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WuXi PharmaTech Announces Third-Quarter 2015 Results
Date:11/3/2015

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.  The Proxy Statement was mailed to the Company's ADS holders on or about October 26, 2015 and to the Company's shareholders on or about November 2, 2015.
    The Special Committee of the Board, comprised of independent directors, that reviewed the transaction recommends that stockholders approve the transaction.

    In light of the upcoming EGM and possible closing of the Merger Transactions shortly thereafter, WuXi does not intend to host a conference call to discuss the financial information contained in this press release, nor is the Company providing an update to its financial guidance.

     WUXI PHARMATECH (CAYMAN) INC.  UNAUDITED CONSOLIDATED BALANCE SHEETS  (in thousands of U.S. dollars, except ordinary share, ADS and par value data)  September 30,
    2015  December 31,
    2014  Assets:  Current assets: Cash and cash equivalents 155,241

    211,456Restricted cash 256

    793Short-term investments 201,992

    223,533Accounts receivable, net 193,718

    162,942Amount due from related parties 6,912

    4,397Inventories 62,766

    48,546Prepaid expenses and other current assets 47,462

    31,990Total current assets 668,347

    683,657 Non-current assets: Goodwill 86,758

    53,619Property, plant and equipment, net 408,561

    351,688Long-term investments 111,060

    49,037Intangible assets, net 54,413

    23,020Land use rights 13,570

    14,120Deferred tax assets 6,143

    1,417Other non-current assets 5,304

    5,068Total non-current assets 685,809

    497,969Total assets 1,354,156

    1,181,626 Liabilities and equity:  Current liabilities: Short-term and current portion of long-term debt 75,965

    199,719Accounts payable 62,928

    58,466Amount due to related parties 636

    275Accrued expenses 53,540

    43,454Deferred revenue 39,587

    27,669Advanced subsidies 14,548

    12,106Other taxes payable 3,036

    2,299Other current liabilities 33,266

    29,787Total current liabilities 283,506

    373,775 Non-current liabilities: Long-term debt, excluding current portion 113,806

    13,987Advanced subsidies 2,735

    2,286 Other non-current liabilities 25,802

    13,724Total non-current liabilities 142,343

    29,997Total liabilities 425,849

    403,772 Equity: Ordinary shares ($0.02 par value, 5,002,550,000 authorized,  561,159,373 and 568,019,232 issued and outstanding as of December 31, 2014 and September 30, 2015, respectively)  11,360

    11,223Additional paid-in capital 395,218

    295,308Retained earnings 467,088

    415,329Accumulated other comprehensive income 29,492

    55,994Equity attributable to WuXi shareholders 903,158

    777,854Noncontrolling interests 25,149

    -Total shareholders' equity 928,307

    777,854Total liabilities and equity 1,354,156

    1,181,626



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