By WuXi PharmaTech (Cayman) Inc. Published: Thursday, May. 10, 2012 SHANGHAI, May 10, 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 first quarter of 2012.
Highlights ‧Net Revenues Increased 26.2% Year Over Year to $118.0 Million ‧Manufacturing Services Net Revenues Grew 35.0% Year Over Year to $31.4 Million ‧Laboratory Services Net Revenues Grew 23.2% Year Over Year to $86.6 Million ‧China-Based Laboratory Services Net Revenues Increased 25.8% Year Over Year to $64.5 Million ‧U.S.-Based Laboratory Services Net Revenues Increased 16.4% Year Over Year to $22.2 Million ‧GAAP Diluted Earnings Per ADS Grew 15.8% Year Over Year to $0.28 ‧Non-GAAP Diluted Earnings Per ADS Increased 15.1% Year Over Year to $0.33 ‧Company Reconfirms 2012 Financial Guidance
Management Comment "WuXi began 2012 with a strong first quarter, achieving 26.2% revenue growth," said Dr. Ge Li, Chairman and Chief Executive Officer. "This strong revenue growth was broad-based across all of our businesses. We met or exceeded all of our financial targets for revenues and margins for the quarter. And we continue to invest to build capabilities and to expand capacities in both laboratory services and manufacturing services. For example, our new Wuhan chemistry site began operations in February. "WuXi is building a comprehensive and integrated technology platform and service offerings that will enable anyone and any company to discover and develop new products efficiently and cost-effectively," Dr. Li concluded. "China is becoming an important hub for pharmaceutical R&D in part because of China's pharmaceutical market, already the third largest in the world and growing very rapidly. By building high-quality operations to better serve our customers, WuXi has become the leader in the Chinese pharmaceutical R&D services industry. We are well-positioned to take full advantage of the significant long-term trend for increasing outsourcing of pharmaceutical research and development." Beginning with this financial report for the first quarter of 2012, WuXi PharmaTech presents its results of operations for Process Chemistry under the Manufacturing Services segment rather than the Laboratory Services segment. Process Chemistry develops processes for making active pharmaceutical ingredients (APIs) and advanced intermediates and thus is more closely related to operations of the Manufacturing Services segment. Prior-year results in this report also reflect this reclassification. Also beginning with the first quarter of 2012, WuXi PharmaTech presents other comprehensive income and its components in its Statement of Comprehensive Income in accordance with Accounting Standards Update 2011-05. For the periods presented herein, other comprehensive income consists of foreign currency translation adjustments resulting from the translation of our financial statements into our reporting currency, the U.S. dollar. The functional currency of our China-based operations is the RMB.
GAAP Results First-quarter 2012 net revenues increased 26.2% year over year to $118.0 million due to strong growth in both Manufacturing Services and Laboratory Services. Manufacturing Services revenue growth was driven by robust demand for clinical-trial materials from our research manufacturing business and solid demand in our commercial manufacturing business. Revenue growth in 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 in China and by increased demand for testing services in the United States for both biologics and medical devices. First-quarter 2012 GAAP gross profit increased 20.7% year over year to $41.9 million mainly due to 26.2% revenue growth. First-quarter 2012 GAAP gross margin decreased year over year to 35.5% from 37.1%. Gross margin in Laboratory Services decreased year over year to 37.1% from 39.3% mainly due to the effects of increasing labor costs in China and the negative impact from appreciation of the RMB relative to the U.S. dollar, partially offset by improved productivity. Gross margin in Manufacturing Services slightly improved year over year to 31.0% from 30.5%. First-quarter 2012 GAAP operating income grew 4.0% year over year to $20.6 million due to the 20.7% increase in gross profit, offset by increased operating expenses relating to the hiring of new senior staff and sales and marketing personnel, RMB appreciation relative to the U.S. dollar, and R&D investment in developing capabilities in biology, biologics, genomics, and other areas. Operating margin decreased to 17.5% from 21.2% due to the increase in operating expenses. First-quarter 2012 GAAP net income increased 15.2% year over year to $21.0 million due to a 4.0% increase in operating income, gains on foreign-exchange forward contracts of $1.8 million, higher interest income from short-term investments, and a small decrease in the effective tax rate. First-quarter 2012 GAAP diluted earnings per ADS increased 15.8% to $0.28, mainly due to the 15.2% increase in net income and a lower share count caused by the repurchase of about 22.8 million ordinary shares, equivalent to about 2.8 million ADSs, which were previously converted from the convertible bonds by General Atlantic in February 2012. First-quarter 2012 GAAP comprehensive income decreased 1.1% year over year to $21.4 million due to the decrease in currency translation adjustments, partially offset by the 15.2% increase in GAAP net income.
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. First-quarter 2012 non-GAAP gross profit increased 20.7% year over year to $43.5 million mainly due to broad-based revenue growth. Non-GAAP gross margin decreased to 36.8% from 38.5%. Non-GAAP gross margin in Laboratory Services decreased year over year due to increased labor costs and the negative impact from appreciation of the RMB relative to the U.S. dollar, partially offset by improved productivity. Non-GAAP gross margin in Manufacturing Services improved due to strong revenue growth and increased capacity utilization. First-quarter 2012 non-GAAP operating income increased 5.1% year over year to $24.3 million, primarily due to the 20.7% 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 R&D investment in developing capabilities in biology, biologics, genomics, and other areas. Operating margin decreased to 20.6% from 24.7% due to the increase in operating expenses. First-quarter 2012 non-GAAP net income grew 14.5% year over year to $24.5 million due to the 5.1% increase in non-GAAP operating income, gains on foreign-exchange forward contracts of $1.8 million, higher interest income from short-term investments, and a small decrease in the effective tax rate. First-quarter 2012 non-GAAP diluted earnings per ADS grew 15.1% year over year to $0.33, mainly due to the 14.5% increase in non-GAAP net income and lower share count caused by the repurchase of about 22.8 million ordinary shares, equivalent to about 2.8 million ADSs, which were previously converted from the outstanding convertible bonds by General Atlantic in February 2012.
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