WuXi PharmaTech Announces Preliminary Third Quarter 2008 Results and Updates 2008 Guidance
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Third Quarter 2008 Preliminary Unaudited Financial Results
For the third quarter ended September 30, 2008, WuXi reports the followingpreliminary unaudited financial results. These results are subject to changeas a result of finalization of share-based compensation expenses, closingadjustments and completion of the review process for the quarter.
Financial data presented on a non-GAAP basis exclude share-basedcompensation expenses and amortization of acquired intangible assets. Thenon-GAAP measures are reconciled to the corresponding GAAP measures in thesection below titled "Use of Non-GAAP Financial Measures".
Commenting on the third quarter 2008 preliminary results, Dr. Ge Li,Chairman and Chief Executive Officer of WuXi PharmaTech, said, "WuXi continuesits historical trend of delivering strong revenue and profitability growth, asreflected in the 96% top-line revenue and 52% non-GAAP EBITDA growth (eachusing the mid-point of current estimates). As we enter the fourth quarter, weexpect lower than anticipated full-year 2008 revenues, due to cancelled ordelayed projects from small biotechnology customers. However, our China-basedlaboratory services business remains strong and is expected to grow over 40%,year-over-year.
"Even with the financial market unrest, we believe the need for outsourcedservices remains robust. WuXi has an outstanding reputation for providinghigh-quality, IP-protected services in a cost-effective and efficient manner.In all environments, we are positioned to meet and anticipate our customerneeds, by expanding and evolving our services, while maintaining our focus onrevenue growth and profitability."
Expected third quarter 2008 operating income reflects expected sales,general and administrative expenses (excluding share-based compensation)generally consistent with the second quarter of 2008.
On November 12, 2008, WuXi expects to announce finalized operating results(including net income and earnings per ADS) for the third quarter 2008. Inthe interim, WuXi is evaluating and/or finalizing the following items, whichimpact net income and earnings per ADS: its goodwill balances from the AppTecacquisition for impairment and income tax provisions.
Revised Full Year 2008 Guidance
In light of the current economic environment and its impact on theanticipated research and development spending of its smaller customers, WuXiis revising its net revenue guidance for the full year 2008 to $260 to $265million from $280 to $300 million. This represents year-over-year revenuegrowth ranging from 92% to 96%. Full year non-GAAP EBITDA will be in therange of $70 to $75 million (excluding share-based compensation charges,potential impact from goodwill impairment charges, and further mark-to-marketadjustment on foreign currency forward contracts).
Termination of Rule 10b5-1 Trading Plans; Company Trading Window
At this time, each of our four founders (including Dr. Li) and othermanagement members are terminating their existing 10b5-1 plans.
A number of our executive officers, other management team members andemployees, including each of our four founders (who are also WuXi executiveofficers and directors), previously (i) established pre-arranged stock tradingplans in accordance with the provisions of Rule10b5-1 of the SecuritiesExchange Act of 1934, and (ii) sold ADSs pursuant to those plans.
Although those 10b5-1 plans were terminated, we expect up to 350,000 ADSsmay be sold by other management members and employees prior to year-end for409A purposes. Prior to 2008, a number of our management members andemployees who were U.S. taxpayers were granted options with an exercise pricepotentially below fair market value on the date of grant, as determined underSection 409A of the U.S. Tax Code. To avoid the adverse tax consequencesimposed under Section 409A to these U.S. taxpayers, the options were amendedpreviously to require that they be exercised, if at all, on or prior toDecember 31, 2008 (no other changes were made). If unexercised by year-endthose options will expire, and those individuals may need to sell ADSs to payrelated taxes and the purchase price payable upon exercise.
Following the release of this announcement and the related conference call,WuXi intends to open its trading window under WuXi's Insider Trading Policy.
Following this announcement, WuXi PharmaTech senior management will host aconference call at 8:00 am (Eastern) / 5:00 am (Pacific) / 8:00 pm(Beijing/Hong Kong) on October 14, 2008 to discuss the preliminary 2008 thirdquarter financial results. The conference call may be accessed by calling (US)+1 866-239-0753 or +1 718-354-1157 / (HK) +852-3002-1615 or 800-933-519 / (UK)0800-559-3272. Passcode: 5190406.
A live webcast of the conference call and replay will be available on theinvestor relations page of WuXi PharmaTech's website athttp://www.wuxiapptec.com .
About WuXi PharmaTech
WuXi PharmaTech is a leading pharmaceutical, biotechnology and medicaldevice R&D outsourcing company, with operations in China and the United States.As a research-driven and customer-focused company, WuXi PharmaTech providespharmaceutical, biotechnology and medical device companies a broad andintegrated portfolio of laboratory and manufacturing services throughout thedrug and medical device R&D process. WuXi PharmaTech's services are designedto assist its global partners in shortening the cycle and lowering the cost ofdrug and medical device R&D. The operating subsidiaries of WuXi PharmaTechare known as WuXi AppTec. For more information, please visit:http://www.wuxiapptec.com .
Use of Non-GAAP Financial Measures
We have provided the preliminary unaudited third quarter 2008 and thirdquarter 2007 financial data and EBITDA on a non-GAAP basis, which excludesshare-based compensation expenses and amortization of acquired intangibleassets. We believe both management and investors benefit from referring toEBITDA and these non-GAAP financial measures in assessing our financialperformance and liquidity and when planning and forecasting future periods.EBITDA and these non-GAAP operating measures are useful for understanding andassessing underlying business performance and operating trends. You shouldnot view non-GAAP (including EBITDA) results on a stand-alone basis or as asubstitute for results under GAAP, or as being comparable to results reportedor forecasted by other companies, and should refer to the reconciliation ofnon-GAAP measures to GAAP measures for the indicated periods attached hereto.
Cautionary Note Regarding Forward-Looking Statements
Statements in this release contain "forward-looking" statements within themeaning of Section 27A of the Securities Act of 1933, as amended, and Section21E of the Securities Exchange Act of 1934, as amended, and as defined in thePrivate Securities Litigation Reform Act of 1995, including, among others, ourpreliminary financial unaudited results for the third quarter 2008; expectednet revenue levels for 2008 and expected revenue trends related to our smallerbiotech customers and the impact of current market turmoil; the global trendin R&D outsourcing; and our expected ability to grow revenue and profitabilityin 2008 and beyond and meet and anticipate customer needs in all environmentswhile maintaining our ability to adjust our internal capacity.
These forward-looking statements are not historical facts but insteadrepresent only our belief regarding future events, many of which, by theirnature, are inherently uncertain and outside of our control. Our actualresults and financial condition and other circumstances may differ, possiblymaterially, from the anticipated results and financial condition indicated inthese forward-looking statements. Our preliminary Q3 2008 operating resultsmay change as a result of final management review, review by outside auditors,finalization of share-based compensation expenses and closing adjustments forthe quarter. Also the uncertainty in the global economy may adversely impactour business and R&D outsourcing trends; and our smaller biotech customers maycontinue to face funding and other spending difficulties for longer thananticipated. We may be unable to successfully expand our capabilities to meetclient needs. In addition other factors that could cause our actual resultsto differ from what we currently anticipate include our limited operatinghistory; failure to generate sufficient future cash flows or secure anyrequired future financing on acceptable terms or at all; failure to retain keypersonnel; effective integration of products and services from AppTec; ourreliance on a limited number of customers to continue to account for a highpercentage of our revenues; risk of payment failure by any of our largecustomers, which could significantly harm our cash flows and profitability;dependency upon the continued service of our senior management and keyscientific personnel and ability to retain our existing customers or expandour customer base. The financial information contained in this release shouldbe read in conjunction with the consolidated and pro forma financialstatements and notes thereto included in our 2007 Annual Report on Form 20-Ffiled with available on the Securities and Exchange Commission's website athttp://www.sec.gov . For additional information on these and other importantfactors that could adversely affect our business, financial condition, resultsof operations and prospects, see "Risk Factors" beginning on page 10 of our2007 Annual Report on Form 20-F. Our preliminary results of operations forthe third quarter 2008 are not necessarily indicative of our operating resultsfor any future periods. Any projections in this release are based on limitedinformation currently available to us, which is subject to change. Althoughthese projections and the factors influencing them will likely change, weundertake no obligation to update or revise these forward- looking statements,whether as a result of new information, future events or otherwise, after thedate of this press release. Such information speaks only as of the date ofthis release.Preliminary Third Quarter 2008 Financial Results (Unaudited, U.S. Dollars in Millions) GAAP Non-GAAP The third quarter of The third quarter of 2008 2007 % 2008 2007 % Growth* Growth* Net Revenue $66.0 - 67.5 $34.0 96% $66.0 - 67.5 $34.0 96% Laboratory Services 46.0 - 47.0 26.7 74% 46.0 - 47.0 26.7 74% Manufacturing Services 20.0 - 20.5 7.3 177% 20.0 - 20.5 7.3 177% Gross Profit 21.4 - 22.9 16.0 38% 25.9 - 27.4 16.3 63% Laboratory Services 18.7 - 19.7 12.9 49% 22.0 - 23.0 13.2 70% Manufacturing Services 2.7 - 3.2 3.1 (5%) 3.9 - 4.4 3.1 34% Operating Income 6.7 - 8.2 7.5 (1%) 13.7 - 15.2 9.0 61% EBITDA 13.9 - 15.4 10.2 44% 17.0 - 18.5 11.7 52% * Growth rate calculated based on mid-point range
SOURCE WuXi PharmaTech (Cayman) Inc.
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