SHANGHAI, March 5, 2015 /PRNewswire/ -- WuXi PharmaTech (Cayman) Inc. (NYSE: WX), a leading open-access R&D capability and technology platform 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 2014.
Fourth-Quarter 2014 Highlights
- Net Revenues Increased 21.3% Year Over Year to $190.6 Million
- Laboratory Services Net Revenues Grew 17.7% Year Over Year to $140.5 Million
- Manufacturing Services Net Revenues Increased 32.8% Year Over Year to $50.1 Million
- GAAP Diluted Earnings Per ADS Grew 2.8% Year Over Year to $0.46
- Non-GAAP Diluted Earnings Per ADS Increased 4.1% Year Over Year to $0.55
Full-Year 2014 Highlights
- Net Revenues Increased 16.6% Year Over Year to $674.3 Million
- Laboratory Services Net Revenues Grew 14.2% Year Over Year to $492.0 Million
- Manufacturing Services Net Revenues Increased 23.8% Year Over Year to $182.3 Million
- GAAP Diluted Earnings Per ADS Decreased 1.2% Year Over Year to $1.56
- Non-GAAP Diluted Earnings Per ADS Grew 3.0% Year Over Year to $1.88
Management Comment
“We completed a strong 2014 with a very good fourth quarter,” said Dr. Ge Li, Chairman and CEO. “Full-year 2014 revenue growth of 16.6% and fourth-quarter 2014 revenue growth of 21.3% both exceeded our guidance. Our revenue growth was broad-based, with both Laboratory Services and Manufacturing Services achieving record revenues both in the fourth quarter and the full year. We also made investments in 2014 in new capabilities, including talent, new laboratories, and technologies, particularly in manufacturing, biologics, genomics, R&D, sales and marketing, and information technology, to sustain our business growth.
“We continue to invest to strengthen our core businesses, particularly in expansion of capacity,” Dr. Li continued. “Capital spending will be in the range of $180-$200 million in 2015. We expect to complete construction of new small-molecule manufacturing facilities in Changzhou in late 2015/early 2016. We will begin construction of commercial-scale biologics manufacturing facilities in Wuxi city adjacent to our existing clinical facilities in 2015 and complete construction in late 2016. Each of these manufacturing facilities will cost nearly $150 million and support strong growth in demand in these businesses. Two new cell therapy manufacturing facilities in Philadelphia, to be completed in 2015 and 2016, respectively, will cost an additional $40 million in total and expand our capabilities in this rapidly developing field.
“We are also investing aggressively in 2015 in new businesses to seize opportunities for further growth. We have been good at planting seeds when we see emerging business opportunities, and we don’t hesitate to invest to capture growing demand and to capitalize on market trends. We did so in the past few years in building our small-molecule manufacturing business and our biologics business in China by investing aggressively. Now we are getting strong growth and returns from these investments. We are very excited and confident about our new investments in genomics/bioinformatics, clinical diagnostics, e-commerce, cell therapy manufacturing, e-health solutions, and other emerging areas with tremendous potential. These investments are expected to reduce 2015 diluted earnings per share by about 26 cents per share and to earn strong returns in future years.
“New technologies, emerging markets, and global connectivity will profoundly change the practice of medicine in the 21st century,” Dr. Li concluded. “Genomic medicine will fundamentally change how doctors treat patients and how patients access better healthcare solutions. The newly established WuXi NextCODE Genomics is already at the forefront of developing products and services to meet such a powerful paradigm shift. We are equally excited about the future of the China healthcare market. WuXi is uniquely positioned to bring western innovation to China with our comprehensive R&D capabilities, superior access to technology, extensive China healthcare know-how, and a 15-year track record of accomplishment. We are investing in our e-commerce platform for reagent sales and custom synthesis via Labnetwork.com and the WuXi V-Lab App, respectively. We expect our new investments will augment the continuing strong performance of our core businesses to propel our growth for years to come.”
Fourth-Quarter 2014 GAAP Results
Fourth-quarter 2014 net revenues increased 21.3% year over year to $190.6 million. Revenue growth in Laboratory Services of 17.7% was driven by our comprehensive and integrated drug discovery and development services. Revenue growth of 32.8% in Manufacturing Services was driven by strong demand in both research manufacturing and commercial manufacturing compared to the fourth quarter of 2013.
Fourth-quarter 2014 GAAP gross profit increased 18.0% year over year to $70.4 million due to 21.3% revenue growth, offset by project mix and ongoing increased labor costs in China. Gross margin decreased year over year to 36.9% from 38.0% mainly due to project mix and ongoing increased labor costs in China. Gross margin in Manufacturing Services decreased year over year to 30.1% from 32.0% due to our being in the early stage of our biologics manufacturing ramp-up. Gross margin in Laboratory Services decreased year over year to 39.4% from 39.9%.
Fourth-quarter 2014 GAAP operating income decreased 16.4% year over year to $24.6 million due to merger and acquisition related transaction costs, increased selling and marketing expenses, higher general and administrative expenses including compensation cost of management due to business expansion, and increased research and development expenses in biologics, discovery biology, genomics, and other areas, partially offset by the 18.0% increase in gross profit. Operating margin declined to 12.9% from 18.7% due to these increased selling and marketing expenses, general and administrative expenses, merger and acquisition related transaction costs, and research and development expenses.
Fourth-quarter 2014 GAAP net income increased 0.4% year over year to $33.0 million due to $6.9 million of gains on the sale of investments by the corporate venture fund, smaller equity-method investment losses from our joint ventures with PRA and MedImmune and other equity-method investments, higher interest income due to higher cash balances and higher interest rates, and a lower effective tax rate compared to the fourth quarter of 2013 due to the mix of taxable income, partially offset by the 16.4% year-over-year decrease in operating income, an adverse change of $4.7 million in mark-to-market losses on foreign-exchange forward contracts (losses of $2.4 million in the fourth quarter of 2014 compared to gains of $2.3 million in the fourth quarter of 2013), and lower realized gains on settled foreign-exchange forward contracts (gains of $2.4 million in the fourth quarter of 2014 compared to gains of $4.4 million in the fourth quarter of 2013).
Fourth-quarter 2014 GAAP diluted earnings per ADS increased 2.8% to $0.46 due to the 0.4% increase in net income and a lower number of outstanding ADSs as a result of share purchases earlier in the year. Fourth-quarter 2014 GAAP comprehensive income decreased 30.5% year over year to $24.3 million due to an unfavorable change in currency translation adjustments and a cash flow hedge, partially offset by a favorable change in unrealized gains on available-for-sale securities and the 0.4% increase in GAAP net income.
Fourth-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.
Fourth-quarter 2014 non-GAAP gross profit increased 17.3% year over year to $72.3 million due to the 21.3% revenue growth, offset by project mix and ongoing increased labor costs in China. Non-GAAP gross margin decreased year over year to 37.9% from 39.2% due to project mix and ongoing increased labor costs in China.
Fourth-quarter 2014 non-GAAP operating income decreased 11.8% year over year to $31.4 million due to merger and acquisition related transaction costs, increased selling and marketing expenses, higher general and administrative expenses including compensation cost of management due to business expansion, and increased research and development expenses in biologics, discovery biology, genomics, and other areas, partially offset by the 17.3% increase in non-GAAP gross profit. Non-GAAP operating margin decreased to 16.5% from 22.6% due to increased selling and marketing expenses, general and administrative expenses, merger and acquisition related transaction costs, and research and development expenses.
Fourth-quarter 2014 non-GAAP net income increased 1.7% year over year to $39.7 million due to $6.9 million of gains on the sale of investments by the corporate venture fund, smaller equity-method investment losses from our joint ventures with PRA and MedImmune and other equity-method investments, higher interest income due to higher cash balances and higher interest rates, and a lower effective tax rate compared to the fourth quarter of 2013 due to the mix of taxable income, partially offset by the 11.8% year-over-year decrease in non-GAAP operating income, an adverse change of $4.7 million in mark-to-market losses on foreign-exchange forward contracts (losses of $2.4 million in the fourth quarter of 2014 compared to gains of $2.3 million in the fourth quarter of 2013), and lower realized gains on settled foreign-exchange forward contracts (gains of $2.4 million in the fourth quarter of 2014 compared to gains of $4.4 million in the fourth quarter of 2013).
Fourth-quarter 2014 non-GAAP diluted earnings per ADS increased 4.1% year over year to $0.55 due to the 1.7% increase in non-GAAP net income and a lower number of outstanding ADSs as a result of share purchases earlier in the year.
Full-Year 2014 GAAP Results
2014 net revenues increased 16.6% year over year to $674.3 million. Revenue growth in Laboratory Services of 14.2% was driven by our comprehensive and integrated drug discovery and development services. Revenue growth of 23.8% in Manufacturing Services was caused by strong demand in both research manufacturing and commercial manufacturing compared to 2013.
2014 GAAP gross profit increased 19.0% year over year to $251.7 million due to 16.6% revenue growth and productivity improvements. Gross margin increased year over year to 37.3% from 36.6% mainly due to improved productivity and the ramp-up of biologics services, partially offset by increased labor costs in China. Gross margin in Manufacturing Services increased year over year to 32.0% from 30.6%. Gross margin in Laboratory Services increased year over year to 39.3% from 38.6%.
2014 GAAP operating income decreased 1.4% year over year to $103.7 million due to merger and acquisition related transaction costs, increased selling and marketing expenses, higher general and administrative expenses including compensation cost of management due to business expansion, and increased research and development expenses in biologics, discovery biology, genomics, and other areas, partially offset by the 19.0% increase in gross profit. Operating margin declined to 15.4% from 18.2% due to these increased selling and marketing expenses, general and administrative expenses, merger and acquisition related transaction costs, and research and development expenses.
2014 GAAP net income decreased 2.1% year over year to $112.2 million due to the 1.4% year-over-year decrease in operating income, mark-to-market losses on foreign-exchange forward contracts of $16.6 million compared to mark-to-market gains of $9.1 million in 2013, lower realized gains on settled foreign-exchange forward contracts of $7.4 million in 2014 compared to $10.2 million in 2013, and a higher effective tax rate compared to full-year 2013 due to the mix of taxable income and certain non-recurring tax benefits we received in 2013, partially offset by $16.6 million of gains on the sale of investments 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.
2014 GAAP diluted earnings per ADS decreased 1.2% to $1.56 due to the 2.1% decrease in net income, partially offset by a slightly lower number of outstanding ADSs as a result of share purchases earlier in the year. 2014 GAAP comprehensive income decreased 25.0% year over year to $101.2 million due to the 2.1% decrease in GAAP net income, unfavorable currency translation adjustments, lower unrealized gains on available-for-sale securities, and a cash flow hedge.
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