- Net Revenues Up 99% Year-Over-Year
SHANGHAI, China, Sept. 5 /Xinhua-PRNewswire/ -- WuXi PharmaTech (Cayman) Inc. (NYSE: WX) ("WuXi PharmaTech" or "the Company"), the leading China-based pharmaceutical and biotechnology research and development outsourcing company, today announced its unaudited financial results for the second quarter ended June 30, 2007.
(Logo: http://www.newscom.com/cgi-bin/prnh/20040705/CNM002LOGO )
Second Quarter 2007 Highlights:
-- Total net revenues increased 99.3% over the second quarter of 2006 to
US$30.2 million.
-- Net income increased 482.1% over the second quarter of 2006 to US$7.1
million.
-- Diluted earnings per American Depositary Share ("ADS") for the second
quarter of 2007 was US$0.11. Diluted earnings per ADS excluding share-
based compensation expenses (non-GAAP) for the second quarter of 2007
was US$0.13.
"During the second quarter of 2007, we experienced strong revenue and earnings growth compared to the same period last year," said Dr. Ge Li, Chairman and Chief Executive Officer of WuXi PharmaTech. "We achieved solid growth throughout our business divisions, with revenue from laboratory services up 102.1% and revenue from research manufacturing up 86.8%. In the second quarter of 2007, laboratory services remained the major revenue contributor, accounting for 83.1% of our total net revenues, with research manufacturing accounting for the remainder. Our strong revenue growth was driven by the robust demand for drug R&D outsourcing services that we provide, and was a direct result of our ability to expeditiously deliver quality results to customers. As we continue to implement our growth strategy of becoming a full service provider of drug R&D outsourcing services, we are making steady progress in the expansion of the Jinshan manufacturing facility and the design of our new preclinical drug safety evaluation center in Suzhou."
Second Quarter 2007 Unaudited Financial Results
Net Revenues. Net revenues amounted to US$30.2 million in the second quarter of 2007, compared to US$15.2 million for the second quarter of 2006, representing an increase of 99.3%, primarily attributable to increased business volume and the expansion of services and capacities. Net revenues from laboratory services increased by 102.1% from US$12.4 million in the second quarter of 2006 to US$25.1 million in the second quarter of 2007. This increase was a result of an increased number of projects and expanded laboratory service offerings. Net revenues from research manufacturing increased 86.8% over the second quarter of 2006 to US$5.1 million. Research manufacturing increased on an annualized basis as the Company has expanded and ramped up manufacturing capabilities.
Gross Profit. Gross profit increased 118.0% to US$15.3 million in the second quarter of 2007, compared to US$7.0 million in the second quarter of 2006. Second quarter 2007 gross profit reflects laboratory services cost of revenues of $11.8 million, compared to $5.7 million in the second quarter of 2006, and research manufacturing cost of revenues of $3.2 million, compared to $2.4 million in the second quarter of 2006. Overall gross margin was 50.5% in the second quarter of 2007, up from 46.2% in the second quarter of 2006. The increase was primarily due to the improvement in our research manufacturing gross margins of 37.7% in the second quarter of 2007, compared to 11.2% in the same period of 2006, as at that time we had expanded our manufacturing capacity but had not yet ramped up production.
Operating Expenses. Operating expenses, consisting of selling and marketing expenses and general and administrative expenses, increased by 41.6% from US$5.5 million in the second quarter of 2006 to US$7.8 million in the second quarter of 2007. This increase was primarily due to business expansion. Operating expenses as a percentage of total net revenues decreased from 36.2% in the second quarter of 2006 to 25.7% in the second quarter of 2007.
Share-Based Compensation Expenses. The Company's share-based compensation expenses, which were allocated to related expense line items, decreased in aggregate by US$1.7 million in the second quarter of 2007 from the second quarter of 2006.
Net Income. Net income increased by 482.1% from US$1.2 million for the second quarter of 2006 to US$7.1 million for the second quarter of 2007. Net income excluding share-based compensation expenses (non-GAAP) for the second quarter of 2007 was US$8.6 million, a 96.7% increase compared to the non-GAAP net income of $4.4 million from second quarter of 2006. Diluted earnings per ADS was US$0.11 for the second quarter of 2007. Diluted earnings per ADS excluding share-based compensation expenses (non-GAAP) was US$0.13 for the second quarter of 2007.
Cash Flow. As of June 30, 2007, the Company had a cash balance of US$48.5 million. Net cash inflow from operating activities was US$13.0 million in the second quarter of 2007, compared to an inflow of US$15.5 million in the first quarter of 2007.
Initial Public Offering. On August 9, 2007, WuXi PharmaTech successfully completed its initial public offering ("IPO") of 15,167,326 American Depositary Shares ("ADSs"), including 1,978,347 ADSs issued in connection with the exercise of the over-allotment option in full. Each ADS represents eight of our ordinary shares.
In addition, upon the consummation of the IPO, 216,498,550 preference shares that were classified as mezzanine equity as of June 30, 2007, were automatically converted on a one-for-one basis into 216,498,550 ordinary shares or the equivalent of 27,062,319 ADSs.
Business Outlook
The Company estimates that its revenues for 2007 will range from US$128 million to US$132 million.
Conference Call
Following the earnings announcement, WuXi PharmaTech's senior management will host a conference call at 8:00 am (Eastern) / 5:00 am (Pacific) / 8:00 pm (Beijing/Hong Kong) on Thursday, September 6, 2007 to discuss its 2007 second quarter financial results and recent business activities. The conference call may be accessed by calling (US) +1 718 354 1157 / (UK) +44 (0)20 7138 0815 / (HK) +852 3002 1616. A telephone replay will be available shortly after the call until October 5, 2007 at (US) +1 718 354 1112/ (UK) +44 (0)20 7806 1970 / (HK) +852 3002 1607, Passcode: 1468987.
A live webcast of the conference call and replay will be available on the investor relations page of WuXi PharmaTech's website at http://www.wuxipharmatech.com .
About WuXi PharmaTech
Founded in 2000, Shanghai-based WuXi PharmaTech is the leading China-based pharmaceutical and biotechnology R&D outsourcing company. As a research-driven and customer-focused company, WuXi PharmaTech provides pharmaceutical and biotechnology companies a broad and integrated portfolio of laboratory and research manufacturing services throughout the drug discovery and development process. WuXi PharmaTech's services are designed to assist its global partners in shortening the cycle and lowering the cost of drug discovery and development by providing cost-effective and efficient outsourcing solutions that save its customers both time and money. Its operations are grouped into two segments: laboratory services, consisting of discovery chemistry, service biology, analytical, pharmaceutical development and process development services, and research manufacturing, focusing on manufacturing of advanced intermediates and active pharmaceutical ingredients for R&D use. In 2006, WuXi PharmaTech provided services to 70 pharmaceutical and biotechnology customers, including nine of the top ten pharmaceutical companies in the world, as measured by 2006 total revenues. For more information, please visit: http://www.wuxipharmatech.com .
Use of Non-GAAP Financial Measures
WuXi PharmaTech has provided the second quarter of 2007 net income and earnings per ADS on a non-GAAP basis, all excluding share-based compensation expenses. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the Company's financial performance and liquidity and when planning and forecasting future periods. These non-GAAP operating measures are useful for understanding and assessing underlying business performance and operating trends. The Company expects to provide net income and earnings per ADS on a non-GAAP basis using a consistent method on a quarterly basis going forward.
Readers are cautioned not to view non-GAAP results on a stand-alone basis or as a substitute for results under GAAP, or as being comparable to results reported or forecasted by other companies, and should refer to the reconciliation of non-GAAP measures to GAAP measures for the indicated periods attached hereto.
Cautionary Note Regarding Forward-Looking Statements
Statements in this release contains "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the Private Securities Litigation Reform Act of 1995, including, among others, WuXi PharmaTech's anticipated operating results for 2007, our expansion plan for the Jinshan manufacturing facility and the design of our new preclinical drug safety evaluation center in Suzhou. These forward-looking statements are not historical facts but instead represent only our belief regarding future events, many of which, by their nature, are inherently uncertain and outside of our control. Our actual results and financial condition and other circumstances may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Among the factors that could cause WuXi PharmaTech's actual results to differ from what the Company currently anticipates may include the Company's limited operating history; its reliance on a limited number of customers to continue to account for a high percentage of its revenues; risk of payment failure by any of its large customers, which could significantly harm the Company's cash flows and profitability; dependency upon the continued service of our senior management and key scientific personnel and ability to retain our existing customers or expand our customer base. The financial information contained in this release should be read in conjunction with the consolidated financial statements and notes thereto included in our prospectus filed with the Securities and Exchange Commission on August 9, 2007, and is available on the Securities and Exchange Commission's website at http://www.sec.gov . For additional information on these and other important factors that could adversely affect our business, financial condition, results of operations and prospects, see "Risk Factors" beginning on page 11 of our prospectus. Our actual results of operations for the second quarter of 2007 are not necessarily indicative of our operating results for any future periods. Any projections in this release are based on limited information currently available to us, which is subject to change. Although such projections and the factors influencing them will likely change, WuXi PharmaTech undertakes no obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this press release. Such information speaks only as of the date of this release.
WUXI PHARMATECH (CAYMAN) INC.
CONSOLIDATED BALANCE SHEETS
(in thousands of US Dollars, except share data and par value data)
June 30, December 31,
2007 2006
Assets: (Unaudited)
Current assets:
Cash and cash equivalents 48,491 9,683
Restricted cash 4,426 2,067
Accounts receivables, net 14,865 12,589
Inventories 14,721 9,617
Prepaid expenses and other current assets 5,725 2,696
Total current assets 88,228 36,652
Non-current assets:
Property, plant and equipment, net 56,588 42,776
Intangible assets, net 787 628
Land use rights, net 5,009 4,643
Other non-current assets 1,274 992
Total non-current assets 63,658 49,039
Total assets 151,886 85,691
Liabilities, mezzanine equity and
shareholders' deficit
Current liabilities:
Short-term bank borrowings, current 1,970 9,604
Accounts payables 7,486 9,259
Accrued expenses 9,223 5,012
Deferred revenue 13,408 2,619
Other tax payable 1,546 2,343
Other current liabilities 2,769 1,757
Total current liabilities: 36,402 30,594
Non-current liabilities:
Long-term debt, excluding current portion 5,252 5,763
Advanced subsidies 1,046 1,027
Convertible notes 41,818 0
Deferred tax liabilities 125 129
Total non-current liabilities 48,241 6,919
Total liabilities 84,643 37,513
Mezzanine equity 100,735 49,106
Shareholders' deficit:
Ordinary shares (Note 1), ($0.02 par
value, 550,000,000 authorized,
249,060,000 and 197,901,450 issued
and outstanding as of December 31,
2006 and June 30, 2007, respectively) 3,958 4,981
Additional paid-in capital 37,861 33,075
Retained earnings (accumulated deficit) (78,080) (40,173)
Accumulated other comprehensive income 3,129 1,549
Treasury stock (360) (360)
Total shareholders' deficit (33,492) (928)
Total liabilities, mezzanine
equity and shareholders' deficit 151,886 85,691
Note 1: Eight (8) ordinary shares are equal to one (1) ADS
WUXI PHARMATECH (CAYMAN) INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006
(In thousands of US Dollars, except ADS data and per ADS data )
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006
Net revenues:
Laboratory services 25,118 12,429 46,794 21,294
Research manufacturing 5,124 2,743 17,267 6,650
Total net revenues 30,242 15,172 64,061 27,944
Cost of revenues (14,968) (8,166) (33,116) (15,505)
Gross profit 15,274 7,006 30,945 12,439
Operating expenses (7,770) (5,488) (17,598) (9,427)
Operating income 7,504 1,518 13,347 3,012
Other income (expenses), net (105) (276) 106 (655)
Income before income taxes 7,399 1,242 13,453 2,357
Income taxes (251) (14) (329) (302)
Net income 7,148 1,228 13,124 2,055
Income (loss) attributable to
holders of ADS (Note 2):
Basic 3,244 (42,110) 2,656 (41,283)
Diluted 3,244 (42,110) 2,656 (41,283)
Basic earnings (loss) per
ADS (Note 2) 0.14 (1.35) 0.11 (1.33)
Diluted earnings (loss) per
ADS (Note 2) 0.11 (1.35) 0.09 (1.33)
Weighted average ADS
outstanding - basic
(Note 2) 22,487,681 31,132,500 23,873,225 31,132,500
Weighted average ADS
outstanding - diluted
(Note 2) 29,324,338 31,132,500 30,452,998 31,132,500
Note 2: One (1) ADS is equal to eight (8) ordinary shares
WUXI PHARMATECH (CAYMAN) INC.
RECONCILIATION OF NON-GAAP TO GAAP
(in thousands of US Dollars, except per ADS data)
(Unaudited)
Three Months Ended June 30,
2007 2006
GAAP net income 7,148 1,228
Add back: Share-based compensation expenses 1,434 3,135
Non-GAAP net income 8,582 4,363
Non-GAAP Income (loss) attributable to
holders of ADS 3,895 (38,975)
Non-GAAP earnings (loss) per ADS - basic 0.17 (1.25)
Non-GAAP earnings (loss) per ADS - diluted 0.13 (1.25)
