SHANGHAI, March 5, 2015 /PRNewswire/ -- WuXi PharmaTech (Cayman) Inc. (NYSE: WX), a leading open-access R&D capability and technology platform company serving the pharmaceutical, biotechnology, and medical device industries, with operations in China and the United States, today announced its financial results for the fourth quarter and full year of 2014. 

Fourth-Quarter 2014 Highlights

• Net Revenues Increased 21.3% Year Over Year to $190.6 Million
• Laboratory Services Net Revenues Grew 17.7% Year Over Year to $140.5 Million
• Manufacturing Services Net Revenues Increased 32.8% Year Over Year to $50.1 Million
• GAAP Diluted Earnings Per ADS Grew 2.8% Year Over Year to $0.46
• Non-GAAP Diluted Earnings Per ADS Increased 4.1% Year Over Year to $0.55

Full-Year 2014 Highlights

• Net Revenues Increased 16.6% Year Over Year to $674.3 Million
• Laboratory Services Net Revenues Grew 14.2% Year Over Year to $492.0 Million
• Manufacturing Services Net Revenues Increased 23.8% Year Over Year to $182.3 Million
• GAAP Diluted Earnings Per ADS Decreased 1.2% Year Over Year to $1.56
• Non-GAAP Diluted Earnings Per ADS Grew 3.0% Year Over Year to $1.88

Management Comment

"We completed a strong 2014 with a very good fourth quarter," said Dr. Ge Li, Chairman and CEO. "Full-year 2014 revenue growth of 16.6% and fourth-quarter 2014 revenue growth of 21.3% both exceeded our guidance. Our revenue growth was broad-based, with both Laboratory Services and Manufacturing Services achieving record revenues both in the fourth quarter and the full year. We also made investments in 2014 in new capabilities, including talent, new laboratories, and technologies, particularly in manufacturing, biologics, genomics, R&D, sales and marketing, and information technology, to sustain our business growth. 

"We continue to invest to strengthen our core businesses, particularly in expansion of capacity," Dr. Li continued. "Capital spending will be in the range of $180-$200 million in 2015. We expect to complete construction of new small-molecule manufacturing facilities in Changzhou in late 2015/early 2016. We will begin construction of commercial-scale biologics manufacturing facilities in Wuxi city adjacent to our existing clinical facilities in 2015 and complete construction in late 2016. Each of these manufacturing facilities will cost nearly $150 million and support strong growth in demand in these businesses. Two new cell therapy manufacturing facilities in Philadelphia, to be completed in 2015 and 2016, respectively, will cost an additional $40 million in total and expand our capabilities in this rapidly developing field.   

"We are also investing aggressively in 2015 in new businesses to seize opportunities for further growth. We have been good at planting seeds when we see emerging business opportunities, and we don't hesitate to invest to capture growing demand and to capitalize on market trends. We did so in the past few years in building our small-molecule manufacturing business and our biologics business in China by investing aggressively. Now we are getting strong growth and returns from these investments. We are very excited and confident about our new investments in genomics/bioinformatics, clinical diagnostics, e-commerce, cell therapy manufacturing, e-health solutions, and other emerging areas with tremendous potential. These investments are expected to reduce 2015 diluted earnings per share by about 26 cents per share and to earn strong returns in future years.

"New technologies, emerging markets, and global connectivity will profoundly change the practice of medicine in the 21^st century," Dr. Li concluded. "Genomic medicine will fundamentally change how doctors treat patients and how patients access better healthcare solutions. The newly established WuXi NextCODE Genomics is already at the forefront of developing products and services to meet such a powerful paradigm shift. We are equally excited about the future of the China healthcare market. WuXi is uniquely positioned to bring western innovation to China with our comprehensive R&D capabilities, superior access to technology, extensive China healthcare know-how, and a 15-year track record of accomplishment. We are investing in our e-commerce platform for reagent sales and custom synthesis via Labnetwork.com and the WuXi V-Lab App, respectively. We expect our new investments will augment the continuing strong performance of our core businesses to propel our growth for years to come."

Fourth-Quarter 2014 GAAP Results

Fourth-quarter 2014 net revenues increased 21.3% year over year to $190.6 million. Revenue growth in Laboratory Services of 17.7% was driven by our comprehensive and integrated drug discovery and development services. Revenue growth of 32.8% in Manufacturing Services was driven by strong demand in both research manufacturing and commercial manufacturing compared to the fourth quarter of 2013.

Fourth-quarter 2014 GAAP gross profit increased 18.0% year over year to $70.4 million due to 21.3% revenue growth, offset by project mix and ongoing increased labor costs in China. Gross margin decreased year over year to 36.9% from 38.0% mainly due to project mix and ongoing increased labor costs in China. Gross margin in Manufacturing Services decreased year over year to 30.1% from 32.0% due to our being in the early stage of our biologics manufacturing ramp-up. Gross margin in Laboratory Services decreased year over year to 39.4% from 39.9%.

Fourth-quarter 2014 GAAP operating income decreased 16.4% year over year to $24.6 million due to merger and acquisition related transaction costs, increased selling and marketing expenses, higher general and administrative expenses including compensation cost of management due to business expansion, and increased research and development expenses in biologics, discovery biology, genomics, and other areas, partially offset by the 18.0% increase in gross profit. Operating margin declined to 12.9% from 18.7% due to these increased selling and marketing expenses, general and administrative expenses, merger and acquisition related transaction costs, and research and development expenses.

Fourth-quarter 2014 GAAP net income increased 0.4% year over year to $33.0 million due to $6.9 million of gains on the sale of investments by the corporate venture fund, smaller equity-method investment losses from our joint ventures with PRA and MedImmune and other equity-method investments, higher interest income due to higher cash balances and higher interest rates, and a lower effective tax rate compared to the fourth quarter of 2013 due to the mix of taxable income, partially offset by the 16.4% year-over-year decrease in operating income, an adverse change of $4.7 million in mark-to-market losses on foreign-exchange forward contracts (losses of $2.4 million in the fourth quarter of 2014 compared to gains of $2.3 million in the fourth quarter of 2013), and lower realized gains on settled foreign-exchange forward contracts (gains of $2.4 million in the fourth quarter of 2014 compared to gains of $4.4 million in the fourth quarter of 2013).

Fourth-quarter 2014 GAAP diluted earnings per ADS increased 2.8% to $0.46 due to the 0.4% increase in net income and a lower number of outstanding ADSs as a result of share purchases earlier in the year. Fourth-quarter 2014 GAAP comprehensive income decreased 30.5% year over year to $24.3 million due to an unfavorable change in currency translation adjustments and a cash flow hedge, partially offset by a favorable change in unrealized gains on available-for-sale securities and the 0.4% increase in GAAP net income.

Fourth-Quarter 2014 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. 

Fourth-quarter 2014 non-GAAP gross profit increased 17.3% year over year to $72.3 million due to the 21.3% revenue growth, offset by project mix and ongoing increased labor costs in China. Non-GAAP gross margin decreased year over year to 37.9% from 39.2% due to project mix and ongoing increased labor costs in China. 

Fourth-quarter 2014 non-GAAP operating income decreased 11.8% year over year to $31.4 million due to merger and acquisition related transaction costs, increased selling and marketing expenses, higher general and administrative expenses including compensation cost of management due to business expansion, and increased research and development expenses in biologics, discovery biology, genomics, and other areas, partially offset by the 17.3% increase in non-GAAP gross profit. Non-GAAP operating margin decreased to 16.5% from 22.6% due to increased selling and marketing expenses, general and administrative expenses, merger and acquisition related transaction costs, and research and development expenses.

Fourth-quarter 2014 non-GAAP net income increased 1.7% year over year to $39.7 million due to $6.9 million of gains on the sale of investments by the corporate venture fund, smaller equity-method investment losses from our joint ventures with PRA and MedImmune and other equity-method investments, higher interest income due to higher cash balances and higher interest rates, and a lower effective tax rate compared to the fourth quarter of 2013 due to the mix of taxable income, partially offset by the 11.8% year-over-year decrease in non-GAAP operating income, an adverse change of $4.7 million in mark-to-market losses on foreign-exchange forward contracts (losses of $2.4 million in the fourth quarter of 2014 compared to gains of $2.3 million in the fourth quarter of 2013), and lower realized gains on settled foreign-exchange forward contracts (gains of $2.4 million in the fourth quarter of 2014 compared to gains of $4.4 million in the fourth quarter of 2013).

Fourth-quarter 2014 non-GAAP diluted earnings per ADS increased 4.1% year over year to $0.55 due to the 1.7% increase in non-GAAP net income and a lower number of outstanding ADSs as a result of share purchases earlier in the year. 

Full-Year 2014 GAAP Results

2014 net revenues increased 16.6% year over year to $674.3 million. Revenue growth in Laboratory Services of 14.2% was driven by our comprehensive and integrated drug discovery and development services. Revenue growth of 23.8% in Manufacturing Services was caused by strong demand in both research manufacturing and commercial manufacturing compared to 2013.

2014 GAAP gross profit increased 19.0% year over year to $251.7 million due to 16.6% revenue growth and productivity improvements. Gross margin increased year over year to 37.3% from 36.6% mainly due to improved productivity and the ramp-up of biologics services, partially offset by increased labor costs in China. Gross margin in Manufacturing Services increased year over year to 32.0% from 30.6%. Gross margin in Laboratory Services increased year over year to 39.3% from 38.6%.

2014 GAAP operating income decreased 1.4% year over year to $103.7 million due to merger and acquisition related transaction costs, increased selling and marketing expenses, higher general and administrative expenses including compensation cost of management due to business expansion, and increased research and development expenses in biologics, discovery biology, genomics, and other areas, partially offset by the 19.0% increase in gross profit. Operating margin declined to 15.4% from 18.2% due to these increased selling and marketing expenses, general and administrative expenses, merger and acquisition related transaction costs, and research and development expenses.

2014 GAAP net income decreased 2.1% year over year to $112.2 million due to the 1.4% year-over-year decrease in operating income, mark-to-market losses on foreign-exchange forward contracts of $16.6 million compared to mark-to-market gains of $9.1 million in 2013, lower realized gains on settled foreign-exchange forward contracts of $7.4 million in 2014 compared to $10.2 million in 2013, and a higher effective tax rate compared to full-year 2013 due to the mix of taxable income and certain non-recurring tax benefits we received in 2013, partially offset by $16.6 million of gains on the sale of investments by the corporate venture fund, smaller equity-method investment losses from our joint ventures with PRA and MedImmune and other equity-method investments, and higher interest income due to higher cash balances and higher interest rates.

2014 GAAP diluted earnings per ADS decreased 1.2% to $1.56 due to the 2.1% decrease in net income, partially offset by a slightly lower number of outstanding ADSs as a result of share purchases earlier in the year. 2014 GAAP comprehensive income decreased 25.0% year over year to $101.2 million due to the 2.1% decrease in GAAP net income, unfavorable currency translation adjustments, lower unrealized gains on available-for-sale securities, and a cash flow hedge.

Full-Year 2014 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. 

2014 non-GAAP gross profit increased 18.9% year over year to $258.1 million due to the 16.6% revenue growth and productivity improvements. Non-GAAP gross margin increased year over year to 38.3% from 37.5% due to improved productivity and the ramp-up of biologics services, offset by increased labor costs in China. 

2014 non-GAAP operating income increased 3.0% year over year to $127.1 million due to the 18.9% increase in non-GAAP gross profit, partially offset by merger and acquisition related transaction costs, increased selling and marketing expenses, higher general and administrative expenses including compensation cost of management due to business expansion, and research and development expenses in biologics, discovery biology, genomics, and other areas. Non-GAAP operating margin decreased to 18.9% from 21.3% due to increased selling and marketing expenses, general and administrative expenses, merger and acquisition related transaction costs, and research and development expenses.

2014 non-GAAP net income increased 2.1% year over year to $135.4 million due to the 3.0% year-over-year increase in non-GAAP operating income, $16.6 million of gains on the sale of investments by the corporate venture fund, smaller equity-method investment losses from our joint ventures with PRA and MedImmune and other equity-method investments, and higher interest income due to higher cash balances and higher interest rates, partially offset by mark-to-market losses on foreign-exchange forward contracts of $16.6 million compared to mark-to-market gains of $9.1 million in 2013, lower realized gains on settled foreign-exchange forward contracts of $7.4 million in 2014 compared to $10.2 million in 2013, and a higher effective tax rate compared to 2013 due to the mix of taxable income and certain non-recurring tax benefits we received in 2013.

2014 non-GAAP diluted earnings per ADS increased 3.0% year over year to $1.88 due to the 2.1% increase in non-GAAP net income and a slightly lower number of outstanding ADSs as a result of share purchases earlier in the year. 

Full-Year 2015 Financial Guidance

WuXi PharmaTech provides the following full-year 2015 financial guidance:

• Total net revenues of $790-$800 million
• GAAP diluted earnings per ADS of $1.31-$1.36
• Non-GAAP diluted earnings per ADS of $1.73-$1.78
• Capital expenditures of $180-$200 million

First-Quarter 2015 Financial Guidance

WuXi PharmaTech provides the following first-quarter 2015 financial guidance:

• Total net revenues of $173-$175 million
• GAAP diluted earnings per ADS of $0.20-$0.22
• Non-GAAP diluted earnings per ADS of $0.30-$0.32

WUXI PHARMATECH (CAYMAN) INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS

(in thousands of U.S. dollars, except ordinary share, ADS and par value data)

WUXI PHARMATECH (CAYMAN) INC.

 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 (In thousands of U.S. dollars, except ADS data and per ADS data)

WUXI PHARMATECH (CAYMAN) INC.

 RECONCILIATION OF GAAP TO NON-GAAP

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Conference Call

WuXi PharmaTech senior management will host a conference call at 8:00 am (U.S. Eastern) / 5:00 am (U.S. Pacific) / 9:00 pm (Beijing/Shanghai/Hong Kong) on March 6, 2015, to discuss its fourth-quarter 2014 financial results and future prospects. The conference call may be accessed by calling:

China 4001 200 539

Hong Kong 800 905 927

Singapore 800 616 3222

United Kingdom 0800 015 9725

United States 1855 298 3404

United States - New York (toll) +1 631 5142 526

Other countries (toll) +65 6823 2299

Conference ID 2198866

A telephone replay will be available two hours after the call's completion at:

China 4001 842 240

Hong Kong 800 966 697

Singapore 800 616 2127

United Kingdom 0800 169 7301

United States 1866 846 0868

Conference ID 2198866

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.wuxiapptec.com.

About WuXi PharmaTech

WuXi PharmaTech is a leading open-access R&D capability and technology platform company serving the pharmaceutical, biotechnology and medical device industries, with operations in China and the United States. As a research-driven and customer-focused company, WuXi PharmaTech provides a broad and integrated portfolio of laboratory and manufacturing services throughout the drug and medical device R&D process. WuXi PharmaTech's services are designed to assist its global partners in shortening the cycle and lowering the cost of drug and medical device R&D. WuXi PharmaTech's operating subsidiaries are known as WuXi AppTec. For more information, please visit: http://www.wuxiapptec.com.

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts, but instead are predictions about future events. Examples of forward-looking statements in this press release include statements about our full-year 2015 guidance and our goal of building an open-access technology platform. 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, our ability to control our costs and sustain revenue growth, to realize the anticipated benefits of our investments, to protect our clients' intellectual property, to compete effectively, and to complete the expansion of our manufacturing facilities in Changzhou. Additional information about these and other relevant risks can be found in our Annual Report on Form 20-F for the year ended December 31, 2013. The forward-looking statements in this press release 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 law.

Use of Non-GAAP Financial Measures 

We have provided the fourth-quarter and full-year 2013 and 2014 gross profit, gross margin, operating income, operating margin, net income, net margin, and diluted earnings per ADS, and estimated first-quarter and full-year 2015 diluted earnings per ADS on a non-GAAP basis, which excludes share-based compensation expenses and the amortization and deferred tax impact of acquired intangible assets. The non-GAAP financial measures used in this press release are useful for understanding and assessing underlying business performance and operating trends, and we believe that management and investors benefit from referring to these non-GAAP financial measures in assessing our financial performance and liquidity and when planning and forecasting future periods. We expect to continue to provide such non-GAAP financial measures on a quarterly basis using a consistent method. You should not 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.

Statement Regarding Unaudited Financial Information

The financial information in this press release is unaudited and subject to adjustments. Adjustments to the financial statements may be identified when our annual financial statements are prepared and audit work is performed for the year-end audit, which could result in significant differences from this unaudited financial information.

For more information, please contact:

Ronald Aldridge (for investors)

Director of Investor Relations 

Tel:  +1-201-585-2048

Email: ron_aldridge@wuxiapptec.com

Aaron Shi (for the media)

Associate Director of Corporate Communications

Tel:  +86-21-5046-4362

Email: aaron_shi@wuxiapptec.com