WuXi PharmaTech Q2 Profit Down, But Tops View; Lifts FY Outlook

(RTTNews) - Drug-research contractor WuXi PharmaTech Inc. (WX), Wednesday said its second-quarter profit dropped slightly from a year ago, as a 15 percent growth in revenues were erased by higher operating costs and income tax expense. Nonetheless, earnings for the quarter came in ahead of analysts estimates, as did revenues.

Shanghai, China-based WuXi PharmaTech's second-quarter profit edged down to $29.3 million or $0.41 per ADS, from $29.6 million or $0.41 per ADS last year.

The company said profit dropped due to mark-to-market losses on foreign-exchange forward contracts of $2.5 million and higher tax rate.

Adjusted earnings for the quarter rose to $35.2 million or $0.49 per ADS from $33.7 million or $0.46 per ADS last year. On average, six analysts polled by Thomson Reuters expected earnings of $0.47 per share for the quarter. Analysts' estimates typically exclude special items.

WuXi's second-quarter revenues increased 14.8 percent to $163.4 million from $142.3 million last year. Six analysts had a consensus revenue estimate of $162.11 million for the quarter.

Laboratory services revenue for the quarter grew 13.2 percent to $119.9 million, with China-based laboratory services up 14.2 percent while US-based laboratory services improved 9.6 percent year-over-year. Revenues were driven by comprehensive and integrated drug discovery and development services.

Manufacturing services division revenue climbed 19.3 percent to $43.4 million reflecting strong demand in both research manufacturing and commercial manufacturing.

Gross margin for the quarter improved to 37.7 percent from 36.4 percent last year.

Operating costs for the quarter rose to 28.7 percent to $33.5 million, while income tax expense rose 72 percent to $6.7 million from last year.

"Our strong second-quarter performance gives us confidence about our performance for the remainder of the year. We expect to sustain strong revenue growth in the second half of 2014, as we capitalize on the growing late-stage and commercial product pipeline in small-molecule manufacturing, the ramp-up of our biologics manufacturing business, and investments in new businesses," said CEO Ge Li.

Looking forward to the third quarter, the company expects adjusted earnings of $0.48 to $0.50 per ADS and revenues between $171 million and $173 million. Analysts currently expect earnings of $0.49 per share on revenues of $173.92 million for the third quarter.

For the fiscal year 2014, the company now expect adjusted earnings of $1.82 to $1.86 per ADS and revenues of $665 million to $670 million. Analysts currently expect full-year earnings of $1.84 per share on revenues of $669.74 million.

Earlier, the company projected adjusted earnings of $1.80 to $1.85 per ADS and revenues of $660 million to $670 million.

WX closed Wednesday's trading at $32.21, up $0.36 or 1.13%, on the NYSE.