SHANGHAI, Nov. 3, 2015 /PRNewswire/ -- WuXi PharmaTech (Cayman) Inc. (“WuXi” or the “Company”) (NYSE: WX) announces the following financial information for the third quarter ended September 30, 2015.
Third-Quarter 2015 Highlights
- Net Revenues Increased 23.1% Year Over Year to $213.6 Million
- GAAP Diluted Earnings Per ADS Declined 53.7% Year Over Year to $0.21
- Non-GAAP Diluted Earnings Per ADS Attributable to WuXi Shareholders Decreased 41.8% Year Over Year to $0.31, Reflecting Exclusion of Share-Based Compensation of $0.09, Amortization of Acquired Intangible Assets of $0.02, and Deferred Tax Impact Related to Acquired Intangible Assets of ($.01)
- Mark-to-Market Losses on Foreign-Exchange Forward Contracts of $7.3 Million and Realized Losses on Settled Foreign-Exchange Forward Contracts of $1.6 Million Resulted from RMB Depreciation Against the U.S. Dollar in the Quarter
Third-Quarter 2015 GAAP Results
Third-quarter 2015 net revenues increased 23.1% year over year to $213.6 million. Laboratory Services revenue grew 18.0%, driven by our comprehensive and integrated drug discovery and development services. Revenue growth of 19.6% in Small-Molecule Manufacturing Services resulted from strong demand in both research manufacturing and commercial manufacturing. Biologics Services revenue had strong growth of 66.1% year over year from both development and manufacturing. Revenue growth of 34.8% in New Businesses and Other related mainly to the significant revenue increase in clinical site management services in China, offset by slower than expected growth in the emerging new businesses such as genomics, China healthcare initiatives, and e-commerce.
Third-quarter 2015 GAAP gross profit increased 14.7% year over year to $75.9 million due to 23.1% revenue growth, partially offset by increased labor costs in China and investments in new businesses. Gross margin decreased year over year to 35.5% from 38.1%. Gross margin in Laboratory Services decreased year over year to 38.3% from 41.2% due to increased labor costs in China and investments in new businesses. Gross margin in Small-Molecule Manufacturing Services was unchanged at 34.9%. The increase in gross margin in Biologics Services year over year to 32.7% from 28.6% was due to efficiencies of scale. Gross margin in New Businesses and Other decreased year over year to (1.7%) from 28.3% mainly as a result of investments in genomics and bioinformatics.
Third-quarter 2015 GAAP operating income decreased 7.0% year over year to $25.8 million mainly due to investments in new businesses, including increased selling and marketing, general and administrative, and research and development expenses and transaction expenses related to the proposed privatization, partially offset by the 14.7% increase in gross profit. Operating margin declined to 12.1% from 16.0% due to these increased operating expenses.
Third-quarter 2015 GAAP net income decreased 49.8% year over year to $16.1 million mainly due to an unfavorable change of $9.4 million in mark-to-market gains and losses on foreign-exchange forward contracts (losses of $7.3 million in the third quarter of 2015 compared to gains of $2.1 million in the third quarter of 2014), an adverse change of $3.1 million in realized gains and losses on settled foreign-exchange forward contracts (losses of $1.6 million in the third quarter of 2015 compared to gains of $1.5 million in the third quarter of 2014), the 7.0% year-over-year decrease in operating income, larger equity-method investment losses from our joint ventures with PRA and MedImmune and other equity-method investments, and higher interest expense due to higher loan balances needed to support increased investment.
Third-quarter 2015 GAAP net income attributable to WuXi shareholders decreased 52.8% year over year to $15.1 million mainly due to the 49.8% year-over-year decrease in net income and net income attributable to non-controlling interests of $1.0 million in the third quarter of 2015.
Third-quarter 2015 GAAP diluted earnings per ADS attributable to WuXi shareholders decreased 53.7% year over year to $0.21 due to the 52.8% decrease in net income attributable to WuXi shareholders and a higher number of outstanding ADSs as a result of share issuances relating to the XenoBiotic Laboratories acquisition and vesting of restricted stock units. Third-quarter 2015 GAAP comprehensive income/loss attributable to WuXi shareholders was a $9.9 million loss versus income of $41.0 million in the third quarter of 2014 mainly due to the 52.8% decrease in net income and unfavorable changes in currency translation adjustments, unrealized gains and losses on available-for-sale securities, and cash flow hedges, net of tax.
Third-Quarter 2015 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 2015 non-GAAP gross profit increased 17.3% year over year to $79.6 million due to 23.1% revenue growth, partially offset by increased labor costs in China and investments in new businesses. Non-GAAP gross margin decreased year over year to 37.2% from 39.1% for the same reasons.
Third-quarter 2015 non-GAAP operating income was substantially unchanged at $33.9 million due to investments in new businesses, including increased selling and marketing, general and administrative, and research and development expenses and transaction expenses related to the proposed privatization, substantially offset by the 17.3% increase in non-GAAP gross profit. Non-GAAP operating margin decreased to 15.9% from 19.5% due to higher operating expenses.
Third-quarter 2015 non-GAAP net income decreased 38.0% year over year to $23.6 million mainly due to an unfavorable change of $9.4 million in mark-to-market gains and losses on foreign-exchange forward contracts (losses of $7.3 million in the third quarter of 2015 compared to gains of $2.1 million in the third quarter of 2014), an adverse change in realized gains and losses on settled foreign-exchange forward contracts (losses of $1.6 million in the third quarter of 2015 compared to gains of $1.5 million in the third quarter of 2014), larger equity-method investment losses from our joint ventures with PRA and MedImmune and other equity-method investments, and higher interest expense due to higher loan balances needed to support increased investment.
Third-quarter 2015 non-GAAP net income attributable to WuXi shareholders decreased 40.7% year over year to $22.6 million mainly due to the 38.0% year-over-year decrease in net income and net income attributable to noncontrolling interests of $1.0 million in the third quarter of 2015.
Third-quarter 2015 non-GAAP diluted earnings per ADS attributable to WuXi shareholders decreased 41.8% year over year to $0.31 due to the 40.7% decrease in net income attributable to WuXi shareholders and a higher number of outstanding ADSs as a result of share issuances relating to the XenoBiotic Laboratories acquisition and vesting of restricted stock units.
Third-Quarter 2015 Results Preliminary; Upcoming WuXi Extraordinary General Meeting
The third-quarter 2015 results contained in this press release are preliminary, unaudited and unreviewed and are being released ahead of the upcoming extraordinary general meeting (or “EGM”) of the WuXi shareholders. The EGM is scheduled to be held on November 25, 2015 at 10:00 a.m.Shanghai time at the executive offices of the Company located at 288 Fute Zhong Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, 200131, People’s Republic of China and is being convened to consider and vote on, among other matters, the proposal to authorize and approve the previously announced agreement and plan of merger dated as of August 14, 2015 and amended on October 20, 2015, among the Company, New WuXi Life Science Limited and WuXi Merger Limited, and the transactions contemplated thereby (the “Merger Transactions”). The related transaction statement on Schedule 13E-3 and the proxy statement (the “Proxy Statement”) attached as Exhibit (a)-(1) thereto were filed with the U.S. Securities and Exchange Commission (the “SEC”) on October 20, 2015. Investors, shareholders and holders of American Depositary Shares of WuXi (“ADSs”, each representing eight ordinary shares of WuXi) are urged to read carefully and in their entirety these materials and other materials filed with or furnished to the SEC when they become available, as they contain important information about the company, the proposed merger and related matters.
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