WuXi AppTec Reports Strong 2018 Annual Results

SHANGHAI, March 22, 2019 /PRNewswire/ -- WuXi AppTec Co., Ltd. (stock code: 603259.SH / 02359.HK), a leading global pharmaceutical and medical device open-access capability and technology platform company with global operations, announces its audited annual results for the year ended December 31, 2018 today.

All financials disclosed in this press release are prepared based on International Financial Reporting Standards (or "IFRS").

Financial Highlights

• Strong revenue growth of 23.8% year-over-year to RMB9,614 million. Applying a constant exchange rate, revenue grew 25.4% to RMB9,739 million. We continued to enhance capabilities and build capacity across all segments, while investing in the latest technologies to expand our service offering. We particularly benefited from a surging increase in business from China-based customers, and biotech customers globally.
• Gross profit grew 16.6% year-over-year to RMB3,777 million. Gross profit margin was 39.3%.^[1] Excluding the impact of foreign exchange loss, gross profit margin was 39.9%.
• Net profit attributable to owners of the Company increased 84.2% year-over-year to RMB2,261 million, due to strong operations execution coupled with an extraordinary gain of RMB616 million from the fair value change of our investment portfolio. 
• Adjusted non-IFRS net profit attributable to owners of the Company grew 23.3% year-over-year to RMB1,742 million.
• Diluted EPS and adjusted non-IFRS EPS increased by 70.0% and 13.9%, respectively.

Operational Highlights

• We acquired 1,400+ new customers, and our active customers count reached 3,500+.
  - All of the top 20 global pharmaceutical companies are our customers.
  - We achieved 100% retention rate for our top 10 customers.
  - We continue to expand our biotech customer base rapidly as our integrated R&D platform enables them to efficiently and effectively discover and develop products.
• For our success-based drug discovery services, in 2018 we filed 27 new-chemical-entity INDs for our customers with the NMPA (China National Medical Products Administration) and obtained 17 CTAs (clinical trial approval). As of December 31, 2018, we have cumulatively submitted 55 new-chemical-entity IND filings with NMPA for our customers and obtained 34 CTAs.
• Our small molecule CDMO/CMO segment provided services to 650+ projects, including 40 in Phase III clinical trials and 16 that have been commercialized. 
• We became the first CMO services provider under China's newly implemented MAH (Market Authorization Holder) policy and began commercial manufacturing services for two products, including: Ganovo®, developed by Ascletis Pharma for treatment of Hepatitis C and Elunate®, developed by Hutchison MediPharma for treatment of colorectal cancer.
• In the highly-specialized field of cell and gene therapy, we provided CDMO services for 30 clinical stage cell and gene therapies projects; 25 in phase I and 5 in phase II/III.
• Our fast growing clinical research services business helped one multinational company's PD-1 antibody obtain market approval in China. We also helped a domestic company's break-through drug obtain market approval for the treatment of colorectal cancer. In addition, we helped the BLA submission of the first CD20 biosimilar product in China.
• In July 2018, we acquired an Austin, Texas based clinical research CRO WuXi Clinical Development, Inc. (carrying on business as ResearchPoint Global). This acquisition has allowed us to expand our global clinical trial service offering to both China based companies and US based companies for their global clinical development.
• To support future growth, we are significantly expanding capacity including: chemistry laboratory expansion in our Tianjin site and new Qidong site; new cell and gene therapy GMP facilities in our Philadelphia site and Wuxi Jiangsu site; API GMP manufacturing facilities in our Changzhou site; a new medical device testing laboratory in Suzhou, and a new biology research laboratory in San Diego, California.

Management Comments

"2018 was an incredible year for the global healthcare industry and a fantastic one for our company," said Dr. Ge Li, Chairman and CEO. "The industry experienced significant progress as new innovative drugs address increasingly complex indications with remarkable results.  And with the drug approval timeline greatly accelerated, the number of new drugs approved for market in the United States and in China has reached a record high. We were proud to see that 39 out of the 59 new drugs approved by the FDA came from our customers and we are committed to continually investing in our capabilities and capacity to consistently provide the highest level of service in this rapidly-changing environment." 

"We are grateful to our investors who continue to believe in our vision. The capital they provide drives our growth reinforcing the confidence they have in our management team and our business model. In May and December of 2018, we successfully listed on the Shanghai Stock Exchange and the Main Board of the Hong Kong Stock Exchange, respectively."

"Our 'Follow the Project / Follow the Molecule / Follow the Customer' strategy continues to deliver stellar results. All along, we continued to successfully execute on our business plan achieving revenue of RMB9,614 million, representing growth of 23.8% year-over-year. Applying a constant exchange rate, our revenue grew 25.4% to RMB9,739 million. Revenue growth was broad-based across all business segments; especially our China-based laboratory services, CDMO/CMO services and clinical research and other CRO services. In addition to investments in our operations, i.e. new talent, new laboratories and facilities, our unique ecosystem that we are relentlessly building provided additional opportunities for us to effectively put our capital to use laying the foundation for future growth."

"WuXi AppTec is committed to enable innovation worldwide, catalyzing and benefiting from the continuous transformation of the healthcare ecosystem," Dr. Li continued. "Once the platform boasts enough scale and depth, the long tail effects will be truly dramatic. Looking forward, we are now entering an unprecedented golden age with the healthcare ecosystem emerging, where an ever-increasing number of participants are able to play a role at different stages of innovation. Through our integrated platform, more and more institutions, scientists, hospitals, and doctors will realize their dreams of innovation. In doing so, we will undoubtedly help bring vital medicine to patients faster."

Full-Year 2018 IFRS Results

• 2018 revenue increased 23.8% year-over-year to RMB9,614 million. Applying a constant exchange rate, revenue increased 25.4% year-over-year to RMB9,739 million.
  - Our China-based laboratory services revenue increased 24.1% year-over-year to RMB5,113 million. We fully leveraged our platform to attract more customers, especially "long-tail" customers, while expanding services to our existing customers.
  - We grew our CDMO/CMO services revenue 28.0% year-over-year to RMB2,699 million by diligently executing our "follow the molecule" strategy. As our customers' projects move into late stage, we progress alongside of them by providing process validation services all the way through to commercial manufacturing services.
  - Our US-based laboratory services revenue increased 6.1% year-over-year to RMB1,204 million. Revenue growth was driven by our cell and gene therapies CDMO services and partially offset by a decline in medical device testing services. Cell and gene therapies CDMO services revenue grew 7.5% and 28.4% in the first half of 2018 and second half of 2018, respectively.
  - Our clinical research and other CRO services revenue increased 64.2% year-over-year to RMB585 million. Revenue growth was mainly driven by the substantial increase of the domestic drug clinical trial market as well as significant improvement of our services in terms of quality, scale and capabilities.
  - Across all segments, we benefitted from the rapid rise of pharmaceutical innovation in China experiencing 55.5% year-over-year revenue growth from China-based customers.
• 2018 gross profit increased 16.6% year-over-year to RMB3,777 million. Gross profit margin was 39.3%, slightly lower than 41.7% in 2017^[2] primarily due to a decrease in gross profit of US-based laboratory services and RMB appreciation against USD in the first half of 2018. Applying a constant exchange rate, the gross profit margin would be 39.9%.
• 2018 IFRS net profit attributable to owners of the Company increased 84.2% year-over-year to RMB2,261 million. We experienced significant synergies across business segments by fully leveraging the strength of our "integrated end-to-end" R&D services platform. In addition, we experienced an extraordinary gain of RMB616 million from the fair value change of our investment portfolio.

Full-Year 2018 Non-IFRS Results

• 2018 non-IFRS net profit attributable to owners of the Company increased 75.5% year-over-year to RMB2,464 million. This excludes RMB46 million share-based payments, RMB22 million listing expenses for the offering of our A shares and H shares, RMB116 million foreign exchange-related losses and RMB19 million amortization of intangible assets acquired. 

Full-Year 2018 Adjusted Non-IFRS Results

• Excluding a further RMB750 million realized and unrealized gains from our venture investments and RMB28 million losses from our joint ventures, 2018 adjusted non-IFRS net profit attributable to owners of the Company increased 23.3% year-over-year to RMB1,742 million in 2018.

[1] If prepared under Accounting Standard for Business Enterprises of PRC, the gross profit grew 16.8% year over year to RMB 3,793 million. Gross profit margin was 39.5%.

[2] If prepared under Accounting Standard for Business Enterprises of PRC, 2018 gross profit increased 16.8% year-over-year to RMB 3,793 million. Gross profit margin was 39.5%, slightly lower than 41.8% in 2017.

About WuXi AppTec

WuXi AppTec is a leading global pharmaceutical and medical device open-access capability and technology platform company with global operations. As an innovation-driven and customer-focused company, WuXi AppTec provides a broad and integrated portfolio of services to help our worldwide customers and partners shorten the discovery and development time and lower the cost of drug and medical device R&D through cost-effective and efficient solutions. With its industry-leading capabilities such as small molecule drug R&D and manufacturing, cell therapy and gene therapy R&D and manufacturing, drug R&D and medical device testing, WuXi platform is enabling more than 3,500 innovative collaborators from more than 30 countries to bring innovative healthcare products to patients, and to fulfill WuXi's dream that "every drug can be made and every disease can be treated."

Forward-Looking Statements

This presentation may contain certain "forward-looking statements" which are not historical facts, but instead are predictions about future events based on our beliefs as well as assumptions made by and information currently available to our management. Although we believe that our predictions are reasonable, future events are inherently uncertain and our forward-looking statements may turn out to be incorrect. Our forward-looking statements are subject to risks relating to, among other things, the ability of our service offerings to compete effectively, our ability to meet timelines for the expansion of our service offerings, and our ability to protect our clients' intellectual property. Our forward-looking statements in this presentation speak only as of the date on which they are made, and we assume no obligation to update any forward-looking statements except as required by applicable law or listing rules. Accordingly, you are strongly cautioned that reliance on any forward-looking statements involves known and unknown risks and uncertainties. All forward-looking statements contained herein are qualified by reference to the cautionary statements set forth in this section.

Use of Non-IFRS and Adjusted Non-IFRS Financial Measures

We provide non-IFRS net profit attributable to owners of the Company and earnings per share for the year of 2017 and 2018, which exclude share-based compensation expenses, listing expenses for offering of our A shares and H shares, foreign exchange-related gains or losses and amortization of intangible assets acquired in business combinations. We further provide an adjusted non-IFRS net profit attributable to owners of the Company and earnings per share for the year of 2017 and 2018, which exclude realized and unrealized gains or losses from our venture investments and joint ventures. Neither is required by, or presented in accordance with IFRS. We believe that the adjusted financial measures used in this presentation are useful for understanding and assessing our core business performance and operating trends, and we believe that management and investors may benefit from referring to these adjusted financial measures in assessing our financial performance by eliminating the impact of certain unusual and non-recurring items that we do not consider indicative of the performance of our core business. However, the presentation of these adjusted non-IFRS financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with IFRS. You should not view adjusted results on a stand-alone basis or as a substitute for results under IFRS, or as being comparable to results reported or forecasted by other companies.

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