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Fourth Quarter 2012
Earnings Presentation
Dr. Ge Li, Chairman and CEO
Edward Hu, COO/CFO
1
Cautionary Note Regarding Forward-Looking Statements
Statements in this presentation contain "forward-looking" statement...
2
Use of Non-GAAP and Pro-Forma Financial Measures
 We have provided the fourth-quarter 2011 and 2012 gross profit, gross...
3
Overview
 WuXi is succeeding on three fronts: growing, investing, and returning
capital to shareholders
 We achieved s...
4
WuXi’s Integrated R&D Service Platform Today
Synthetic
Chemistry
Discovery Clinical/Commercial
Research
Manufac-
turing
...
5
Fourth-Quarter 2012 Financial Results
 Strong, broad-based year-over year revenue growth of 15.8%,
driven by continued ...
6
Full-Year 2012 Financial Results
 22.8% revenue growth, with double-digit growth from each of our
three businesses
 26...
7
2012 Operational Highlights
 Opened new chemistry facility in Wuhan
 Opened cGMP drug-substance biologics manufacturin...
8
Revenue Summary*
(US$ in millions)
Fourth Quarter Full Year
2012 2011 Δ 2012 2011 Δ
Total Net Revenue $125.7 $108.5 15.8...
9
Total Net Revenues
(US$ in Millions)
4Q11 1Q12 2Q12 3Q12 4Q12
Manufacturing
Services
China-Based
Laboratory
Services
Rev...
10
GAAP Financial Summary
(US$ in millions)
Fourth Quarter Full Year
2012 2011 Δ 2012 2011 Δ
Net Revenue $125.7 $108.5 15....
11
(US$ in Millions)
4Q11 1Q12 2Q12 3Q12 4Q12
Gross Profit/Margin
Revenues
Operating Income/
Margin
GAAP Revenues/Gross Pr...
12
Non-GAAP Financial Summary*
(US$ in millions)
Fourth Quarter Full Year
2012 2011 Δ 2012 2011 Δ
Net Revenue $125.7 $108....
13
(US$ in Millions)
4Q11 1Q12 2Q12 3Q12 4Q12
Gross Profit/
Margin
Revenues
Operating Income/
Margin
Non-GAAP Revenues/Gro...
14
Capital Resources and Cash Flow
 Cash and short term investments of $229.4 million at
December 31, 2012
 Total debt o...
15
Share Purchases
 While investing aggressively in our growing business, we
are also returning capital to shareholders
...
16
Full-Year 2013 Financial Guidance
 Total revenues of $565-$575 million, up 13-15% year
over year
 GAAP diluted earnin...
17
Factors Expected to Impact 2013 Diluted Earnings Per ADS
$1.19
$1.26-$1.30
~$.30
(~$.04)
(~$.13)
(~$.07)
2012
Diluted E...
18
First-Quarter 2013 Preview
 Estimated total revenues of $129-$131 million, up 9-11% year
over year
 Estimated GAAP an...
19
Strong Revenue and Profit Growth
(US$ in Millions, except per-share amounts)
Revenues
$270.0
$334.1
$407.2
$565-575
$49...
20
Major Drug Discovery and Development Services
Drug Discovery Services
Synthetic chemistry
Medicinal chemistry
Biology
D...
21
Revenue Distribution by Service Offering
Manufacturing
23.5%
Development**
8.6%
U.S. Lab
Services
17.9%
U.S. Lab
Servic...
22
China-Based Laboratory Services: History of Growth
Drug
Discovery
Drug
Development
2009 2010 2011 2012 2013 Est.
+15.8%...
23
Synthetic Chemistry
Competition in synthetic chemistry in China and India is
producing pricing pressure
WuXi achieved...
24
Medicinal Chemistry and
Other Drug Discovery Services
Medicinal chemistry and other discovery services are now
WuXi’s ...
25
Toxicology
 Continuing to build our position as the #1 toxicology CRO in China for
domestic and international clients
...
26
Biologics Services
 WuXi is the partner of choice for biologics services in China, with few
competitors
 Deep underst...
27
Clinical Research – Forming JV with PRA
 Complementary strengths of both companies to accelerate the buildup of a
lead...
28
Small Molecule Manufacturing Services
Overall small molecule manufacturing revenue to grow at mid-
teen rate in 2013
...
29
U.S.-Based Laboratory Services
Revenues have grown at a 9.2% CAGR since 2008, with
substantial improvement in profit m...
30
Key Drivers of Revenue Growth
 Continued revenue growth across China-based Laboratory
Services, driven by our ability ...
31
Conclusion
 We are confident that our dream will become a reality—to build an
open-access technology platform of integ...
32
Appendix
GAAP to Non-GAAP Reconciliation
Share Count Information
ADS Shares for Earnings-per-ADS Calculation
33
4Q2012
(US$ in millions)
GAAP
Share-
Based
Compen-
sation
Expenses
Amortization of
Acquired
Intangible
Assets and
Defer...
34
FY2012
(US$ in millions)
GAAP
Share-
Based
Compen-
sation
Expenses
Amortization of
Acquired
Intangible
Assets and
Defer...
35
Share Count Information
(As of December 31, 2012)
ADS Shares
ADS issued and outstanding 70,140,125
Share options and eq...
36
ADS Shares for Earnings-per-ADS Calculation
Date Activities
Weighted
Average ADS
Shares
October 1, 2012 Ordinary share ...
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WuXi Pharma Fourth Quarter 2012 Earnings Presentation

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Transcript of "WuXi Pharma Fourth Quarter 2012 Earnings Presentation"

  1. 1. 0 Fourth Quarter 2012 Earnings Presentation Dr. Ge Li, Chairman and CEO Edward Hu, COO/CFO
  2. 2. 1 Cautionary Note Regarding Forward-Looking Statements Statements in this presentation contain "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, our ability to reach our business and financial goals for the full year 2013, our financial guidance for full-year and first-quarter 2013 (including, as applicable, estimated total revenues, estimated GAAP and non-GAAP diluted earnings per ADS, capital expenditures, and other trends), overall ongoing and future investment in talent and facilities, laboratory services’ ongoing and future investment, the growth of our small-molecule manufacturing business pipeline, our ability to continue achieving substantial free cash flow, building a comprehensive and integrated technology platform, the ability of this platform to enable anyone and any company to discover and develop new products efficiently and cost-effectively, our future delivery of drug candidates, pricing pressure in synthetic chemistry, our productivity and future operating costs, the build-up of clinical development service capabilities, the growth of our biologics drug discovery and development capabilities, our expected biologic services project portfolio, the growth and growth drivers in our manufacturing services, the expected variability of commercial manufacturing revenue, research manufacturing revenues, expected growth across China-based laboratory services, increasing utilization of our integrated drug development services, revenue growth in U.S.-based laboratory services, growth in manufacturing services, expansion of our clinical development platform, lower capital expenditures, and more efficient use of existing facilities. 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 other factors, the state of the global economy may continue to be uncertain; pharmaceutical companies may not change their business models as expected or in a manner favorable to us; we may fail to capitalize on the opportunities presented; the pressures being felt by our customers and pharmaceutical industry consolidation may adversely impact our business and the trends for outsourced and offshored R&D and manufacturing for longer than expected or more severely than expected; we may not enjoy the anticipated benefits of our acquisitions and joint ventures or other planned investments and capital expenditures (including investments made through our corporate venture fund) on a timely basis or at all; we may need to modify the nature and level of our investments and capital expenditures; we may not maintain our preferred provider status with our clients and may be unable to successfully expand our capabilities to meet client needs; our intellectual property protection policies may be breached, harming our customers and us; and we may face increased margin pressure as a result of renminbi appreciation and increased labor inflation in China and the company’s investment. In addition, other factors that could cause our actual results to differ from what we currently anticipate include failure to generate sufficient future cash flows or to secure any required future financing on acceptable terms or at all; failure to retain key personnel; our reliance on a limited number of customers to continue to account for a high percentage of our revenues; the risk of payment failure by any of our large customers, which could significantly harm our cash flows and profitability; our dependence upon the continued service of our senior management and key scientific personnel, and our ability to retain our existing customers or expand our customer base. You should read the financial information contained in this release in conjunction with the consolidated financial statements and related notes thereto included in our 2011 Annual Report on Form 20-F filed with the Securities and Exchange Commission and 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 6 of our 2011 Annual Report on Form 20-F. Our results of operations for fourth-quarter 2012 are not necessarily indicative of our operating results for any future periods. All projections in this release are based on limited information currently available to us, which is subject to change. Although these projections and the factors influencing them will likely change, we undertake 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, except as required by law. Such information speaks only as of the date of this release.
  3. 3. 2 Use of Non-GAAP and Pro-Forma Financial Measures  We have provided the fourth-quarter 2011 and 2012 gross profit, gross margin, operating income, operating margin, net income, net margin, and earnings per ADS on a non-GAAP basis, which excludes share-based compensation expenses, the amortization and deferred tax impact of acquired intangible assets, impairment charges for goodwill and intangible assets, and revaluation of contingent consideration. We believe both 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. These non-GAAP operating measures are useful for understanding and assessing underlying business performance and operating trends. We expect to continue to provide net income and earnings per ADS on a non-GAAP basis using a consistent method on a quarterly basis.  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, and should refer to the reconciliation of GAAP measures to non-GAAP measures for the indicated periods attached hereto.
  4. 4. 3 Overview  WuXi is succeeding on three fronts: growing, investing, and returning capital to shareholders  We achieved strong double-digit revenue growth in the fourth quarter and full year of 2012  We also achieved double-digit EPS growth in 2012 despite margin pressure  We continue to invest to build capabilities and capacity in order to sustain revenue growth and EPS growth for the long term  We are making progress toward our dream of building an open-access technology platform and integrated service offerings that will enable anyone and any company to discover and develop medicines more efficiently and cost-effectively  While growing and investing, we are generating strong free cash flow that allows us to purchase our shares, which we believe are undervalued
  5. 5. 4 WuXi’s Integrated R&D Service Platform Today Synthetic Chemistry Discovery Clinical/Commercial Research Manufac- turing Discovery Biology Medicinal Chemistry ADME/ DMPK Formulation Toxicology Clinical Testing Bio- analytical Services Preclinical/Development Commercial Manufac- turing Small Molecules Biologics Medical Devices 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Revenues ($ millions) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Headcount ~7,000 ~500 Toxicology Combo Product Testing/ Manufacture Package Testing Biocom- patibility Tissue- Based Product Testing Lot Release Testing Micro- biology Novel MAb Discovery Discovery Biology/ Drug Screening Cell Line Engineering/ Construction Toxicology Assay/For- mulation/ Process Devel. Cell Bank- ing/Cell Line Char- acterization Viral Clearance Validation Lot Release/ Stability Testing Research Manufac- turing Genomics Manufac- turing Process Research cGMP Manufac- turing Clinical & Bioanal. Testing Bio- analytical Services Preclinical Efficacy Materials Character- ization Risk Assess- ment Research Reagents
  6. 6. 5 Fourth-Quarter 2012 Financial Results  Strong, broad-based year-over year revenue growth of 15.8%, driven by continued growth in demand for WuXi’s comprehensive, integrated services platform  22.2% year-over-year growth in China-based Laboratory Services revenue, led by growth in integrated drug discovery and drug development services  Higher GAAP and non-GAAP gross margin and operating margin versus first three quarters of 2012  Met or exceeded financial guidance
  7. 7. 6 Full-Year 2012 Financial Results  22.8% revenue growth, with double-digit growth from each of our three businesses  26.8% revenue growth in China-based Laboratory Services, led by 25% growth in integrated drug discovery services (medicinal chemistry, biology, DMPK/ADME) and 75% growth in drug development services  10.8% GAAP EPS growth, 13.3% Non-GAAP EPS growth in spite of margin pressure  Invested $67.8 million in capital expenditures for new facilities and equipment  Purchased 7% of our ADSs outstanding at the beginning of 2012  Met or exceeded financial guidance
  8. 8. 7 2012 Operational Highlights  Opened new chemistry facility in Wuhan  Opened cGMP drug-substance biologics manufacturing facility in Wuxi  Formed joint venture with MedImmune to develop MEDI5117, an anti-IL6 antibody for rheumatoid arthritis and other autoimmune disorders for the China market  Entered into an agreement to form joint venture with PRA to offer clinical research services in China  Performed numerous integrated drug development projects from API synthesis to GLP toxicology studies for IND filings in China and globally  Increased workforce to about 7,000 people worldwide
  9. 9. 8 Revenue Summary* (US$ in millions) Fourth Quarter Full Year 2012 2011 Δ 2012 2011 Δ Total Net Revenue $125.7 $108.5 15.8% $499.9 $407.2 22.8% China-Based Laboratory Services $81.5 $66.7 22.2% $293.2 $231.3 26.8% U.S.-Based Laboratory Services $22.3 $20.8 7.2% $89.7 $80.3 11.6% Total Laboratory Services $103.8 $87.5 18.6% $382.9 $311.6 22.9% Manufacturing Services $21.9 $21.0 4.0% $117.0 $95.5 22.5% *Classifies Process Chemistry in Manufacturing Services for all periods
  10. 10. 9 Total Net Revenues (US$ in Millions) 4Q11 1Q12 2Q12 3Q12 4Q12 Manufacturing Services China-Based Laboratory Services Revenue Performance by Services* U.S.-Based Laboratory Services $108.5 21.0 20.8 66.7 $118.0 22.2 64.4 31.4 *Classifies Process Chemistry in Manufacturing Services for all periods $130.4 70.3 23.3 36.8 77.0 21.9 26.9 $125.8 81.5 22.3 21.9 $125.7
  11. 11. 10 GAAP Financial Summary (US$ in millions) Fourth Quarter Full Year 2012 2011 Δ 2012 2011 Δ Net Revenue $125.7 $108.5 15.8% $499.9 $407.2 22.8% Gross Profit $48.8 $42.6 14.6% $183.2 $156.4 17.1% Gross Margin 38.8% 39.2% 36.7% 38.4% Operating Income $23.6 $20.2 16.5% $89.4 $83.8 6.7% Operating Margin 18.7% 18.6% 17.9% 20.6% Net Income $23.8 $23.5 1.4% $86.6 $81.0 6.9% Effective Tax Rate 15.9% 14.3% 16.7% 17.0% Weighted Average ADS Outstanding— Diluted 71,688,426 75,233,086 (4.7%) 72,797,344 75,439,734 (3.5%) Diluted Net Earnings Per ADS $0.33 $0.31 6.5% $1.19 $1.07 10.8%
  12. 12. 11 (US$ in Millions) 4Q11 1Q12 2Q12 3Q12 4Q12 Gross Profit/Margin Revenues Operating Income/ Margin GAAP Revenues/Gross Profit/Operating Income $108.5 39.2% 18.6%20.2 42.6 $118.0 20.6 41.9 35.5% 17.5% $130.4 46.5 23.8 35.7% 18.2% 125.8 21.5 46.1 36.6% 17.0% 125.7 23.6 48.8 38.8% 18.7%
  13. 13. 12 Non-GAAP Financial Summary* (US$ in millions) Fourth Quarter Full Year 2012 2011 Δ 2012 2011 Δ Net Revenue $125.7 $108.5 15.8% $499.9 $407.2 22.8% Gross Profit 50.0 44.0 13.7% $189.1 $161.8 16.9% Gross Margin 39.8% 40.5% 37.8% 39.7% Operating Income 27.4 23.8 15.1% $105.7 $96.8 9.2% Operating Margin 21.8% 21.9% 21.2% 23.8% Net Income 27.5 26.9 2.1% $102.2 $93.4 9.4% Weighted Average ADS Outstanding— Diluted 71,688,426 75,233,086 (4.7%) 72,797,344 75,439,734 (3.5%) Diluted Net Earnings Per ADS 0.38 0.36 7.2% $1.40 $1.24 13.3% *Excludes the impact of share-based compensation expenses, amortization and the deferred tax impact of acquired intangible assets, impairment charges for goodwill and intangible assets, and revaluation of contingent consideration
  14. 14. 13 (US$ in Millions) 4Q11 1Q12 2Q12 3Q12 4Q12 Gross Profit/ Margin Revenues Operating Income/ Margin Non-GAAP Revenues/Gross Profit/Operating Income 23.8 44.0 $108.5 40.5% 21.9% 24.3 43.5 $118.0 36.8% 20.6% $130.4 21.0% 36.8%48.0 27.4 $125.8 26.6 47.6 37.8% 21.2% $125.7 50.0 27.4 21.8% 39.8%
  15. 15. 14 Capital Resources and Cash Flow  Cash and short term investments of $229.4 million at December 31, 2012  Total debt of $64.8 million at December 31, 2012  Operating cash flow of $33.8 million for fourth-quarter 2012, $131.2 million for full-year 2012  Capital expenditures of $15.6 million for fourth-quarter 2012, $67.8 million for full-year 2012
  16. 16. 15 Share Purchases  While investing aggressively in our growing business, we are also returning capital to shareholders  In 2012, we spent $67 million to purchase about 7% of our ADSs outstanding at the beginning of 2012  Today, we announce a new share purchase authorization for $100 million over the next 18-24 months
  17. 17. 16 Full-Year 2013 Financial Guidance  Total revenues of $565-$575 million, up 13-15% year over year  GAAP diluted earnings per ADS of $1.26-$1.30, up 6-9%  Non-GAAP diluted earnings per ADS of $1.49-$1.53, up 6-9%  Capital expenditures of about $60 million
  18. 18. 17 Factors Expected to Impact 2013 Diluted Earnings Per ADS $1.19 $1.26-$1.30 ~$.30 (~$.04) (~$.13) (~$.07) 2012 Diluted EPS Estimated 2013 Diluted EPS Foreign Exchange Business Growth Investment* Share Purchases Labor Inflation ~$.03 * Investment includes biologics R&D, losses from biologics manufacturing facilities, JVs with MedImmune and PRA and risk sharing projects $1.40 $1.49-$1.53 ~$.32 GAAP Non-GAAP GAAP Non-GAAP Non-GAAP GAAP
  19. 19. 18 First-Quarter 2013 Preview  Estimated total revenues of $129-$131 million, up 9-11% year over year  Estimated GAAP and Non-GAAP diluted earnings per ADS of 26-27 cents and 31-32 cents, respectively  Accelerating quarterly revenue growth throughout 2013, particularly in discovery, biologics, and development services  Accelerating diluted EPS growth throughout 2013, driven by this accelerating revenue growth, slower sequential expense growth, and share purchases
  20. 20. 19 Strong Revenue and Profit Growth (US$ in Millions, except per-share amounts) Revenues $270.0 $334.1 $407.2 $565-575 $499.9 GAAP EPS Non-GAAP EPS 2009 2011 20122010 2013 Est. $1.49-1.53$1.40$1.24$1.09$0.89 $1.26-1.30$1.19$1.07$1.22*$0.72 • Reflects activity relating to proposed Charles River Laboratories transaction, including receipt of termination fee and payment of transaction costs and employee bonuses
  21. 21. 20 Major Drug Discovery and Development Services Drug Discovery Services Synthetic chemistry Medicinal chemistry Biology DMPK/ADME Peptide synthesis Biological reagents Drug Development Services Formulation Analytical development services Toxicology Bioanalytical services Biologics development Clinical research Genomics
  22. 22. 21 Revenue Distribution by Service Offering Manufacturing 23.5% Development** 8.6% U.S. Lab Services 17.9% U.S. Lab Services 19.7% Medicinal Chemistry And Other Discovery* 26.6% Synthetic Chemistry 21.6% Manufacturing 23.4% Development** 12.3% Medicinal Chemistry And Other Discovery* 28.1% Synthetic Chemistry 18.3% *Includes Medicinal Chemistry, Radio Chemistry, Biology, DMPK/ADME, Peptide Synthesis, and Biological Reagents **Includes Formulation, Analytical Development, Toxicology, Bioanalytical Services, Biologics, Clinical, and Genomics China Based Lab Services
  23. 23. 22 China-Based Laboratory Services: History of Growth Drug Discovery Drug Development 2009 2010 2011 2012 2013 Est. +15.8% +6.9%+29.6% +76.4% +76.6% +13.7% +17.0% China-Based Laboratory Services Note: All periods exclude Process Chemistry , which is included in Manufacturing Services +26.8% +18.1% +75.4% +13-15% +~30% +~10%
  24. 24. 23 Synthetic Chemistry Competition in synthetic chemistry in China and India is producing pricing pressure WuXi achieved single-digit revenue growth in 2012 through volume growth that more than offset this pricing pressure Lean Sigma program helped control costs, improve productivity, and increase margins The new Wuhan facility offers attractive prices through lower operating costs and government subsidies, delivers good margin We anticipate single-digit revenue growth in 2013 While once the entire company, synthetic chemistry is now about 18% of company revenues
  25. 25. 24 Medicinal Chemistry and Other Drug Discovery Services Medicinal chemistry and other discovery services are now WuXi’s largest function, with differentiated capabilities and good profitability We delivered nine small molecule preclinical drug candidates and one proof of concept compound for customers in 2012 41 lead-optimization programs were ongoing at year-end 2012 Mid-teen revenue growth expected from these combined functions in 2013, particularly strong growth in biology Certain integrated drug discovery programs are eligible for success-based bonuses when compound enters first-in- human clinical trials
  26. 26. 25 Toxicology  Continuing to build our position as the #1 toxicology CRO in China for domestic and international clients  Re-certified in 2012 by Belgium (OECD) regulators and SFDA for GLP compliance, including broadened scope of both certifications to cover all preclinical studies needed to support small and large molecule safety studies  More than doubled annual revenues in 2012, targeting > 40% increase in revenues in 2013; ~30% of revenues from domestic Chinese clients  Currently at 50-60% capacity utilization, expect to reach full (80-85%) capacity in built-out rooms within a year and will consider building out the remainder of the facility early next year  Expanding small- and large-molecule bioanalytical capability
  27. 27. 26 Biologics Services  WuXi is the partner of choice for biologics services in China, with few competitors  Deep understanding of Chinese regulations, which require that biologics used in clinical trials either be approved in other markets or manufactured in China  Expected project portfolio to be a mix of biosimilars and novel molecules, with both multinational and Chinese customers  Highly capable team of about 300 people, including about 30 returnees with US/EU industry experience  About $30 million in capital expenditures to date, $16-$18 million more planned in 2013  Current backlog at about $33 million, with about 50 customers now and growing  Operating at a loss currently reducing company margins by about 2 percentage points, expected to turn to an operating profit within two years with strong revenue ramp-up
  28. 28. 27 Clinical Research – Forming JV with PRA  Complementary strengths of both companies to accelerate the buildup of a leading clinical CRO in China • WuXi’s existing clinical research organization with talented employees, strong China operational experience, integrated drug discovery and development capabilities, and strong management team • PRA’s proven track record as a leading global clinical CRO, with operations in over 80 countries; strong capabilities to conduct Phase I-IV clinical trials globally  WuXi’s existing clinical research organization of about 90 people and PRA’s 11 China- and Hong Kong-based employees will join forces to form the JV initially, with rapid hiring of additional staff planned in 2013  The JV will offer a broad platform of Phase I-IV clinical trial services in China, including clinical trial monitoring, project management, regulatory strategy and submissions, data management/biostatistics services, pharmacovigilance/ safety reporting, and medical monitoring  Starting in second quarter, clinical research business will not be consolidated into WuXi’s P&L and will be accounted for as Equity Investment Income/Loss
  29. 29. 28 Small Molecule Manufacturing Services Overall small molecule manufacturing revenue to grow at mid- teen rate in 2013 Commercial manufacturing revenue declined moderately in 2012, will be relatively flat for 2013 as we continue to diversify our portfolio beyond one large product We manufactured advanced ingredients for five commercial products in 2012 Seven additional commercial product opportunities are in the near-term pipeline starting in 2014, including some with large revenue potential for WuXi
  30. 30. 29 U.S.-Based Laboratory Services Revenues have grown at a 9.2% CAGR since 2008, with substantial improvement in profit margins 2012 revenue growth of 11.6% was driven by double-digit growth in both medical device and biologics testing services Broad-based, high-single-digit revenue growth is expected in 2013, with stable profitability Revenue and net income expected to grow sequentially throughout the year, driven by seasonality of business in both 2012 and 2013
  31. 31. 30 Key Drivers of Revenue Growth  Continued revenue growth across China-based Laboratory Services, driven by our ability to deliver high-quality services and drug candidates for our customers  Increasing utilization of our integrated drug development services for API manufacturing, IND-enabling toxicology studies and IND filings with the China SFDA and global regulatory authorities  Steady growth in revenues in U.S.-based Laboratory Services  Continuing growth in Manufacturing Services driven by research manufacturing and growing commercial-manufacturing pipeline  Ramp-up of biologics drug discovery, development, and manufacturing services  Expansion of our clinical development platform with the WuXi PRA joint venture
  32. 32. 31 Conclusion  We are confident that our dream will become a reality—to build an open-access technology platform of integrated services that will enable anyone and any company to discover and develop products to benefit patients  We believe this because: • An open-access platform is the most effective and efficient way to allow researchers to capitalize their knowledge and experience and help solve the problem of low productivity in the pharmaceutical industry • Health care spending will continue to grow globally because the world’s patients will demand, and be willing to pay for, high-quality medical products and a better quality of life • Operational strength in China is important to capitalize on the rising demand by a large and rapidly growing Chinese middle class for the same treatments prescribed for Western patients
  33. 33. 32 Appendix GAAP to Non-GAAP Reconciliation Share Count Information ADS Shares for Earnings-per-ADS Calculation
  34. 34. 33 4Q2012 (US$ in millions) GAAP Share- Based Compen- sation Expenses Amortization of Acquired Intangible Assets and Deferred Tax Impact Impairment Charges for Goodwill and Intangible Assets Revaluation of Contingent Compensation Non- GAAP Net revenues 125.7 125.7 Cost of revenues (76.9) 0.8 0.4 (75.7) Selling & marketing expense (4.7) (4.7) General & administrative exp. (18.0) 2.6 (15.4) Research & development exp. (2.5) (2.5) Impairment charge (3.4) 3.4 -- Revaluation of contingent comp. 3.4 (3.4) -- Other income/(exp.), net 4.7 4.7 Income tax expense (4.5) (0.1) (4.6) Net income 23.8 3.4 0.3 3.4 (3.4) 27.5 Fourth-Quarter 2012 GAAP to Non-GAAP Reconciliation
  35. 35. 34 FY2012 (US$ in millions) GAAP Share- Based Compen- sation Expenses Amortization of Acquired Intangible Assets and Deferred Tax Impact Impairment Charges for Goodwill and Intangible Assets Revaluation of Contingent Compensation Non- GAAP Net revenues 499.9 499.9 Cost of revenues (316.7) 3.9 2.0 (310.8) Selling & marketing expenses (15.4) (15.4) General & administrative exp. (70.3) 10.4 (59.9) Research & development exp. (8.1) (8.1) Impairment charge (3.4) 3.4 -- Revaluation of contingent comp. 3.4 (3.4) -- Other income/(exp.), net 14.6 14.6 Income tax expense (17.4) (0.7) (18.1) Net income 86.6 14.3 1.3 3.4 (3.4) 102.2 Full-Year 2012 GAAP to Non-GAAP Reconciliation
  36. 36. 35 Share Count Information (As of December 31, 2012) ADS Shares ADS issued and outstanding 70,140,125 Share options and equivalents granted and outstanding 2,815,196 ADS available for future grants under employee incentive plan 4,806,549
  37. 37. 36 ADS Shares for Earnings-per-ADS Calculation Date Activities Weighted Average ADS Shares October 1, 2012 Ordinary share balance1 67,725,673 October 1, 2012 RSUs vested and not exercised 2,263,946 Fourth Quarter 2012 Share options exercised and RSUs vested 69,703 December 31, 2012 ADSs outstanding – basic 70,059,322 December 31, 2012 Share options and equivalents 1,629,104 December 31, 2012 ADSs outstanding – diluted 71,688,426 1 541,805,384 ordinary shares, with each ADS representing eight ordinary shares
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