SHANGHAI, Aug. 10, 2011 /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 second quarter of 2011.
Highlights
- WuXi PharmaTech Quarterly Net Revenues Exceeded $100 Million for the First Time
- Second-Quarter 2011 Net Revenues Increased 24.8% Year Over Year to $101.1 Million
- Laboratory Services Net Revenues Grew 10.3% Year Over Year to $80.1 Million
- China-Based Laboratory Services Net Revenues Increased 14.5% Year Over Year to $60.3 Million
- Manufacturing Services Net Revenues Grew 148.7% Year Over Year to $21.0 Million
- GAAP Diluted Earnings Per ADS Grew 34.2% Year Over Year to 25 Cents
- Non-GAAP Diluted Earnings Per ADS Increased 9.3% Year Over Year to 29 Cents
Management Comment
"WuXi delivered strong revenue and income growth in the second quarter," said Dr. Ge Li, Chairman and Chief Executive Officer. "For the first time in our company's history we topped $100 million in quarterly net revenues. Total net revenues and GAAP diluted EPS grew 24.8% and 34.2%, respectively. At the same time, we continued to invest in new capabilities and capacity to better serve our customers and to sustain future growth.
"WuXi met or exceeded its financial guidance for the quarter. Revenues grew to $101.1 million, versus our guidance of $97-99 million. Net revenues in both Laboratory Services and Manufacturing Services exceeded our guidance. GAAP and non-GAAP operating margins were comparable to those in the first quarter, as we expected.
"We are particularly pleased with the strong performance of our Manufacturing Services business this year. A few years ago we chose to diversify, investing in building and equipping a new facility for large-scale commercial manufacturing as a natural extension of our capabilities in small-scale manufacturing of drugs for preclinical and clinical trials. We are now seeing a very strong return on this investment.
"We continue to expect 2011 to be a strong year for WuXi, with annual revenue growth of 20-22% in a highly competitive environment. We expect to achieve mid-teens annual revenue growth in the China-based Laboratory Services business. Manufacturing Services annual revenue is expected to grow 80-90% to approximately $70-74 million in 2011, versus $39 million in 2010 and $20 million in 2009.
"In 2011, we will continue to invest and build a strong integrated drug R&D service platform to be the industry's alternative R&D engine to discover and develop new drugs. Among our major investment projects in 2011 are a new site in Wuhan for our chemistry business, a new GMP biologics manufacturing facility in the city of Wuxi, expansion of our new research manufacturing capacity in our Jinshan facility, and continuing build-up of pharmacology models and biology capabilities. In the second quarter, we opened our new API/drug product stability testing facility dedicated to Bristol-Myers Squibb. To help manage this uniquely broad R&D services platform, we have recently hired several executives with significant expertise and extensive industry experience across the drug discovery and development value chain.
"WuXi has a business model that is working," Dr. Li concluded. "Offshore outsourcing of R&D offers pharmaceutical and biotech companies greater operational flexibility and access to high-quality scientific expertise at reasonable prices. Moreover, we are beginning to see increasing interest from our customers to develop drugs for the rapidly growing Chinese pharmaceutical market. As the leading R&D outsourcing service company in China, WuXi is in a unique position to help our customers to discover and develop drugs for both global markets and the Chinese market."
GAAP Results
Second-quarter 2011 net revenues increased 24.8% year over year to $101.1 million mainly due to 148.7% growth in Manufacturing Services net revenues and 14.5% growth in China-based Laboratory Services revenues. Revenue growth in Laboratory Services was driven by our comprehensive and integrated discovery and development services. 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.
Second-quarter 2011 GAAP gross profit increased 16.3% year over year to $38.6 million due to solid revenue growth in Laboratory Services and both strong revenue growth and gross-margin improvement in Manufacturing Services. Second-quarter 2011 GAAP gross margin decreased year over year to 38.2% from 41.0%. Gross margin in Manufacturing Services, while lower than that in Laboratory Services, improved year over year to 31.1% from 21.3% due to strong revenue growth and increasing capacity utilization in our large-scale manufacturing facilities. Gross margin in Laboratory Services decreased year over year to 40.1% from 43.3% 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.
Second-quarter 2011 GAAP operating income grew 33.7% year over year to $21.5 million due to the 16.3% increase in gross profit and relatively flat operating expenses. In the second quarter of 2010 operating expenses included $2.9 million of non-recurring deal costs relating to the previously proposed combination with Charles River Laboratories. Excluding the impact of these deal costs, the growth in operating expenses was mainly due to the hiring of new senior staff and sales and marketing personnel, RMB appreciation, and building of our biology research capabilities.
Second-quarter 2011 GAAP net income increased 35.6% year over year to $18.7 million due to the 33.7% increase in operating income and higher interest income from short-term investments.
Second-quarter 2011 GAAP diluted earnings per ADS increased 34.2% to 25 cents, mainly due to the 35.6% increase in net income, offset by a slightly higher share count due to exercise of stock options.
Non-GAAP Results
Non-GAAP financial results excluded 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, and non-recurring costs relating to the previously proposed combination with Charles River Laboratories in the prior-year results.
Second-quarter 2011 non-GAAP gross profit increased 14.4% year over year to $40.0 million due to revenue growth in Laboratory Services and both strong revenue growth and gross-margin improvement in Manufacturing Services. Second-quarter 2011 non-GAAP gross margin decreased year over year to 39.5% from 43.2%. Gross margin in Manufacturing Services, while lower than that in Laboratory Services, improved year over year due to strong revenue growth and increased capacity utilization in our large-scale manufacturing facilities. 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.
Second-quarter 2011 non-GAAP operating income increased 10.8% year over year to $25.0 million, primarily due to the 14.4% 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 building of our biology research capabilities.
Second-quarter 2011 non-GAAP net income grew 10.4% year over year to $22.0 million due to the 10.8% increase in non-GAAP operating income and higher interest income from short-term investments.
Diluted non-GAAP earnings per ADS grew 9.3% year over year to 29 cents, mainly due to the 10.4% increase in non-GAAP net income, offset by slightly higher share count due to the exercise of stock options.
2011 Financial Guidance
The company announces the following update of its full-year 2011 financial guidance:
- Total net revenues of $400-407 million, which represents 20-22% growth
- Growth in net revenues of China-based Laboratory Services of 14-15%
- Growth in net revenues of U.S.-based Laboratory Services of 5-7%
- Growth in net revenues of Manufacturing Services of 80-90%
- Decrease in gross margin of about 1 percentage point
- GAAP operating margin of about 21% and non-GAAP operating margin of about 24%
- Capital expenditures of about $60 million
- GAAP effective tax rate of about 18%
The Company provides the following guidance for third-quarter 2011 performance:
- Total net revenues of $100-103 million, or 19-23% year-over-year growth
- Laboratory Services revenues of $82-84 million, Manufacturing Services net revenues of $18-19 million
- GAAP and non-GAAP operating margins of about 21% and 24%, respectively
