of increasing labor costs in China, investments in new businesses, and lower pricing, partially offset by improved productivity. Gross margin in Manufacturing Services decreased year over year to 30.7% from 32.6% mainly due to lower revenues from commercial manufacturing.

Third-quarter 2012 GAAP operating income decreased 3.6% year over year to $21.5 million due to increased operating expenses from the hiring of new senior staff and increased share-based compensation expense, partially offset by 13.6% growth in gross profit. Operating margin decreased to 17.0% from 21.4% due to the lower gross margin and the increased operating expenses.

Third-quarter 2012 GAAP net income increased 3.2% year over year to $21.3 million due to a 49.7% increase in other income/(expenses), net, driven by a gain on foreign-exchange forward contracts of $1.4 million, partially offset by the 3.6% decrease in operating income.

Third-quarter 2012 GAAP diluted earnings per ADS increased 7.8% to $0.30 due to the 3.2% increase in net income and a lower ADS count caused by the company's purchase of 2,846,375 ADSs from General Atlantic in February 2012 and of 2,138,993 ADSs, at an average price of $14.03 per ADS, in the open market during the second and third quarters of 2012 to complete the $30 million authorized share repurchase program announced in March 2012.

Third-quarter 2012 GAAP comprehensive income decreased 27.5% year over year to $20.2 million due to the decrease in currency translation adjustments, partially offset by the 3.2% increase in GAAP net income.

Third-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.

Third-quarter 2012 non-GAAP gross profit increased 13.9% year over year to $47.6 million mainly due to broad-based revenue growth, offset by lower gross margin. Non-GAAP gross margin decreased year over year to 37.8% from 40.2%. Non-GAAP gross margin in Laboratory Services decreased mainly due to increased labor costs, investment in new businesses, and lower pricing, partially offset by improved productivity. Non-GAAP gross margin in Manufacturing Services decreased mainly due to lower revenues from commercial manufacturing.         

Third-quarter 2012 non-GAAP operating income increased 6.9% year over year to $26.6 million, primarily due to the 13.9% increase in non-GAAP gross profit, offset by increased operating expenses from the hiring of new senior staff. Operating margin decreased to 21.2% from 24.0%, mainly due to the lower gross margin.

Third-quarter 2012 non-GAAP net income grew 13.4% year over year to $26.3 million due to the 6.9% increase in non-GAAP operating income and a 49.7% increase in other income/(expenses), net, driven by a gain on foreign-exchange forward contracts of $1.4 million.

Third-quarter 2012 non-GAAP diluted earnings per ADS grew 18.4% year over year to $0.36 due to the 13.4% increase in non-GAAP net income and a lower ADS count caused by the company's purchase of 2,846,375 ADSs from General Atlantic in February 2012 and of 2,138,993 ADSs, at an average price of $14.03 per ADS, during the second and third quarters of 2012 to complete the $30 million authorized share repurchase program announced in March 2012.

Full-Year 2012 Financial Guidance

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

  • Total net revenues of $495-498 million, or about 22% year-over-year growth, compared to previous guidance of $488-498 million, or 20-22% growth
  • Total net revenues for China-based Laboratory Services of $291-292 million, or about 26% growth year over year, compared to previous guidance of 23-26% growth, on a pro-forma basis reflecting the classification of Process Chemistry in Manufacturing Services for both years
  • Total net revenues for U.S.-based Laboratory Services of $89-90 million, or about 11-12% growth year over year, compared to previous guidance of 12-13% growth
  • Total net revenues of Manufacturing Services of $115-116 million, or about 20-21% growth year over year, compared to previous guidance of 18-21%, on a pro-forma basis reflecting the classification of Process Chemistry in Manufacturing Services for both years
  • Operating margin of about 17.5% on a GAAP basis and about 20.5% on a non-GAAP basis, compared to previous guidance of 17.0-18.0% and 20.0%-21.0%, respectively
  • Capital expenditures of about $70 million, the same as previous guidance
  • GAAP effective tax rate of about 17.5%, the same as previous guidance

Fourth-Quarter 2012 Financial Guidance

  • The company provides the following fourth-quarter 2012 financial guidance:
  • Total net revenues of $121-124 million, up about 11-14% year over year
  • Laboratory Services net revenues (not including Process Chemistry) of $101-103 million
  • Manufacturing Services net revenues (including Process Chemistry) of $20-21 million
  • Operating margin of about 17.0% GAAP, about 20.0% non-GAAP

 


WUXI PHARMATECH (CAYMAN) INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS

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







September 30,
2012

December 31,
2011

Assets:




Current assets:




        Cash and cash equivalents


53,833

71,368

        Restricted cash


532

2,458

        Short-term investment


132,029

128,054

        Accounts receivable, net


94,645

72,736

        Inventories


41,294

45,351

        Prepaid expenses and other current assets


16,932

15,133

                    Total current assets


339,265

335,100

Non-current assets:




        Goodwill


34,208

34,701

        Property, plant and equipment, net


263,256

245,694

        L/T investment


11,157

4,335

        Intangible assets, net


9,235

10,568

        Land use rights


5,354

5,488

        Deferred tax assets


4,964

8,499

        Other non-current assets


19,220

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