SHANGHAI, March 8, 2012 /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 the fourth quarter and full year of 2011.
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Fourth-Quarter 2011 Highlights
- Net Revenues Increased 22.5% Year Over Year to $108.5 Million
- Manufacturing Services Net Revenues Grew 56.1% Year Over Year to $15.7 Million
- Laboratory Services Net Revenues Grew 18.2% Year Over Year to $92.8 Million
- China-Based Laboratory Services Net Revenues Increased 20.8% Year Over Year to $72.0 Million
- U.S.-Based Laboratory Services Net Revenues Increased 10.1% Year Over Year to $20.8 Million
- GAAP Diluted Earnings Per ADS Grew 35.1% Year Over Year to $0.31
- Non-GAAP Diluted Earnings Per ADS Increased 29.3% Year Over Year to $0.36
Full-Year 2011 Highlights
- Net Revenues Increased 21.9% Year Over Year to $407.2 Million
- Manufacturing Services Net Revenues Grew 91.8% Year Over Year to $75.2 Million
- Laboratory Services Net Revenues Increased 12.6% Year Over Year to $332.0 Million
- China-Based Laboratory Services Net Revenues Grew 14.7% Year Over Year to $251.7 Million
- U.S.-Based Laboratory Services Net Revenues Increased 6.4% Year Over Year to $80.3 Million
- GAAP Diluted Earnings Per ADS Declined 11.7% Year Over Year to $1.07 Due to Inclusion in the Prior-Year Results of a Termination Fee Relating to the Proposed Transaction with Charles River Laboratories
- Non-GAAP Diluted Earnings Per ADS Increased 13.7% Year Over Year to $1.24
- WuXi Met or Exceeded All of Its 2011 Financial Guidance
Management Comment
"WuXi completed a successful 2011 with a solid fourth quarter, driven by strong revenue performances in both Manufacturing Services and Laboratory Services," said Dr. Ge Li, Chairman and Chief Executive Officer. "Our year-over-year revenue growth was broad-based and was particularly strong in integrated medicinal chemistry, DMPK/ADME, formulation, toxicology, bioanalytical services, and commercial manufacturing. We exceeded our revenue guidance and met all of the rest of our guidance for the full year.
"We believe that 2012 will be a year of strong growth for all of our businesses. Our financial guidance for 2012 reflects 15-20% net revenue growth, anchored by projected China-based Laboratory Services revenue growth of 18-24% on a pro forma basis, resulting from increasing customer demand for our broad and integrated services. In 2012, we intend to make significant investments in new businesses, including biologics drug discovery, development and manufacturing services; clinical development services; biologics reagents; and genomics. We will also invest in expanding our existing business, including ramping up our Wuhan chemistry site; expanding our formulation and stability testing labs; and strengthening our leading position in integrated medicinal chemistry capabilities.
"WuXi is building an alternative R&D engine for the life-sciences industry," Dr. Li concluded. "This engine represents an integrated technology platform and service offerings that will enable anyone and any company to discover and develop medicines. China is rapidly becoming an important hub for pharmaceutical R&D, in part because of the rapid growth of China's large pharmaceutical market. WuXi is positioned well to continue to be a leader in the Chinese life-sciences industry by building capabilities and capacities to better serve our customers."
Beginning with financial reporting in the first quarter of 2012, WuXi PharmaTech will record its results of operations for Process Chemistry under Manufacturing Services rather than Laboratory Services. Process Chemistry develops processes for making active pharmaceutical ingredients (APIs) and advanced intermediates and thus is more closely related to operations of Manufacturing Services. Process Chemistry is managed as part of the Manufacturing Services business unit as of 2012. Full-year 2011 revenues for Process Chemistry were approximately $20.4 million.
GAAP Fourth-Quarter 2011 Results
Fourth-quarter 2011 net revenues increased 22.5% year over year to $108.5 million mainly due to 56.1% growth in Manufacturing Services revenues and 20.8% growth in China-based Laboratory Services revenues. Manufacturing Services revenue growth was driven by our large-scale commercial manufacturing business, as well as the robust demand for clinical-trial materials from our research manufacturing business. Revenue growth in China-based Laboratory Services was driven by our comprehensive and integrated discovery and development services, with particularly strong growth in integrated medicinal chemistry, DMPK/ADME, formulation, toxicology, and bioanalytical services.
Fourth-quarter 2011 GAAP gross profit increased 24.7% year over year to $42.6 million due to 22.5% revenue growth and gross-margin improvement. Fourth-quarter 2011 GAAP gross margin increased year over year to 39.2% from 38.5%. Gross margin in Manufacturing Services improved year over year to 28.1% from 21.2% due to increasing capacity utilization in our large-scale manufacturing facilities. Gross margin in Laboratory Services increased year over year to 41.1% from 40.8% due to improved productivity, particularly in U.S. Laboratory Services and the newer China-based laboratory services, which more than offset the effects of higher labor costs in China, the negative impact from appreciation of the Chinese RMB relative to the U.S. dollar, and increased depreciation expenses from investments in new capabilities and capacity expansion.
Fourth-quarter 2011 GAAP operating income grew 7.7% year over year to $20.2 million due to the 24.7% increase in gross profit, offset by expenses relating to the hiring of new senior staff and sales and marketing personnel, RMB appreciation relative to the U.S. dollar, and development of R&D capabilities in biology, biologics, and genomics.
Fourth-quarter 2011 GAAP net income increased 35.9% year over year to $23.5 million due to a 7.7% increase in operating income, gains on foreign-exchange forward contracts of $3.3 million, and higher interest income from short-term investments, partially offset by an increase in the effective tax rate due to income mix and higher statutory tax rates for certain Chinese legal entities relative to 2010.
Fourth-quarter 2011 GAAP diluted earnings per ADS increased 35.1% to 31 cents, mainly due to the 35.9% increase in net income, offset in part by slightly higher share count due to the exercise of stock options and restricted stock.
GAAP Full-Year 2011 Results
Full-year 2011 net revenues increased 21.9% year over year to $407.2 million mainly due to 91.8% growth in Manufacturing Services revenues and 14.7% growth in China-based Laboratory Services revenues. Manufacturing Services revenue growth was driven by our large-scale commercial manufacturing business, as well as the robust demand for clinical-trial materials from our research manufacturing business. Revenue growth in China-based Laboratory Services was driven by our comprehensive and integrated discovery and development services, with particularly strong growth in integrated medicinal chemistry, DMPK/ADME, formulation, toxicology, and bioanalytical services.
Full-year 2011 GAAP gross profit increased 22.6% year over year to $156.4 million due to 21.9% revenue growth and gross-margin improvement. Full-year 2011 GAAP gross margin increased year over year to 38.4% from 38.2%. Gross margin in Manufacturing Services improved year over year to 29.3% from 20.0% due to increasing capacity utilization in our commercial manufacturing facilities. Gross margin in Laboratory Services decreased slightly year over year to 40.5% from 40.6% due to the effects of higher labor costs in China, the negative impact from appreciation of the Chinese RMB relative to the U.S. dollar, and increased depreciation expenses from investments in new capabilities and capacity expansion, which more than offset improved productivity, particularly in U.S. Laboratory Services and the newer China-based laboratory services.
Full-year 2011 GAAP operating income grew 17.2% year over year to $83.8 million due to the 22.6% increase in gross profit, partially offset by expenses relating to the hiring of new senior staff and sales and marketing personnel, RMB appreciation, and development of R&D capabilities in biology, biologics, and genomics.
Full-year 2011 GAAP net income decreased 10.8% year over year to $81.0 million due to inclusion in the prior-year results of a $30 million termination fee relating to the proposed transaction with Charles River Laboratories and an increase in the effective tax rate due to income mix and higher statutory tax rates for certain Chinese legal entities, partially offset by a 17.2% increase in operating income, gains on foreign-exchange forward contracts of $4.7 million, and higher interest income from short-term investments.
Full-year 2011 GAAP diluted earnings per ADS decreased 11.7% to $1.07 mainly due to the 10.8% decrease in net income and slightly higher share count due to the exercise of stock options and restricted stock.
Non-GAAP Fourth-Quarter 2011 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 in both the current-year and the prior-year results.
Fourth-quarter 2011 non-GAAP gross profit increased 23.4% year over year to $44.0 million due to broad-based revenue growth and an increase in non-GAAP gross margin to 40.5% from 40.2%. Non-GAAP gross margin in Laboratory Services increased year over year due to improved productivity, particularly in U.S. Laboratory Services and the newer China-based laboratory services, which more than offset higher labor costs, the negative impact from appreciation of the Chinese RMB relative to the U.S. dollar, and increased depreciation expenses from investments in new capabilities and capacity expansion. Non-GAAP gross margin in Manufacturing Services improved due to strong revenue growth and increased capacity utilization in our large-scale manufacturing facilities.
Fourth-quarter 2011 non-GAAP operating income increased 6.1% year over year to $23.8 million, primarily due to the 23.4% increase in non-GAAP gross profit, partially offset by the increase in non-GAAP operating expenses driven by the hiring of new senior staff and sales and marketing personnel, RMB appreciation, and development of R&D capabilities in biology, biologics, and genomics.
Fourth-quarter 2011 non-GAAP net income grew 30.1% year over year to $26.9 million due to the 6.1% increase in non-GAAP operating income, gains on foreign-exchange forward contracts of $3.3 million, and higher interest income from short-term investments, offset by an increase in the effective tax rate due to income mix and higher statutory tax rates for certain Chinese legal entities.
Fourth-quarter 2011 non-GAAP diluted earnings per ADS grew 29.3% year over year to 36 cents, mainly due to the 30.1% increase in non-GAAP net income, offset by slightly higher share count due to the exercise of stock options and restricted stock.
Non-GAAP Full-Year 2011 Results
Non-GAAP financial results exclude the impact of share-based compensation expenses and amortization and the deferred tax impact of acquired intangible assets in both 2011 and 2010, as well as a $30 million termination fee received from Charles River Laboratories in 2010, expenses incurred in connection with that transaction, and bonuses paid to all employees after termination of that transaction.
Full-year 2011 non-GAAP gross profit increased 17.9% year over year to $161.8 million due to broad-based revenue growth, offset by a decrease in non-GAAP gross margin to 39.7% from 41.1%. Non-GAAP gross margin in Laboratory Services decreased year over year due to higher labor costs, the negative impact from appreciation of the Chinese RMB relative to the U.S. dollar, and increased depreciation expenses from investments in new capabilities and capacity expansion, which more than offset improved productivity, particularly in U.S. Laboratory Services and the newer China-based laboratory services. Non-GAAP gross margin in Manufacturing Services improved due to strong revenue growth and increased capacity utilization in our large-scale manufacturing facilities.
Full-year 2011 non-GAAP operating income increased 9.9% year over year to $96.8 million, primarily due to the 17.9% increase in non-GAAP gross profit, partially offset by the increase in non-GAAP operating expenses driven by the hiring of new senior staff and sales and marketing personnel, RMB appreciation, and development of R&D capabilities in biology, biologics, and genomics.
Full-year 2011 non-GAAP net income grew 14.9% year over year to $93.4 million due to the 9.9% increase in non-GAAP operating income, gains on foreign-exchange forward contracts of $4.7 million, and higher interest income from short-term investments, offset by an increase in the effective tax rate due to income mix and higher statutory tax rates for certain Chinese legal entities.
Full-year 2011 non-GAAP diluted earnings per ADS grew 13.7% year over year to $1.24, mainly due to the 14.9% increase in non-GAAP net income, offset by slightly higher share count due to the exercise of stock options and restricted stock.
2012 Financial Guidance
The company provides its full-year 2012 financial guidance:
- Total net revenues of $468-$488 million, or 15-20% year-over-year growth
- Growth in total net revenues of China-based Laboratory Services of 18-24% on a pro-forma basis reflecting the classification of Process Chemistry in Manufacturing Services for both years
- Growth in total net revenues of U.S.-based Laboratory Services of 6-9%
- Growth in total net revenues of Manufacturing Services of 13-18% on a pro-forma basis reflecting the classification of Process Chemistry in Manufacturing Services for both years
- Operating income margin of 17.5-19.0% on GAAP basis, 20.0-21.5% on non-GAAP basis
- Capital expenditures of about $70 million
- GAAP effective tax rate of about 17.5%
First Quarter 2012 Financial Guidance
The company provides its first-quarter 2012 financial guidance:
- Total revenues of $114-$117 million, up 22-25%
- Laboratory Services revenues (not including Process Chemistry) of $84-$86 million
- Manufacturing Services revenues (including Process Chemistry) of $30-$31 million
- Operating margin of 17.5-18.0% GAAP, 20.0-20.5% non-GAAP
Share Repurchase Program
The Wuxi Board of Directors has approved a share repurchase plan. Under this plan, the Company is authorized to repurchase up to $30 million of its American Depositary Shares, or ADSs, over the next eighteen months, from time to time, in open-market purchases on the NYSE Euronext at prevailing market prices, in trades pursuant to a Rule 10b5-1 repurchase plan, or otherwise, in accordance with applicable federal securities laws, including the anti-manipulation provisions of Rule 10b-18, promulgated under the U.S. Securities Exchange Act of 1934, as amended. The timing and extent of any purchases will depend upon market conditions, the trading price of WuXi's ADSs and other factors, including customary restrictions on share repurchases. The repurchase program does not obligate WuXi to make repurchases at any specific time or in any specific situation.
