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WuXi PharmaTech:The Leading China-Based
R&D Services Company
2012 J.P. Morgan Healthcare Conference
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Cautionary Note Regarding Forward-Looking Statements
Statements in this release contain "forward-looking" statements within the meaning of Section 27A of the Securities Act of1933, 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 financial guidance for third-quarter and full-year 2011(including, as applicable, estimated total net revenues, China-based Laboratory Services net revenues, U.S.-based LaboratoryServices net revenues, Manufacturing Services net revenues, gross margins, operating margins, capital expenditures,effective tax rates, and other trends), an increased trend towards outsourced and offshored R&D, our ability to benefit from thistrend and our related efforts to be the industrys alternative R&D engine to discover and develop new drugs for both the globaland Chinese markets and the anticipated benefits of the Abgent and MedKey acquisitions and other planned investments andcapital expenditures (including investments through WuXis corporate venture fund). These forward-looking statements arenot historical facts but instead represent only our belief regarding future events, many of which, by their nature, are inherentlyuncertain and outside of our control. Our actual results and financial condition and other circumstances may differ, possiblymaterially, from the anticipated results and financial condition indicated in these forward-looking statements. Among otherfactors, the state of the global economy may continue to be uncertain; pharmaceutical companies may not change theirbusiness 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 thetrends for outsourced and offshored R&D and manufacturing for longer than expected or more severely than expected; wemay not enjoy the anticipated benefits of the Abgent and MedKey acquisitions or other planned investments and capitalexpenditures (including investments made through the planned corporate venture fund) on a timely basis or at all; we mayneed to modify the nature and level of our investments and capital expenditures; we may not maintain our preferred providerstatus with our clients and may be unable to successfully expand our capabilities to meet client needs; and we may faceincreased margin pressure as a result of renminbi appreciation and increased labor inflation in China. In addition, other factorsthat could cause our actual results to differ from what we currently anticipate include our limited operating history; failure togenerate sufficient future cash flows or to secure any required future financing on acceptable terms or at all; failure to retainkey personnel; our reliance on a limited number of customers to continue to account for a high percentage of our revenues; therisk of payment failure by any of our large customers, which could significantly harm our cash flows and profitability; ourdependence 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 inconjunction with the consolidated financial statements and related notes thereto included in our 2010 Annual Report on Form20-F filed with the Securities and Exchange Commission and available on the Securities and Exchange Commission's websiteat 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 2010 Annual Report onForm 20-F. Our results of operations for third-quarter 2011 are not necessarily indicative of our operating results for any futureperiods. 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 revisethese forward-looking statements, whether as a result of new information, future events or otherwise, after the date of thispress release, except as required by law. Such information speaks only as of the date of this release.
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Use of Non-GAAP and Pro-Forma Financial Measures
We have provided third-quarter and nine-month 2010 and 2011 gross profit, gross margin, operating
income, operating margin, net income, and earnings per ADS on a non-GAAP basis, which
excludes share-based compensation expenses, amortization and the deferred tax impact of
acquired intangible assets and a $30 million termination fee received from Charles River
Laboratories related to the proposed transaction, expenses incurred in connection with that
transaction, and bonuses paid to employees after termination of that transaction. 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 providing these financial
measures 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.
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Profile of WuXi
Leading China-based contract research organization serving the
pharmaceutical, biotech, and medical device industries
More than three times larger than the next largest China-basedcompetitor
Virtually all of the largest pharmaceutical companies are customers,several for nearly a decade
World-class operations in China and the United States
One of the largest employers of chemists in the pharmaceuticalindustry
Founded in 2000 to provide compound synthesis services fordrug discovery
Has continuously been building capabilities and capacities alongthe drug discovery and development value chain
Now offers a broad and integrated portfolio of laboratory and
manufacturing services
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WuXis Business Model Is Working
WuXi is building an alternative R&D engine for the global life-
sciences industry
This engine offers a technology platform and integrated
service offerings that will enable anyone and any company to
discover and develop medicines
China is rapidly becoming an important hub for
pharmaceutical R&D, in part because of the rapid growth of
the large Chinese pharmaceutical market itself
WuXi will continue to lead the Chinese life-sciences industry
by building capabilities and capacities to serve our customersbetter
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Building WuXis Integrated R&D Service Platform: 2001
TargetIdentification/
Validation
Screeningfor
Drug Leads
Hit/LeadIdentification
LeadOptimization/
MedicinalChemistry
CompoundSynthesis
AssayDevelopment
FormulationADME/DMPK
Manufac-turing
ProcessScaleup
Toxicology
Phase 1ClinicalTrials
Phase 2Clinical
Trials
Phase 3Clinical
Trials
ResearchManufacture
Phase 4(Post-
Marketing)Studies
CommercialManufacture
Discovery
Preclinical
Clinical
Bioanalytical Services
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Building WuXis Integrated R&D Service Platform: Today
TargetIdentification/
Validation
CompoundSynthesis
Discovery
Preclinical
Clinical
Manufac-turing
ProcessScaleup
ResearchManufac-
turing
Bioanalytical Services
AssayDevelopment
Screeningfor
Drug Leads
Hit/LeadIdentification
LeadOptimization/
MedicinalChemistry
ADME/DMPK
Formulation Toxicology
Phase 1ClinicalTrials
Phase 2Clinical
Trials
Phase 3Clinical
Trials
CommercialManufacture
Phase 4(Post-
Marketing)Studies
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WuXi PharmaTech Revenue Growth
2004 2005 2006 2007 2008 2009 2010 2011
$33.8$20.9
$69.9
$135.2
$253.5
(US$ in Millions)
U.S.-BasedLaboratoryServices
China-Based
LaboratoryServices
Manufacturing
$270.0
$334.1
$406+~22%
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Update of 2011 Financial Guidance
Total Revenues $402-$406 million Exceeded
China-Based LaboratoryServices Revenues
+14-15% Achieved
U.S.-Based LaboratoryServices Revenues
+ About 6% Achieved
Manufacturing Services
Revenues
+ At least 84% Achieved
Gross Margin Approximately equal to 2010 level on GAAPbasis, decline of about 1.5 percentagepoints on non-GAAP basis
Achieved
Operating Margin About 21% GAAP; about 24% non-GAAP Achieved
Effective Tax Rate About 18% Achieved
Capital Expenditures $60-65 million Achieved
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WuXi Business Segment Overview
China-Based
Laboratory Services
Synthetic chemistry
Medicinal chemistry
Discovery biology
DMPK/ADME
Formulation developmentToxicology
Biologics development
Biologic reagentsmanufacturing
Clinical development
Bioanalytical servicesAnalytical/stability testing
U.S.-Based
Laboratory Services
Medical device safetytesting
Biologic products safetytesting
Tissue processing services
Cell banking
Cell therapy
Microbiology testing
Lot release testing
Manufacturing Services
API manufacturing
Advanced intermediatesmanufacturing
Process scale-up
Process validationUnder development:Biologics manufacturing(monoclonal antibodies,therapeutic proteins)
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China-Based Laboratory Services Grew Steadily
2009 2010 2011
408
258
171
2009 2010 2011
185.8
219.4
~251
Number of CustomersRevenues ($ millions)
18%
14-15%
47%
58%
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Toxicology Services Are Gaining Momentum
2009 2010 2011
Number of Customers
US FDA GLP compliant, OECD
and SFDA certified GLP facilityfor general toxicology and
genetic toxicity studies
Contracts signed with Johnson
& Johnson and a second largepharmaceutical client
Six large pharmaceutical
companieshave begun to use
our services
Revenue is ramping up rapidly;
Suzhou site (tox and large
animal DMPK) expected to break
even by 4Q12
9
24
43
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Manufacturing Services
2009 2010 2011
(US$ in Millions)
Revenues ($ millions)
20.1
39.9
~75
99%
~88% Research manufacturing
Driven by innovative work of ~310process chemists
Produces advanced intermediates andAPIs for drug candidates in preclinicaland clinical trials
Facility expansion will be operationalby 2Q12 and will double our capacity
Currently working on 4 Phase III, 17Phase II, and 75 Phase I/preclinicalprograms, some of which will feedtoxicology and commercialmanufacturing
Commercial manufacturing
Produces advanced intermediates for amajor new drug
2009 2010 2011
167184
203
Number of Projects
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U.S.-Based Laboratory Services
2009 2010 2011
64.1
Revenues ($ millions)
75.5~80
18%
~6%Provides a broad range of testing
services for biologics and medical
devices necessary for regulatory
approval or product release
Excluding one tissue processingcustomer, 2011testing revenues
grew double digits
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Investing for the Future
WuXi continues to build capabilities and capacities in the followingareas:
New Wuhan site for chemistry laboratories
Expanded and integrated drug discovery capabilities andcapacities
Biologics discovery and development laboratory in Shanghai andcGMP biologics manufacturing facility in WuXi
Expanded formulation development and drug productmanufacturing capacity
Clinical development capabilities
Abgent marketing and sales capabilities and new reagent productdevelopment capabilities
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Wuhan Chemistry Laboratories
Facility to open 1Q12
Wuhan is a major city in central China with a large talent pool
Initial staff of ~ 200 people will eventually grow to more than
1,000
Allows WuXi to
leverage lower
costs in central
China
Receiving
strong localgovernment
support
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Integrated Biologics Services
Will offer full range of
services from discovery tocommercial drug substance/drug product manufacturing
Signed multiple integrateddevelopment and
manufacturing contracts
Built a strong team ofleaders with proven trackrecords in US/EU
Established a leadingmonoclonal antibodytechnology platform inChina
Expected to contribute torevenue growth starting in
2013
First cGMP Biologics Facility in China
City of WuXi
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Abgent: Producer of Biological Research Reagents
One of the worlds leading manufacturers of antibodies,
peptides, and proteins for research, with catalog of about20,000 antibodies
About 150 employees work in a 34,000 square-footlaboratory in Suzhou and a 10,000 square-foot laboratory
and office in San Diego Expands our service offering to our existing customers and
to new customers in the life-sciences research communityand taps into the rapidly growing Chinese life-sciencesresearch market
In 2012, plan to develop new high-value-added productsand expanded sales and marketing capabilities in the U.S.and China to build a platform for strong growth in 2013 andbeyond
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MedKey: China-Based Clinical Research Services
Provides services in regulatory affairs, Phase I-IV clinical trial
management, and site management for multinational andChinese pharmaceutical companies filing products in China
Has operations in 15 Chinese cities, with offices in Shanghai,Beijing, and Guangzhou, covering all regions of China
Provides WuXi with an existing clinical development servicecapability and infrastructure in China, launching us into thisbusiness faster than we could accomplish on our own
Will focus in 2012 on significantly expanding clinical teams andbuilding capabilities
Two multinational CROs have recently bought China-basedclinical CROs, validating our interest in this business
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(US$ in Millions)
3Q10 4Q10 1Q11 2Q11 3Q11
Gross Profit/Margin
Revenues
Operating Income/Margin
GAAP Revenues/Gross Profit/Operating Income
$83.8
29.8
19.2
35.6%
22.9%
$88.5
34.1
18.8
37.1%
21.2%
$93.6
34.738.5%
19.8 21.2% 21.5
38.6
$101.1
21.3 %
$104.0
40.6
22.2
38.2 %39.0%
21.4 %
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(US$ in Millions)
3Q10 4Q10 1Q11 2Q11 3Q11
Gross Profit/Margin
Revenues
Operating Income/
Margin
Non-GAAP Revenues/Gross Profit/Operating Income
$83.8
34.5
22.6
41.2%
27.0%
$88.5
22.4
35.6
25.3%
40.2%
$93.6
36.1
23.1 24.7%
38.5%
$101.1
40.0
25.0
39.5%
24.7%
$104.0
41.8
24.9
40.2%
24.0%
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Uses of Cash
WuXi has about $200 million of cash and a $29 million
bank loan
We see several good opportunities to use this cash and
our free cash flow for targeted investments, primarily in
China, to continue to build our capabilities and capacity
A convertible note of $36 million will be redeemed on
February 9 if the stock price is below $12.60, reducing
the share count for calculating diluted EPS similar to a
share buyback
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2012 Growth Strategy
Grow China-based Laboratory Services by leveraging our
integrated discovery and development capabilities in
medicinal chemistry, CMC, toxicology, and IND services
Advance manufacturing project pipeline with our strong
process and research manufacturing capabilities
Build Chinas leading biologics drug discovery and
development platform
Continue to drive U.S.-based Laboratory Services to broaden
testing service offerings and gain market share
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WuXi is Well Positioned to Continue to Grow
The pharmaceutical industry is undergoing transformational
change and adopting a more collaborative and networkedR&D model for drug discovery and development
WuXi is building an integrated open-access R&D services
platform as the industrys alternative R&D engine to enable
anyone and any company to discover and develop new drugs
Outsourcing of R&D increases pharmaceutical companies
flexibility and agility and reduces their fixed costs
Offshore outsourcing of R&D to China will accelerate because
of the fast-growing Chinese pharmaceutical market and
growing R&D capabilities in China
WuXi will work hard to become THE technology platform
company of Chinas life science industry
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Appendix
GAAP to Non-GAAP Reconciliations
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3Q2011(US$ in millions)
GAAP
Share-Based
Compensation
Expenses
Amortization of
Acquired
Intangible Assets
Non-GAAP
Net revenues 104.0 104.0
Cost of revenues (63.4) 0.9 0.4 (62.1)Selling & marketing expenses (2.7) (2.7)
General & administrative
expenses(15.6) 1.4 (14.2)
Other income/(expenses), net 3.0 3.0
Income tax expenses (4.7) (0.1) (4.8)
Net income 20.6 2.3 0.3 23.2
Third-Quarter 2011 GAAP to Non-GAAP Reconciliation
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9M2011(US$ in millions)
GAAP
Share-Based
Compensation
Expenses
Amortization of
Acquired
Intangible Assets
Non-GAAP
Net revenues 298.6 298.6
Cost of revenues (184.8) 2.8 1.0 (181.0)Selling & marketing expenses (7.2) (7.2)
General & administrative
expenses(43.0) 5.6 (37.4)
Other income/(expenses), net 6.6 6.6
Income tax expenses (12.7) (0.4) (13.1)
Net income 57.5 8.4 0.6 66.5
Nine-Month 2011 GAAP to Non-GAAP Reconciliation