SHANGHAI, Aug. 13, 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 second quarter of 2014.
Second-Quarter 2014 Highlights
- Net Revenues Increased 14.8% Year Over Year to $163.4 Million
- Laboratory Services Net Revenues Grew 13.2% Year Over Year to $119.9 Million
- China-Based Laboratory Services Net Revenues Increased 14.2% Year Over Year to $95.2 Million
- U.S.-Based Laboratory Services Net Revenues Grew 9.6% Year Over Year to $24.7 Million
- Manufacturing Services Net Revenues Increased 19.3% Year Over Year to $43.5 Million
- GAAP Diluted Earnings Per ADS Remained Unchanged Year Over Year at $0.41
- Non-GAAP Diluted Earnings Per ADS Increased 5.2% Year Over Year to $0.49
- Full-Year 2014 Revenue and Diluted EPS Guidance Increased
"WuXi PharmaTech had another solid performance in the second quarter," said Dr. Ge Li, Chairman and CEO of WuXi PharmaTech. "We achieved record quarterly revenues, led by small-molecule manufacturing and biologics. Our revenue growth was broad-based, with 19.3%, 14.2%, and 9.6% year-over-year growth in Manufacturing Services, China Lab Services, and U.S. Lab Services, respectively, and we exceeded our second-quarter guidance in revenues.
"We also had a good quarter in profitability, exceeding our second-quarter guidance for non-GAAP diluted EPS and achieving the top of our guidance range for GAAP diluted EPS," Dr. Li continued. "Gross margin in the second quarter reflected year-over-year improvement of more than one full percentage point, driven by productivity initiatives, effective cost control, and the favorable impact of a depreciated RMB. We are using our free cash flow to reinvest in our business as we build new capabilities in manufacturing, biologics, genomics, cell therapy, sales and marketing, information technology, and other areas. We also purchased $66 million of our stock in the second quarter.
Our strong second-quarter performance gives us confidence about our performance for the remainder of the year. We expect to sustain strong revenue growth in the second half of 2014, as we capitalize on the growing late-stage and commercial product pipeline in small-molecule manufacturing, the ramp-up of our biologics manufacturing business, and investments in new businesses. We raise our full-year 2014 revenue guidance range from the previous $660-$670 million to $665-$670 million and increase our guidance for full-year 2014 GAAP and non-GAAP diluted EPS.
"We remain committed to building the premier open-access R&D platform that enables anyone and any company to discover and develop innovative medicines to benefit the world's patients," Dr. Li concluded.
Second-Quarter 2014 GAAP Results
Second-quarter 2014 net revenues increased 14.8% year over year to $163.4 million. Revenue growth in Laboratory Services of 13.2% was driven by our comprehensive and integrated drug discovery and development services. Revenue growth of 19.3% in Manufacturing Services was caused by strong demand in both research manufacturing and commercial manufacturing compared to the second quarter of 2013.
Second-quarter 2014 GAAP gross profit increased 18.9% year over year to $61.5 million due to 14.8% revenue growth and productivity improvement. Gross margin increased year over year to 37.7% from 36.4% mainly due to improved productivity, the ramp-up of biologics services, and the favorable impact of a depreciated RMB versus the U.S. dollar, partially offset by increased labor costs in China. Gross margin in Manufacturing Services increased year over year to 31.7% from 29.1%. Gross margin in Laboratory Services increased year over year to 39.8% from 38.9%.
Second-quarter 2014 GAAP operating income increased 9.0% year over year to $28.0 million due to the 18.9% increase in gross profit, partially offset by increased general and administrative expenses, including hiring of senior management, and R&D expenses in biologics, discovery biology, genomics, and other areas. Operating margin declined to 17.1% from 18.1% due to these increased general and administrative and R&D expenses, partially offset by the impact of a depreciated RMB versus the U.S. dollar, which is favorable because a large majority of our revenues are denominated in U.S. dollars and most of our expenses are denominated in RMB.
Second-quarter 2014 GAAP net income decreased 1.0% year over year to $29.3 million due to mark-to-market losses on foreign-exchange forward contracts of $2.5 million, compared to mark-to-market gains of $3.0 million in the second quarter of 2013, and a higher effective tax rate compared to the second quarter of 2013 due to the mix of taxable income and a $1.1 million one-time tax refund received in second-quarter 2013, partially offset by the 9.0% year-over-year increase in operating income, a $2.2 million gain on the sale of an investment by the corporate venture fund, smaller equity-method investment losses from our joint ventures with PRA and MedImmune and other equity-method investments, and higher interest income due to higher cash balances and higher interest rates. Realized gains on settled foreign-exchange forward contracts were $1.6 million in the second quarter of 2014.
Second-quarter 2014 GAAP diluted earnings per ADS remained unchanged at $0.41 due to the 1.0% decrease in net income, offset by a lower number of outstanding ADSs as a result of share purchases. Second-quarter 2014 GAAP comprehensive income decreased 35.4% year over year to $24.1 million due to the 1.0% decrease in GAAP net income and unfavorable currency translation adjustments, offset by unrealized gains on available-for-sale securities.
Second-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.
Second-quarter 2014 non-GAAP gross profit increased 19.3% year over year to $63.2 million due to the 14.8% revenue growth and productivity improvement. Non-GAAP gross margin increased year over year to 38.7% from 37.2% due to improved productivity, the ramp-up of biologics services, and the favorable impact of a depreciated RMB versus the U.S. dollar, offset by increased labor costs in China.
Second-quarter 2014 non-GAAP operating income increased 13.8% year over year to $33.9 million due to the 19.3% 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, discovery biology, genomics, and other areas. Non-GAAP operating margin decreased slightly to 20.8% from 20.9% due to increased general and administrative and R&D expenses, offset by the favorable impact of a depreciated RMB versus the U.S. dollar.
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