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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

(Mark One)

OR

For the fiscal year ended December 31, 2014

OR

OR

Date of event requiring this shell company report

For the transition period from                      to                     .

Commission file number: 001-33623

WuXi PharmaTech (Cayman) Inc.

(Exact name of Registrant as specified in its charter)

Not applicable

(Translation of Registrant’s name into English)

Cayman Islands

(Jurisdiction of incorporation or organization)

288 Fute Zhong Road, China (Shanghai) Pilot Free Trade Zone, Shanghai, 200131, China

(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 561,159,373 ordinary shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    x  Yes    ¨  No

If this report is an annual or transaction report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    ¨  Yes    x  No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes    ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    x  Yes    ¨  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  x                Accelerated filer  ¨                Non-Accelerated filer  ¨

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If “Other” has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected to follow.    ¨  Item 17    ¨  Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes    x  No

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WuXi PharmaTech (Cayman) Inc.

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INTRODUCTION

Except where the context otherwise requires and for purposes of this annual report on Form 20-F only:

This annual report on Form 20-F includes our audited consolidated statements of comprehensive income for the years ended December 31, 2012, 2013 and 2014, our audited consolidated balance sheets as of December 31, 2013 and 2014 and our audited consolidated statements of cash flows for the years ended December 31, 2012, 2013 and 2014.

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FORWARD-LOOKING STATEMENTS

This annual report on Form 20-F contains forward-looking statements that involve risks and uncertainties. All statements other than statements of historical fact are forward-looking statements based on our current expectations, assumptions, estimates and projections about us and our industry. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. In some cases, these forward-looking statements can be identified by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “potential,” “continue,” “is/are likely to” or similar expressions. The forward-looking statements included in this annual report on Form 20-F relate to, among other things:

These forward-looking statements involve various risks, assumptions and uncertainties. Although we believe that our expectations expressed in these forward-looking statements are reasonable, our expectations may turn out to be incorrect. Our actual results could be materially different from our expectations. Important risks and factors could cause our actual results to be materially different from our expectations. See Item 3.D, “Key Information — Risk Factors,” and elsewhere in this annual report on Form 20-F.

The forward-looking statements made in this annual report on Form 20-F relate only to events or information as of the date on which the statements are made. All forward-looking statements included herein attributable to us or other parties or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except as required by law, we undertake no obligation to update any forward-looking statements.

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PART I

Not applicable.

Not applicable.

A. Selected Financial Data

Selected Consolidated Financial Data

The following selected data from our consolidated statements of comprehensive income for the years ended December 31, 2012, 2013 and 2014, and the selected data from our consolidated balance sheet as of December 31, 2013 and 2014, have been derived from our audited consolidated financial statements included elsewhere in this annual report on Form 20-F. The following selected data from our consolidated statements of comprehensive income for the years ended December 31, 2010 and 2011, and the selected data from our consolidated balance sheet as of December 31, 2010, 2011 and 2012, were derived from our audited consolidated financial statements that are not included in this annual report on Form 20-F. You should read the selected consolidated financial data in conjunction with our audited financial statements and the accompanying notes included elsewhere in this annual report on Form 20-F and Item 5, “Operating and Financial Review and Prospects.” Our audited consolidated financial statements are prepared and presented in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. Our historical results are not necessarily indicative of our future results.

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Exchange Rate Information

In 2014, we recorded approximately 81% of our net revenues in U.S. dollars, while we paid a large majority of our expenses in Renminbi. We use U.S. dollars as our reporting currency in our financial statements and in this annual report on Form 20-F. We translate monetary assets and liabilities denominated in Renminbi into U.S. dollars at the rates of exchange as of the respective balance sheet dates. We translate equity accounts at historical exchange rates. We translate revenues, expenses, gains and losses prior to April 1, 2014, using the average rate for the year as published by the People’s Bank of China, and we translate revenues, expenses, gains and losses after April 1, 2014, using the spot exchange rate released by Federal Reserve Board. We report translation adjustments as cumulative translation adjustments and show them as separate components of other comprehensive income. In other parts of this annual report, any Renminbi-denominated amounts are accompanied by translations. We record Renminbi transactions at the rates of exchange prevailing when the transactions occurred. With respect to amounts not recorded in our consolidated financial statements included elsewhere in this annual report, all translation from Renminbi into U.S. dollars and from U.S. dollars into Renminbi were made at a rate of RMB 6.2046 to $1.00, the noon buying rate set forth in the H.10 statistical release of the Federal Reserve Board on December 31, 2014. We make no representation that any Renminbi or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Renminbi at any particular rate. The Chinese government imposes control over its foreign-currency reserves in part through direct regulation of the conversion of Renminbi into foreign exchange and through restrictions on foreign trade. See Item 3.D, “Key Information—Risk Factors—Risks Relating to China—Fluctuations in exchange rates have resulted in, and are expected to continue to result in, foreign-exchange losses and to adversely impact our profitability.” On April 3, 2015, the noon buying rate set forth in the H.10 statistical release of the Federal Reserve Board was RMB 6.1930 to $1.00.

The following table sets forth information concerning exchange rates between the Renminbi and the U.S. dollar for the periods indicated. These rates are provided solely for your convenience and are not necessarily the exchange rates that we used in this annual report on Form 20-F or will use in the preparation of our periodic reports or any other information to be provided to you.

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Source: Exchange rates supplied by the H.10 Statistical Release of the Federal Reserve Board

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

Risks Relating to Our Business and Industry

The trend toward greater outsourcing of R&D services by pharmaceutical, biotechnology and medical device companies may slow or reverse, which could adversely affect our business, including its financial condition, results of operations, cash flows and prospects.

The success of our business depends primarily on the number and size of contracts that we obtain from pharmaceutical, biotechnology and medical device companies. Over the past several years, our business has benefited from increased levels of outsourcing of R&D activities by these companies. A slowing or reversal of this trend could adversely affect our business, including its financial condition, results of operations, cash flows and prospects.

A reduction in R&D budgets at pharmaceutical, biotechnology and medical device companies may result in a reduction or discontinuation of our services, which may adversely affect our business.

Our business could be adversely affected by any significant decrease in R&D expenditures by pharmaceutical, biotechnology and medical device companies. Fluctuations in the R&D budgets of pharmaceutical, biotechnology and medical device companies could have a significant effect on the demand for our services. R&D budgets fluctuate due to, among other things, sales performance of these companies, including lost sales of products that lose patent exclusivity, face greater competition or otherwise experience reduced demand; inability of these companies to replace these lost sales with sales from new products; changes in their available resources; their decisions to consolidate; their spending priorities; and their budgetary policies and practices.

Our ability to continue to grow revenues and profit depends on our retaining existing customers and gaining new customers.

We generate most of our revenues from sales to customers headquartered in the United States and Europe, and our future revenue growth depends, in part, on our ability to expand our customer base globally. Our top ten customers accounted for 38.0% of our total 2014 net revenues compared to 48.0% of our total net revenues in 2012. Although this revenue concentration has declined in recent years, any reversal in that trend subjects us to additional customer concentration risk. Also, our top 10 customers provided us a solid revenue base from which to grow. Any significant cutback in spending for outsourcing by these customers due to mergers and acquisitions, consolidation, R&D budget cuts or other reasons could have a material impact on our business. Our future revenue growth also depends on our ability to expand our customer base globally.

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Our success largely depends on our ability to attract, train, motivate and retain highly skilled scientists and other personnel.

Our success largely depends on the breadth and depth of our team of scientists and other personnel and their capabilities and efforts for our customers on behalf of our company, including their ability to keep pace with continuing changes in pharmaceutical and medical device R&D technologies and methodologies. In particular, our customers value Western-trained scientists with experience at pharmaceutical and/or biotechnology companies. Any inability to attract, motivate and retain qualified scientists and mid-level personnel and to train them in the latest developments in their fields of expertise may have a material adverse effect on our business, including its financial condition, results of operations, cash flows and prospects.

We face challenges in attracting and retaining high-quality employees. We compete vigorously with pharmaceutical, biotechnology, medical device and contract research companies and academic and research institutions for qualified and experienced scientists, particularly in our Laboratory Services segment in chemistry, biology and biologics and in our Manufacturing Services segment. To compete effectively, we may need to offer higher compensation and other benefits, which could materially and adversely affect our financial condition and results of operations. Despite paying a company-wide merit increase in 2013 and 2014, we may be unable to hire and retain enough skilled and experienced scientists at current wage rates. In addition, we may be unable to redeploy and retrain our professionals to keep pace with changing customer needs, technological changes and performance standards.

We face increasingly intense competition. If we do not compete successfully against new and existing competitors, some of whom subject us to pricing pressure, demand for our services and related revenues may decrease.

The global pharmaceutical, biotechnology and medical device R&D outsourcing markets are highly competitive, and we expect this high level of competition to continue. We face competition based on several factors, including quality of services; breadth of service offerings; ability to protect intellectual property or other confidential information; timeliness of delivery; maintenance of standards of good laboratory practices, or GLP, and good manufacturing practices, or GMP; depth of customer relationships; price; and geography.

We compete with contract research organizations, or CROs, contract manufacturing organizations and research and academic institutions, typically in specific service areas. For example, we compete with Charles River Laboratory Inc. in the preclinical services area. We compete with ShangPharma Corporation and Pharmaron, Inc. in the drug discovery and chemistry area. We compete with BioReliance Holdings, Inc., or BioReliance, a division of Sigma-Aldrich Corporation (with a pending acquisition by Merck KGaA), in the biologics testing area, and with North American Science Associates, Inc., and Toxikon Corporation, or Toxikon, in the medical device testing area. After the acquisition of Jiecheng and MedKey and the formation of WuXiPRA, we also compete with clinical research organizations such as Pharmaceutical Product Development, LLC, or PPD, Parexel International, and Tigermed Consulting Co., Ltd. in the clinical research services area. In genomics, we compete with companies such as Beijing Genomics Institute, or BGI. We believe that we do not compete with any single company across the entire breadth of our service offerings. We expect to increasingly compete against multinational companies, both domestically and internationally, as we continue to invest in more complex and sophisticated broad-based laboratory, manufacturing and other services. These investments may result in increased competition for qualified personnel.

Some of our competitors may have greater financial, research and other resources; a broader scope of services; greater pricing flexibility; more extensive technical capabilities; and greater name recognition.

We also expect increased competition as new companies enter our market and as more advanced technologies become available. Our competitors’ existing or new technologies or business approaches may be more effective than our own. Furthermore, increased competition could create pricing pressure on our services, which could reduce our profitability.

New technologies or methodologies may be developed, validated and used in the global pharmaceutical, biotechnology and medical device R&D outsourcing industry, which could reduce demand for some of our services.

The global pharmaceutical, biotechnology and medical device R&D outsourcing industry is constantly evolving, and we must keep pace with new technologies and methodologies to maintain our competitive position. We must continue to invest significant amounts of human and capital resources in R&D to enhance technologies that allow us to introduce new and better services. We may be unsuccessful in developing, adapting to or commercializing these new technologies. New technologies could decrease the need for our existing technologies and their return on investment, and we may not be able to develop new services or technologies effectively or in a timely manner. Our failure to develop, enhance or adapt to new technologies and methodologies could significantly reduce demand for our services and harm our business and prospects.

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If we fail to effectively manage our anticipated growth and to execute on our growth strategies, our business, financial condition, results of operations and prospects could suffer.

Pursuing our growth strategies, including integrating and expanding our facilities and service offerings to meet our customers’ needs, has resulted in, and will continue to result in, substantial demands on management’s time and other resources. Managing this growth and our growth strategies will require, among other things, continued enhancement of our R&D capabilities and the services and products developed with those capabilities for the healthcare market; effective coordination and integration of our research facilities and teams, particularly those located in different facilities, including newly opened sites; successful hiring and training of personnel; effective management of a business separated geographically between the United States and China; effective cost control; sufficient liquidity; effective and efficient financial and management control; increased marketing and sales-support activities; effective quality control; and management of our suppliers to leverage our purchasing power. Any failure to effectively manage our anticipated growth and to execute on our growth strategies could adversely affect our business, including its financial condition, results of operations, cash flows and prospects.

We may be unable to expand our capacity and scale up our operations within the timeframe or budgeted costs that we anticipate, possibly resulting in material delay in preparing facilities for service, increased costs and lost business opportunities.

We are engaged in a substantial expansion of our capabilities and capacity. For example, we are constructing large small-molecule manufacturing facilities in Changzhou, commercial biologics manufacturing facilities in Wuxi and two cell therapy manufacturing facilities in Philadelphia. In preparing these facilities for operation, we may experience unforeseen delays or cost increases that could result in lost business opportunities and could materially and adversely affect our business, including our financial condition, results of operations, cash flows and prospects.

We have made significant capital investments to meet our customers’ needs, and, as a result, we depend on the success of our customers’ projects and their continued business.

We have made and are continuing to make significant capital expenditures based on anticipated demand from existing and potential new businesses. We depend on our customers’ success in advancing products through development, regulatory approval and commercialization. Any delay, non-approval or lack of demand may have a material impact on our business. Consequently, we may be required to reallocate our resources, a decision that could cause delays in our service offerings and result in lower-than-expected revenues.

Because many of our fee-for-service contracts are contingent on successful completion of a project and often have a fixed price, we may bear financial risk.

A significant portion of our net revenues, including a significant portion of our Laboratory Services revenues and all of our Manufacturing Services revenues, are based on fee-for-service contracts, which are contingent on successful completion of a project and often have a fixed price. In 2014, fee-for-service contracts accounted for approximately 73% of our total net revenues. If we do not deliver a service in a timely manner as specified in the contract, if we incur cost overruns or if we price these contracts below our costs because of competitive pressures, there could be a material adverse effect on our business, including its financial condition, results of operations, cash flows and prospects.

We may fail to effectively develop and market new services, which may harm our growth opportunities and prospects, possibly resulting in losses.

We intend to continue to expand our services. Over the past few years, we have established new services in toxicology, biologics drug development and manufacturing, small molecule commercial manufacturing and other areas. We are in the early stages of launching new services in biologics drug discovery, clinical research and genomics. To develop and market our new services successfully, we must accurately assess and meet customer needs; make significant capital expenditures; optimize our pharmaceutical and medical device discovery, development and manufacturing processes to predict and control costs; hire, train and retain the necessary personnel; obtain required regulatory clearances or approvals; increase customer awareness and acceptance of our services; provide services of a high quality and in a timely manner; price our services competitively; compete effectively with other R&D outsourcing providers and effectively integrate customer feedback into our business planning. If we fail to effectively develop new services and create demand for them, our future business, including results of operations, financial condition, cash flows and prospects, could be materially and adversely affected.

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The loss of services of our senior management and key scientific personnel could severely disrupt our business and growth.

Our success significantly depends upon the continued service of our senior management and key scientific personnel. In particular, we are highly dependent on Dr. Ge Li, our Chairman and Chief Executive Officer, who has managed our business, operations and sales and marketing activities and maintained personal and direct relationships with many of our major customers since our inception; Edward Hu, our Chief Financial Officer and Chief Investment Officer; Dr. Shuhui Chen, our Chief Scientific Officer; Xiaozhong Liu, our Executive Vice President and other senior management members and key scientific personnel. The loss of any of them, and in particular Dr. Li, could have a material adverse effect on our business and operations. Although each member of our senior management and key scientific personnel has signed a non-compete agreement with us, we may be unable to successfully enforce these provisions. If we lose the services of any senior management members or key scientific personnel, we may be unable to locate and retain suitable qualified replacements and may incur additional expenses to recruit and train new personnel, which could severely disrupt our business and its growth.

Global economic uncertainty adversely affected, and could continue to adversely affect, our business, financial condition and results of operations.

Global economic uncertainty in recent years affected certain areas of our business, particularly the biotechnology R&D outsourcing markets. Disruptions in orderly financial markets resulted from, among other factors, severely diminished liquidity, reduced credit availability, volatile and declining valuations of securities and other investments, reduced business and consumer confidence and increased unemployment. The economic uncertainty adversely affected, and a future economic weakening in the United States or globally could adversely affect, our business in several ways, including:

Any failure to comply with existing regulations and industry standards could harm our reputation and our business, including our financial condition, results of operations, cash flows and prospects.

Several government agencies and industry regulatory bodies in China, the United States, Europe and Japan impose strict rules, regulations and industry standards on how we and our customers conduct pharmaceutical and medical device R&D. We may need to obtain clearance from the U.S. Food and Drug Administration, or FDA, or other regulatory authorities in the event that our customers’ preclinical trials are filed as part of an Investigational New Drug application to seek authorization to begin clinical trials, or their clinical trials are filed as part of a New Drug Application, Biologic License Application or other filing to seek marketing approval. These regulatory authorities may conduct scheduled or unscheduled periodic inspections of our facilities to monitor our regulatory compliance. We may not pass inspections or obtain clearance for our operations from the regulatory authorities, either immediately or over time. A material violation by us of Good Laboratory Practice or Good Manufacturing Practice requirements, as determined by the FDA or other regulatory authorities, could cause our customers to terminate their contracts with us.

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Any failure to comply with existing regulations and industry standards could result in fines or other punitive actions against us or our customers, the termination of ongoing research and the disqualification of data for submission to regulatory authorities. For example, if we fail to treat research animals in accordance with international standards set out by the Association for Assessment and Accreditation of Laboratory Animal Care, or AAALAC, that organization could revoke accreditation, and the accuracy of our animal research data could be questioned. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses, divert our management’s attention from the operation of our business and damage our reputation. Other relevant laws and regulations include those that are described in Item 4.A, “History and Development of the Company—Chinese Government Regulations,” notably the Labor Contract Law, the PRC Drug Administration Law, the 1998 Interim Measures relating to human genetic resources and regulations described in “History and Development of the Company—Regulations in the United States and other Jurisdictions.” Any adverse action by regulatory authorities could have a material and adverse impact on our reputation and our business, including our financial condition, results of operations, cash flows and prospects.

Changes in government regulation or in practices relating to the pharmaceutical, biotechnology and medical device industries, including healthcare reform, could decrease demand for the services we provide, and compliance with new regulations may result in additional costs.

Governmental agencies throughout the world, particularly in the United States, strictly regulate the pharmaceutical, biotechnology and medical device R&D process. Changes in regulations, such as a relaxation in regulatory requirements, the introduction of simplified drug approval procedures or an increase in regulatory requirements that we may have difficulty satisfying or that may make our services less competitive could eliminate or substantially reduce the demand for our services.

In addition, recent laws and regulations may increase our risk of liability, increase our costs or limit our service offerings. For example, regulations and guidance worldwide concerning the production and use of laboratory animals for research purposes continues to be updated. For example, the European Directive 2010/63/EU requires new standards for animal housing and accommodations that require implementation by 2017. Other relevant laws and regulations include those that are described in Item 4.A, “History and Development of the Company—Chinese Government Regulations,” notably regulations relating to the China (Shanghai) Pilot Free Trade Zone, PRC regulations relating to inventor remuneration, the 1998 Interim Measures relating to human genetic resources and regulations described in “History and Development of the Company—Regulations in the United States and other Jurisdictions.” Some of these laws and regulations require additional operating and capital expenses that have impacted and will continue to impact not only us and our competitors, but also clients through both changes in the pricing of goods and services and changes in their own operations.

If we fail to comply with the U.S. Foreign Corrupt Practices Act or other anti-bribery laws, our reputation may be harmed and we could be subject to significant penalties and expenses that could have a material adverse effect on our business, financial condition and results of operations.

Although we are a China-based company, we are subject to the Foreign Corrupt Practices Act, or FCPA, enacted in the United States. The FCPA generally prohibits us from making improper payments to foreign officials for the purpose of obtaining or retaining business. We are also subject to the anti-bribery laws of other jurisdictions, particularly China. As our business has expanded, the applicability of the FCPA and other anti-bribery laws to our operations has increased. Our procedures and controls to monitor anti-bribery compliance may fail to protect us from reckless or criminal acts committed by our employees or agents. If we fail to comply with applicable anti-bribery laws due to our own deliberate or inadvertent acts or those of others, our reputation could be harmed and we could incur criminal or civil penalties, other sanctions and significant expenses, which could have a material adverse effect on our business, including our financial condition, results of operations, cash flows and prospects.

Our customer agreements contain provisions that run counter to our interests or expose us to potential liability.

Our customers’ agreements generally provide that the customers can terminate their agreements with us or reduce the scope of services we provide to them with little or no notice. Most of our customer contracts allow customers to unilaterally terminate the contract for convenience upon prior notice ranging from 30 to 90 days. If a customer terminates a contract with us, under the terms of the contract we are only entitled to receive revenues earned up to the date of termination. Therefore, cancellation or modification of one large contract, or proximate cancellation or modification of multiple smaller contracts, could materially and adversely affect our business, including its financial condition, results of operations, cash flows and prospects.

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In addition, in some of our customer contracts, we agree not to compete with the customer, either alone or together with third parties. We are required to seek a customer’s prior written consent before making compounds for other customers chemically or pharmacologically similar to those made for the customer. For some customers, our non-compete obligation is broad. Complying with these non-compete obligations may restrict our ability to expand certain service offerings, and failure to comply could significantly harm our business and reputation, as well as expose us to liability for breach of contract.

Any failure by us to meet our customers’ standards in audits and inspections could harm our reputation.

Our customers audit and inspect our facilities, processes and practices to ensure that our services are meeting their standards in the pharmaceutical and medical device product development process. To date, we have passed all such audits and inspections. However, failure to pass these audits or inspections to our customers’ satisfaction could significantly harm our reputation and could materially and adversely affect our business, including its financial condition, results of operations, cash flows and prospects.

If we fail to protect our customers’ or our own intellectual property (IP) rights, we may be subject to liability for breach of contract and may suffer damage to our reputation.

Our success depends on the protection of our customers’ and our own intellectual property, or IP. Our customers provide us with their trade secrets and other IP and generally own the IP created in connection with the services we provide. This is particularly important for us because a large part of our operations is based in China, and China and Chinese companies have not traditionally enforced IP protection to the same extent as the United States and other Western countries. Despite measures we take to protect our customers’ or our own IP, unauthorized parties may attempt to obtain and use it. For example, in 2011 a junior employee stole and sold sample amounts of two patented chemical compounds that we had made for a customer. The employee was apprehended and subsequently convicted on May 22, 2012. Such events may subject us to liability for breach of contract, as well as significantly damage our reputation, and their remediation may significantly divert management’s attention and other resources from other activities. This could materially harm our business, including its financial condition, results of operations, cash flows and prospects.

In some of our customer agreements, we have assumed indemnification obligations for IP infringement to the extent that we create the infringing aspect in deliverables by our customers. Our liability is usually not capped under these agreements. As a result, if any aspect of deliverables to our customers that we create infringes a third party’s IP rights, and particularly if such deliverable ultimately becomes a commercially successful product, we could be exposed to substantial liability.

We may undertake acquisitions or joint ventures or make equity investments that may have a material adverse effect on our ability to manage our business and may end up being unsuccessful.

Acquisitions and Joint Ventures. Our growth strategy may involve acquisitions of new technologies, businesses, products or services or the creation of strategic alliances. For example, in September 2012, we formed WuXi MedImmune Biopharmaceutical Co. Ltd, or WuXi MedImmune, a joint venture with MedImmune, the global biologics arms of AstraZeneca, to develop and commercialize MEDI5117, a novel biologic for autoimmune and inflammatory diseases, in China. In April 2013, we formed a joint venture with PRA, WuXi PRA Clinical Research Services Co., Ltd., to offer a broad platform of Phase I-IV clinical trial services in China, Hong Kong and Macau. In October, 2014, we acquired XenoBiotic Laboratories, Inc., a contract research organization to enhance our bioanalytical, drug metabolism and pharmacokinetic service capabilities. In January 2015, we acquired NextCODE Health, or NextCODE, to enhance our genomic analysis and bioinformatics capabilities.

Integration of an acquired company or technology into our own operations is a complex, time-consuming and expensive process. The successful integration of an acquisition requires, among other things, that we integrate and retain key management, sales and other personnel; integrate the acquired products and services into our product and service offerings from both an engineering and a sales and marketing perspective; integrate and support preexisting supplier, distribution and customer relationships; coordinate research and development efforts; and consolidate duplicate facilities and functions.

The geographic distance between companies, the complexity of the technologies and operations being integrated and the disparate corporate cultures being combined may increase the difficulties of integrating an acquired company or technology. Management’s focus on the integration of operations may distract attention from our day-to-day business and may disrupt key research and development, marketing or sales efforts. In addition, it is common in the technology industry for aggressive competitors to attract customers and recruit key employees away from companies during the integration phase of an acquisition.

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Investments. If we are presented with appropriate opportunities, we may acquire or make minority equity investments in businesses that are complementary to our existing businesses or can leverage WuXi’s service platform to create significant value. In 2011, we formed a corporate venture fund structured using PRC and offshore entities to facilitate RMB and U.S. dollar investments. We own 100% of this fund, to which we have made a capital funding commitment of up to $50 million, with an investment focus on technology and life-science companies. As of December 31, 2014, through this venture fund we had invested approximately $36.1 million in investees, including investments in biopharmaceutical companies of $32.5 million and industry funds of $3.6 million. As of December 31, 2014, we have realized $23.6 million in gains from three portfolio companies into which we had made $7.0 million of investments.

Our available cash and stock may be used to buy or invest in companies or products, possibly resulting in significant acquisition-related charges to earnings and dilution to our shareholders. Future acquisitions or equity investments will likely present challenges and could require that our management develop expertise in new areas, manage new business relationships and attract new types of customers. The diversion of our management’s attention and any difficulties encountered in these acquisitions and equity investments could have an adverse effect on our ability to effectively manage our own business. These acquisitions and equity investments may also expose us to other potential risks, including loss of the invested amounts, inability to earn an adequate return, unforeseen liabilities, diversion of resources from our existing businesses and potential harm to relationships with employees or customers.

Our principal laboratory and manufacturing facilities may be vulnerable to natural disasters or other unforeseen catastrophic events.

We conduct our primary R&D activities in the China (Shanghai) Pilot Free Trade Zone in Waigaoqiao (previously called the Waigaoqiao Free Trade Zone). We also conduct or plan to conduct R&D and/or manufacturing activities at seven other facilities in China located in the Jinshan area of Shanghai, Tianjin, Suzhou, Wuhan, Changzhou, Nanjing and Wuxi and at five United States facilities in St. Paul, Minnesota; Philadelphia, Pennsylvania; San Diego, California; Atlanta, Georgia and Lansdale, Pennsylvania. We depend on these facilities for continued business operations. Natural disasters or other unanticipated catastrophic events, including power interruptions, water shortages, storms, fires, earthquakes, terrorist attacks and wars, could significantly impair our ability to operate our business. Our facilities and certain equipment located in these facilities would be difficult to replace in any such event and could require substantial replacement lead time. The occurrence of any such event could materially and adversely affect our business, including its financial condition, results of operations, cash flows and prospects.

We have limited insurance coverage, and any claims beyond our insurance coverage may result in our incurring substantial costs and a diversion of resources.

We maintain property insurance policies covering physical damage to, or loss of, our buildings and their improvements, equipment, office furniture and inventory. We hold employer’s liability insurance generally covering death or work-related injury of employees. We maintain product liability and professional errors and omissions insurance covering product liability claims arising from the use, consumption or operation of our small-molecule compounds and biologics and claims arising from negligence in connection with our services to customers. We hold public liability insurance covering certain incidents involving third parties that occur on or in the premises of the company. We hold directors and officers liability insurance. We do not maintain key-man life insurance on any of our senior management or key personnel, or business interruption insurance. Our insurance coverage may be insufficient to cover any claim for product liability, damage to our fixed assets or employee injuries. To our knowledge, insurance companies in China do not offer business liability insurance. Any liability or damage to, or caused by, our facilities or our personnel beyond our insurance coverage may result in our incurring substantial costs and a diversion of resources.

We may be liable for contamination or other harm caused by hazardous materials that we use.

Our pharmaceutical and medical device R&D processes involve the use of highly toxic and hazardous materials. Any failure by us to control the use or discharge of hazardous substances could subject us to potentially significant monetary damages and fines or suspensions in our business operations. We cannot fully eliminate the risk of contamination or injury resulting from hazardous materials, and we may incur liability as a result of any contamination or injury, which could have a material adverse impact on our business, including its financial condition, results of operations, cash flows and prospects.

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Compliance with environmental regulations can be expensive, and noncompliance with these regulations may result in adverse publicity and potentially significant monetary damages and fines.

As our pharmaceutical, biotechnology and medical device R&D processes generate wastewater and toxic and hazardous substances and other industrial wastes, we must comply with all national and local environmental regulations in the countries in which we operate. Because the requirements imposed by environmental laws and regulations may change and more stringent regulations may be adopted, we may be unable to comply with, or to accurately predict the potentially substantial cost of complying with, these laws and regulations. If we fail to comply with environmental regulations, we may be required to pay substantial fines, suspend production or cease operations. In addition, we cannot eliminate the risk of accidental contamination or injury from hazardous materials. If we fail to prevent contamination or injury, we could be liable for any resulting damages, which could have a material and adverse impact on our business, including our financial condition, results of operations, cash flows and prospects.

Negative attention from special interest groups may impair our ability to operate our business efficiently.

Some of our current services involve testing pharmaceuticals and medical devices in laboratory animals. Some of the laboratory animals we work with are large animals, including non-human primates. Although the testing of pharmaceuticals in laboratory animals is mandated by law, certain special-interest groups categorically object to the use of animals for these research purposes. Any threats directed against our animal research activities or any negative media attention could impair our ability to operate our business efficiently. In addition, if regulatory authorities were to mandate a significant reduction in safety testing procedures that utilize laboratory animals, as has been advocated by certain groups, our business could be materially and adversely affected.

In providing our pharmaceutical, biotechnology and medical device R&D outsourcing services, we face health and safety liability and product liability risks.

In providing our pharmaceutical development services, we face a range of potential liabilities. For example, animals serving as disease models and animals infected with diseases for research purposes may be harmful, or even lethal, to humans despite preventive measures we take for animal quarantine and handling.

We also face product liability risks if the pharmaceuticals and medical devices we help to develop and manufacture are subject to product liability claims. We provide services in the development, testing and manufacturing of pharmaceuticals and medical devices that are intended ultimately to be used in humans, either in clinical trials or as marketed products, although we do not commercially market or sell these products to end users. If any of these pharmaceuticals or medical devices harms people, we may be subject to litigation and may be required to pay damages to those people. Damages awarded in a product liability action could be substantial and could have a material and adverse impact on our business, including its financial condition, results of operations, cash flows and prospects. Although we currently maintain product liability and professional errors and omissions insurance, our insurance coverage may be inadequate or may become unavailable on terms acceptable to us.

Our recently announced growth strategies and initiatives subject us to new and enhanced risks and uncertainties, which could adversely impact our financial condition, results of operations, cash flows and prospects.

We are pursuing several new strategic growth strategies and initiatives—construction of new small-molecule and biologics manufacturing facilities, listing and issuance of shares of SynTheAll Pharmaceutical Co. Ltd., or STA, investing in genomics/bioinformatics, investing in mobile technologies and investing in China healthcare initiatives—to expand our service offerings and to position us to introduce new services and products. These initiatives will require significant financial investment and management attention, involve significant execution risk, present new or different challenges and risks and subject us to additional regulatory oversight and review. Our strategies and initiatives may fail, and we may not achieve the desired benefits or returns on a timely basis or at all.

Our new small-molecule and biologics manufacturing facilities under construction might not earn a satisfactory return on investment.

We are in the process of significantly expanding both our small-molecule manufacturing capacity and our biologics manufacturing capacity in China. These businesses are significantly more capital intensive than our laboratory services business. Ongoing and planned investments include construction of facilities for process chemistry, research manufacturing and commercial manufacturing of small molecules in Changzhou and for commercial manufacturing of biologics in Wuxi. Completion of these new facilities could be delayed due to construction, regulatory or licensing issues. Costs of construction could exceed budgeted amounts, divert resources from other productive uses in the company and consume significant amounts of management time. Construction is likely to entail borrowing costs, including interest payments that would reduce cash amounts available for other productive uses. We may be unable to obtain sufficient work orders to effectively utilize these facilities in the near term or at all. Products manufactured at these new facilities may fail to meet regulatory requirements or our customers’ quality standards. We do not have prior previous experience in manufacturing biologic drugs on a commercial scale.

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Our listing of the shares of STA, our small-molecule manufacturing subsidiary, on stock exchanges in China may not provide its anticipated benefits, and the listing could negatively impact holders of our ADSs.

We conduct our small-molecule manufacturing operations exclusively in China through our PRC subsidiary STA. To provide STA with the ability and flexibility to raise cash from Chinese capital markets for facility expansion and mergers and acquisitions, on April 3, 2015 we listed STA on the newly established over-the-counter stock exchange in China (commonly referred to as the New Third Board). In connection with this listing, we did not publicly offer STA shares upon listing, and we may not publicly offer STA shares in the near-term or at all. Our ability to offer STA shares is subject to various PRC exchange and regulatory filings and approvals, and the policies to enable NEEQ-registered companies to transfer to the GEM exchanges are not expected to be introduced until the second half of 2015. As a result, there are significant timing, qualification and other uncertainties in connection with these possible actions.

We may incur costs, including share-based compensation charges, in connection with STA’s listing and possible share offerings. STA’s management and employees may receive stock options and other STA equity incentive grants. Even if STA remains our consolidated subsidiary, the ownership interest of our ADS holders in the earnings of STA’s operations could be diluted, depending on the amount of cash raised, the returns on that cash and the manner in which that cash is raised (debt or equity). Volatility in the trading price of our ADSs may increase due to events more specifically impacting STA’s trading price and operations. Cash raised by issuing shares of STA may not be sufficient to fund STA’s capital needs, and STA’s operation as a listed company may result in distraction of WuXi management. Our influence over the election of STA’s board of directors will be impacted if STA’s shareholders appoint directors who are independent of WuXi.

Investments in our genomics/bioinformatics business may fail to produce satisfactory returns to our ADS holders.

We have acquired NextCODE Health and have begun integrating it with our China-based WuXi Genome Center to create WuXi NextCode Genomics Inc. Our China-based WuXi Genome Center primarily provides genomic services to support research and clinical development conducted by biopharmaceutical companies and academic research institutions. This acquisition, among other anticipated benefits, positions us to offer new genomic and bioinformatic products and services; to expand our customer base to include hospitals, doctors and patients; and to become a leader in the advancement of personalized medicine, with a particular focus on China and the United States. Areas where we are considering the development of new products and services include diagnostic products for rare pediatric diseases, cancer panels and executive health check services.

We may not succeed in developing some or all of our planned genomic and bioinformatic products and services without significant additional investments. Expansion of our combined genomics business will require significant outside funding. Products and services that we develop and launch may not compete effectively with those of more established and better financed competitors. The market for genomic analysis and bioinformatics and related drug discovery and development is rapidly evolving, with business models changing in ways that we may not anticipate. The business model we are developing for our combined genomics business may not prove to be viable or our business profitable. As a company that historically has provided pharmaceutical R&D services to other companies, we have no track record in selling and marketing our services and products directly to consumers and their representatives, such as hospitals, doctors and patients. To effectively sell and market these products, we must hire additional qualified personnel in medical genetics, genomics and bioinformatics, among other areas.

Additionally, the regulatory environment for activities involving genomics in China is still unclear and evolving. New laws and regulations may be adopted from time to time to address evolving issues and concerns. We may be unable to obtain or maintain the required licenses to allow us to offer specified genomics-related products and services in China. As a result, substantial uncertainties exist regarding the interpretation and implementation of current and any future PRC laws and regulations applicable to the genomics industry. For example, in February 2014 the CFDA and the National Health and Family Planning Commission, or NHFPC, issued a notice regarding strengthening administration on use of products and technologies related to gene sequencing in clinical applications. The notice ordered an immediate halt to gene sequencing practices in clinical applications in China except for those already operating on a trial basis after approval.

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We are currently evaluating the potential legal structure of our combined genomics business, and that structure may entail additional risks. Foreign investments in the development and application of genetic diagnosis and treatment are currently prohibited in China pursuant to the Foreign Investment Industrial Guidance Catalogue, most recently amended in March 10, 2015, and effective as of April 10, 2015, or the Foreign Investment Catalog. To allow us (as a Cayman entity) or one of our PRC subsidiaries (as a foreign invested enterprise) to engage in potentially prohibited activities, including the formation of our WuXi Genome Center, and to develop our related strategy, we expect to conduct the relevant portion of our genomics business indirectly through an affiliated entity owned by PRC shareholders. These arrangements—commonly referred to as a variable interest entity, or VIE—rely on a series of related contractual agreements with the affiliated entity and its shareholders. Among other risks, these indirect ownership arrangements are often not as effective as direct ownership and operation of the business, they may limit our ability to receive dividends from or transfer funds to the affiliated entity, and the interests of the affiliated entity’s shareholders may not be fully aligned with ours. In addition, in January 2015, the Ministry of Commerce of the People’s Republic of China released a draft Foreign Investment Laws of the PRC, or the Draft FIL, that appears to include VIEs within the scope of entities considered to be foreign invested enterprises subject to the restrictions under existing PRC law on foreign investment. It is unclear if or when the Draft FIL will be adopted and, if adopted, how the related rules and interpretations will impact our ability to develop and offer genomics diagnostic and treatment products directly or through an affiliate entity. If we (or any affiliated entity) (1) are found to be in violation of any existing or future PRC laws or regulations or (2) fail to obtain or maintain required licenses, permits or approvals, the relevant PRC regulatory authorities would have broad discretion in handling these violations, which may include revoking our related business and operating licenses; imposing conditions on our operations; requiring us to discontinue or limit operations of the related business; or requiring us to restructure our ownership structure or operations. Any of these limitations or requirements could have a material adverse effect on our business and impact our ability to offer genomics-based diagnostic products and services and expand our genomics business in China.

Moreover, we rely on a limited number of suppliers, or, in some cases, sole suppliers, including Illumina., Inc. and Life Technologies Inc., for sequencers, reagents and other equipment used in our genomics/bioinformatics business. Any failure of this equipment or interruption of these supply arrangements could significantly harm our business.

Our risk of legal liability increases significantly as we sell and market products directly to consumers, such as hospitals, doctors and patients. We must comply with legal requirements regarding the impact of our products on patients, as well as with legal requirements regarding the protection and appropriate use of personal medical information.

Doctors and other individuals involved in the procurement process in China may seek illegal compensation in exchange for their commitment to purchase or prescribe our products and services. In China, hospitals are often state-owned, and doctors are often employed by these state-owned enterprises. These doctors and other individuals may also be considered “government officials” for purposes of the Foreign Corrupt Practices Act, or FCPA, increasing our exposure to FCPA-related risks.

We may incur costs, including share-based compensation charges, in connection with the creation of a combined genomics/bioinformatics business. Our ownership interest in the operations of such a business would be diluted to the extent equity is issued to third parties and WuXi NextCode Genomics Inc.’s management and employees.

Investments in our LabNetwork.com and WuXi V-Lab mobile technology platforms may fail to produce satisfactory returns to our ADS holders.

In 2015, we launched LabNetwork.com, a global mobile technology platform for connecting buyers to sellers of highly pure and rare research chemicals. We plan initially to offer our own chemical products through this platform and subsequently to offer chemicals from other vendors. The platform’s longer-term success depends, among other things, on its ability to offer a stable and secure trading platform with a sufficient number of qualified buyers and sellers, the quality of the chemicals sold through the platform and sustained transactional volume to recover its costs and provide an adequate return on investment. Certificates of analysis provided by WuXi to buyers could entail risk if the quality of chemical products provided by third-party vendors is substandard.

In 2015, we also launched WuXi V-Lab, a mobile app to offer small-molecule compound synthesis services to the global research community. Success of this computer application depends, among other things, on its ease of use, speed and flexibility for our customers.

The operation of the LabNetwork.com and WuXi V-Lab must comply with various regulatory requirements regarding internet information services. We may be subject to legal liability if we fail to comply with these regulations, especially if we operate LabNetwork.com and Wuxi V-Lab in China, where the provision of internet information services is highly regulated.

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Investments in our China Healthcare Initiatives may fail to produce satisfactory returns to our ADS holders and subject us to new and enhanced risks and uncertainties.

We are investing in several initiatives to provide products and services directly to doctors, patients, and hospitals in China, and we may undertake other similar or different China healthcare initiatives in the future.

We are developing and plan to offer for sale to doctors, patients and hospitals certain clinical tests, such as BRCA1/BRCA2 diagnostic tests for breast cancer and liquid biopsy and lung fusion tests for lung cancer. Offering for sale such diagnostic products entails that we fully comply with legal and regulatory requirements for such products. For example, these clinical tests may not accurately or completely diagnose the disease condition of every patient tested.

We are developing MEDI5117, an anti-IL 6 antibody for treatment of rheumatoid arthritis, for the China market in a joint venture with MedImmune, the biologics division of AstraZeneca. Development of this product, like that of all pharmaceuticals, may not be successful due to the inability of the joint venture to demonstrate efficacy or safety sufficient to obtain regulatory approval. AstraZeneca will be responsible for sales and marketing of this product. Even if approved, the product may not generate sufficient sales to recover development costs and to earn a profit. We may enter into other drug development partnerships with our customers for the China market.

We plan to create a business in China to offer cell therapies to patients. Autologous cell therapies involve harvesting cells, such as T cells, from a patient, engineering them to fight diseases such as certain cancers and reintroducing them into the same patient. Allogeneic cell therapies involve use cells of patients other than those of the patient being treated. Marketing these products would subject us to additional regulatory and licensing requirements and expose us to potential product liability laws in China.

In 2014, we launched Boshi360.com, a Chinese-language web portal that has the potential to provide approximately 16.8 million Chinese patients with rare diseases access to information, professional consultation and other services. Providing this web portal requires that we comply with the relevant legal and regulatory requirements and subjects us to risk regarding the information on the portal. For example, statements on the portal made by ourselves or others may not be accurate or complete. Services to diagnose or treat rare diseases discussed on the portal may not benefit, or may harm, patients. Our legal obligations for providing the venue for such discussions remain unclear. The provision of information on the internet is highly regulated in China, and the regulations frequently change. We obtained an Internet Drug Information Certificate in March 2015 for drug information published on Boshi360 and are in the process of applying for the Internet Medical and Health Information Certificate for providing medical and health information on Boshi360. Although we do not believe additional certificates or approvals for the operation of Boshi360 are necessary at this time, regulators may determine that other certificates or approvals are required, and we may be subject to legal liability for any failure to obtain such additional certificates or approvals.

We may be unable to maintain an effective system of internal control over financial reporting, and as a result we may be unable to accurately report our financial results or prevent fraud.

We are subject to provisions of the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley. Section 404 of Sarbanes-Oxley requires that we include a report from management on our internal control over financial reporting in our annual reports on Form 20-F. In addition, our independent registered public accounting firm must attest to, and report on, the effectiveness of our internal control over financial reporting. While our management concluded that our internal control over financial reporting was effective as of December 31, 2014, our management may later conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm may disagree. If our independent registered public accounting firm is not satisfied with our internal control over financial reporting or the level at which our internal control over financial reporting is designed, documented, operated or reviewed, or if they interpret the requirements, rules or regulations differently from the way we do, then they may issue an adverse or qualified opinion on our consolidated financial statements.

Any of these outcomes could result in a loss of investor confidence in the reliability of our audited consolidated financial statements, which could materially and adversely affect the trading price of our ADSs. Our reporting obligations as a public company could place a significant strain on our managerial, operational and financial resources and systems for the foreseeable future.

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Restrictions on our operations contained in agreements relating to bank loans may limit how we conduct our business.

We have entered into several lending facilities in connection with the funding of our global business, including a $165 million syndicated loan facility entered into in February 2015. The related loan agreements include terms that may limit the manner in which we conduct our business, including terms relating to our maintenance of debt-related financial ratios within certain thresholds and limits on our indebtedness and the indebtedness of our PRC subsidiaries. These financial ratio covenants could limit our operational flexibility and could prevent us from taking advantage of business opportunities to build our business or compete effectively. A failure to maintain these ratios to comply with other provisions in these loan agreements could result in a default, which, if not cured or waived, could result in such debt becoming immediately due and payable. This, in turn, could cause our other debt to become due and payable as a result of cross-acceleration provisions contained in the agreements governing such other debt.

We may need additional capital that we may be unable to obtain in a timely manner on acceptable terms.

In order to expand our capacity, develop new services and remain competitive, we may require additional capital. Financing may be unavailable in amounts or on terms acceptable to us. Our ability to obtain additional capital is subject to a variety of uncertainties, including our future financial condition; results of operations and cash flows; general market conditions for capital-raising activities by life-science and related companies; and economic, political and other conditions in China, the United States and other countries. The sale of additional equity or equity-linked securities could result in dilution to the shares held by our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants restricting our operations or our ability to pay dividends.

We depend on information technology and other infrastructure that face security, including cyber security, risks.

We rely on a variety of information technology and automated operating systems to manage or support our operations, including protecting our customers’ intellectual property, or IP. We have begun to switch from the use of physical notebooks to electronic notebooks for many of our customers. The proper functioning of these systems is critical to the efficient operation and management of our business. In addition, these systems may require modifications or upgrades as a result of technological changes or growth in our business. These changes may be costly and disruptive to our operations and could impose substantial demands on management time. Our systems and those of third-party providers may be vulnerable to damage or disruption caused by circumstances beyond our control, such as catastrophic events, power outages, natural disasters, computer system or network failures, viruses or malware, physical or electronic break-ins, unauthorized access, cyberattacks and thefts. Although we take steps to secure our systems and electronic information, these security measures may not be adequate. Any significant disruption to our systems could adversely affect our business and operating results.

Risks Relating to China

The discontinuation of any of the preferential tax treatments currently available to us in the PRC or imposition of any additional PRC taxes on us could adversely affect our financial condition, results of operations, cash flows and prospects.

The Enterprise Income Tax Law, or the EIT Law, and its implementing rules became effective January 1, 2008. The EIT Law and its implementing rules permit certain “high and new technology enterprises,” or HNTEs, to enjoy a reduced 15% EIT rate subject to certain general factors described in the EIT Law and the related regulations. In the fourth quarter of 2008, our PRC subsidiaries WXAT, WASH, WATJ and STA were recognized by the local provincial level Municipal Science and Technology Commission, Finance Bureau and State and Local Tax Bureaus as HNTEs under the EIT Law. Therefore WXAT, WASH, WATJ and STA are eligible to enjoy a preferential tax rate of 15% as long as they maintain their qualification as an HNTE. According to the three-year review schedule regulated by the relevant government authority, WASH, WATJ and STA re-applied for their HNTE qualification in 2014. Thus, those three entities are eligible to enjoy a preferential tax rate of 15% for 2014 through 2016. In 2010, WASZ, located in Suzhou, was recognized as an HNTE and successfully renewed its certificate as an HNTE in 2013, making it eligible to enjoy a 15% preferential tax rate as an HNTE from 2010 through 2015. In the third quarter of 2012, STA R&D, Abgent SZ and WAWH were recognized as HNTEs under the EIT Law and are eligible to enjoy a preferential tax rate of 15% for calendar years 2012 through 2014. STA R&D obtained approval from the relevant tax authority to enjoy the one-year exemption and three-year 50% deduction (“1+3 tax holiday”) in April 2013, thus STA R&D became eligible for the income tax rates of 0%, 12.5%, 12.5%, and 12.5% for 2012 through 2015. WABIO also was recognized by the local provincial Municipal Science and Technology Commission, Finance Bureau and State and Local Tax Bureaus as HNTEs under the EIT Law. Therefore, WABIO is eligible to enjoy a preferential tax rate of 15% for 2013 through 2015. The continued qualification of HNTE status is subject to three-year renewal and annual evaluation by the relevant PRC government authorities. If any or all of these entities fail to maintain the HNTE qualification, their applicable EIT rate may increase to up to 25%, which could have a material adverse effect on our results of operations.

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Preferential tax treatment granted to our subsidiaries by local governmental authorities is subject to review and may be adjusted or revoked at any time. The discontinuation of any preferential tax treatment currently available to us and our consolidated subsidiaries would cause our effective tax rate to increase, which could have a material adverse effect on our financial condition, results of operations, cash flows and prospects. We may be unable to maintain our current effective tax rate.

Under China’s EIT Law, we may be classified as a “resident enterprise” of China. This classification could result in unfavorable tax consequences to us and our non-PRC shareholders.

Under China’s EIT Law, an enterprise established outside of China with “de facto management bodies” within China is considered a “resident enterprise,” meaning that it can be treated in a manner similar to a Chinese enterprise for EIT purposes. A tax circular issued by the PRC State Administration of Taxation on April 22, 2009, or Circular 82, regarding the standards used to classify resident enterprises clarified that dividends and other disbursements paid by such resident enterprises will be considered to be PRC source income, subject to PRC withholding tax, currently at a rate of 10%, when received or recognized by non-PRC resident enterprise shareholders. This circular also subjects such resident enterprises to various reporting requirements with the PRC tax authorities. The implementing rules of the EIT Law define “de facto management bodies” as “management bodies that exercise substantial and overall management and control over the production and operations, personnel, accounting, and properties” of the enterprise. In addition, Circular 82 specifies that certain China-invested enterprises controlled by Chinese enterprises or Chinese group enterprises will be classified as resident enterprises if the following are located or resident in China: senior management personnel and departments that are responsible for daily production, operation and management; financial and personnel decision-making bodies; key properties, accounting books, company seal, and minutes of board meetings and shareholders’ meetings; and half or more of senior management or directors having voting rights. On July 27, 2011, the PRC State Administration of Taxation issued Administrative Measures of Enterprise Income Tax of Chinese-Controlled Offshore Incorporated Resident Enterprises (Trial), or Bulletin 45, which became effective on September 1, 2011, to provide further guidance on the implementation of Circular 82. Bulletin 45 clarifies certain issues related to determining PRC resident enterprise status, including which competent tax authorities are responsible for determining offshore incorporated PRC resident enterprise status, as well as post-determination administration. Bulletin 45 specifies that when provided with a copy of a Chinese tax resident determination certificate issued by the competent tax authorities from an offshore incorporated PRC resident enterprise, the payer should not withhold 10% income tax when paying Chinese-sourced dividends, interest and royalties to the PRC resident enterprise. In 2014, the State Administration of Taxation, or SAT, released the Announcement of the SAT on Issues Concerning the Recognition of Chinese-Controlled Enterprises Incorporated Overseas as Resident Enterprises on the Basis of Their Actual Management Bodies, or Bulletin 9 and supplemented some provisions on the administrative procedures for the recognition of resident enterprise, while the standards used to classify resident enterprises in Circular 82 remain unchanged.

Currently, most of the members of our management team as well as the management team of some of our offshore holding companies are located in China. However, Circular 82 and Bulletin 45 only apply to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreign corporations like us. In the absence of detailed implementing regulations or other guidance determining that offshore companies controlled by PRC individuals or foreign corporations like us are PRC resident enterprises, we do not currently consider our Company or any of our overseas subsidiaries to be a PRC resident enterprise.

However, the State Administration of Taxation may take the view that the determining criteria set forth in Circular 82 and Bulletin 45 reflect the general position on how the “de facto management body” test should be applied in determining the tax resident status of all offshore enterprises. Additional implementing regulations or guidance may be issued determining that our Cayman Islands holding company is a “resident enterprise” for PRC enterprise income tax purposes. If the PRC tax authorities determine that our Cayman Islands holding company is a resident enterprise for PRC EIT purposes, a number of unfavorable PRC tax consequences could follow. First, we may be subject to EIT at a rate of 25% on our worldwide taxable income, as well as to PRC EIT reporting obligations. Second, although under the EIT Law and its implementing rules and Bulletin 45 dividends paid by a PRC tax resident enterprise to an offshore incorporated PRC tax resident enterprise controlled by a PRC enterprise or enterprise group would qualify as tax-exempted income, we cannot assure that dividends paid by our PRC subsidiaries to us will not be subject to a 10% withholding tax, as the PRC foreign-exchange control authorities and tax authorities have not yet issued guidance with respect to the processing of outbound remittances to entities that are treated as resident enterprises for PRC EIT purposes but not controlled by a PRC enterprise or enterprise group like us. Finally, the EIT Law and its implementing rules issued by PRC tax authorities suggest that dividends paid by us to our non-PRC shareholders and, while less clear, capital gains recognized by them with respect to the sale of our stock may be subject to a withholding tax of 10% for non-PRC enterprise shareholders and potentially 20% for non-PRC individual shareholders. Similarly, these unfavorable consequences could apply to other offshore companies if they are classified as a PRC resident enterprise.

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The discontinuation of any of the financial incentives currently available to us in the PRC could adversely affect our financial position, results of operation, cash flows and prospects.

Since the inception of our business, we have benefited from exemptions and subsidies with respect to income tax and sales tax. Our eligibility to receive these financial incentives requires that we continue to qualify for them. The incentives are subject to the discretion of the central government or relevant local government authorities, which could determine at any time to immediately eliminate or reduce these financial incentives, generally with prospective effect. Since our receipt of the financial incentives is subject to periodic time lags and inconsistent government practice, for as long as we continue to receive these financial incentives our net income in a particular period may be higher or lower relative to other periods based on the potential changes in these financial incentives in addition to any business or operational factors that we may otherwise experience. For example, we expect downward pressure on margins on goods manufactured for export due to changes in China’s VAT system, reducing the potential VAT export refund rate on certain categories of goods from 15% to 0%.

We face uncertainty from PRC VAT reform, which could result in unfavorable tax consequences to us.

On October 26, 2011, the State Council of China approved a new tax rule to launch the VAT reform pilot program in Shanghai on January 1, 2012. On November 16, 2011, China’s Ministry of Finance and the State Administration of Taxation, or SAT, jointly issued the Circular on the Pilot Program for the Collection of Value Added Tax Instead of Business Tax, or Circular 110, and the Circular on the Pilot Program for the Collection of Value Added Tax Instead of Business Tax in Transportation and Certain Modern Service Sectors in Shanghai, or Circular 111, to provide specific implementation rules for the pilot program, which became effective January 1, 2012. As part of a tax replacement policy, Circular 110 and Circular 111 allow companies in the traffic and transport sector and certain modern service sectors in Shanghai to pay a VAT instead of the business tax. Since January 1, 2012, a 17% rate has applied to the movable property leasing sector, an 11% rate to the traffic and transport sector and a 6% rate to sectors related to research and development, technological services, culture, logistics and consultation. According to the existing business tax rules, our revenue from R&D services is subject to a 5% business tax on gross revenue, while the recovery of the input VAT incurred on the purchase of raw materials and VAT-able service is disallowable. Under the new VAT reform pilot program, our R&D service revenue will be subject to a 6% VAT on revenue; however, the input VAT incurred on the purchase of raw materials and VAT-able services is recoverable and can be used as a credit when calculating VAT. Under both the business tax rules and the new VAT reform pilot rules, the revenue from R&D services can be eligible for the exemption policy if the R&D services meet certain standards and receive a certification from a Commission of Science or Commission of Commerce at the provincial level. Furthermore, on December 29, 2011, China’s Ministry of Finance and the State Administration of Taxation jointly issued the Notice on Application of a Zero Rate and Exempt Treatment for Certain Taxable Services, or Circular 131, to clarify the scope of taxable services eligible for the zero rate or exemption under the VAT reform pilot program in Shanghai. Circular 131 applies as of January 1, 2012, the same date the pilot program commenced. According to Circular 131, R&D services provided to overseas entities are eligible for the zero-rate policy, which means that no VAT is charged on the invoice to overseas customers and the input VAT associated with the service provided to the customer is fully recoverable. On August 1, 2012, the pilot program was extended to eight other provinces and cities, including Jiangsu Province, Hubei Province and Tianjin city, and on August 1, 2013, the pilot program was further extended nationwide. WASH, the Shanghai branch of WXAT and STA R&D, which are located in Shanghai; the head offices of WXAT and WASZ, which are located in Jiangsu Province; and WAWH and WATJ, which are located in Hubei Province and Tianjin city, respectively, derive their main revenues from R&D services and were subject to this new VAT reform pilot program beginning on January 1, 2012; October 1, 2012; and December 1, 2012, respectively. In addition, the Ministry of Finance and SAT further expanded the VAT pilot program to include the railway transportation and postal services into the scope of the VAT pilot program from January 1, 2014, by the promulgation of the Circular on Including the Railway Transportation and Postal Industries into the VAT Pilot Program, or Circular 106, which superseded Circular 101, Circular 111 and Circular 131. However, the tax policy and favorable tax treatments for the Company remain unchanged under Circular 106.

Fluctuations in exchange rates have resulted in, and continue to result in, foreign-exchange losses and to adversely impact our profitability.

In 2014, more than 81% of our net revenues were generated from sales denominated in U.S. dollars, and a significant portion of our operating costs and expenses were denominated in Renminbi. As a result, when the Renminbi appreciates against the U.S. dollar, our margins are pressured. Although currently the Renminbi exchange rate versus the U.S. dollar is restricted to a rise or fall of no more than 2.0% per day, and the People’s Bank of China regularly intervenes in the foreign-exchange market to prevent significant short-term fluctuations in the exchange rate, the Renminbi may appreciate or depreciate significantly in value against the U.S. dollar in the medium to long term. Moreover, in the future Chinese authorities may lift restrictions on fluctuations in the Renminbi-dollar exchange rate and lessen intervention in the foreign-exchange market. More recently, the PRC government has indicated a strong willingness to introduce two-way volatility in the Renminbi-dollar exchange rate.

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Very limited hedging transactions are available in China to reduce our exposure to exchange-rate fluctuations. We periodically purchase derivative financial instruments such as foreign-exchange forward contracts to manage our exposure to Renminbi-dollar exchange risk. While we may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedges may be limited, and we may not be able to successfully hedge our exposure at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert Renminbi into foreign currency.

Changes in China’s economic, political and social conditions could adversely affect our business, including our financial condition, results of operations, cash flows and prospects.

We conduct a significant portion of our business operations in China. Accordingly, our business, including our financial condition, results of operations, cash flows and prospects, is affected to a significant degree by economic, political and social conditions in China. The PRC economy differs from the economies of most developed countries in many respects, including the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. The PRC government has implemented various measures to encourage, but also to control, economic growth and to guide the allocation of resources. Some of these measures benefit the overall PRC economy but may also have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by changes in tax regulations. These measures may cause decreased economic activity in China, which in turn could adversely affect our business, including our financial condition, results of operations, cash flows and prospects.

The PRC legal system embodies uncertainties that could limit the legal protections available to investors and the Company.

The PRC legal system is a civil law system based on written statutes. Unlike common law systems, it is a system in which decided legal cases have limited precedential value. In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing general economic matters. The overall effect of legislation over the past three decades has significantly increased the protections afforded to various forms of foreign investment in China. Most of our PRC operating subsidiaries are FIEs and are subject to laws and regulations applicable to foreign investment in China as well as laws and regulations applicable to FIEs. These laws and regulations change frequently, and their interpretation and enforcement involve uncertainties. In addition, some regulatory requirements issued by certain PRC government authorities may not be consistently applied by other government authorities, thus making strict compliance with all regulatory requirements impractical or, in some circumstances, impossible. For example, we may have to resort to administrative and court proceedings to enforce the legal protections that we benefit from either by law or contract. However, since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in legal systems in more developed nations. These uncertainties may also impede our ability to enforce the contracts we have entered into. As a result, these uncertainties, together with any development or interpretation of the PRC law that is adverse to us, could materially and adversely affect our business, including our financial condition, results of operations, cash flows and prospects.

PRC regulations relating to offshore investment activities by PRC residents may increase the administrative burden we face and create regulatory uncertainties. A failure by our shareholders who are PRC residents to complete any required applications and filings pursuant to such regulations may prevent us from distributing profits and could expose us and our PRC resident shareholders to liability under PRC law.

The State Administration of Foreign Exchange, or SAFE, has promulgated several regulations that require PRC residents to register with and/or obtain approvals from branches of SAFE in connection with their direct or indirect offshore investment activities. On October 21, 2005, SAFE issued the Notice on Issues Relating to the Administration of Foreign Exchange in Fund-Raising and Reverse Investment Activities of Domestic Residents Conducted via Offshore Special Purpose Companies, or Notice 75, which became effective as of November 1, 2005. Notice 75 requires (a) PRC residents to register with the local SAFE branch before establishing or controlling any offshore company, referred to as an “offshore special purpose company,” for the purpose of acquiring any assets or equity of PRC companies and raising funds from overseas, (b) any PRC resident who is a shareholder of an offshore special purpose company to amend such shareholder’s SAFE registration with the relevant SAFE branch with respect to such company in connection with any increase or decrease of capital, transfer of shares, merger, division, equity investment or creation of any security interest over any assets located in China, and (c) registration by March 31, 2006, of direct or indirect investments previously made by PRC residents in such companies.

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In July 2014, SAFE issued the Notice on Issues Relating to the Administration of Foreign Exchange in Overseas Investment and Financing and Reverse Investment Activities of Domestic Residents Conducted via Special Purpose Companies, or Notice 37, which became effective as of July 4, 2014, and suspended the previous Notice 75. Notice 37 generally maintains the registration requirement of PRC residents with the local SAFE branch for establishing or controlling any offshore company as required under Notice 75, and, in comparison to Notice 75, expands the application of the registration requirement at certain aspects and provides clearer guidance and procedures for the registration requirements. As Notice 37 is newly issued, it is unclear how these regulations will be interpreted and implemented. In addition, different local SAFE branches may have different views and procedures as to the interpretation and implementation of the SAFE regulations.

We previously notified and urged our shareholders who are PRC residents to make the necessary registrations and filings as required under these regulations, and these shareholders have made efforts to register their investments in our company with the local SAFE branch in Wuxi. However, the local SAFE branch in Wuxi declared that registrations under Notice 75 were not required from these shareholders. It remains unclear whether the local SAFE branch in Wuxi correctly interprets Notice 75 as to its application to certain of our shareholders and how Notice 37 and any future PRC legislation concerning offshore or cross-border transactions will be interpreted and implemented by the relevant PRC government authorities. Therefore, we cannot assure you that all relevant shareholders have made or will make and obtain all applicable registrations or filings required by these regulations or other related legislation. If any of our PRC shareholders fails to make any required SAFE registrations and amendments thereto, our ability to inject capital into our PRC subsidiaries may be limited, and our PRC subsidiaries may be prohibited from distributing their profits and the proceeds from any reduction in capital, share transfer or liquidation to us. Moreover, the failure to comply with SAFE registration and amendment requirements described above could result in liability under PRC laws for evasion of applicable foreign-exchange restrictions and may subject us to significant fines.

We rely principally on dividends and other distributions on equity paid by our operating subsidiaries to fund cash and financing requirements. Limitations on the ability of our operating subsidiaries to pay dividends to us could have a material adverse effect on our ability to conduct our business.

We are a holding company, and we rely principally on dividends and other distributions on equity paid by our subsidiaries for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders, to service any debt we may incur and to pay our operating expenses. If any of our subsidiaries in China incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us. Furthermore, relevant PRC laws and regulations permit payments of dividends by the subsidiary only out of its retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Under PRC laws and regulations, each of our main operating subsidiaries in China is required to set aside a portion of its net income each year to fund specific reserve funds. These reserves are not distributable as cash dividends. A wholly foreign-owned enterprise is required to set aside at least 10% of its after-tax profits of the preceding year as its reserve funds. It may stop contributing if the aggregate amount of the reserve funds has already accounted for more than 50% of its registered capital. Moreover, upon a board resolution, it may set aside certain amounts from its after-tax profits of the preceding year as bonus and welfare funds for staff and workers. A Sino-foreign equity joint-venture enterprise is required to set aside reserve funds, bonus and welfare funds for staff and workers and development funds, the percentage of which must be determined by the board of directors. As a result of these PRC laws and regulations, each of our main operating subsidiaries in China is restricted in its ability to transfer a portion of its net assets to us in the form of dividends, loans or advances. As of December 31, 2014, the restricted portion of their net assets totaled $234.2 million, which was composed of the registered capital and the statutory reserve of the PRC subsidiaries. Limitations on the ability of our operating subsidiaries in China to pay dividends to us could materially and adversely limit our ability to grow, make investments or acquisitions, pay dividends or otherwise fund and conduct our business.

Government control of currency conversion and regulations of loans to, and direct investment in, PRC entities by offshore holding companies may delay or prevent us from making loans or additional contributions to our PRC subsidiaries, which could restrict our ability to utilize our revenues effectively and also affect our ability to fund and expand our business.

The PRC government imposes controls on the convertibility of RMB into foreign currencies and, in certain cases, the remittance of foreign currency out of China. Under China’s existing foreign-exchange regulations, payments of current account items, including profit distributions, interest and expenditures from trade-related transactions, can be made in foreign currencies without prior approval from SAFE or its local counterparts by complying with certain procedural requirements. However, the PRC government may take further measures in the future to restrict access to foreign currencies for current account transactions.

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Foreign-exchange transactions under capital accounts continue to be subject to significant foreign-exchange controls and require the registration with, and approval of, PRC governmental authorities. In particular, if one subsidiary receives foreign-currency loans from us or other foreign lenders, these loans must be registered with SAFE or its local counterparts. If we finance such subsidiary by means of additional capital contributions, these capital contributions must be approved by certain government authorities, including the Ministry of Commerce or its local counterparts.

In August 2008, SAFE promulgated SAFE Circular No. 142 regulating the conversion by a foreign-invested enterprise of foreign-currency-registered capital into RMB by restricting how the converted RMB may be used. SAFE Circular No. 142 provides that the RMB capital converted from foreign-currency-registered capital of a foreign-invested enterprise may only be used for purposes within the business scope approved by the applicable government authority and may not be used for equity investments within the PRC. In addition, SAFE strengthened its oversight of the flow and use of the RMB capital converted from foreign-currency-registered capital of a foreign-invested enterprise. The use of such RMB capital may not be altered without SAFE’s approval, and such RMB capital may not in any case be used to repay RMB loans if the proceeds of such loans have not been used. Furthermore, in November 2010, SAFE promulgated SAFE Circular No. 59, which requires that government authorities closely examine that the settlement of net proceeds from offshore offerings are authentic and that the net proceeds be settled in the manner described in the offering documents. In November 2011, SAFE also promulgated SAFE Circular No. 45, which, among other things, restricts a foreign-invested enterprise from using RMB converted from its registered capital to provide entrusted loans or to repay loans between non-financial enterprises. Violations of these circulars could result in severe monetary or other penalties.

In light of the various requirements imposed by PRC regulations on loans to, and direct investment in, PRC entities by offshore holding companies, including the SAFE Circulars referred to above, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to future loans or capital contributions by us to our PRC subsidiaries and conversion of such loans or capital contributions into RMB. If we fail to complete such registrations or obtain such approvals, our ability to capitalize or otherwise fund our PRC operations may be negatively affected, which could adversely affect our ability to fund and expand our business.

Recent litigation and negative publicity surrounding China-based companies listed in the United States may result in increased regulatory scrutiny of us and negatively impact the trading price of our ADSs and could have a material adverse effect upon our business, including its results of operations, financial condition, cash flows and prospects.

We believe that litigation and negative publicity surrounding companies with operations in China that are listed in the United States have negatively impacted stock prices for such companies. Various equity-based research organizations have published reports on China-based companies after examining, among other things, their corporate governance practices, related party transactions, sales practices and financial statements that have led to special investigations and stock suspensions on national exchanges. Any similar scrutiny of us, regardless of its lack of merit, could result in a diversion of management resources and energy, potential costs to defend ourselves against rumors, decreases and volatility in our ADS trading price, and increased directors and officers insurance premiums and could have a material adverse effect upon our business, including its results of operations, financial condition, cash flows and prospects.

Our contractual arrangements with our consolidated entities in China may be subject to audit or challenge by the PRC tax authorities, and a finding that our PRC subsidiary or our affiliated entity owes additional taxes could substantially reduce our net income and the value of our shareholders’ investment.

Under PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities. We would be subject to adverse tax consequences if the PRC tax authorities were to determine that the contracts between our subsidiaries were not executed on an arm’s length basis, and as a result the PRC tax authorities could require that our PRC subsidiaries adjust their taxable income upward for PRC tax purposes. Such a pricing adjustment could adversely affect us by increasing our tax expenses.

The audit reports included in this annual report are prepared by auditors who are not inspected by the U.S. Public Company Accounting Oversight Board, and, as such, investors may be deprived of the benefits of such inspection.

As an auditor of companies that are publicly traded in the United States and a firm registered with the U.S. Public Company Accounting Oversight Board, or the PCAOB, our independent registered public accounting firm is required by the laws in the United States to undergo regular inspections by the PCAOB to assess its compliance with the laws of the United States and the professional standards of the PCAOB. However, because our auditor is located in the PRC, a jurisdiction where the PCAOB is currently unable to conduct inspections without the approval of the Chinese authorities, our auditor is not currently inspected by the PCAOB.

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Inspections of other auditors conducted by the PCAOB outside of China have at times identified deficiencies in those auditors’ audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality. The lack of PCAOB inspections in China prevents the PCAOB from regularly evaluating our auditor’s audits and quality control procedures. In addition, the inability of the PCAOB to conduct auditor inspections in China makes it more difficult to evaluate the effectiveness of our auditor’s audit procedures or quality control procedures as compared to auditors located outside of China that are subject to regular PCAOB inspections. As a result, investors may be deprived of the benefits of PCAOB inspections and may lose confidence in our reported financial information and procedures and the quality of our financial statements.

If additional remedial measures are imposed on the “Big Four” PRC-based accounting firms, including our independent registered public accounting firm, in administrative proceedings brought by the Securities and Exchange Commission (“SEC”) alleging the firms’ failure to meet specific criteria set by the SEC, with respect to requests for the production of documents, we could be unable to file future financial statements on a timely basis in compliance with the requirements of the Securities Exchange Act of 1934, as amended.

Since 2011, the Chinese affiliates of the “Big Four” accounting firms (including our independent registered public accounting firm) were affected by a conflict between U.S. and Chinese law. Specifically, for certain U.S.-listed companies operating and audited in mainland China, the SEC and the PCAOB sought to obtain from the Chinese firms access to their audit work papers and related documents. The firms were, however, advised and directed that under China law they could not respond directly to the U.S. regulators on those requests, and that requests by foreign regulators for access to such papers in China had to be channeled through the China Securities Regulatory Commission, or CSRC.

In late 2012, this impasse led the SEC to commence administrative proceedings under Rule 102(e) of its Rules of Practice and under Sarbanes-Oxley against the Chinese accounting firms (including our independent registered public accounting firm). A first instance trial of the proceedings in July 2013 in the SEC’s internal administrative court resulted in an adverse judgment against the firms. The administrative law judge proposed penalties on the firms including a temporary suspension of their right to practice before the SEC, although that proposed penalty did not take effect pending review by the Commissioners of the SEC. On February 6, 2015, before a review by the Commissioners had taken place, the firms reached a settlement with the SEC. Under the settlement, the SEC accepts that future requests by the SEC for the production of documents will normally be made to the CSRC. The firms will receive matching Section 106 requests, and are required to abide by a detailed set of procedures with respect to such requests, which will in substance require them to facilitate production via the CSRC. If they fail to meet specified criteria, the SEC retains authority to impose a variety of additional remedial measures on the firms, depending on the nature of the failure. Remedies for any future noncompliance could include, as appropriate, an automatic six-month bar on a single firm’s performance of certain audit work, commencement of a new proceeding against a firm or in extreme cases the resumption of the proceeding against all four firms.

In the event that the SEC restarts the administrative proceedings, depending upon the final outcome, listed companies in the United States with major PRC operations may find it difficult or impossible to retain auditors in respect of their operations in the PRC, which could result in financial statements being determined not to be in compliance with the requirements of the Exchange Act of 1934, as amended, or the Exchange Act, leading to possible delisting. Moreover, any negative news about any such future proceedings against these audit firms could cause investor uncertainty regarding China-based, United States-listed companies, and the market price of our ADSs may be adversely affected.

If our independent registered public accounting firm were denied, even temporarily, the ability to practice before the SEC and we were unable to find another registered public accounting firm to audit and issue an opinion on our financial statements on a timely basis, our financial statements could be determined not to be in compliance with the requirements of the Exchange Act of 1934, as amended. Such a determination could ultimately lead to the delisting of our ADSs from the New York Stock Exchange, or the NYSE, deregistration from the SEC or both, which would substantially reduce or effectively terminate the trading of our ADSs in the United States.

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Risks Relating to Investing in Our ADSs

Our quarterly revenues and operating results are difficult to predict and could fall below investors’ expectations, which could cause the market price of our ADSs to decline.

Our quarterly revenues and other operating results have fluctuated in the past and may continue to fluctuate depending upon numerous factors, including the signing, completion or cancellation of contracts, and in particular large contracts; the progress of ongoing contracts; trends in costs and expenses, such as from labor inflation, Renminbi fluctuations, investment and our ability to increase prices to reflect these changes in costs; impairment charges and charges related to discontinued operations; acquisitions, dispositions or discontinuances of businesses and any associated charges; our customers’ requirements for delivery of services, including timing of delivery, particularly our manufacturing services; changes in the mix of our revenues from our laboratory service and manufacturing service businesses, including the portion of services performed on a fee-for-service or full-time-equivalent basis; changes in the R&D outsourcing industry’s operating environment; and changes in government policies or regulations or their enforcement. Many of these factors are beyond our control, making our quarterly results difficult to predict, which could cause the trading price of our ADSs to decline below investor expectations.

The trading prices of our ADSs have been, and may continue to be, volatile, which could result in substantial losses to investors.

Between January 1, 2014, and April 3, 2015, the trading price of our ADSs on the NYSE ranged from $30.47 to $41.70 per ADS, and the last reported sale price on April 2, 2015 was $38.83 per ADS. The trading prices of our ADSs could fluctuate widely in response to factors beyond our control. Broad market and industry factors may significantly affect the market price and volatility of our ADSs, regardless of our operating performance.

In addition to market and industry factors, the price and trading volume for our ADSs may be highly volatile for specific business reasons. In particular, factors such as variations in our revenues, earnings and cash flow and announcements of new investments or acquisitions could cause the trading price of our ADSs to change substantially. Any of these factors may result in large and sudden changes in the volume and trading price of our ADSs. In the past, following periods of volatility in the trading price of a company’s securities, shareholders have often instituted securities class action litigation against that company. If we were involved in a class action suit, it could divert the attention of senior management and, if adversely determined, could have a material adverse effect on our financial condition and results of operations.

The voting rights of holders of ADSs are limited in several significant ways by the terms of the deposit agreement.

Holders of our ADSs may only exercise their voting rights with respect to the underlying ordinary shares in accordance with the provisions of the deposit agreement. Upon receipt of voting instructions from a holder of ADSs in the manner set forth in the deposit agreement, the depositary will attempt to vote the underlying ordinary shares in accordance with these instructions. Under our amended and restated memorandum and articles of association, the minimum notice period required for convening a general meeting is ten clear days. When a general meeting is convened, holders of our ADSs may not receive sufficient notice of a shareholders’ meeting to permit the holder to withdraw the ordinary shares to allow the holder to cast his or her vote with respect to any specific matter at the meeting. In addition, the depositary and its agents may not be able to send voting instructions to the holder or carry out the holder’s voting instructions in a timely manner. We make all reasonable efforts to cause the depositary to extend voting rights to holders of our ADSs in a timely manner, but holders may not receive the voting materials in time to ensure that the holder can instruct the depositary to vote his or her shares. Furthermore, the depositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of any such vote. As a result, holders of our ADSs may not be able to exercise the right to vote and may lack recourse if the holder’s ordinary shares are not voted as requested.

Anti-takeover provisions in our charter documents may discourage our acquisition by a third party, which could limit our shareholders’ opportunity to sell their shares, including ordinary shares represented by our ADSs, at a premium.

Our amended and restated memorandum and articles of association include provisions that could limit the ability of others to acquire control of our company, could modify our structure or could cause us to engage in change-of-control transactions. These provisions could have the effect of depriving our shareholders of an opportunity to sell their shares, including ordinary shares represented by ADSs, at a premium over prevailing market prices by discouraging third parties from seeking to obtain control in a tender offer or similar transaction.

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For example, our board of directors has the authority, without further action by our shareholders, to issue preference shares in one or more series and to fix the powers and rights of these shares, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than the rights associated with our ordinary shares. Preference shares could thus be issued quickly with terms calculated to delay or prevent a change in control or make removal of management more difficult. In addition, if our board of directors authorizes the issuance of preference shares, the market price of our ADSs may fall and the voting and other rights of the holders of our ordinary shares may be materially and adversely affected.

Because our directors are divided into three classes with staggered terms of three years each, shareholders can only elect or remove a limited number of our directors in any given year. The length of these terms could present an obstacle to certain actions, such as a merger or other change of control, which could be in the interest of our shareholders.

Holders of ADSs may not receive distributions on our ordinary shares or any value for them if it is illegal or impractical to make them available to the holders.

The depositary of our ADSs has agreed to pay holders of our ADSs cash dividends or other distributions that it or the custodian of our ADSs receives on our ordinary shares or other deposited securities after deducting its fees and expenses. Holders of our ADSs will receive these distributions in proportion to the number of our ordinary shares the holder’s ADSs represent. However, the depositary is not responsible if it is unlawful or impractical to make a distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if the securities being distributed require registration under the Securities Act of 1933, as amended, or the Securities Act, but are not properly registered or distributed pursuant to an applicable exemption from registration. The depositary is not responsible for making a distribution available to any holders of ADSs if any government approval or registration required for such distribution cannot be obtained after reasonable efforts made by the depositary. We have no obligation to take any other action to permit the distribution of our ADSs, ordinary shares, rights or anything else to holders of our ADSs. This means that holders of our ADSs may not receive the distributions we make on our ordinary shares or any value for them if it is illegal or impractical for us to make them available to the holders. These restrictions may have a material and adverse effect on the value of the holder’s ADSs. We intend to retain all available funds and any future earnings for use in the operation and expansion of our business and do not anticipate paying any cash dividends directly on our ordinary shares, or indirectly on our ADSs, in the foreseeable future.

Holders of our ADSs may not be able to participate in rights offerings and may experience dilution of their holdings.

From time to time, we may distribute rights to our shareholders, including rights to acquire securities. Under the deposit agreement, the depositary will not distribute rights to holders of ADSs unless the distribution and sale of rights and the securities to which these rights relate are either exempt from registration under the Securities Act with respect to all holders of ADSs or are registered under the provisions of the Securities Act. The depositary may, but is not required to, attempt to sell these undistributed rights to third parties and may allow the rights to lapse. We may be unable to establish an exemption from registration under the Securities Act, and we are under no obligation to file a registration statement with respect to these rights or underlying securities or to try to have a registration statement declared effective. Accordingly, holders of ADSs may be unable to participate in our rights offerings and may experience dilution of their holdings as a result.

Holders of our ADSs may be subject to limitations on transfer of their ADSs.

To the extent holders of our ADSs hold certificated ADRs rather than hold ADSs through their bank, broker or other nominee through the Depository Trust Company, the ADSs represented by ADRs will be transferable on the books of the depositary. However, the depositary may close its books at any time that it deems expedient in connection with the performance of its duties. The depositary may close its books from time to time for a number of reasons, including in connection with corporate events such as a rights offering, during which time the depositary needs to maintain an exact number of ADS holders on its books for a specified period. The depositary may also close its books in emergencies and will close its books on weekends and public holidays. The depositary may refuse to deliver, transfer or register transfers of our ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary thinks it is advisable to do so because of any requirement of law or any governmental body, or under any provision of, or circumstance permitted by, the deposit agreement.

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We may be classified as a passive foreign investment company, which could result in adverse U.S. federal income tax consequences to U.S. holders of our ADSs or ordinary shares.

Depending upon the value of our ADSs or ordinary shares and the nature of our assets and income over time, we could be classified as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes. We will be classified as a PFIC in any taxable year if either (a) the average quarterly value of our gross assets that produce passive income or are held for the production of passive income is at least 50% of the average quarterly value of our total gross assets, or (b) 75% or more of our gross income for the taxable year is passive income. According to these technical rules, we would likely become a PFIC for a given taxable year if our market capitalization were to decrease significantly while we hold substantial cash and cash equivalents in that year.

Based in part on our estimate of the composition of our income and our estimates of the value of our assets, we do not expect to be a PFIC for U.S. federal income tax purposes for our taxable year ended December 31, 2014. However, PFIC status is tested each year and will depend on the composition of our assets and income and the value of our assets from time to time, including goodwill and equity investments in less-than-25%-owned entities. Because we expect to hold a substantial amount of cash and other passive assets, and because the value of our assets is likely to be determined in large part by reference to the market price of our ADSs, which fluctuates, we may be a PFIC in the future. If we are treated as a PFIC for any taxable year during which a U.S. investor holds our ADSs or ordinary shares, certain adverse U.S. federal income tax consequences would apply to the U.S. investor. For more information on the U.S. tax consequences to U.S. holders that would result from our classification as a PFIC, please see Item 10.E, “Taxation—U.S. Federal Income Taxation—Passive Foreign Investment Company.”

We are a Cayman Islands company. Because judicial precedent regarding the rights of shareholders is more limited under Cayman Islands law than under U.S. law, shareholders may have fewer shareholder rights than they would have under U.S. law.

Our corporate affairs are governed by our amended and restated memorandum and articles of association (as may be amended from time to time), the Cayman Islands Companies Law, or the Companies Law, and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of our directors are to a large extent governed by the common law of the Cayman Islands. This common law is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, which has persuasive, but not binding, authority on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities law than the United States. In addition, some states in the United States, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands.

Moreover, as a non-U.S. company with foreign private-issuer status, we have been exempted from, and you may not be provided with the benefits of, some of the NYSE corporate-governance requirements applicable to U.S. companies, including that a majority of our board of directors must be independent directors, the compensation of our chief executive officer must be determined or recommended by a majority of the independent directors or a compensation committee comprised solely of independent directors and our director nominees must be selected or recommended by a majority of the independent directors or a nomination committee comprised solely of independent directors.

In addition, as a Cayman-Islands-exempted company, our shareholders have no general rights under Cayman Islands law to inspect corporate records and accounts or to obtain copies of lists of shareholders of these companies. Our directors have discretion under our Articles of Association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest. As a Cayman Islands company, we may not have standing to initiate a derivative action in a federal court of the United States. As a result, you may be limited in your ability to protect your interests if you are harmed in a manner that would otherwise enable you to sue in a United States federal court.

As a result of all of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a U.S. company.

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Certain judgments obtained against us by our shareholders may be unenforceable.

We are a Cayman Islands company, and most of our assets and a large part of our operations are located outside of the United States. A substantial portion of our current operations are conducted, and a substantial portion of our operating assets are located, in the PRC. In addition, many of our directors and officers are nationals and/or residents of countries other than the United States. A substantial portion of the assets of these persons are located outside the United States. As a result, it may be difficult for you to effect service of process within the United States upon these persons. It may also be difficult for you to enforce in U.S. courts judgments obtained in U.S. courts based on the civil-liability provisions of the U.S. federal securities laws against us and our officers and directors, most of whom are not resident in the United States and most of whose assets are located outside of the United States. Even if you are successful in bringing an action of this kind, the courts of the Cayman Islands or the PRC may not recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil-liability provisions of the securities laws of the United States or any state. In addition, such Cayman Islands or PRC courts may not be competent to hear original actions brought in the Cayman Islands or the PRC against us or such persons predicated upon the securities laws of the United States or any U.S. state.

A. History and Development of the Company

Our principal executive offices are located at 288 Fute Zhong Road, China (Shanghai) Pilot Free Trade Zone, Shanghai 200131, People’s Republic of China. Our telephone number is 86 (21) 5046-1111. Our website address is www.wuxiapptec.com. The information on our website or any other website utilized by us or our subsidiaries in connection with our business does not form a part of this annual report on Form 20-F. Our agent for service of process in the United States is CT Corporation System, located at 111 Eighth Avenue, 13th Floor, New York, NY 10011.

We conduct substantially all of our business through our operating subsidiaries in China and the United States. We own, directly or indirectly, 100% of the equity of all of our operating subsidiaries, with the exception of STA, which is 94.45% owned as of April 3, 2015. We own the equity of our major operating subsidiaries in China, directly or indirectly, through WXAT BVI, an intermediate holding company incorporated in the British Virgin Islands on June 3, 2004, under the name WuXi PharmaTech (BVI) Inc., with no significant assets and/or operations of its own. Substantially all of our business conducted in the PRC is through our primary operating subsidiary, WXAT, which was established in December 2000 under the name WuXi PharmaTech Co., Ltd.

We commenced operations and began offering our pharmaceutical and biotechnology R&D outsourcing services in 2001. In connection with our initial public offering, we incorporated WuXi PharmaTech (Cayman) Inc., a holding company, in the Cayman Islands on March 16, 2007. We and certain of our shareholders completed the initial public offering in August 2007.

In 2011, we completed several acquisitions: Chemdepo, which primarily offers radioactive chemistry compound synthesis services; Abgent, which is a service provider of biological research reagent products; and two Chinese clinical research services companies, Jiecheng and MedKey, to expand into clinical trial services in China.

In 2011, we formed a corporate venture fund structured using PRC and offshore entities to facilitate RMB and U.S. dollar investments. This is a 100% owned fund, to which we have made a capital funding commitment of up to $50 million, with an investment focus on technology and life-science companies.

In September 2012, we formed WuXi MedImmune Biopharmaceutical Co. Ltd., a joint venture with MedImmune, the global biologics arms of AstraZeneca, to develop and commercialize MEDI5117, a novel biologic for autoimmune and inflammatory diseases, in China. In April 2013, we formed a joint venture with PRA International Inc.—WuXiPRA Clinical Research Services, Co. Ltd., or WuXiPRA—to offer a broad platform of Phase I-IV clinical trial services in China, Hong Kong and Macau. Jiecheng is now a wholly owned subsidiary of WuXiPRA.

In September, 2014, we acquired XenoBiotic Laboratories, Inc., a contract research organization that provides bioanalytical, drug metabolism and pharmacokinetic services to the pharmaceutical, animal health and agrochemical industries and has research facilities in Plainsboro, New Jersey, and Nanjing, China.

In January 2015, we acquired NextCODE Health, a genomic analysis and bioinformatics company with operations in the U.S. and Iceland.

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To provide STA, our China-based small-molecule manufacturing subsidiary, with the ability and flexibility to raise cash from the Chinese capital markets for facility expansion and mergers and acquisitions, on April 3, 2015 we listed STA on the newly established over-the-counter stock exchange in China (commonly referred to as the New Third Board). In connection with this listing, we did not publicly offer STA shares and we may not offer STA shares in the near-term or at all. For more details regarding STA and factors that could impact the listing of STA and any offering of its shares, see “see Item 4.B, “Business Overview—Manufacturing Services Segment—Small Molecule Commercial Manufacturing,”

For additional information on our organizational structure, see Item 4.C, “—Organizational Structure.”

B. Business Overview

Industry Background and Market Opportunities

Contract research organizations, or CROs, generally arose in the 1980s, mainly in the United States, Europe and Japan, to meet the needs of life-science companies to improve their R&D productivity and operational agility. More recently CROs have been founded in developing countries based on their unique capabilities. For example, China offers highly educated, highly trained and productive scientists at reasonable cost. We believe we have been successful in establishing operations in China that provide high-quality discovery, preclinical and clinical services to life-science companies efficiently and cost-effectively.

CROs offer a wide range of R&D services to life-science customers as external vendors, thereby modifying the traditional model of life-science companies performing such services themselves. Under the CRO model, both life-science companies and CROs operate more flexibly as independent entities, each contracting with multiple business partners. CROs aim to achieve scale and technical expertise that allow them to offer services that reduce the product discovery and development costs of their life-science customers. As a result, life-science companies can reduce their fixed costs, including scientific staff and laboratory facilities, and operate on a more variable-cost basis. CROs offer other benefits in addition to cost reduction, such as improved quality of product candidates; improved quality of data about product candidates to allow earlier and more cost-effective decision making; process enhancement to speed product development, including industrialization of processes to achieve economies of scale and integration of services; and technical expertise.

In research and development of small-molecule pharmaceuticals, chemical synthesis and other discovery chemistry services that involve substantial labor inputs are well suited to outsourcing to China. This was the original capability of our company. We are a leader in providing such discovery chemistry services and are among the largest employers of chemists in the worldwide pharmaceutical industry. Other areas of discovery and development, including biology, medicinal chemistry, DMPK/ADME, formulation, analytical development services, process research, research manufacturing, toxicology, bioanalytical services, clinical research, genomics and bioinformatics are increasingly being outsourced to us and other CROs. We believe the share of small-molecule pharmaceutical R&D spending that is being outsourced to developing countries like China is increasing and will continue to increase for the foreseeable future as the fast-growing pharmaceutical market in China draws increasing R&D activities there.

China-based CROs are also increasingly used to discover and develop large-molecule biologic products, which are a growing portion of the product pipelines of biopharmaceutical companies. CROs perform most of the stages of biologic product development, from discovery of novel monoclonal antibodies to cell-line development, process development and cGMP manufacturing. Testing services for biologic products are primarily performed by CROs in developed countries, including WuXi’s operations in the United States.

Medical-device companies often have found it more economical to use CROs to perform testing services for their products, such as biocompatibility, toxicology, microbiology, package testing and lot release testing, than to create and support the organizations to complete such services themselves. Such services are generally performed by CROs in developed countries, including WuXi’s operations in the United States.

CROs can use some capabilities both to serve life-science companies and to develop products and services to offer directly to healthcare providers and their patients. For example, capabilities of a CRO in gene sequencing and bioinformatics can both help pharmaceutical and biotech companies learn how their products impact patients with individual genetic profiles and be used in developing diagnostic tests and other products and services for such patients.

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Company Overview

We are a leading pharmaceutical, biotechnology and medical device R&D services company, with operations in China and the United States. We provide a broad and integrated portfolio of laboratory and manufacturing services throughout the drug and medical device R&D process to our customers, which include many of the world’s premier pharmaceutical, biotechnology and medical device companies. Our services are designed to assist our global customers in shortening the cycle and lowering the cost of pharmaceutical and medical device R&D by providing cost-effective and efficient outsourcing solutions. We have approximately 2,400 customers, including most of the largest pharmaceutical companies by revenues, many of whom have presented us with awards for our performance.

When we were founded in 2000, our core business was to provide chemistry services to synthesize small molecules at the beginning of the drug discovery process. Over the years, we have built an integrated R&D services platform along the entire value chain of drug discovery and development. We believe we have one of the broadest integrated service and technology platforms in the life-science industry, from discovery to preclinical development to clinical development. We continue to broaden our customer relationships with our expanded capabilities and integrated services. Our mission is to enable anyone and any company to use our integrated open-access drug discovery and development platform to discover and develop new therapeutic products to benefit patients worldwide.

We are well positioned to capitalize on the global trend toward greater R&D outsourcing by emphasizing our experience, capabilities, quality, responsiveness, protection of customer intellectual property and reliability.

As of December 31, 2014, the number of locations and aggregate square footage of floor space by geographic area were as follows:

See Item 4.D, “—Property, Plant and Equipment” for a description of these facilities.

On January 9, 2015, we acquired a 2,250 square-foot facility in Cambridge, Massachusetts, and a 3,466 square-foot facility in Reykjavik, Iceland, for genomics and bioinformatics services.

Our net revenues increased from $499.9 million in 2012 to $578.1 million in 2013 and $674.3 million in 2014, representing year-over-year growth of 15.6% and 16.6%, respectively. Excluding the acquisition of XenoBiotic Laboratories, Inc., in September 2014, revenues in that year were $669.0 million and year-over-year growth was 15.7%. Revenue growth was generated by increased demand for our broadening platform of services. We generated most of our revenues in each of these years from customers headquartered in the United States and Europe. Our historical growth rate is attributable primarily to an increasing customer base and a greater number of projects that resulted from our expanded capacity and increased service offerings. Net income increased 32.3% from $86.6 million in 2012 to $114.6 million in 2013 and decreased 2.1% to $112.2 million in 2014. Net income growth in 2013 was primarily due to growth in demand for our services and higher other income, primarily realized gains and mark-to-market gains on foreign-exchange forward contracts. The small decline in net income in 2014 was primarily due to increased investment in new capabilities, including talent, laboratories and technologies, particularly in manufacturing, biologics, genomics, R&D, sales and marketing and information technology, as well as mark-to-market losses on foreign-exchange forward contracts, partially offset by continued growth in demand for our services, improvement in the productivity of our scientists and gains on the sale of our corporate venture fund investments.

Backlog for our Laboratory Services segment was $242.4 million as of December 31, 2014, compared to $186.1 million and $104.8 million as of December 31, 2013 and 2012, respectively. Backlog for our Manufacturing Services segment was $122.9 million as of December 31, 2014, compared to $91.7 million and $84.9 million as of December 31, 2013 and 2012, respectively. We maintain an order backlog to track anticipated revenue from projects that are expected to begin in the near future or are in process and have not been completed. The backlog amounts included herein are determined based on written evidence of a customer’s intention, including signed contracts, purchase orders or letters of intent, and are typically recognized in revenues within the following year.

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Our backlog as of any date is not necessarily a meaningful predictor of future results for a variety of reasons. The projects included in backlog vary in duration and scope. While we have not experienced significant deviations historically between amounts included in backlog and the amount ultimately recognized in revenue, there is no assurance that projects included in backlog will not be cancelled or delayed by our customers at any time.

Our Strategy

Our mission is to build an open-access technology platform of integrated services that will enable anyone and any company to discover and develop healthcare products and services to benefit patients. We believe that an open-access platform is the most effective and efficient way to allow life-science researchers to capitalize their knowledge and experience and improve productivity. We have established technologically advanced operations both in China, where we have access to high-quality talent and facilities to provide drug discovery and development services at lower cost than in the United States and Europe, and in the United States, where we have strong capabilities in the testing of biologics and medical devices, cell-therapy manufacturing, DMPK/ADME services, bioanalytical services, genomics and bioinformatics. With these operations, we believe we are well positioned to provide considerable value to the world’s life-science companies.

Our company is now evolving to broaden its product and service offerings beyond those of a traditional contract research organization. To date we have developed capabilities in three main areas outside of traditional CRO services: genomics / bioinformatics, mobile technologies and China healthcare initiatives.

Our WuXi Genome Center has state-of-the-art gene sequencing technology, to which we have added capabilities in bioinformatics with our acquisition of NextCODE Health in January 2015. We are developing genomics / bioinformatics products and services that we expect to offer not only to life-science customers but also directly to doctors, patients and hospitals globally. Our initial product development efforts are in the areas of rare pediatric diseases, cancer, cardiovascular diseases and executive health check services.

We are also building a mobile technology business to take advantage of the growing impact of global connectivity on the R&D community. To date, we have developed two technologies to assist our life-science customers. LabNetwork is a global mobile technology platform that connects buyers and sellers of research chemicals, backed by a global warehousing and logistics system and web and mobile tools. WuXi V-Lab is a mobile app that allows the global research community to order customized small-molecule compound synthesis services through a mobile device.

We are also undertaking several China Health Initiatives to address the needs of China’s large and rapidly growing healthcare market. McKinsey & Company estimates that healthcare spending in China will grow from approximately $350 billion in 2014 to approximately $1 trillion in 2020. To serve our traditional life-science customers, we have built world-class and end-to-end capabilities in five major platforms: small molecules, biologics, medical devices, genomics and cell therapies. We have acquired extensive knowledge of both Western innovations through our work with about 2,400 customers and of China’s large, unmet medical needs. We formed a new business unit named Product Development Services and Partnership, or PDSP, to lead collaborations with our Western partners to either co-develop new drugs for the China market or to provide clinical and regulatory product development services. We are also bringing our capabilities that we have developed in other countries, such as cell-therapy manufacturing, to China.

Other China Healthcare Initiatives extend our R&D capabilities directly to patients, doctors, and hospitals in China, with the goal of helping doctors to treat patients better and helping patients to receive better treatments. We have developed Boshi360.com, a Chinese-language web portal where the nearly 17 million Chinese patients with rare diseases can now access information about their condition and locate third-party professionals to assist in professional consultations. Effective cancer screening largely does not exist in China today. Air pollution and smoking have increasingly made China an unfortunate leader in terms of the number of new cases of lung cancer, for which we are developing lung fusion tests and EGFR liquid biopsy tests to detect genetic abnormalities to aid in patient diagnosis and treatment. We are also developing BRCA1/BRCA2 screening tests for breast cancer to address the underdiagnosis of breast cancer in China.

Our Competitive Strengths

Since our incorporation in December 2000, we have worked hard to build an open access technology and capability platform company. Our competitive advantages include:

An integrated, open-access R&D services platform. We have built a broad range of contiguous services that promote the efficient advancement of therapeutic product candidates through the drug discovery and development value chain. 

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An experienced international management team. Many of our senior management are professionals educated at major universities in the United States and China, with extensive work experience in leading pharmaceutical, biotechnology and medical device companies, including many that are our current customers.

A highly educated and trained workforce. As of December 31, 2014, we had 8,837 employees, including 6,842 science professionals. More than 45% of our scientists have obtained Master’s degrees and above. We successfully recruit recent graduates from universities in China and have an extensive proprietary training program. More than 92% of our employees work in China.

Operational excellence. We have developed operating procedures that meet the high quality standards of the world’s leading life-science companies.

Broad technical expertise. Our scientists have technical backgrounds in most of the functions necessary for pharmaceutical, biotechnology and medical device discovery, preclinical and clinical operations.

World-class facilities. Our laboratories and manufacturing facilities and the equipment with which they are furnished meet international standards.

An intense focus on a diversified, high-quality customer base. Most of the world’s largest pharmaceutical companies by revenue and many other pharmaceutical, biotechnology and medical device companies are our current customers. We have successfully obtained repeat business from all of our top ten customers over the past five years. Our projects have grown in size, and our working relationships with our customers have become more strategic based on the trust earned through successful working experience.

Strong protection of customers’ intellectual property (IP). We have stringent procedures and systems in place for protecting customers’ IP and confidential information.

Labor costs. While our company’s costs of scientific labor, which is mainly based in China, have been increasing about 10% per year for the past few years, they remain significantly below the cost of similar labor in developed countries, and we expect that cost differential to continue for an extended period of time.

Compliance. Our operations and facilities comply with US FDA, OECD and China FDA regulatory requirements for cGMP, GLP and GCP.

Our Services

We conduct our operations in two segments:

Net revenues from our Laboratory Services segment increased from $382.9 million in 2012 to $430.9 million in 2013 and $492.0 million in 2014, or 12.5% and 14.2% growth, respectively. Net revenues from our Manufacturing Services segment increased from $117.0 million in 2012 to $147.2 million in 2013 and $182.3 million in 2014, or 25.8% and 23.8% growth, respectively.

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Laboratory Services Segment

Pharmaceuticals

We provide a broad and integrated portfolio of pharmaceutical services, including:

Synthetic Chemistry. We employ approximately 2,800 chemists to perform services in custom synthesis, compound library design and synthesis and specialty chemistry. We perform custom synthesis of reference compounds, intermediates and product candidates from mg to kg scale, providing a quotation for customers within 48 hours. Our library design, synthesis and purification operations, with advanced computational tools and access to a stock room of more than 20,000 reagents, have delivered millions of compounds to our customers since 2001. We offer a catalog of WuXi-designed templates / scaffolds and other off-the-shelf compounds, including fragments, building blocks, library compounds and purified natural products. We offer these compounds through a commercial website. We also have teams of experts to provide specialty chemistry services in fluorination and nucleoside chemistry. Our compound management services include storage, formatting, re-formatting and assay plate preparation in a temperature-controlled storage facility equipped with barcode / RFID technology and a customizable software system for compound tracking. In January 2015, we introduced WuXi V-Lab, a mobile app for Apple and Android devices to allow our customers to order, track and pay for compound synthesis services quickly and easily.

Analytical Chemistry. After we synthesize compounds, we purify and analyze them in a scalable lab, which simplifies an otherwise cumbersome process, lowers cost and shortens development time. To support synthetic and process chemistry for both WuXi and our customers, we offer analytical and separation chemistry services that include chiral separation, natural product purification, high-throughput purification and analysis, high-throughput physical property determination, isolation and structure elucidation of impurities and method validation.

Peptide Synthesis. We provide synthesis and purification services for peptides and peptidomimetics. Our expertise extends to route design, unnatural amino acid synthesis and incorporation, synthesis of long peptides (up to 95 amino acids), peptide modifications and cyclic peptides.

Catalog Reagents. We provide a catalog of reagents, available in a few days to a few weeks mainly from Chinese vendors that have been pre-screened by WuXi. We have developed and launched LabNetwork, a global mobile technology platform that connects buyers and sellers of research chemicals, backed by a global warehousing and logistics system.

Medicinal Chemistry. After compounds are synthesized, our medicinal chemistry operations provide a broad range of services to create a successful preclinical candidate and its IND package: chemistry do-ability assessment of new biological targets, high-throughput screening, literature-based hit identification, hit generation and target validation, hit-to-lead optimization, lead optimization and preclinical candidate selection and computational medicinal chemistry. We perform these services for all known target families and therapeutic areas. These services are performed in collaboration with other WuXi functional areas: synthetic chemistry, structural biology, computational biology, in vitro biology, in vivo pharmacology, DMPK/ADME and safety assessment and toxicology.

Discovery Biology. Our discovery biology group offers services in reagent generation, assay development, screening, biomarker research, custom monoclonal antibody generation, stable line development, biosafety and adventitious virus testing. We are organized in five therapeutic areas: oncology, infectious disease, cardiovascular and metabolic disease, immunology and inflammation and CNS and pain. Our structural biology function has built capabilities in protein crystallography, fragment-based drug discovery, structure-based drug design and chemoinformatics to understand the molecular structure of proteins and other macromolecular targets and the binding potential of therapies under development. The safety pharmacology group uses its expertise in electrophysiology, in vitro pharmacology and early toxicology to profile compounds for potential adverse drug reactions at various R&D stages, thereby helping to deliver high-quality drug candidates faster and at lower cost.

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DMPK/ADME. We perform drug metabolism and pharmacokinetics, or DMPK, and absorption, distribution, metabolism and excretion, or ADME, services to gain information about how the human body changes a pharmaceutical physically and impacts its action, including its efficacy and toxicity. We offer in vivo pharmacokinetic studies in small and large mammals by measuring drug concentrations in a range of biological matrices, including blood, urine, bile, cerebrospinal fluid and tissues. We have capabilities to administer drugs using a variety of dosing routes and to provide results in a rapid turnaround time. We operate two animal facilities: a 14,000 square-foot AAALAC-certified vivarium in Shanghai that handles small rodent studies, and a 10,000 square-foot AAALAC-certified vivarium in Suzhou for large animal pharmacokinetic / toxicokinetic studies. In addition, we perform full mass balance and tissue distribution studies using cold material or ¹⁴C-labeled material. Our in vitro ADME profiling services include analyzing the metabolic stability and permeability of drug candidates, interactions with transporters, drug-drug interactions and plasma protein binding. For early-stage compounds, we conduct a full panel of early ADME screening studies to investigate druggability. For drug candidates, definitive studies are conducted to profile which transporters and CYPs the drug interacts with as well as the resultant metabolic biotransformations. Our metabolite identification services include metabolite profiling, characterization and structure elucidation, bulk metabolite isolation and purification, synthesis of authentic standards of metabolites and pharmacokinetic evaluation of parent compounds and metabolites in preclinical and clinical samples. We study the metabolic pathway of a compound (cold or ¹⁴C-labeled) using in vitro (cellular and microsomal) and in vivo systems followed by high resolution mass spectroscopy and nuclear magnetic resonance to determine the number and structure of the major metabolites. We also perform pharmacokinetic / pharmacodynamic modeling studies in various rodent efficacy models, including cancer, central nervous system disorders and metabolic diseases. Our acquisition of Xenobiotic Laboratories, Inc., in September 2014 enhanced our capabilities in offering ADME studies with radio-labeled compounds, which are increasingly becoming a regulatory requirement.

Bioanalytical Services. WuXi AppTec offers comprehensive and FDA / OECD / CFDA GLP-compliant bioanalysis services to support preclinical and clinical development for small molecule drugs, biologics, vaccines and pharmacodynamic biomarkers. Our capabilities include liquid chromatography / tandem mass spectrometry method development and validation, immunoassay method development and validation, small-molecule drug sample analysis, peptide and protein drug analysis, synthesis of reference standards and stable labeled internal standards, biomarker analysis, vaccine analysis and measurement of antibody immunogenicity.

Pre-Formulation Services. Preformulation services include studies to identify the intrinsic physicochemical properties of compounds, to select an appropriate salt form, to characterize the particle size and flow properties of powders and to determine the compatibility of drug excipients. We provide services to support preparation of chemistry / manufacturing / controls (CMC) documentation, including solid state characterization, polymorph screening, crystallization process development and formulation support.

Formulation Services. We offer a range of services to convert optimized lead compounds into formulated drugs suitable for preclinical and clinical testing and to assist in preparation of regulatory filings. Our formulation development services cover a wide spectrum, including early safety studies, toxicity studies, proof-of-concept formulation development, late-stage formulation development, dosage manufacturing, packaging and product life-cycle management. Packaging and storage conditions are suggested based on thorough stability studies. Our capabilities cover both solid oral and liquid oral dosage forms.

Analytical Development. With EMA- and CFDA-inspected GMP laboratories, we provide a full range of analytical services. We develop and validate methods of analyzing APIs and formulated products for properties such as potency, purity and solubility. We also offer compound stability tests and tests necessary for the release of APIs and clinical test material. We deliver services related to regulatory compliance with chemistry, manufacturing and controls, or CMC, requirements, including creation of a readiness testing package for an Investigational New Drug, or IND, filing and development of a full CMC package. Our supercritical fluid chromotography and high-performance liquid chromotography technology for large-scale chiral and achiral separation support process chemistry of APIs or intermediates. We also offer a range of biologics analysis and stability studies.

Toxicology. We provide a full range of in vivo and in vitro preclinical safety evaluation studies as part of our integrated portfolio of drug discovery and development services. Our toxicology services cover acute, sub-chronic, chronic and carcinogenicity general toxicology; developmental and reproductive toxicology; genetic toxicology; screening and regulatory assays for genetic toxicology; safety pharmacology; immunotoxicology; and anatomic and clinical pathology. We also offer laboratory services in analytical chemistry, bio-analysis and toxicokinetic modeling, immunology and biomarkers. Our services involve a wide selection of animal models and routes of administration. WuXi has worked with scientists and government authorities to establish services that meet international regulatory requirements. Our facility is AAALAC accredited and certified as GLP compliant by the OECD and the CFDA. Our bioanalytical laboratory has received a bioequivalency inspection by the FDA. WuXi has conducted IND and NDA enabling studies for submission to the FDA, EMA and other global regulatory authorities.

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We offer in vivo and in vitro non-clinical safety evaluation programs for medical devices in our St. Paul facility. Our tests include in vivo tests for acute toxicity and repeat exposure, in vitro and in vivo tests for genotoxicity, as well as tumorigenicity, biodistribution and immunotoxicity tests. The facility is FDA-registered, ISO 17025 certified, accredited by AAALAC and the American Association for Laboratory Animal Science and licensed by the U.S. Department of Agriculture and the U.S. Drug Enforcement Administration. Our studies use a variety of animal models, modes of administration and methodologies in clinical and anatomical pathology.

Clinical Development. WuXi entered the clinical trial business in China with the acquisition of Jiecheng and MedKey in 2011. WuXi and PRA formed the joint venture WuXiPRA in 2013 and have since built it into a leading clinical services management company in China. WuXiPRA covers China’s major territories and has offices in Beijing, Shanghai, Wuhan, Hong Kong and Guangzhou. Its three business divisions focus on full-service clinical studies, including phase I, phases II-III, and phase IV clinical trials, registry trials, outcomes research and medical device trials; embedded strategic consulting; and global clinical informatics, respectively. Other WuXiPRA services include project management, regulatory strategy and submissions, data management, biostatistics, drug safety reporting and medical monitoring. In connection with the formation of WuXiPRA, we contributed Jiecheng to WuXiPRA. MedKey remains a wholly owned WuXi subsidiary and operates in 40 cities in China as a site management organization. Its services include clinical research center services, subject recruitment and referral, site feasibility analysis, subject visit management, QA/QC activities at sites and GCP training of on-site staff.

Research Reagents. WuXi, through its Abgent subsidiary, is a leading provider of antibodies and related services for biomedical research and drug discovery. WuXi develops over 2,000 antibodies for research use against novel and well-established targets annually. Our competencies lie in the development of high-quality antibodies and related reagents for the study of neurodegenerative diseases, stem cells, autophagy and model organisms. Our antibodies are validated and optimized to ensure accurate and consistent performance. Abgent also offers a broad range of antibody services customized for customers’ drug discovery, including antibodies validated and optimized in customer-defined applications using either Abgent- or customer-provided antigens, protocols, samples or compounds.

Genomics and Bioinformatics. Our WuXi Genome Center, which opened in mid-2011, offers gene sequencing and bioinformatics services as part of an integrated service offering from assay development and validation through clinical testing to support our clients’ research and clinical development. We also offer services in clinical diagnostics, including genomics tests using FFPE samples and needle biopsies with blood, plasma, lung fluid, and other media. Our genomics laboratory meets international standards and is the only genomics lab in China that has been certified as meeting the Clinical Laboratory Improvement Amendments (CLIA) standards of the Centers for Medicare and Medicaid Services of the U.S. Department of Health and Human Services. These standards apply to all clinical laboratory testing on specimens derived from humans in the United States to give information for the assessment, diagnosis, prevention and treatment of disease. Our collection of genetically characterized Chinese patient-derived xenograft models of various cancer types, as well as a Western ancestry collection licensed from the Mayo Clinic, provides a platform for targeted therapy, biomarker discovery and translational research in a preclinical setting. In 2014, we acquired 10 Illumina HiSeq X machines, which are state-of-the-art next-generation sequencing technology, to expand beyond target panel, exome and transcriptome scale sequencing to population genome scale sequencing. We provide full-spectrum microarray services using the industry standard Affymetrix platform. We also offer both comprehensive and customized bioinformatics services.

In January 2015, WuXi acquired NextCODE Health, a genomic analysis and bioinformatics company with operations in the United States and Iceland. NextCODE Health has developed a leading genome sequence analysis platform and an efficient database architecture to enable clinicians and researchers to use next-generation sequencing data to better diagnose and treat diseases. The company’s services combine a whole genome analysis system developed at population scale with access to a large clinical genetics reference database. These capabilities give clinicians and researchers the ability to store, visualize and analyze their genetic data at base-by-base resolution, in real time, from any browser; to collaborate with other clinicians and researchers; and thereby to solve medical cases efficiently. We are in the process of combining our WuXi Genome Center operations with those of NextCODE. The NextCODE acquisition positions us to broaden our genomics business beyond supporting pharmaceutical and biotech companies in their research and clinical development to offering diagnostic products and services directly to hospitals, doctors and patients.

Biologics

We offer a comprehensive array of services, in both China and the United States, for the discovery, development, manufacturing and testing of biologics.

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Discovery. Our broad spectrum of discovery services for the generation of novel monoclonal antibody therapeutics cover five functional groups: research materials, hybridoma, antibody engineering, high throughput and in vitro function assays. Our research materials generation team generates research materials for immunization and screening, such as proteins and cell lines expressing membrane proteins. Our hybridoma group uses an immunization method and advanced electro cell fusion techniques to obtain high antibody titer and high fusion efficiencies using lymphnode or spleen cells from immunized mice. Our antibody engineering group provides therapeutic antibodies of high quality using three strategies: naïve human library and phage display, OMT transgenic rat immunization library and phage display and regular mice immunization library and phage display. This group also provides integrated services for antibody refinement, including mouse antibody humanization, antibody affinity maturation and Fc engineering for longer half-life and better effector functions. Our high throughput screening team uses ELISA, FACS and other image-based binding methodologies as well as antibody biochemical characterization to ensure the identification of antibody drug candidates with high potency and suitability for functional assays and animal study. Our in vitro functional assays group allows selection of biologically relevant and functionally potent therapeutic antibody candidates to advance to in vivo assays. We are supported by WuXi’s in vivo biology groups in oncology, immunology and inflammation, cardiovascular and metabolic diseases, infectious disease and CNS and pain.

Development. We offer services in biopharmaceutical, including biosimilar, development. Our capabilities range from cell line engineering and selection to formulation analysis and assay and process optimization. Our biologic development services span all facets of biotherapeutic CMC (chemistry, manufacturing and controls) development, including technical transfer, cell line development, protein characterization, cell culture (upstream) development, purification (downstream) development, formulation development and assay development.

Multifunctional project teams transfer a sponsor’s methods, assays and processes, providing a defined baseline to measure the effects of operating procedures, raw materials, manufacturing scale-up, process optimization, protein characterization and product release criteria. After clients provide cDNA vectors or sequences for subsequent molecular cloning and after transfection into a client-specified protein expression cell line, we develop high-expressing cell pools and work with the client to select top clones. Identification and selection of high-producing stable clones can be subjected to additional rounds of subcloning and further analysis such as product quality characterization, long-term stability studies, GMP cell banking and cell line characterization. We provide a comprehensive range of analytical development and testing services to characterize biological therapeutics. Our cell culture process technology platform provides for optimization of media, seeding densities and feeding and bioreactor process control strategies to maximize expression, enhance process reproducibility and facilitate scale-up. Our downstream process development program helps optimize yields, improves product purity and provides a reproducible purification process using technologies and raw materials designed to be suitable for cost-effective large-scale manufacturing. We offer a broad array of formulation development services that cover both innovative and biosimilar drugs and both liquid dosage forms and lyophilized powders. We provide expertise in formulation and analysis of monoclonal antibodies, recombinant proteins, fusion proteins, growth factors, blood factors, cytokines, colony stimulating factors, vaccines and other therapeutic proteins.

Biologics Testing. Utilizing in vitro, in vivo, molecular and analytical methodologies, we provide biologics testing services to take products from development to commercialization. Our services include biomarker identification and development, assay development, protein characterization, supply chain assessments, cell and viral bank characterization, viral clearance, lot release programs, stability studies, cleaning validations, sterility assurance and bioanalytical studies.

Medical Devices

We offer testing and development services to ensure that a medical device is manufactured, packaged and sterilized in accordance with GMP guidelines. Our in vivo and in vitro toxicology testing includes materials selection and evaluation, product efficacy and materials performance, materials characterization, risk assessment, biocompatibility, toxicology, sterilization / inactivation validation, package integrity validation, controlled environment testing, raw material verification and lot release testing.

Combination Products

We offer specialized programs in support of product development, regulatory submission and marketing claims for combination products, including devices, tissue products, biologics and pharmaceuticals. We offer testing services for combination products in antimicrobial efficacy, biocompatibility / safety, microbiology, orthobiology and toxicology. WuXi also offers cGMP processing services for combination, device and tissue products that require aseptic processing.

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Cell-Therapy Manufacturing

We offer services in the manufacture of autologous and allogeneic cell therapies. Autologous cell therapies involve harvesting a patient’s cells, engineering them to address a disease, and reintroducing them back into the patient. Allogeneic cell therapies involve introduction of engineered cells that had been harvested from a different patient. Our capabilities extend to both gene-mediated therapies, such as chimeric antigen receptor T, or CAR-T, cells, and non-gene-mediated therapies. Our capabilities are currently offered in facilities in Philadelphia, and we are also developing capabilities in this field in China.

Diagnostics

We are developing clinical tests to diagnose disease. Our genomics / bioinformatics business is developing diagnostic products and services that we expect to offer not just to life-science customers but also directly to doctors, patients and hospitals globally. Our initial product development efforts are in the areas of rare pediatric diseases, cancer, cardiovascular disease and executive health check. In China, we are developing lung fusion tests and EGFR liquid biopsy tests to detect genetic abnormalities to aid in patient diagnosis and treatment. We are also developing BRCA screening tests for breast cancer to begin to remedy the substantial underdiagnosis of breast cancer in China.

Healthcare Information

We have developed Boshi360.com, a Chinese-language web portal where nearly 17 million Chinese patients with rare diseases can now access knowledge about their condition, professional consultation and other services.

Manufacturing Services Segment

Through our Chinese subsidiary STA, we provide process chemistry services and small-molecule research and commercial manufacturing services for producing small-molecule advanced intermediates and APIs for customer use in preclinical and clinical trials and for marketed small-molecule drugs. STA’s operations are located in Shanghai and Changzhou. STA’s business (which excludes our biologics manufacturing business described below) is significantly more capital intensive than our laboratory services business, with STA currently in the process of building new facilities in Changzhou to increase its production capacity. As of December 31, 2014, STA’s assets totaled approximately $204.7 million and for the years ended December 31, 2013 and December 31, 2014, its revenues totaled approximately $140.8 million and $171.0 million, respectively.

Process Chemistry. Our cGMP-quality kilo-lab and pilot plants help our customers to develop processes to manufacture pharmaceuticals in larger quantities, from laboratory quantities measured in milligrams and grams to scale-up quantities measured in kilograms, to process optimization quantities measured in hundreds of kilograms, to commercial quantities measured in metric tons. We aim to identify the most efficient and cost-effective methods of compound synthesis. Efficiency can be improved by reducing the number of products used in synthesis, improving the yield of the desired compound and accelerating the time needed for synthesis. Our process development services are integrated with our analytical development, formulation development and cGMP manufacturing of APIs. Many of our manufacturing projects involve compounds for which we developed the scale-up methodology in process chemistry. We offer process safety evaluations as part of this service.

Small-Molecule Research Manufacturing. We began offering manufacturing process development services to meet the growing customer demand to scale up production of advanced intermediates and APIs for drug candidates to be tested in late-stage clinical trials. As a logical extension of this process development service, we then developed our own preclinical and clinical-trial manufacturing services.

Small-Molecule Commercial Manufacturing. Our capabilities in research manufacturing also allow us to be the commercial manufacturer of these APIs or key ingredients for drug candidates that complete clinical trials and receive regulatory approval. As with our laboratory services, our manufacturing services are intended to reduce our customers’ product development time and cost. We manufactured ingredients for 11 commercial products in 2014.

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We have cGMP-quality manufacturing facilities in the Jinshan Chemical Industry Development Zone of Shanghai, which covers both research manufacturing and commercial manufacturing. We also have manufacturing facilities in Changzhou. Our original research manufacturing plant in Jinshan, established in 2004, complies with CFDA standards and is certified to both ISO 9001:2000 and ISO 14001:2004 standards. It measures approximately 35,000 square foot and has 38 reactors with volumes ranging from 50 to 3,000 liters each, for total volume of more than 50,000 liters. In 2010, we completed a 120,000 square-foot commercial manufacturing facility in Jinshan, with 30 reactors ranging in volume from 3,000 to 20,000 liters each, or more than 230,000 liters of total reactor volume. The facility offers advanced process automation for control of temperature, agitation and other parameters and has high-pressure, high-temperature, cryogenic and hydrogenation capabilities. In 2012, we added a second research manufacturing plant in Jinshan, which has added 33 reactors comprising 75,000 liters. Our current facilities in Changzhou comprise 40 reactors totaling 102,000 liters. We are undertaking construction of a new small-molecule research and commercial manufacturing facility in Changzhou, where we expect the first commercial manufacturing plant to become operational in late 2015 to early 2016. The new facility will have 22 reactors, with volumes ranging from 5,000 to 15,000 liters each, or more than 200,000 liters of total reactor volume. In addition to this first commercial plant, we are also building one pilot plant and a second commercial plant in Changzhou, which are expected to be completed in 2016 and 2017, respectively.

In late 2014, we submitted an application to the National Equities Exchange and Quotations (NEEQ) in China to list STA on the New Third Board, the over-the-counter (OTC) stock exchange in China. On April 3, 2015, this listing was completed. We listed STA to fund future growth by flexibly raising capital from the Chinese capital markets. China is currently undergoing capital market reform. The New Third Board was established by the State Council in January 2013 as a national OTC stock exchange to supplement trading activities on the Shanghai and Shenzhen stock exchanges, including the related Growth Equity Market (GEM) exchanges (commonly referred to as the Second Board). China’s GEM exchanges provide for trading of stocks of growth companies that do not otherwise satisfy the requirements for listing on the main Shanghai or Shenzhen stock exchanges. The New Third Board provides a pricing mechanism for valuing a company’s stock. As of March 11, 2015, there were over 2,000 companies listed on the New Third Board and over 700 companies with applications in the review process for listing. Policies are currently expected to be introduced in the second half of 2015 to enable NEEQ-registered companies to transfer to the GEM exchanges.

There can be no assurances that STA’s shares will obtain or maintain a favorable valuation, that we will publicly offer STA’s shares or that STA’s shares will transition to the GEM exchanges. See Item 3.D, “Key Information—Risk Factors—Risks Relating to Our Business and Industry—Our listing of the shares of STA, our small-molecule manufacturing subsidiary, on stock exchanges in China may not provide the anticipated benefits and the listing could negatively impact holders of our ADSs.”

Biologics Manufacturing. Our biologics manufacturing facility is located in Wuxi city. We manufacture biotherapeutic protein products produced from mammalian cell culture. Our competencies cover major aspects of therapeutic recombinant protein and monoclonal antibody manufacture, from cell culture, purification and formulation to final filling under cGMP conditions as defined by various regulatory agencies and the Code of Federal Regulations.

Sales and Marketing

We market our services directly to customers through meetings with representatives of pharmaceutical, biotechnology and medical device companies including their senior management; maintenance of extensive internet websites; and participation in trade conferences, trade shows and scientific conferences. We also receive a significant amount of business from customer referrals. Since our inception, our senior management has been actively involved in managing our sales and marketing activities and maintaining direct relationships with our major customers.

A new customer typically assigns us a small project to test our capabilities. After we successfully complete the assignment, the customer often increases the size and duration of succeeding contracts and hires us for more types of assignments. We aim to increase our customer base by targeting pharmaceutical, biotechnology and medical device companies who recognize the cost-effectiveness of outsourcing to us and / or who lack in-house discovery and development capabilities and view outsourcing as an attractive option to achieve their objectives.

We have field forces strategically located in key geographic locations, including the United States and Europe. Our field representatives generate sales leads and work closely with technical experts to prepare quotes and to secure customer orders. We significantly expanded our sales and marketing organization in 2014 in the United States, Europe and China.

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Customers

In 2014, our China-based operations provided services to approximately 1,100 pharmaceutical and biotechnology customers, and our U.S.-based operations served approximately 1,300 medical device, biotechnology and pharmaceutical companies. We generate most of our net revenues from sales to customers headquartered in the United States. Most of our large customers return to us for additional projects, and each of our top ten customers over the last four years continues to be our customer today. As a result, our customer base has grown both in number and in average revenue per customer.

The table below shows information regarding our historical customer base:

For certain major customers, we provide not only dedicated teams of scientists, but also dedicated laboratory facilities, analytical support and independent information technology and security services. This physical and operational separation of customer projects ensures enhanced security and protection of our customers’ intellectual property. The laboratory configuration and setup, research plan, operating procedures, information technology and security protocols all can be tailored to our customers’ specifications.

In 2013 one customer, and in 2014 no customers, accounted for more than 10% of our net revenues. In 2013, Merck accounted for 11.4% of our total net revenues. See Item 3.D, “Key Information—Risk Factors—Risks Relating to Our Business and Industry—A limited number of our customers have accounted for, and are expected to continue to account for, a high percentage of our revenues. The loss of, or significant reduction in, orders from any of our significant customers could reduce our revenues and have a material adverse effect on our financial condition, results of operations, cash flows and prospects.”

Project Management and Customer Support

We believe that we have an established reputation among our customers for high productivity, rapid turnaround times and comprehensive customer support. We generally assume full project-management responsibility in each of our service offerings. We strictly adhere to our internal quality and project management processes. We believe our processes, methodologies and knowledge management systems and tools reduce the overall cost to the customer and enhance the quality and speed of delivery. We have developed a project-management methodology to ensure timely, consistent and accurate delivery of quality services. To facilitate project management, we developed an online system allowing a customer’s project manager to monitor and report on the progress of its projects through a secure encrypted website. Additionally, our project team interacts with the customer’s project-management team through daily emails, bi-weekly reports and regular conference calls. Our project management involves strict adherence to our strategic imperative to protect our customers’ IP and other confidential information. See “—Intellectual Property” below.

We conduct frequent customer satisfaction surveys with several of our more significant customers, measuring key performance indicators to improve our planning, execution, evaluation and support. Internally, we focus on operational improvement and innovation to achieve lower direct costs, better use of assets, faster development time, increased accuracy, greater customization or precision of data, more added value and simplified processes. Our customer support department focuses on sales support and relationship management with our customers and is dedicated to improving responsiveness to our customers’ needs and inquiries. Less-than-satisfactory marks and comments are scrutinized for root causes and used to continuously improve operations and services.

Seasonality

Our first-quarter revenues for our China-based services business are generally lower than the preceding fourth-quarter revenues, as certain customers spend the remainder of their annual budget in the fourth quarter and are in the process of planning new projects in the first quarter following the approval of a new annual budget. Otherwise, our revenues generally are not subject to significant seasonal fluctuations because our customers’ needs are relatively continuous.

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WuXi Venture Fund; WuXi Healthcare Ventures Fund II

In 2011, we formed a corporate venture fund, WuXi Venture Fund, with an expectation of investing up to $50 million in life-sciences companies. As of December 31, 2012, 2013 and 2014, we had invested approximately $9.8 million, $17.3 million and $36.1 million, respectively, in approximately 18 life-sciences companies. In 2012, 2013 and 2014, we recognized gains on the sale of related investment securities of $0, $1.2 million, and $16.6 million. Investment activities at our corporate venture fund are overseen primarily by Edward Hu, our Chief Financial Officer and Chief Investment Officer, with the assistance of a group of investment professionals and Dr. Ge Li, our Chairman, Chief Executive Officer and Founder. In addition to providing favorable investment returns, our corporate venture fund has allowed us to monitor developments in the life-sciences industry and has provided opportunities for us to successfully market our services to a range of potential customers. Many of our portfolio companies have used WuXi’s drug discovery and development services.

Given the various benefits of corporate venture investment to WuXi, in March 2015 our board of directors approved an anchor investment commitment of up to $50 million in a newly formed venture fund, WuXi Healthcare Ventures Fund II, with expected total commitments of approximately $200 million. WuXi Healthcare Ventures Fund II is being formed to invest in significant equity stakes in the U.S. and China. The general partners of WuXi Ventures are expected to consist of three operating partners and two non-operating partners (Dr. Ge Li and Edward Hu). The fund has not yet been raised, and investment is subject to negotiation of definitive documentation and approval by our audit committee. See Item 7, “Major Shareholders and Related Party Transactions—WuXi Healthcare Ventures Fund II.”

Intellectual Property (IP)

Protection of IP associated with R&D is critical to all of our pharmaceutical, biotechnology and medical device customers. Our customers generally retain ownership of all associated IP, including both IP they provide to us and that arising from the services we provide. Our success depends in substantial part on our ability to protect the proprietary rights of our customers, and we have made this a priority since our inception. This is particularly important for us because a substantial part of our operation is based in China, and China and Chinese companies have not traditionally enforced IP protection to the same extent that the United States and U.S. companies have.

We diligently seek to protect our customers’ IP. As one aspect of our system of protecting IP, including both our customers’ and our own, we enter into agreements with all of our employees under which they disown all IP they create during their employment and waive all relevant IP rights or claims. All our employees are also bound by confidentiality obligations and have agreed to disclose and assign to us all inventions conceived by them during their term of employment. Furthermore, our service agreements generally provide that IP generated during the course of a project is exclusively the property of the customer for whom we are conducting the project.

We have also created an IP-protection process in China whereby we periodically scan signed and dated notebooks of every scientist onto diskettes and then engage the notary public office to notarize the records. Notebooks are critical to the drug and medical device R&D process, as scientists’ notes are often used as original data in support of patent applications and disputes. We are now switching from physical notebooks to electronic notebooks for many of our clients. Our process preserves the documentation necessary to establish IP ownership should any disputes arise in the future. This process not only significantly enhances the protection of key original information, but also increases customers’ confidence and trust in our company. In addition, each customer project has dedicated laboratory space equipped with key-card access control systems. Furthermore, we forbid our scientists from displaying chemical structures in any form in communal analytical laboratories. Most laboratory computers are not connected to the internet and have restricted data-transfer capabilities.

We have established documentation procedures, powered by the Laboratory Information Management System, or LIMS, licensed by Thermo Watson, to control information access on a need-to-know basis and to restrict system access in connection with our DMPK studies in drug discovery and development. A typical bioanalytical laboratory generates hundreds or even thousands of test results daily, which must be securely stored for long periods. LIMS is designed for tracking individual samples and the information obtained about them with various analytical tools. Only after the results of all bioanalytical techniques have been reviewed in LIMS is a product released or rejected. We believe that our LIMS complies with all FDA requirements regarding security, including data integrity, compatibility and audit-trail generation.

Despite measures we have taken to protect our own and our customers’ IP, unauthorized parties may attempt to obtain and use information that we regard as proprietary. See Item 3.D, “Key Information—Risk Factors—Risk Relating to Our Business.” In 2011 a junior employee, acting by himself, stole and sold for personal gain sample amounts of two patented chemical compounds made for a customer. The employee was apprehended and was convicted on May 22, 2012. We subsequently strengthened our compliance functions and key security measures, including employee training and inspections.

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As of December 31, 2014, we had 12 trademarks registered in China and also had certain trademarks registered in a number of other jurisdictions, including the United States, the European Union, Japan, Korea, India and Hong Kong. Our service creed, “We Are Determined to Serve You Better,” is registered with the U.S. Patent and Trademark Office.

Competition

We compete with other CROs, contract manufacturing organizations and research and academic institutions. We anticipate that we will face increased competition in the future as new companies enter the market and advanced technologies become available. See Item 3.D, “Key Information—Risk Factors—Risk Relating to Our Business—We face increasingly intense competition. If we do not compete successfully against new and existing competitors, some of whom subject us to increasing pricing pressure, demand for our services and related revenues may decrease.”

The pharmaceutical and biotechnology R&D outsourcing market remains highly fragmented. We compete with industry participants in particular service areas—for example, with ShangPharma Corporation and Pharmaron Inc. in drug discovery and chemistry and other laboratory services and with Laboratory Corporation of America and Charles River Laboratories International, Inc., in preclinical services. We now also compete with companies in biologics testing, such as Charles River Laboratories International, Inc., and BioReliance, a division of Sigma-Aldrich Corporation (with a pending acquisition by Merck KGaA), and in the medical device testing area, such as North American Science Associates Inc., and Toxikon. After the acquisition of Jiecheng and MedKey and the subsequent formation of WuXiPRA, we compete with clinical research organizations such as PPD, Parexel International and Hangzhou Tigermed Consulting Co., Ltd., in the clinical research services area. We will compete with genomics companies in the future as we build this new business. We believe that we do not compete with any single company across the breadth of our service offerings.

We believe we compete primarily on the basis of the relative quality of our technical performance, the quality of our customer service, responsiveness, efficiency, compliance with GLP and GMP quality standards, turnaround time, resources, strategic emphasis in protecting customer IP and price. Our retention of our top ten customers for the last four years has led to a steady and increasing revenue stream. However, many of our current or future competitors may have longer operating histories, better name recognition, greater levels of consumer trust, stronger management capabilities, better supplier relationships, larger technical staffs and sales forces and greater financial, technical or marketing resources than we have.

We believe that the successful recruitment and retention of scientists with Ph.D.s and Master’s degrees are key elements in achieving our strategic goals. We believe that as competitive pressures in the pharmaceutical and medical device R&D industry increase, the recruitment and retention of scientists will become increasingly competitive. To meet this challenge, we actively recruit scientists at colleges and universities and through other means. We believe that the sophisticated pharmaceutical and medical device R&D services performed in the course of our business and our reputation as the leading CRO headquartered in China help us to attract and retain qualified scientists. We offer what we believe are competitive salaries and benefits as a means to recruit and retain highly skilled scientists.

Insurance

We maintain property insurance policies covering physical damage to, or loss of, our buildings and their improvements, equipment, office furniture and inventory; employer’s liability insurance generally covering death or work injury of employees; product liability and professional errors and omissions insurance covering product liability claims arising from the use or operation of our small-molecule compounds and claims arising from negligence in connection with our services to customers; public liability insurance covering certain incidents involving third parties that occur on the premises of the company; and directors and officers liability insurance. We do not maintain life insurance for any members of our senior management or other key personnel or business disruption insurance. While we believe that our insurance coverage is comparable to that held by similarly situated companies with property in China and the United States, it may be insufficient to cover all claims for product liability or damage to our fixed assets. See Item 3.D, “Key Information—Risk Factors—We have limited insurance coverage, and any claims beyond our insurance coverage may result in our incurring substantial costs and a diversion of resources.”

Chinese Government Regulations

We operate in a legal environment with little formalized regulation over several of our activities. The following laws, regulations and regulatory authorities are relevant to our business.

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China Food and Drug Administration (CFDA)

In the PRC, the CFDA is the authority that monitors and supervises the administration of pharmaceutical products and medical devices and equipment as well as food and cosmetics. It is the successor of the State Drug Administration, or SDA, and the State Food and Drug Administration, or SFDA. The SDA was established in August 1998 as an organization under the State Council to assume the responsibilities previously handled by the Ministry of Health, or MOH, the State Pharmaceutical Administration Bureau of the PRC and the State Administration of Traditional Chinese Medicine of the PRC. The SFDA was founded in March 2003 to replace the SDA. In 2008, the SFDA was downgraded and affiliated to the MOH. As a result of the recent governmental reorganization approved by the Twelfth National People’s Congress on March 14, 2013, the SFDA was renamed the China Food and Drug Administration, or CFDA, which again reports to the State Council directly and has been given the consolidated authority to regulate the entire food industry by assuming the responsibility on food regulations of the State Council’s Food Safety Office, the General Administration of Quality Supervision, Inspection and Quarantine, or AQSIQ, and the State Administration for Industry and Commerce. In the meantime, the CFDA’s existing regulatory authority over drugs, medical devices, cosmetics and dietary supplements is expected to remain unchanged.

In addition to monitoring and supervising the administration of pharmaceutical products, medical devices and equipment and food and cosmetics, the CFDA’s primary responsibilities also include formulating administrative rules and policies concerning the supervision and administration of food, health food, cosmetics and pharmaceuticals; evaluating, registering and approving new drugs, generic drugs, imported drugs and traditional Chinese medicines; approving and issuing permits for the manufacture, export and import of pharmaceutical products and medical appliances and equipment; approving the establishment of enterprises for pharmaceutical manufacture and distribution; and examining and evaluating the safety of food and cosmetics and handling significant accidents involving these products.

We offer clinical development and regulatory services to help clients design and implement clinical development programs, conduct clinical trials and support their product registration with the CFDA in China. Although we voluntarily comply with certain CFDA standards, we are not currently, and are not likely to become, subject to CFDA regulation except in the following instances. In order to use the term “pharmaceutical” in its company name, our PRC manufacturing subsidiary in Jinshan was required by the relevant local government to obtain, and has obtained, a pharmaceutical manufacturing certificate from the Shanghai branch of the CFDA. Our Suzhou subsidiary has obtained a toxicology laboratory testing certificate from the CFDA.

Blood and Reagent Import/Export

According to the Circular on Strengthening Administration on Entry and Exit Inspection and Quarantine of Special Articles for Medical Use, which became effective as of August 6, 2003, and the Administrative Provisions on the Sanitation and Quarantine of Entry / Exit Special Articles, which became effective as of March 1, 2015, import or export of special medical articles, including microbes, blood and reagents, must be inspected by the relevant inspection and quarantine authorities and be approved by the MOH or its local counterparts or other authorities. In addition, the import or export entities shall establish safety management systems for special articles.

Pharmaceutical Research

The PRC Drug Administration Law, as promulgated by the Standing Committee of the National People’s Congress in 1984, and the Implementing Measures of the PRC Drug Administration Law, as promulgated by the MOH in 1989, have set forth the legal framework for the establishment of pharmaceutical manufacturing enterprises and pharmaceutical trading enterprises and for the administration of pharmaceutical products, including the development, research and manufacturing of new drugs and medical preparations by medical institutions. The PRC Drug Administration Law also regulates the packaging, trademarks and advertisements of pharmaceutical products in the PRC.

Certain revisions to the PRC Drug Administration Law took effect in December 2001. They were formulated to strengthen the supervision and administration of pharmaceutical products and to ensure the quality and safety of such products for human use. The revised PRC Drug Administration Law applies to entities and individuals engaged in the development, production, trade, application, supervision and administration of pharmaceutical products. It regulates and prescribes a framework for the administration of pharmaceutical manufacturers, pharmaceutical trading companies and medical preparations of medical institutions and for the development, research, manufacturing, distribution, packaging, pricing and advertisement of pharmaceutical products.

The PRC Drug Administration Implementing Rules promulgated by the State Council took effect in September 2002 to provide detailed implementing regulations for the revised PRC Drug Administration Law. In 2013, the PRC Drug Administration Law and its Implementing Rules were slightly amended to abolish or lower the approval level for certain approval matters.

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Safety, Health and Environmental Matters

Our operations and properties are subject to extensive environmental protection and health and safety laws and regulations. These laws and regulations govern, among other things, the generation, storage, handling, use and transportation of hazardous materials and the handling and disposal of hazardous and biohazardous waste generated at our facilities.

These laws and regulations generally impose liability regardless of the negligence or fault of a responsible party, unless it has legally defined immunities. These laws and regulations also require us to obtain permits from governmental authorities for certain operations. If we fail to comply with these laws, regulations, or permits, we could be fined or otherwise sanctioned by regulators. Under certain environmental laws and regulations, we could also be held responsible for all of the costs relating to any contamination at our past or present facilities and at third-party waste-disposal sites.

Although we believe that our costs of complying with current and future environmental laws and our liabilities arising from past or future releases of, or exposure to, hazardous substances will not materially adversely affect our business, including financial conditions, results of operations, cash flows and prospects, they may do so. We do not expect to incur material costs to comply with relevant environmental laws and regulations. However, because the requirements imposed by these laws and regulations may change, we may be unable to accurately predict the cost of complying with these laws and regulations. In addition, although we believe that we currently comply with the standards prescribed by these laws and regulations, the risk of accidental contamination or injury from these materials cannot be eliminated. In that event, we could be liable for any resulting damages, which could exceed our resources and adversely impact our financial position, results of operations and cash flows.

Human Genetic Resources

The key regulation for ownership and control of human genetic samples and genetic information is the Interim Measures for Human Resources Administration promulgated by the State Council in 1998, or the 1998 Interim Measures. Regulated activities are policed by the Human Genetic Resources Administration Office of China. The 1998 Interim Measures regulate, among other things, the international cooperation, collection, use and export of Chinese human genetic resources.

Animal Test Permit and Other Related Regulatory Requirements

According to the Administrative Measures on the Certificate for Animal Experimentation (Trial), performing experimentation on animals requires a Certificate for Use of Laboratory Animals. Applicants must satisfy the conditions as follows: laboratory animals must be qualified and sourced from entities that have Certificates for Production of Laboratory Animals; the environment and facilities for laboratory animals’ living and propagating must meet state requirements; laboratory animals’ feed must meet state requirements; workers feeding or experimenting on laboratory animals must have received professional training; management systems must be effective and efficient; and the applicable entity must follow other requirements as stipulated by PRC laws and regulations.

Pathogenic Microorganisms Lab Classification

According to the Administrative Rules on the Bio-safety of Pathogenic Microorganism Labs promulgated by the State Council on November 12, 2004, the labs conducting pathogenic microorganism-related experiments in China are classified into four levels based on their bio-safety protection levels as well as in accordance with the national bio-safety standards. All of our labs are Level 1 and Level 2 labs under the Administrative Rules and are prohibited from conducting experiments relating to highly pathogenic organisms. Documentation regarding the establishment, alteration and extension of such labs is required to be filed with the local administrative health or veterinary authority.

Radioisotope Use License and Other Related Regulatory Requirements

According to applicable PRC laws and regulations, it is mandatory to obtain a radiation safety license for radioisotope material handling. To apply for such license, applicants are required to meet certain conditions, including: (i) professionals who have the relevant safety and self-protection knowledge and meet health requirements and are qualified to handle radioisotope materials; (ii) facilities and equipment that meet national environmental health and safety standards; (iii) a dedicated safety and monitoring committee or dedicated safety and monitoring personnel equipped with appropriate protective equipment and monitoring instruments; (iv) sound internal safety and monitoring rules and procedures and emergency response measures to prevent or minimize damage caused by radiation accidents; and (v) the capability to treat any radioactive waste gas, liquid or solid, or a feasible treatment plan to ensure that the radioactive waste is discharged appropriately.

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In addition, the purchase of radioisotope materials needs to be approved by and registered with relevant environmental protection authorities after the transfer and the disposal of radioisotope material is performed by qualified entities and filed with relevant environmental protection authorities. Enterprises using radioisotopes and radiological equipment must conduct yearly evaluation of the safety and maintenance conditions of this equipment and submit a report to the relevant environmental protection authorities.

Gene Sequencing in Clinical Applications

In February 2014, the CFDA and the National Health and Family Planning Commission, or NHFPC, issued the notice Strengthening Administration on Use of Products and Technologies Related to Gene Sequencing in Clinical Applications. The notice provides that medical instruments, reagents and other products involved in gene-sequencing technologies must be registered with the CFDA; the relevant technologies must be approved by the NHFPC before being used in clinical applications; use of unapproved technologies must immediately stop; no medical institute can practice gene sequencing in clinical applications before official standards and regulations are issued; and those that have started must cease operation.

Internet Information Services

According to the Regulation on Internet Information Service of the PRC promulgated by the State Council on September 25, 2000, and the Administrative Measures for the Licensing of Telecommunication Business Operations promulgated by the Ministry of Industry and Information Technology on March 1, 2009, providers of internet content services, or ICPs, must obtain a value-added telecommunications license, or ICP license, from the Ministry of Industry and Information Technology (MIIT) or its local counterparts before engaging in any commercial ICP operations with the PRC, while the operation of a non-profitable internet information service must be filed with the MIIT.

Internet Medical and Health Information Services

According to the Administrative Measures for Internet Medical and Health Information Services, which became effective on May 1, 2009, in order to engage in the internet medical and health information services, an applicant is subject to the examination and permit requirement of the MOH or the traditional Chinese medicine administrative department at the provincial level. The term “internet medical and health information services” refers to the provision of medical and health information services to internet users by launching a medical and health institution website, a disease-prevention and health knowledge website or a disease-prevention and health channel on a comprehensive website. The content of internet medical and health information services must be technical and accurate and conform to the relevant laws, regulations and provisions regarding the management of medical and health information. No website providing internet medical and health information services may release any superstitious and pornographic information or false information, publish any medical advertisements without examination and approval or provide online diagnosis or treatment services. In addition, no medical institution may store or process the electronic medical records and health file information on the internet.

Internet Drug Information Services

On July 8, 2014, the CFDA issued Measures Regarding the Administration of Internet Drug Information Service, pursuant to which any website which proposes to provide internet drug information services must obtain a qualification from the CFDA or its local counterparts for internet drug information services. The drug information uploaded by such websites must be scientific and accurate and comply with the laws, regulations and other relevant provisions regarding the administration of drug and medical equipment. All websites providing internet drug information services are prohibited from publishing information regarding narcotic drugs, mental health medication, therapeutic toxic medicines, radioactive medicines, anti-drug medicines or the preparation of products for medical institutions. All advertisements for the drugs published by any website that provides internet drug information services must be subject to the examination and approval of the CFDA or its applicable local counterparts.

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PRC Patent Law

The PRC Patent Law was first promulgated in 1984 and was amended in 1992, 2000 and 2008. The third amendment to the PRC Patent Law became effective on October 1, 2009. One notable change in the latest amendment is the requirement of confidential examination of inventions completed in China. Under the pre-existing PRC Patent Law, for inventions completed in China, Chinese companies and individuals had to make China patent filings first before they could make foreign filings (the so-called “first-file-in-China” rule). The amended Article 20 of the Amended Patent Law now provides that, for an invention or utility model completed in China, any applicant (not just Chinese companies and individuals), before filing a patent application outside of China, must first submit it to the State Intellectual Property Office, or SIPO, for a confidential examination. Failure to comply with this requirement will result in the denial of any Chinese patent for the subject invention. This added requirement of confidential examination by the SIPO draws concerns from foreign companies who conduct R&D activities in China or outsource R&D activities to service providers in China. The PRC Patent Law and the Implementing Regulations of the Patent Law of the People’s Republic of China (Second Revision) regulate compensation for service inventions.

Trade Secrets

According to the Anti-Unfair Competition Law of the PRC, the term “trade secrets” refers to technical information and business information that is unknown to the public, that has utility and may create business interest or profit for its legal owners or holders and that is maintained as a secret by its legal owners or holders.

Under this law, business persons are prohibited from employing the following methods to infringe trade secrets: (a) to obtain the trade secrets from the legal owners or holders by any unfair methods such as stealing, solicitation or coercion; (b) to disclose, use or permit others to use the trade secrets obtained illegally under item (a) above; or (c) to disclose, use or permit others to use the trade secrets in violation of any contractual agreements or any requirements of the legal owners or holders to keep such trade secrets in confidence. If a third party knows or should have known of the above-mentioned illegal conduct but nevertheless obtains, uses or discloses such trade secrets of others, it may be deemed to have committed a misappropriation of others’ trade secrets. The parties whose trade secrets are being misappropriated may petition for administrative corrections, and competent regulatory authorities may stop any illegal activities and may fine infringing parties in the amount of RMB 10,000-200,000. Alternatively, persons whose trade secrets are being misappropriated may file lawsuits in a competent PRC court for loss and damages caused by the misappropriation.

The measures to protect trade secrets include oral or written agreements or other reasonable measures to require the employees of, or persons in business contact with, legal owners or holders to keep such trade secrets confidential. As soon as the legal owners or holders request others to keep the trade secrets confidential and adopt reasonable protection measures, the requested persons shall bear the responsibility for keeping the trade secrets confidential.

China (Shanghai) Pilot Free Trade Zone

In September 2013, the China (Shanghai) Pilot Free Trade Zone, or China FTZ, was established. It encompasses the Waigaoqiao site where our principal executive offices are located. China FTZ acts as a test site for the liberalization of the services and financial services sectors, as well as reforms concerning interest-rate deregulation, foreign direct investment and convertibility of the Chinese currency, among others. Accordingly, the Chinese government has recently promulgated a series of regulations to carry out these and other reforms. For example, certain foreign investment administrative approvals have been suspended for a trial period of three years and replaced with various regulatory approvals and market entry restrictions specific to China FTZ.

Regulation of Foreign Currency Exchange, Dividend Distributions and Foreign Investment

Foreign-Exchange Control and Administration

Foreign exchange in China is primarily regulated by the Foreign Currency Administration Rules (1996), as amended; and the Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996), or the Administration Rules. Under the Foreign Currency Administration Rules, the Renminbi is convertible for current account items, including the distribution of dividends, interest payments and trade and service-related foreign-exchange transactions. However, conversion of Renminbi into foreign currency for capital account items, such as direct investment, loans and investment in securities and repatriation of funds, is still subject to the approval of SAFE or its local counterparts. Under the Administration Rules, FIEs may only buy, sell and remit foreign currencies at banks authorized to conduct foreign-exchange transactions after providing valid commercial documents and, in the case of capital account transactions, only after obtaining approval from SAFE or its local counterparts. Capital investments directed outside of China by FIEs are also subject to restrictions, which include approvals by the PRC Ministry of Commerce, SAFE or its local counterparts and the PRC State Reform and Development Commission. Under our current structure, our income will be primarily derived from dividend payments from our operating subsidiaries in China.

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SAFE Circular No. 142 regulates the conversion by a foreign-invested enterprise of foreign-currency-registered capital into RMB by restricting how the converted RMB may be used. SAFE Circular No. 142 provides that the RMB capital converted from foreign-currency-registered capital of a foreign-invested enterprise may only be used for purposes within the business scope approved by the applicable government authority and may not be used for equity investments within the PRC. In addition, SAFE strengthened its oversight of the flow and use of the RMB capital converted from foreign-currency-registered capital of a foreign-invested enterprise. The use of such RMB capital may not be altered without SAFE’s approval, and such RMB capital may not be used to repay RMB loans if the proceeds of such loans have not been used. Furthermore, SAFE promulgated SAFE Circular No. 59 in November 2010, which requires that the government authorities closely examine the authenticity of settlement of net proceeds from offshore offerings and that the net proceeds be settled in the manner described in the offering documents. SAFE also promulgated SAFE Circular No. 45 in November 2011, which, among other things, restricts a foreign-invested enterprise from using RMB converted from its registered capital to provide entrusted loans or repay loans between non-financial enterprises. Violations of these circulars could result in severe monetary or other penalties.

The value of the Renminbi in relation to the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in China’s political and economic conditions. The Renminbi is permitted to appreciate or depreciate within a band against a basket of foreign currencies. Significant international pressure continues to be applied on the PRC government to adopt a substantial liberalization of its currency policy, which could result in a more significant fluctuation in the value of the Renminbi against the U.S. dollar.

Regulation of Foreign Exchange in Certain Onshore and Offshore Transactions

In July 2014, SAFE issued the Notice on Issues Relating to the Administration of Foreign Exchange in Overseas Investment and Financing and Reverse Investment Activities of Domestic Residents Conducted via Special Purpose Companies, or Notice 37, which became effective as of July 4, 2014, and replaced the previous Notice 75. Notice 37 maintain the registration requirement of PRC residents with the local SAFE branch for establishing or controlling any offshore company for the purpose of investment, and financing and conducting reverse investment in China with the domestic or overseas asset or equity that they legally hold, which is referred to as a “Special Purpose Vehicle” under Notice 75. It further requires amendment to a PRC resident’s registration in the event of significant changes to a Special Purpose Vehicle, such as an increase or decrease of capital, share transfer or exchange, merger, division or other material event. Notice 37 provides clearer guidance and procedures for the registration requirements compared to Notice 75. As Notice 37 is newly issued, it is unclear how these regulations will be interpreted and implemented. In addition, different local SAFE branches may have different views and procedures as to the interpretation and implementation of the SAFE regulations.

Under the relevant rules, failure to comply with the registration procedures set forth in Notice 37 may result in restrictions being imposed on the foreign-exchange activities of the relevant onshore company, including the payment of dividends and other distributions to its offshore parent or affiliate and the capital inflow from the offshore entity, and may also subject relevant PRC residents to penalties under PRC foreign-exchange administration regulations.

If any PRC shareholder of our offshore company fails to make the required SAFE registration and amendment registration, the PRC subsidiaries of our offshore company may be prohibited from distributing their profits and proceeds from any reduction in capital, share transfer or liquidation to the offshore company. In addition, failure to comply with the SAFE registration and amendment registration requirements described above could result in liability under the PRC laws for evasion of applicable foreign-exchange restrictions and subject us to large fines. We require all our shareholders who are PRC residents to comply with any SAFE registration requirements, but we have no control over either our shareholders or the outcome of such registration procedures. Such uncertainties may materially and adversely affect our business and prospects.

Dividend Distributions

The principal regulations governing the distribution of dividends paid by Sino-foreign equity joint-venture enterprises and wholly foreign-owned enterprises include the Sino-Foreign Equity Joint Venture Enterprise Law (1979), or EJV Law, as amended; the Sino-Foreign Equity Joint Venture Enterprise Law Implementing Rules (1983), or EJV Rules, as amended; the Wholly Foreign Owned Enterprise Law (1986), or WFOE Law, as amended; and the Wholly Foreign Owned Enterprise Law Implementing Rules (1990), or WFOE Rules, as amended.

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Under these laws and regulations, Sino-foreign equity joint-venture enterprises and wholly foreign-owned enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. WXAT, being a wholly foreign-owned enterprise, is required to set aside at least 10% of its after-tax profits of the preceding year as its reserve funds. It may stop such setting aside if the aggregate amount of the reserve funds has already accounted for more than 50% of its registered capital. Moreover, upon a board resolution, it may set aside a certain amount from its after-tax profits of the preceding year as bonus and welfare funds for staff and workers. The majority of the other subsidiaries in China are equity joint ventures that are required to set aside reserve funds, bonus and welfare funds for staff and workers and development funds, a percentage of which shall be determined by the board.

Foreign Investment

In accordance with the PRC’s Foreign Investment Catalog, investment in the “development and application of genetic diagnosis and treatment” is currently prohibited. To allow us to engage in potentially prohibited genomics activities, we expect to conduct the relevant portion of our genomics business indirectly through an affiliated entity owned by PRC shareholders. These arrangements—commonly referred to as variable interest entity, or VIE, arrangements—rely on a series of related contractual agreements with the affiliated entity and its shareholders pursuant to which the Company expects to control and maintain the beneficial interests in the underlying operations. However, in January 2015, the Ministry of Commerce of the People’s Republic of China released draft foreign investment laws of the PRC, or the Draft FIL, that appears to include VIEs within the scope of entities considered to be foreign invested enterprises subject to the restrictions under existing PRC law on foreign investment. See Item 3.D, “Key Information—Risk Factors—Risks Relating to Our Business and Industry—Investments in our genomics / bioinformatics business may fail to produce satisfactory returns to our ADS holders” for a discussion of risks related to the potential activities.

Regulations on Employee Stock Incentive Plans

Employee stock-ownership plans or stock-option plans of overseas-listed companies in which PRC individuals participate must be approved by SAFE or its authorized branch before foreign-exchange matters involving these plans can be settled.

On February 15, 2012, SAFE promulgated the Circular of the State Administration of Foreign Exchange on Issues of Foreign Exchange Administration of Domestic Individual Participation in Stock Option Incentive Plans of Companies Listed Overseas, or the Option Plan Registration Rules. According to these rules, the individuals in China who participate in the employment stock ownership plan or the stock option plan of an overseas-listed company are required, through a PRC agent that could be a PRC subsidiary of the overseas-listed company or a PRC institution that conducts an asset custodianship business appointed by the PRC subsidiary, to register with SAFE and deal with the relevant foreign-exchange matters in the PRC. The PRC agent must open a special account to hold funds required in connection with the stock purchase or option exercise, any returned principal or profits upon sales of stock, any dividends issued upon the stock and any other income or expenditures approved by SAFE. The PRC agent must also retain an overseas custodian agency to handle matters in connection with the exercise or sale of stock options for the stock option plan participants. Any failure to comply with the Option Plan Registration Rules may affect the effectiveness of the employee stock-ownership plans or stock-option plans and subject the plan participants, the company offering the plans or the relevant intermediaries to penalties under the PRC foreign-exchange regime. Because we are listed on the NYSE, we and our employee optionees are subject to Option Plan Registration Rules and need to comply with the procedures provided therein.

In addition, the State Administration of Taxation has issued circulars concerning employee stock options. Under these circulars, our employees working in China who exercise stock options will be subject to PRC individual income tax. Our PRC subsidiaries have obligations to file documents related to employee stock options with relevant tax authorities and to withhold the individual income taxes of those employees who exercise their stock options. If our employees fail to pay and we fail to withhold their income taxes, we may face sanctions imposed by tax authorities or any other PRC government authorities.

Company Law

WXAT is governed by both the PRC Company Law and the WFOE Law and its implementation rules, and most other operating subsidiaries are governed by both the PRC Company Law and the EJV Law and its implementation rules. The Amended PRC Company Law eliminates a restriction that limits the amount of equity investments that a company could make to a maximum of 50% of such company’s net assets. With the removal of such a restriction, our operating subsidiaries in China may have more flexibility in making equity investments or planning potential acquisitions. In addition, the amended PRC Company Law now permits the establishment of single-shareholder limited-liability companies. As a result, subject to industry limitations, WXAT may acquire 100% of the equity interest in a PRC limited-liability company and become the sole shareholder of such a limited-liability company. The amended PRC Company Law includes requirements about the establishment of a supervisory committee.

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In December 2013, the Standing Committee of the National People’s Congress adopted amendments to the PRC Company Law with effect from March 1, 2014, or the New PRC Company Law. The New PRC Company Law revamps the company establishment system with the purpose of streamlining the registration procedures and relaxing the threshold for setting up a company in China—for example, removing the strict requirements on the registered capital and the verification of the capital contribution. The New PRC Company Law permits that, except in situations where there are requirements in other relevant laws and regulations, companies may decide the registered capital amount, the timeframe for capital payment and the ratio between cash and other assets based on their business needs in accordance with their articles of association.

Regulations on Labor

Under the Labor Contract Law, an employer is obliged to sign labor contracts with unlimited terms with an employee if the employer continues to hire the employee after the expiration of two consecutive fixed-term labor contracts. The employer has to compensate the employee upon the expiration of a fixed-term labor contract, unless the employee refuses to renew such contract on terms the same as or more favorable to the employee than those contained in the expired contract. The employer also has to indemnify an employee if the employer terminates a labor contract without a cause permitted by law. In addition, employees who have served more than one year for an employer are entitled to a paid vacation ranging from 5 to 15 days per year, depending on their length of service. Employees who waive such vacation time at the request of employers must be compensated for three times their regular salary for each waived vacation day.

In July 2013, an amendment to the Labor Contract Law took effect to restrict the use of dispatch labor and to regulate companies that provide labor dispatch services. In March 2014, Labor Dispatch Provisional Regulations came into effect. These regulations significantly restrict the scope and percentage of use of dispatched employees by companies.

Other National and Provincial Laws and Regulations in China

We are subject to evolving laws and regulations administered by PRC governmental authorities at the national, provincial and city levels, some of which are, or may be, applicable to our business. We must comply with numerous state and local laws relating to matters such as safe working conditions, manufacturing practices, environmental protection and fire-hazard control. We believe we are currently in compliance with these laws and regulations in all material respects. We may be required to incur significant costs to comply with these laws and regulations. Unanticipated changes in existing regulatory requirements or adoption of new requirements could have a material adverse effect on our business, including results of operations, financial condition, cash flows and prospects.

Regulations in the United States and Other Jurisdictions

The services that we perform are subject to various regulatory requirements in the United States and other countries designed to ensure the safety, effectiveness, quality and integrity of healthcare products, including pharmaceuticals, medical devices, biologics and human cell and tissue products, or HCTPs. In the United States, these regulations are primarily the Federal Food, Drug and Cosmetic Act and associated regulations regarding good laboratory practice, or GLP; good manufacturing practice, or GMP; good clinical practice, or GCP; and good tissue practice, or GTP, which are administered by the FDA in accordance with current industry standards. These regulations apply to all phases of pharmaceutical, medical device, biologic and HCTP testing, manufacturing and record keeping, including personnel; facilities; equipment; control of materials, processes and laboratories; and the packaging, labeling, storage and distribution of products. Noncompliance with GLP, GMP, GCP and GTP standards by us in a project could result in disqualification of data that we collected or of the associated product. A material violation of GLP, GMP, GCP and GTP requirements could also result in additional regulatory sanctions, imposition of fines and, in severe cases, a mandated closing of our facilities, which could have a material adverse effect on our business, including its results of operations, financial condition, cash flows and prospects. In 1981, the Organization for Economic Co-operation and Development, or OECD, published Principles of Good Laboratory Practice (GLP). Subsequently, the OECD Council revised the principles and issued the Decision on Mutual Acceptance of Data in the Assessment of Chemicals and Adherence of Non-Member Countries to the Council Acts Related to the Mutual Acceptance of Data in the Assessment of Chemicals. Because China has not yet acceded to this system, separate inspections may be required by specific OECD member countries to qualify data from China as GLP for use in these OECD countries. As a result, many companies, particularly large pharmaceutical companies, do not use Chinese CROs for certain services such as toxicology services in connection with products that could be filed for approval in the United Kingdom, where authorities have raised this issue publicly.

Our laboratories and facilities in the United States are subject to regulation under federal, state and local laws relating to the handling, storage and disposal of laboratory specimens, hazardous waste and radioactive materials; the surface and air transportation of laboratory specimens; and the safety and health of employees. Although we believe that we are currently in compliance in all material aspects with such federal, state and local laws, failure to comply could subject us to denial of the right to conduct business, fines, criminal penalties and other enforcement actions.

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The United States Animal Welfare Act, or AWA, governs the care and use of certain species of animals used for research. The U.S. Congress has passed legislation that excludes the use in research of laboratory rats, mice and chickens from regulation under the AWA. As a result, some of our animal-model activities in the United States are not subject to regulation under the AWA. For regulated species, the AWA and attendant animal-care regulations require producers and users of regulated species to provide veterinary care and to utilize specific husbandry practices relating to cage size, shipping conditions and sanitation and environmental enrichment to assure the welfare of these animals. Although we believe that we comply with licensing and registration standards set by the U.S. Department of Agriculture for the care and use of regulated species, failure to comply could subject us to denial of the right to conduct business, fines, penalties and other enforcement actions.

C. Organizational Structure

WuXi PharmaTech (Cayman) Inc. is our holding company and as of December 31, 2014 owns, directly or indirectly, 100% of the equity of all of our consolidated subsidiaries. For a list of our subsidiaries as of December 31, 2014, please refer to Exhibit 8.1, “List of Subsidiaries.”

D. Property, Plant and Equipment

We currently conduct substantially all our laboratory and manufacturing activities at the following sites, which are operational or under construction:

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None.

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with Item 3.A, “Key Information—Selected Financial Data,” and our audited financial statements and the related notes included elsewhere in this annual report on Form 20-F. This discussion contains forward-looking statements that involve risks and uncertainties. See “Introduction—Forward-Looking Statements.” Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under Item 3.D, “Key Information—Risk Factors.” We caution you that our businesses and financial performance are subject to substantial risks and uncertainties.

A. Operating Results

Overview

We are a leading pharmaceutical, biotechnology and medical device R&D services company, with operations primarily in China and the United States. We provide a broad and integrated platform of laboratory and manufacturing services throughout the drug and medical device R&D process to our customers, which include many of the world’s pharmaceutical, biotechnology and medical device companies. Our services are designed to assist our global customers in shortening the time and lowering the cycle of drug and medical device R&D by providing cost-effective and efficient outsourcing solutions.

We group our operations into two segments: Laboratory Services and Manufacturing Services. Our Laboratory Services segment focuses on helping our customers to discover and develop small-molecule and large-molecule pharmaceuticals through our discovery chemistry, biology, medicinal chemistry, DMPK, formulation, analytical development, toxicology, bioanalytical, research reagent production, genomics and clinical services as well as biopharmaceutical discovery, development and testing and medical device testing. Our Manufacturing Services segment focuses on producing advanced intermediates and APIs for small-molecule pharmaceuticals used in preclinical and clinical trials or marketed commercially, as well as therapeutic protein and antibody drugs used in preclinical and clinical trials.

In 2011, we formed a corporate venture fund, with an expectation to invest up to $50 million in life-science companies. As of December 31, 2012, 2013 and 2014, we had invested approximately $9.8 million, $17.3 million, and $36.1 million, respectively, in those companies. As of December 31, 2014, we have realized $23.6 million in gains from sale of securities in three portfolio companies in which we had invested $7.0 million.

Our current customers include most of the world’s largest pharmaceutical companies as measured by revenue, as well as other large and small pharmaceutical, biotechnology and medical device companies and academic institutions and non-profit organizations. In 2014, we provided services to more than 2,400 pharmaceutical, biotechnology and medical device customers. Many of these customers have presented us with performance awards. Each of our top ten customers over the last four years continues to be a customer.

The pharmaceutical industry is undergoing transformational change and is adopting a more collaborative and networked model. Outsourcing of R&D is one of the key elements of this industry transformation, as companies benefit from the flexibility of working on more of a variable cost basis with a network of vendors. Offshore outsourcing, especially to China, provides further benefits, in particular access to high-quality scientific expertise at an affordable cost. We believe that growth in offshore outsourcing and in China’s domestic pharmaceutical market, already one of the two or three largest in the world and growing rapidly, will cause more pharmaceutical R&D to be conducted in China. To be prepared to lead this industry transformation and to drive the growth of our business, we will continue to expand our service offerings.

Our net revenues increased from $499.9 million in 2012 to $578.1 million in 2013 and $674.3 million in 2014, increases of 15.6% and 16.6%, respectively. Our revenue growth is attributable primarily to new capabilities, a larger customer base and increased revenue per customer. This revenue growth was broad-based, with 12.5% and 14.2% growth, in 2013 and 2014, respectively, in Laboratory Services and 25.8% and 23.8% growth, in 2013 and 2014, respectively, in Manufacturing Services.

Our gross profit increased from $183.3 million in 2012 to $211.6 million in 2013 and $251.7 million in 2014, increases of 15.5% and 19.0%, respectively, mainly due to increased revenue. Our gross margin was 36.7% in 2012, 36.6% in 2013, and 37.3% in 2014.

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Our operating income increased 17.7% from $89.4 million in 2012 to $105.2 million in 2013, mainly due to increased revenue. Operating income decreased 1.4% to $103.7 million in 2014, mainly due to increased investment in new capabilities, particularly in the manufacturing, biologics and genomics businesses and in the functional areas of R&D, sales and marketing and information technology. Our operating margin was 17.9% in 2012, 18.2% in 2013, and 15.4% in 2014. The increase in operating margin in 2013 resulted from improved productivity and the ramp-up of our preclinical and biologics businesses, which more than offset the negative effects of labor cost inflation, appreciation of the Renminbi relative to the U.S. dollar and investment in new businesses. The decrease in operating margin in 2014 resulted primarily from significantly increased investment.

Our net income increased 32.3% from $86.6 million in 2012 to $114.6 million in 2013, mainly due to strong revenue growth, relatively flat gross margin and operating margin, higher non-operating income primarily from realized and mark-to-market gains on foreign-exchange forward contracts and a relatively flat effective tax rate. Our net income decreased 2.1% to $112.2 million in 2014, mainly due to increased investment in new capabilities, particularly in the manufacturing, biologics and genomics businesses and in the functional areas of R&D, sales and marketing and information technology and mark-to-market losses on foreign-exchange forward contracts, partially offset by gains on venture fund investments.

Our capital expenditures were $55.9 million in 2013 and were mainly incurred to construct, expand and update our laboratory service facilities and equipment. Our capital expenditures of $108.0 million in 2014 were mainly incurred to construct, expand, and update our laboratory service facilities and equipment and to construct small-molecule manufacturing facilities in Changzhou. We expect to make about $180-$200 million of capital expenditures in 2015, including completion of the construction of small-molecule manufacturing facilities in Changzhou and initial construction of new commercial manufacturing facilities for biologic products in Wuxi.

We have announced several growth initiatives and strategies, including construction of new small-molecule and biologics manufacturing facilities, listing and anticipated issuance of shares of STA in China, investing in genomics/bioinformatics, investing in mobile technologies, and investing in various China healthcare initiatives. While we expect these initiatives and strategies will position us for future growth, we expect in the near term they will negatively impact our profitability and present significant new risks and uncertainties.

We increased our headcount from 7,445 at year end 2013 to 8,837 at yearend 2014, to meet growing demand. In 2015, we plan to continue increasing our headcount slightly less than anticipated revenue growth to meet the anticipated growth in demand for our services.

Components of Revenue and Expenses

Net Revenues

Our net revenues represent our total revenues from operations, less sales taxes. We generated most of our net revenues over the last three years from U.S.-headquartered customers, with most of the remaining revenues coming from customers based in Europe and Japan. Most of our revenues came from pharmaceutical companies, with the remainder mainly coming from biotechnology and medical device companies. We expect the general composition of our customer base to be similar in 2015.

Laboratory Services Segment

Laboratory services are composed of China-based small-molecule and large-molecule services such as synthetic chemistry, biology, medicinal chemistry, DMPK/ADME, formulation, analytical development, toxicology, bioanalytical services, research reagent production, genomics and clinical research, as well as U.S.-based services for testing of biologics and medical devices. Our Laboratory Services revenues are generated primarily on a fee-for-service basis or on a full-time-equivalent basis. For fee-for-service contracts, we are compensated for our work on the basis of shipment of a negotiated deliverable, generally data about a compound or quantifies of a manufactured compound. The duration of fee-for-service contracts varies from a few months to a few years. For full-time-equivalent, or FTE, contracts, the customer pays a fixed rate per FTE employee per period of time, and we recognize revenues as the services are provided. Full-time-equivalent contracts generally are for multiyear periods. In recent years, revenues from fee-for-service contracts have been growing faster than, and are now larger than, revenues from full-time-equivalent contracts.

Manufacturing Services Segment

We derive our Manufacturing Services revenues from four sources, all based in China: providing manufacturing process chemistry services, manufacturing advanced intermediates and APIs for small molecules for use by our customers in preclinical and clinical trials, manufacturing advanced intermediates for marketed small-molecule products and manufacturing biologic drugs. We generate all of our Manufacturing Services revenues on a fee-for-service basis. Under fee-for-service contracts, we are compensated for the shipment of a negotiated deliverable.

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Cost of Revenues

Laboratory Services Segment

Cost of revenues of the Laboratory Services segment consists primarily of (a) labor costs, including salaries, bonuses, share-based compensation charges and other benefits for employees who provide laboratory services; (b) raw material costs, including catalysts, reagents, solvents, laboratory animals, biological products and laboratory supplies; and (c) overhead, including fixed-asset depreciation, intangible-asset amortization, utilities, rents, employee salaries, bonuses, an allocation of share-based compensation charges and benefits and other expenses associated with support functions, such as health, safety, environmental protection, quality assurance and logistics, including an allocation of our share-based compensation charges based on the nature of work that certain employees are assigned to perform.

Cost of revenues of the Laboratory Services segment increased in 2013 and 2014 principally in connection with increased sales and additionally due to increasing labor costs. We expect cost of revenues in the Laboratory Services segment to increase in 2015 driven by higher demand for our services. Headcount is expected to grow roughly in line with revenue growth as we expand to meet anticipated growth. We also expect that rising labor costs in China will increase our near-term labor costs as a percentage of Laboratory Services segment net revenues, partially offset by improved employee productivity and operating efficiency. However, we expect near-term raw-material costs as a percentage of Laboratory Services segment net revenues to remain relatively stable due to steps we are taking to control raw-materials costs, such as improving raw-material usage efficiencies and taking advantage of economies of scale. We expect near-term overhead costs to increase in absolute terms as we expand our facilities, purchase new equipment and increase the size of our supporting staff to meet future business needs. However, we expect the near-term Laboratory Services segment overhead costs as a percentage of net revenues to be relatively stable, with the leverage of improved facility utilization and economies of scale partially offsetting overhead expense increases. Labor, material and overhead costs in China may also increase in U.S. dollar terms due to Renminbi fluctuation versus the U.S. dollar.

Manufacturing Services Segment

Cost of revenues of the Manufacturing Services segment consists primarily of (a) labor costs, including salaries, bonuses, share-based compensation charges and other benefits for employees who provide manufacturing services; (b) the cost of raw materials used in manufacturing; and (c) overhead, consisting primarily of facility depreciation, utilities and the costs of employee salaries, bonuses, share-based compensation charges and benefits and other expenses associated with support functions, such as quality control and quality assurance, including an allocation of our share-based compensation charges based on the nature of work that certain employees are assigned to perform.

Cost of revenues of the Manufacturing Services segment increased significantly in 2013 and 2014 due to increasing demand for such services. In 2014, we expect the cost of revenues of the Manufacturing Services segment to increase as demand for research manufacturing services grows. With an increase in manufacturing orders, we expect to increase our manufacturing headcount and to have increased raw material and utility costs.

Gross Profit and Gross Margin

Gross profit is equal to net revenues less cost of revenues. Gross margin represents gross profit divided by net revenues. Gross profit increased significantly in 2013 and 2014 primarily due to increased revenues from higher demand for our services. Gross margin was relatively flat in 2013 as downward pressure from labor cost inflation, RMB appreciation versus the U.S. dollar and investment was essentially offset by improved productivity. Gross margin increased in 2014 as benefits from improved productivity and business mix more than offset downward pressure from labor cost inflation and investment. The exchange rate of the RMB versus the U.S. dollar fluctuated significantly during 2014 but did not appreciate or depreciate significantly.

Operating Expenses

Our operating expenses consist of selling and marketing expenses, general and administrative expenses and research and development expenses. In 2014, our operating expenses increased significantly as we invested in talent and capabilities in R&D, information technology, sales and marketing and administration to drive future growth. We expect the ratio of operating expenses to net revenues to further increase in 2015 as we continue these investments.

Selling and Marketing Expenses

Our selling and marketing expenses consist primarily of salaries, bonuses, commissions and other benefits for our sales and business development personnel and promotional activities and tradeshow expenses. In 2015, we expect our selling and marketing expenses to increase due to the need to invest in business development in order to increase market penetration and to promote our newer services.

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General and Administrative Expenses

General and administrative expenses consist primarily of (a) salaries, bonuses and other benefits for senior management and employees in our administrative departments, including finance, human resources, the executive office, site administration, legal, information technology, public relations and investor relations; (b) external legal, consulting and auditing fees and (c) allocation of facilities, utilities and other overhead expenses. In certain periods, general and administrative expenses are partially offset by government cash subsidies for our general use that are awarded at the discretion of local Chinese authorities. General and administrative expenses also include an allocation of our share-based compensation charges based on the nature of work that certain employees perform.

Research and Development Expenses

Research and development expenses consist primarily of (a) salaries, bonuses and other benefits for scientists engaged in researching and developing new capabilities that we do not yet offer as services to our customers; (b) raw material costs, including catalysts, reagents, solvents, laboratory animals, biological products and laboratory supplies; and (c) overhead, including fixed-asset depreciation; intangible-asset amortization; utilities; and employee salaries, bonuses, an allocation of share-based compensation charges and benefits and expenses associated with support functions.

Revaluation of Contingent Consideration

In 2012, we recorded a gain from revaluation of contingent consideration of $3.4 million- relating to the Abgent acquisition. We recorded no gain or loss on contingent consideration in 2013 or in 2014.

Impairment Charges for Goodwill and Intangible Assets

We test the carrying amounts of goodwill, acquired intangible assets and other long-lived assets in accordance with relevant guidance. See “—Critical Accounting Policies—Goodwill and Impairment of Long-Lived Assets.” In 2012, we recorded a $3.4 million impairment charge related to Abgent due to the reduced outlook for its antibody reagent business. No impairment charges were recorded in 2013 and 2014.

Operating Income and Operating Margin

Operating income is equal to gross profit less operating expenses. Operating margin is equal to operating profit divided by net revenues. In 2013, operating margin increased and continued to increase slightly as the favorable effect of improved productivity more than offset the unfavorable effect of labor cost inflation and new investments. However, the operating margin decreased in 2014 due to the increased selling and marketing expenses, general and administrative expenses, merge and acquisition costs and research and development expenses.

Other Income, Net

Other income includes realized and unrealized (mark-to-market) gains and losses on foreign-exchange forward contracts, gains and losses from venture fund investments, gains and losses from investments in joint ventures and government subsidies. In March 2015, we agreed to sell STA shares to 75 eligible members of STA and WuXi management, representing approximately 5.55% of STA’s then-outstanding shares. These shares were sold at fair market value based on a third-party appraisal of STA’s equity value, and we will recognize a related gain in the second quarter of 2015.

Interest Expense

Interest expense consists of interest owed on bank borrowings.

Interest Income

Interest income consists of income earned on cash and cash equivalents, restricted cash and short-term investments.

Taxes and Incentives

Cayman Islands

We are incorporated in the Cayman Islands. Under the current laws of the Cayman Islands, we are not subject to income or capital gains tax. In addition, dividend payments are not subject to withholding tax in the Cayman Islands.

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British Virgin Islands

Our intermediate offshore holding company, WXAT BVI, was incorporated in the British Virgin Islands. Under the current laws of the British Virgin Islands, WXAT BVI is not subject to income or capital gains tax. In addition, dividend payments are not subject to withholding tax in the British Virgin Islands.

United States

WXAT Holding, AppTec, Xenobiotic Laboratories, NextCode Health USA and LabNetwork are registered in Delaware, Delaware, New Jersey, Delaware and Maine, respectively. They are subject to a U.S. federal corporate marginal income tax rate of 35%. They are subject to state tax rates ranging approximately from 5% to 10%. As of December 31, 2014, these entities had gross federal and state net operating losses of $0.7 and $0.8 million, respectively.

Hong Kong

STA HK, WuXi AppTec (Hong Kong) Ltd., XBL-HK, Ltd. and WuXi Biologics (Hong Kong) Ltd. were subject to Hong Kong profit tax at a rate of 16.5% in 2014.

China

The EIT Law and its implementing rules permit certain HNTEs to enjoy a reduced 15% EIT rate subject to certain general factors described in the EIT Law and the related regulations. In the fourth quarter of 2008, our PRC subsidiaries WXAT, WASH, WATJ and STA were recognized by the local provincial Municipal Science and Technology Commission, the Finance Bureau and the State and Local Tax Bureaus as HNTEs under the EIT Law. Therefore, WXAT, WASH, WATJ and STA were eligible to enjoy a preferential tax rate of 15% as long as they maintain their qualification as HNTEs. According to the three-year review schedule regulated by the relevant government authority, WASH, WATJ and STA successfully re-applied for their HNTE qualification in 2014. Thus, those three entities are eligible to enjoy a preferential tax rate of 15% for 2014 through 2016. In 2010, WASZ, located in Suzhou, was recognized as an HNTE and successfully renewed its HNTE certificate in 2013, making it eligible to enjoy a 15% preferential tax rate as an HNTE from 2010 through 2015. In 2012, STA R&D, Abgent SZ and WAWH were recognized as HNTEs and were eligible to enjoy a reduced 15% EIT rate for 2012 through 2014. STA R&D obtained approval from the relevant tax authorities to enjoy the one-year exemption and three-year 50% deduction (“1+3 tax holiday”) in April 2013, thus STA R&D became eligible for income tax rates of 0%, 12.5%, 12.5%, and 12.5% for 2011 through 2015. WABIO was recognized by the local provincial Municipal Science and Technology Commission, the Finance Bureau and the State and Local Tax Bureaus as HNTEs under the EIT Law. Therefore, WABIO was, is, and will be eligible to enjoy a preferential tax rate of 15% for 2013 through 2015. However, as the continued qualification of an HNTE is subject to annual evaluation and a three-year review by the relevant government authority in China, it is uncertain whether all these entities can pass the future review, and our computation of deferred taxes is based on the enacted tax rate, which does not factor in the extension of the HNTE status. If either or all of them fail to maintain the HNTE qualification, their applicable EIT rate may increase up to 25%, which could have a material adverse effect on our results of operations.

Because we are a Cayman Islands holding company, substantially all of our income may be derived from dividends we receive from our PRC operating subsidiaries described above. The EIT Law and its implementing rules generally provide that a 10% withholding tax applies to China-sourced income derived by non-resident enterprises for purposes of PRC EIT, unless such non-resident enterprise’s jurisdiction of incorporation has a tax treaty with China that provides for a different withholding tax arrangement. We expect that this 10% withholding tax will apply to dividends paid to us by our PRC subsidiaries. We intend to indefinitely reinvest the undistributed earnings of PRC subsidiaries.

Since the company’s inception, we have benefited from either exemptions or subsidies with respect to income tax and turnover tax. Our eligibility to receive these financial incentives requires that we continue to qualify for them and is subject to the discretion of the central government or relevant local government authorities, who could determine at any time to eliminate or reduce these financial incentives, generally with prospective effect. Since our receipt of these financial incentives is subject to periodic time lags and inconsistent government practice, for as long as we continue to receive these financial incentives our net income in a particular period may be higher or lower relative to other periods based on the potential changes in these financial incentives. See Item 3.D, “Key Information—Risk Factors—Risks Relating to China—The discontinuation of any of the financial incentives currently available to us in the PRC could adversely affect our results of operations and prospects.”

Our effective tax rate was 16.7%, 17.0% and 17.9% in 2012, 2013, and 2014, respectively.

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Results of Operations

The following table presents a summary of our consolidated results of operations and comprehensive income by amount and as a percentage of our total net revenues for the years ended December 31, 2012, 2013 and 2014. You should read this information together with our audited consolidated financial statements and related notes included elsewhere in this annual report on Form 20-F. Our historical operating results are not necessarily indicative of our future results.

Comparison of 2013 and 2014 Financial Results

Net Revenues

The following table presents our net revenues by segment for 2013 and 2014:

Our net revenues increased from $578.1 million in 2013 to $674.3 million in 2014, or 16.6%. This growth was primarily due to higher demand for a broader range of services. Our customer number increased from approximately 1,700 in 2013 to about 2,400 in 2014. Our average revenue per top ten customers was relatively unchanged at $26.0 million in 2013 and $25.6 million in 2014.

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Laboratory Services Segment Net Revenues

Net revenues from our Laboratory Services segment increased from $430.9 million in 2013 to $492.0 million in 2014, or 14.2% growth. The increase in net revenues is mainly attributable to year-over-year growth in chemistry services, discovery services, formulation, biology, genomics, analytical services and biologics development.

Manufacturing Services Segment Net Revenues

Net revenues from our Manufacturing Services segment increased from $147.2 million in 2013 to $182.3 million in 2014, or 23.8%. The increase in net revenues is primarily due to higher demand for clinical-trial materials in our small-molecule research manufacturing and biologics businesses, advanced intermediates in our commercial manufacturing business and process chemistry services.

Cost of Revenues

The following table presents cost of revenues by segment for 2013 and 2014:

Our total cost of revenues increased by 15.3% from $366.5 million in 2013 to $422.6 million in 2014, mainly due to revenue growth driven by volume.

Laboratory Services Segment Cost of Revenues

Cost of revenues for the Laboratory Services segment increased by 12.9% from $264.4 million in 2013 to $298.6 million in 2014, driven by the revenue growth and the impact of increased labor costs.

Manufacturing Services Segment Cost of Revenues

Cost of revenues for the Manufacturing Services segment increased by 21.4% from $102.1 million in 2013 to $124.0 million in 2014 due to revenue growth and the impact of increased labor costs.

Gross Profit and Gross Margin

Our gross profit increased by 19.0% from $211.6 million in 2013 to $251.7 million in 2014 mainly due to revenue growth. Gross margin increased from 36.6% in 2013 to 37.3% in 2014 primarily due to improved productivity and the ramp-up of biologics development and preclinical services, partially offset by the effects of increasing labor costs in China. Gross margin in the Laboratory Services segment increased year over year from 38.6% to 39.3%, primarily due to improved productivity and the ramp-up of biologics development and preclinical services, partially offset by the effects of increasing labor costs in China. Gross margin in the Manufacturing Services segment increased from 30.6% in 2013 to 32.0% in 2014 primarily due to business mix.

Operating Expenses and Operating Margin

Total operating expenses increased by 39.2% from $106.3 million in 2013 to $148.0 million in 2014, primarily as a result of investments in talent; sales and marketing; IT infrastructure; R&D to develop new capabilities in biologics, biology, genomics, and other areas; and merger- and acquisition- related transaction costs. Operating expenses as a percentage of revenues increased from 18.4% in 2013 to 21.9% in 2014 due to these investments.

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Investment Income (Loss)

We had investment income of $12.7 million in 2014 compared to an investment loss of $4.0 million in 2013. In 2014, investment income consisted primarily of the offsetting effects of realized gains from our venture fund and investment losses from our joint ventures WuXiPRA and WuXi MedImmune and other investments accounted for under the equity method. We sold certain shares of our venture fund’s public portfolio companies, realizing $16.6 million in gains in 2014.

Other Income, Net

Other income, net, decreased 87.1% from $27.3 million in 2013 to $3.5 million in 2014, primarily due to mark-to-market losses on foreign-exchange forward contracts of $16.6 million in 2014 compared to mark-to-market gains of $9.1 million in 2013 and lower realized gains on settled foreign-exchange forward contracts of $7.4 million in 2014 compared to $10.2 million in 2013, offset by increased government subsidies.

Interest Expense

Interest expense increased 32.1% from $2.0 million in 2013 to $2.6 million in 2014, mainly due to increased borrowing.

Interest Income

Interest income increased 68.0% from $11.6 million in 2013 to $19.3 million in 2014, mainly due to the increased investments in short-term instruments and higher interest rates.

Income Tax Expense

Despite a 1.0% decline in pre-tax income, income tax expense increased by 4.2% from $23.4 million in 2013 to $24.4 million in 2014 due to income mix and non-recurring tax benefits in 2013. Our effective tax rate increased from 17.0% in 2013 to 17.9% in 2014.

Net Income

Due to the foregoing, net income decreased by 2.1% from 114.6 million in 2013 to $112.2 million in 2014.

Comparison of 2012 and 2013 Financial Results

Net Revenues

The following table presents our net revenues by segment for 2012 and 2013:

Our net revenues increased from $499.9 million in 2012 to $578.1 million in 2013, or 15.6%. This growth was primarily due to higher demand for our services. Our customer number increased from approximately 1,600 in 2012 to approximately 1,700 in 2013. Our average revenue per top ten customers increased from $24.0 million in 2012 to $26.0 million in 2013.

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Laboratory Services Segment Net Revenues

Net revenues from our Laboratory Services segment increased from $382.9 million in 2012 to $430.9 million in 2013, or 12.5% growth. The increase in net revenues is attributable to $17.8 million in new service offerings introduced in 2013, with particularly strong growth in integrated medicinal chemistry, biology, toxicology, bioanalytical services, genomics and biologics development, partially offset by an average price decline relating to FTE contracts for ongoing service offerings of 1.7%, or $2.9 million, as well as an increase in the number of our customers and larger revenue per top-ten customer for our existing service offerings.

Manufacturing Services Segment Net Revenues

Net revenues from our Manufacturing Services segment increased from $117.0 million in 2012 to $147.2 million in 2013, or 25.8%. The increase in net revenues is primarily due to higher demand for clinical-trial materials from our research manufacturing business and for process chemistry services.

Cost of Revenues

The following table presents cost of revenues by segment for 2012 and 2013:

Our total cost of revenues increased by 15.7% from $316.7 million in 2012 to $366.5 million in 2013, mainly due to revenue growth driven by volume.

Laboratory Services Segment Cost of Revenues

Cost of revenues for the Laboratory Services segment increased by 12.4% from $235.1 million in 2012 to $264.4 million in 2013, driven by the revenue growth in biology, medicinal chemistry, toxicology, bioanalytical services, genomics and biologics and the impact of increased labor costs.

Manufacturing Services Segment Cost of Revenues

Cost of revenues for the Manufacturing Services segment increased by 25.3% from $81.6 million in 2012 to $102.1 million in 2013, primarily due to revenue growth in research manufacturing and process chemistry in 2013 and the impact of increased labor costs.

Gross Profit and Gross Margin

Our gross profit increased by 15.5% from $183.2 million in 2012 to $211.6 million in 2013, mainly due to revenue growth. Gross margin decreased slightly from 36.7% in 2012 to 36.6% in 2013 primarily due to the effects of increasing labor costs in China and appreciation of the RMB versus the U.S. dollar, partially offset by improved productivity and the ramp-up of biologics and preclinical services. Gross margin in the Laboratory Services segment was unchanged year over year at 38.6%. Gross margin in the Manufacturing Services segment increased from 30.3% in 2012 to 30.6% in 2013 primarily due to business mix. Total gross margin decreased slightly despite a slight increase in Manufacturing Services gross margin and no change in Laboratory Services gross margin due to the mathematical effect produced by greater growth in the lower-gross-margin Manufacturing Services business.

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Operating Expenses and Operating Margin

Total operating expenses increased by 13.3% from $93.8 million in 2012 to $106.3 million in 2013. Operating expenses as a percentage of revenues decreased from 18.8% in 2012 to 18.4% in 2013. While our expenses relating to the hiring of new senior staff and sales and marketing personnel and development of R&D capabilities in biology, biologics and genomics increased, those increases were lower than our growth in net revenues.

Impairment Charges for Goodwill and Intangible Assets

We did not record any impairment charges in 2013. An impairment charge of $3.4 million in 2012 was related to goodwill and intangible assets attributable to the Abgent acquisition and was triggered by the 2012 underperformance of the business, combined with a reduced outlook for its reagent laboratory business. These charges were largely offset by the reversal of contingent consideration initially accrued as part of the acquisition, which is no longer payable as a result of the business’s underperformance.

Investment Loss

Losses from equity-method investments relate to our joint ventures WuXiPRA and WuXi MedImmune, offset by gains on the sale of equity investments in certain portfolio companies by our corporate venture fund.

Other Income, Net

Other income, net, increased by 296.7% from $9.2 million in 2012 to $27.3 million in 2013, primarily due to higher realized and mark-to-market gains from foreign-exchange forward contracts and more government subsidy income.

Interest Expense

Interest expense increased by 13.7% from $1.7 million in 2012 to $2.0 million in 2013, mainly due to increased borrowing.

Interest Income

Interest income increased by 48.6% from $7.7 million in 2012 to $11.5 million in 2013, mainly due to the increased investments in short-term instruments and higher interest rates.

Income Tax Expense

Income tax expense increased by 34.9% from $17.4 million in 2012 to $23.4 million in 2013 due to the higher 2013 pretax income, which was driven by sales growth. Our effective tax rate increased from 16.7% in 2012 to 17.0% in 2013 primarily due to income mix.

Net Income

Due to the foregoing, net income increased by 32.3% from $86.6 million in 2012 to $114.6 million in 2013.

Critical Accounting Policies

We prepare our financial statements in conformity with U.S. GAAP, which requires us to make estimates and assumptions that affect our reporting of assets and liabilities, contingent assets and liabilities and net revenues and expenses, among other things. We periodically evaluate these estimates and assumptions based on available information, our historical experience, and other factors that we deem to be relevant. As our financial reporting process inherently relies on the use of estimates and assumptions, our actual results could differ from our expectations. This is especially true with accounting policies that require higher degrees of judgment than others in their application. We consider the policies discussed below to be critical to an understanding of our audited consolidated financial statements because they involve the greatest reliance on our management’s judgment.

Business Combinations

Our consolidated financial statements reflect the results of an acquired business after the completion of the acquisition. We account for business combinations using the acquisition method of accounting, which requires that assets acquired and liabilities assumed be recorded at the date of acquisition at their fair values. Any excess of the purchase price over the assigned values of the net assets acquired is recorded as goodwill.

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The judgments made in determining the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact our results of operations. There are several methods that can be used to determine fair value. For intangible assets, we typically use the income method. This method starts with our forecast of all expected future net cash flows. These cash flows are then adjusted to present value by applying an appropriate discount rate that reflects the risk factors associated with the cash-flow streams. Some of the more significant estimates and assumptions inherent in the income method or other methods include:

Determining the useful life of an intangible asset also requires judgment, as different types of intangible assets will have different useful lives and certain assets may even be considered to have indefinite useful lives.

Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired at the date of acquisition. We perform an annual goodwill impairment test comprised of two steps. The first step compares the fair value of each reporting unit to its carrying amount, including goodwill. If the fair value of each reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and the second step will not be required. If the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of goodwill to the carrying amount of a reporting unit’s goodwill. We determine the fair value of each reporting unit with reference to a third-party valuation using the expected present value of future cash flows. The key assumptions used in the calculation include the long-term rates of sales and cost growth, expected profitability, working-capital requirements and discount rates. The implied fair value of goodwill is determined in a manner similar to accounting for a business combination, with the allocation of the assessed fair value (determined in the first step) to the assets and liabilities of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied fair value of goodwill. This allocation process is only performed for purposes of evaluating goodwill impairment and does not result in an entry to adjust the value of any assets or liabilities. An impairment loss is recognized for any excess in the carrying value of goodwill over the implied fair value of goodwill. We perform our annual impairment test on November 30.

Based on step one of our impairment test for 2014, the fair values of the AppTec, MedKey, Chemdepo and Abgent units were greater than their respective carrying values. We did not recognize any goodwill impairment for the year ended December 31, 2012, 2013 and 2014.

Impairment of Long-Lived Assets

We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of these assets is measured by comparison of its carrying amount to the future undiscounted cash flows that the asset is expected to generate. If the sum of the expected undiscounted cash flows is less than the carrying amount of the asset, we would recognize an impairment loss equal to the amount by which the carrying value of the asset exceeds its fair value. Our estimates of undiscounted cash flow are based on the current regulatory, social and economic climate in which we conduct our operations as well as recent operating information and budgets for our business. These estimates could be negatively impacted by changes in laws and regulations, economic downturns or other events affecting our business.

During the fourth quarter of 2014, based on the underperformance of certain business, we assessed certain long-lived asset groups for impairment. The assessment included an evaluation of the future cash flows expected to be generated by the long-lived assets. Based on this analysis, we determined that all assets were recoverable, and we recognized no impairment charge for the year ended December 31, 2012, 2013 and 2014.

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Revenue Recognition

Revenues are recognized when persuasive evidence of an arrangement exists, the sales price is fixed or determinable, delivery of the product or performance of the service has occurred and there is reasonable assurance of collection of the sales proceeds. For laboratory services provided on a fee-for-service or project basis, we recognize revenues upon finalization of the project terms and delivery and acceptance of the final product, which is generally in the form of a technical laboratory report or small amount of compound. For certain fee-for-service or project-basis services that span multiple accounting periods, we recognize revenue as we perform services and satisfy our contractual obligations, measured on a proportional-performance basis, generally using output measures that are specific to the service being provided. Examples of output measures include dosing performed, specimens prepared and hours worked. Substantially all of our fee-for-service contracts have durations of less than one year. For laboratory services provided on a full-time-equivalent basis, the customer pays a fixed rate per FTE employee and we recognize revenues as the services are provided. FTE contracts do not require acceptance by the customer of fixed deliverables from us. We provide manufacturing services to our customers that involve the manufacture of advanced intermediates and APIs for R&D or commercial use. Revenues from the sale of manufactured products are recognized upon delivery and acceptance by the customer when title and risk of loss have been transferred, assuming all other revenue recognition criteria have been met. We record deferred revenues for payments received from the customer prior to the delivery of products or services.

Income Taxes

We account for income taxes using the asset and liability method. Under this method, the change in the net deferred tax asset or liability is included in the computation of net income. Deferred income taxes are recognized for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, net operating loss carryforwards and credits by applying enacted statutory tax rates applicable to the years in which the temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance when, in our opinion, it is more likely than not that some or all of the deferred tax assets will not be realized. The components of the deferred tax assets and liabilities are individually classified as current and non-current based on the characteristics of the underlying assets and liabilities.

We consider positive and negative evidence when determining whether a portion or all of our deferred tax assets will more likely than not be realized. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carryforward periods, our experience with tax attributes expiring unused and our tax planning strategies. The ultimate realization of deferred tax assets depends upon our ability to generate sufficient future taxable income within the carryforward periods provided for in the tax law and during the periods in which the temporary differences become deductible. When assessing the realization of deferred tax assets, we have considered possible sources of taxable income, including (i) future reversals of existing taxable temporary differences, (ii) future taxable income exclusive of reversing temporary differences and carryforwards, (iii) future taxable income arising from implementing tax planning strategies and (iv) the overall future industry outlook. We believe it is more likely than not that we will realize the benefits of these deductible differences as of December 31, 2012, 2013 and 2014. The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward periods are reduced.

We recognize a tax benefit associated with an uncertain tax position when, in our judgment, it is more likely than not that the position will be sustained upon examination by a taxing authority. For a tax position that meets the more-likely-than-not recognition threshold, we initially and subsequently measure the tax benefit as the largest amount that we judge to have a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority. Our liability associated with unrecognized tax benefits is adjusted periodically due to changing circumstances, such as the progress of tax audits, case law developments and new or emerging legislation. Such adjustments are recognized entirely in the period in which they are identified. Our effective tax rate includes the net impact of changes in the liability for unrecognized tax benefits and subsequent adjustments as considered appropriate by management. We classify interest and penalties recognized on the liability for unrecognized tax benefits as income tax expense.

B. Liquidity and Capital Resources

The primary sources of liquidity for our business have been cash generated from operating and financing activities, including positive operating cash flow and bank borrowings. As of December 31, 2014, we had $211.5 million in cash and cash equivalents and $223.5 million in short-term investments. Our cash and cash equivalents consist of cash on hand and bank deposits. Our cash needs include primarily the working capital for our daily operations, equipment purchases, expansion of existing facilities and construction of our new biologic manufacturing facility in the city of Wuxi and a new research and commercial manufacturing site in Changzhou.

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To fund our investment in several new business opportunities, on February 16, 2015, we entered into a syndicated loan facility, or the Loan Agreement, with a consortium of banks led by Citigroup Global Markets Asia Limited as coordinating arranger and Citicorp International Limited as agent, to borrow up to $165 million, which comprises a $100 million term loan (tranche A), for which we have three months to draw and intend to do so, and a $65 million revolving credit (tranche B). Tranche A will be repaid in four semi-annual installments after an 18-month grace period: 15% (installments 1 and 2), 20% (3) and 50% (4). Amounts available under Tranche B will be reduced starting from the 18th month through four semi-annual reductions: 15% (reduction 1 and 2), 20% (3) and 50% (4). Borrowings under both tranches are guaranteed by our subsidiaries. The Loan Agreement contains customary covenants, including among other things, limitations on liens, financial conditions (including restrictions on various leverage ratios (both overall and for our PRC subsidiaries) and maintaining a required interest coverage ratio and a minimum consolidated tangible net worth and restrictions on payment of dividends. The interest rate for both tranches is LIBOR plus 2.89%, a rate that includes all related fees and expenses.

We believe that our cash and cash equivalents, anticipated cash flows from operations and proceeds from this borrowing will be sufficient to meet our anticipated cash needs for the next twelve months, including purchases of equipment and the remaining capital expenditures needed for capacity expansion. The following table presents a summary of our cash flows for the periods indicated:

Operating Activities

Net cash provided by operating activities consists primarily of net income increased by non-cash adjustments such as share-based compensation charges, impairment charges for goodwill and acquired intangible assets, amortization of acquired intangible assets and depreciation of property, plant and equipment and decreased by unrealized mark-to-market gains from foreign-exchange forward contracts, as well as changes in assets and liabilities such as accounts receivable, accounts payable and inventories. Net cash provided by operating activities was $131.1 million, $181.5 million and $140.4 million for the years ended December 31, 2012, 2013, and 2014, respectively. The decrease in net cash provided by operations in 2014 was primarily due to an increase in working capital, particularly accounts receivable.

Investing Activities

Net cash used in investing activities largely reflects capital expenditures, which are primarily purchases of property, plant and equipment in connection with the expansion and upgrade of our laboratory and manufacturing facilities, short-term investments, as well as acquisitions and minority equity investments. Our capital expenditures were $67.8 million, $55.9 million and $108.0 million in 2012, 2013 and 2014, respectively. The increase in capital expenditures in 2014 was primarily due to expansion of small-molecule manufacturing facilities in Changzhou. We expect to incur $180-$200 million in capital expenditures in 2015, driven primarily by this capacity expansion in small-molecule manufacturing in Changzhou and initial construction of a commercial-scale biologics manufacturing facility in Wuxi. See “—Capital Expenditures.”

Financing Activities

Net cash provided by (used in) financing activities was $(31.2) million, $17.9 million and $38.1 million for the years ended December 31, 2012, 2013 and 2014, respectively. Net cash used in financing activities in 2012 was primarily due to payment for share repurchases of $67.0 million, offset by cash received from additional bank loans. Net cash provided by financing activities in 2013 was primarily attributable to net proceeds from bank borrowings of $14.1 million. Net cash provided by financing activities in 2014 was primarily attributable to net proceeds from bank borrowings of $134.6 million, partially offset by share repurchases of $98.9 million.

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As of December 31, 2014, we had bank debt of $213.7 million. The weighted-average interest rates on the bank debt were 2.91% and 2.35% in 2013 and 2014, respectively. In November 2012, we entered into a one-year line of credit of $25.0 million and a one-year promissory note of $20.0 million with an interest rate of 2.74%. In November 2013, we renewed the line of credit for one additional year, and a one-year promissory note of $20.0 million expired. On November 29, 2013, we also entered into a one-year line of credit of $20.0 million. On October 27, 2014, we renewed the one-year promissory note for one additional year and the line of credit of $25.0 million expired. On September 26, 2014, we entered into a two-year term loan of $25.0 million, which we expect to be repaid in two installments. The interest rate for each drawdown is based on LIBOR rates prevailing as of the period of drawdown plus 2.5%. On November 14, 2014, we entered into a one-year revolving loan of $50.0 million. The interest rate is based on the three-month LIBOR plus 2.0%. As of December 31, 2014, we had an outstanding balance of $95.0 million in that line of credit. We were in compliance with all financial covenants contained in our debt and bank borrowing facilities as of that date.

On February 16, 2015, we entered into the Loan Agreement, to borrow up to $165 million from a consortium of banks, to be repaid in four installments over 18-36 months. Borrowings under the Loan Agreement will incur interest rate at a rate of LIBOR plus 2.89%, including all expenses.

On September 10, 2012, we entered into a one-year revolving line of credit of $15.0 million. On July 16, 2013, we renewed the revolving line of credit for one additional year and increased the amount to $40.0 million. On September 23, 2014, the company renewed the revolving line of credit for one year and increased the amount to $50.0 million. As of December 31, 2014, we had drawn down $34.6 million. For further information on our bank borrowings, see Note 11 to our consolidated financial statements included in this annual report on Form 20-F.

As of December 31, 2012, 2013 and 2014, our convertible notes totaled $0, $0 and $0, respectively. On February 9, 2012, the holders of our convertible notes converted in full the $35.0 million principal amount of convertible notes plus accrued interest of $0.9 million into 22,771,021 ordinary shares. On February 24, 2012, we repurchased 22,771,021 ordinary shares from the convertible notes holders (equivalent to 2,846,375 ADSs) at $13.00 per ADS for approximately $37.0 million.

Legal Restrictions on the Ability of Subsidiaries to Transfer Funds

For a discussion of the limitations on the ability of our operating subsidiaries to pay dividends to us, see Item 8.A, “Financial Information—Dividend Policy.”

Capital Expenditures

We make capital expenditures primarily in connection with purchases of property, plant and equipment; construction of facilities; leasehold improvements; and investment in equipment, technology and operating systems. Our capital expenditures were $67.8 million, $55.9 million and $108.9 million in 2012, 2013 and 2014, respectively. Most of these capital expenditures were used to expand laboratories and manufacturing capacities and to purchase related equipment, to equip new biologics laboratories in Shanghai, to build a biologics drug-substance manufacturing facility in Wuxi and to build research and commercial manufacturing facilities for small molecules in Changzhou. We currently plan to make approximately $180-200 million of capital expenditures in 2015, mainly to build research and commercial manufacturing facilities for small molecules in Changzhou and to begin construction of a commercial-scale biologics manufacturing facility in Wuxi.

C. Research and Development

Our research and development activities are mainly focused on developing new capabilities, such as research in biology, animal models, immunology, genomics, bioinformatics, biologics drug discovery and development, chemistry and process development. In 2014, our research and development expenses were approximately $21.2 million.

D. Trend Information

Other than as disclosed elsewhere in this annual report on Form 20-F, we are not aware of any trends, uncertainties, demands, commitments or events for the period from January 1, 2012 to December 31, 2014, that are reasonably likely to have a material adverse effect on our financial position, revenues, income, cash flows, profitability, liquidity or capital resources, or that caused the disclosed financial information not necessarily to be indicative of future operating results or financial conditions.

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E. Off-Balance-Sheet Arrangements

We do not have any outstanding off-balance-sheet commitments or arrangements. We do not engage in trading activities involving non-exchange-traded contracts. In our ongoing business, we do not enter into transactions involving, or form relationships with, unconsolidated entities or financial partnerships that are established for the purpose of facilitating off-balance-sheet arrangements or other contractually narrow or limited purposes.

F. Tabular Disclosure of Contractual Obligations

The following table sets forth the timing of the contractual obligations and commercial commitments that we had as of December 31, 2014:

G. Safe Harbor

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, and as defined in the Private Securities Litigation Reform Act of 1995. See “Introduction—Forward-Looking Statements.”

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A. Directors and Senior Management

The following table sets forth certain information relating to our directors and executive officers as of the date of this annual report on Form 20-F.

Dr. Ge Li has served as our Chief Executive Officer since the Company was founded in 2000 and as Chairman since early 2004. Dr. Li is one of the founders of our company. He is responsible for operations, strategic planning and business development. He was one of the founding scientists of Pharmacopeia, Inc. He received a bachelor’s degree in chemistry from Peking University and a Master’s degree and a Ph.D. in organic chemistry from Columbia University. Dr. Li’s wife, Dr. Ning Zhao, serves as one of our directors, senior vice president of operations, and head of corporate human resources.

Xiaozhong Liu has served as our Executive Vice President since 2001 and as a director since 2005. Mr. Liu is one of the founders of our company. He is responsible for our project and engineering departments and China healthcare initiatives. Mr. Liu received a bachelor’s degree from Peking University and an EMBA from China Europe International Business School.

Zhaohui Zhang has served as our Vice President of Domestic Marketing since 2002 and a director since 2005. Mr. Zhang is one of the founders of our company. He is currently Senior Vice President of Operations and is responsible for domestic marketing. Prior to joining our company, he worked for Jiangsu Silver Bell Group as an Assistant to the General Manager and later as a Vice President of American Silver Bell Company responsible for government procurement. Mr. Zhang received a bachelor’s degree in mechanical and electrical engineering from Jiangnan University.

Edward Hu has served as our Chief Financial Officer and Chief Investment Officer since April 2014. Mr. Hu joined our company in August 2007 and served as Executive Vice President of Operations before becoming Chief Operating Officer. He served as our acting Chief Financial Officer from February 2009 to April 2010 and in August 2010 was reappointed Chief Financial Officer in addition to serving as Chief Operating Officer since February 2008. From October 2000 to July 2007, he worked for Tanox, Inc., where he served as Senior Vice President and Chief Operating Officer. From 1998 to 2000, he worked for Biogen (now known as Biogen Idec) as Manager of Financial Planning and Analysis. From 1996 to 1998, he worked at Merck as a Senior Financial Analyst. He received his MBA and completed his Ph.D. work, except for his dissertation, in biophysics and biochemistry at Carnegie Mellon University.

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Dr. Steve Yang has served as our Executive Vice President and Chief Operating Officer since April 2014. Before joining our company, Dr. Yang was Vice President and Head of Asia and Emerging Markets iMed at AstraZeneca from 2011 to early 2014. Previously, Dr. Yang served as Vice President and Head of Asia R&D at Pfizer from 2008 to 2010. Prior to that, Dr. Yang held management positions with increasing responsibilities at Pfizer from 2001 to 2008. Before joining Pfizer, Dr. Yang held leadership positions at IntraBiotics Pharmaceuticals, a U.S.-based biotech company. He also worked for Strategic Decisions Group, a boutique strategy consulting firm. Dr. Yang received a bachelor’s degree in biology from Michigan Technological University and a Ph.D. in pharmaceutical chemistry from the University of California, San Francisco.

Dr. Shuhui Chen has served as our Chief Scientific Officer since 2004. From 1998 to 2004, he worked for Eli Lilly as a Research Advisor. From 1995 to 1997, he worked for Vion Pharmaceuticals as a Group Leader and later as an Associate Director of Chemistry on several anti-cancer and anti-viral projects. From 1990 to 1995, he worked for Bristol-Myers Squibb as a Research Investigator and later as a Senior Research Investigator. Dr. Chen received a bachelor’s degree in chemistry from Fudan University and a Ph.D. in organic chemistry from Yale University.

Kai Gu has served as our Vice President of Human Resources since 2011. From 2001 to 2011, he served in various technical and management positions in our analytical chemistry services department. Mr. Gu received a Master’s degree in analytical chemistry from Nanjing University

Jiang (John) Long has served as our Senior Vice President of Finance since August 2013. From 2009 to 2013, Mr. Long served as Chief Financial Officer of Willis Group Holdings plc China region. From 2004 to 2009, he served in various finance management positions with Tyco International, including Finance Controller for Tyco’s Fire and Security Segment, China. From 2001 to 2004, he worked for Lucent Technologies as Senior Manager of Financial Planning and Analysis. Mr. Long received a bachelor’s degree in Economics from University of International Business and Economics and his MBA in finance and accounting from the Wharton School of the University of Pennsylvania.

Alexander Fowkes has served as our Senior Vice President of Commercial Operations since December 2013, having previously served as our Vice President of Corporate Development since July 2012. Prior to joining our company, he worked at Pfizer for 13 years in various leadership roles supporting R&D in the UK, Australia, the U.S. and China. From 2006 to 2011, he served as Executive Director and Head of Asia R&D Business Development and Operations at Pfizer, supporting and leading the establishment of Pfizer’s research operations in China and its team of external research professionals throughout Asia Pacific. Mr. Fowkes received a bachelor’s degree in biochemistry and pharmacology from the University of Queensland and a bachelor’s degree in law from Bond University.

Dr. Ning Zhao has served as a director since February 2009. Dr. Zhao, one of our company’s co-founders, is currently Senior Vice President of Operations and Head of Corporate Human Resources. She was Vice President of the company’s analytical services department from 2004 to 2008 and also established its bioanalytical services, core analytical services and analytical development services departments. Dr. Zhao previously worked for Wyeth, Pharmacopeia and Bristol-Myers Squibb. She received a bachelor’s degree in chemistry from Peking University and a Ph.D. in chemistry from Columbia University. Dr. Zhao is married to our Chairman and Chief Executive Officer, Dr. Ge Li.

Kian-Wee Seah has served as a director since 2005. Mr. Seah joined UOB Venture Management Pte. Ltd. in 1997 and currently holds the position of Managing Director. He currently holds directorships at various private equity funds that focus on growth companies in China and ASEAN, and chairs the investment committees on several of them. He is a Chartered Financial Analyst. Mr. Seah received a bachelor’s degree in engineering from National University of Singapore, a Master’s degree from the University of California at Los Angeles and an EMBA from Tsinghua University.

Xuesong (Jeff) Leng has served as a director since October 2008. Mr. Leng joined General Atlantic LLC, a global growth investor, as Managing Director in 2007. From June 1999 to September 2007, he served as a Managing Director, Vice President and Associate at Warburg Pincus. Mr. Leng is currently a director of SouFun Holdings Ltd. and Zhongsheng Group Holdings Ltd. Mr. Leng holds a bachelor’s degree from the business school of Jiao Tong University in Shanghai and an MBA from the Wharton School of the University of Pennsylvania.

Stewart Hen has served as a director since February 2009. Since August 2010, Mr. Hen has been Managing Partner of Serrado Capital LLC, a healthcare investment firm based in New York. Previously, he was a Managing Director at Warburg Pincus LLC, where he focused on investments in biotechnology and pharmaceuticals. He has more than 20 years of experience in the life-sciences industry. Prior to joining Warburg Pincus in 2000, he was a consultant at McKinsey & Company serving the pharmaceutical industry. From 1990 to 1994, he worked at Merck in both research and development and manufacturing. Mr. Hen received an MBA from the Wharton School of the University of Pennsylvania and a Master’s degree in chemical engineering from the Massachusetts Institute of Technology.

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Walter T. Kwauk has served as a director since August 2014. Mr. Kwauk is a senior consultant at Motorola Solutions (China) Co., Ltd. He serves as a director of Thunder Power Co. Ltd.; Sinosoft Technology Group Ltd., where he serves as chairman of the audit committee; China Fordoo Holdings Ltd., where he serves as chairman of the audit committee; Alibaba Group Holding Ltd., where he serves as chairman of the audit committee; and several private companies. He was formerly a director of Alibaba.com Ltd. from October 2007 to July 2012. Mr. Kwauk worked for KPMG from 1977 to 2002, serving as the general manager of KPMG’s joint venture accounting firm in Beijing, the managing partner in KPMG’s Shanghai office and a partner in KPMG’s Hong Kong office. He is a member of the Hong Kong Institute of Certified Public Accountants. Mr. Kwauk received a B.S. and a licentiate’s degree in accounting from the University of British Columbia.

William R. Keller has served as a director since September 2014. Mr. Keller is the founder, and since September 2003 a principal, of Keller Pharma Consultancy, a pharmaceutical consulting firm in China. From 1994 to 2003, he was the general manager of Roche China Ltd. and Shanghai Roche Pharmaceutical Ltd., and from 1974 to 2003 he served in various positions at Roche Group in South America and Asia. He was the vice chairman of the Shanghai Association of Enterprises with Foreign Investment from 1997 to 2014 and a senior consultant to the Shanghai Foreign Investment Development Board from 2003 to 2014. From 2003 to 2014, he was the deputy general manager of Zhangjiang Biotech and Pharmaceutical Base Development Co., Ltd. From 2007 to September 2009, he was chairman of HBM Biomed China Partners, a specialized venture capital organization dedicated exclusively to the life sciences in China. Mr. Keller currently holds directorships at Alexion Pharmaceuticals, Inc., Coland Pharmaceutical Co., Ltd., and Cathay Industrial Biotech Ltd. Mr. Keller graduated from the School of Economics and Business Administration in Zurich.

10b5-1 Trading Plans

Our Insider Trading Policy allows directors, officers and other employees covered under the policy to establish, under limited circumstances contemplated by Rule 10b5-1 under the Exchange Act, written programs that permit automatic trading of our stock or trading of our stock by an independent person (such as an investment bank) who is not aware of material inside information at the time of the trade. From time to time, certain of our directors, executive officers and employees have adopted Rule 10b5-1 trading plans. We believe in many cases that these plans have been, or will be, adopted to ensure the exercise of previously granted options while avoiding adverse tax consequences to the individual under Section 409A of the U.S. Internal Revenue Code and were amended to provide for fixed exercise dates.

B. Compensation

Compensation of Directors and Executive Officers

In 2014, we paid cash compensation of $5.99 million to our directors and executive officers as a group. We do not pay or set aside any amounts for pension, retirement or other benefits for our officers and directors. Our executive officers are eligible for performance bonuses.

Pursuant to our employee share incentive plans, our board of directors previously authorized the issuance of an aggregate of up to 105,855,112 ordinary shares upon exercise of stock options and non-vested restricted stock units granted from 2004 to 2014. As of April 3, 2015, stock options and non-vested restricted stock units covering 13,537,741 ordinary shares were outstanding and 21,326,562 shares were reserved for future issuance. All future option grants will be made under our 2007 Employee Share Incentive Plan described below.

As of December 31, 2014, our officers and executive directors held, in the aggregate, options and restricted shares with respect to 12,628,384 ordinary shares. These options and restricted shares have a weighted-average exercise price of $0.14. Of these options, 90,400 expire on March 22, 2018; 284,800 expire on March 11, 2019; 139,200 expire on March 18, 2020; 104,000 expire on August 5, 2020; 41,600 expire on November 10, 2020; 836,000 expire on March 3, 2021; 272 expire on March 23, 2021; 40,000 expire on November 8, 2021; 1,609,280 expire on March 6, 2022; 1,866,672 expire on June 1, 2022; 80,000 expire on August 7, 2022; 40,000 expire on October 8, 2022; 2,929,600 expire on March 7, 2023; 320,000 expire on August 8, 2023; 40,000 expire on September 30, 2023; 712,800 expire on December 31, 2023; 1,597,760 expire on March 4, 2024; 640,000 expire on May 13, 2024; 1,216,000 expire on August 12, 2024; and 40,000 expire on September 30, 2024.

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In March 2015, following receipt of required Chinese government approvals, 75 eligible members of STA and WuXi management purchased from us 6,663,871 shares of STA stock at 26.04 RMB (or $4.20) per share, representing approximately 5.55% of STA’s 120,000,000 then-outstanding shares and approximately $28.0 million in total cash consideration. The purchase price was based on a third-party appraisal of STA’s equity value, with WuXi recognizing a related gain on these sales in the second quarter of 2015. For all such purchasers, two thirds of their purchased shares are subject to a lock-up, with 1/3 available for sale on the first anniversary of the listing date and another 1/3 available for sale on the second anniversary of the listing date. The STA shares so purchased by eligible individuals who are WuXi executive officers (representing approximately 2.8% of STA’s then-outstanding shares or 3,416,527 shares and total cash consideration of approximately $14.3 million) are as follows: Ge Li 1,318,000 shares, Xiaozhong Liu 557,676 shares, Shuhui Chen 424,896 shares, Edward Hu 349,151 shares, Zhaohui Zhang 304,187 shares, Ning Zhao 233,572 shares, Kai Gu 145,756 shares, Alexander Fowkes 54,319 shares and Jiang Long 28,970 shares.

2007 Employee Share Incentive Plan

Our 2007 Employee Share Incentive Plan was adopted by our board of directors in July 2007. This plan is intended to promote our success and to increase shareholder value by providing an additional means to attract, motivate, retain and reward selected directors, officers, employees and third-party consultants and advisors. In 2010 the Board determined to increase the number of ordinary shares authorized to be issued pursuant to the 2007 Employee Share Incentive Plan, as well as to increase the limit on the total number of ordinary shares that may be delivered pursuant to options qualified as incentive stock options granted under the plan, by 36,000,000 ordinary shares so that the aggregate number of ordinary shares authorized to be issued under the plan became 82,044,400.

Our compensation committee, which administers our employee share incentive plan, has wide discretion to award options and restricted stock units. Subject to the provisions of our option plan, our compensation committee determines who will be granted options, the type and timing of options to be granted and vesting schedules and other terms and conditions of options, including the exercise price. Any of our employees may be granted options. The number of options awarded to a person, if any, is based on the person’s ability to contribute to our success, the person’s position with us and other factors determined by our board of directors. The number of options that vest for an employee in any given year is subject to performance requirements and evaluated by our human resources department. Options generally do not vest unless the grantee remains under our employment or in service with us on the given vesting date.

Generally, to the extent that an outstanding option granted under our option plan has not vested on the date the grantee’s employment by, or service with, us terminates, the unvested portion of the option will terminate and become unexercisable. However, in circumstances where there is a death or disability of the grantee or, for certain option holders, a change in control of our company, the vesting of options will be accelerated to permit immediate exercise of all options granted to a grantee.

Our board of directors may amend, alter, suspend or terminate our option plan at any time, provided that to increase the limit on issuable options from the current limit, our board of directors must first seek the approval of our shareholders and, if such amendment, alteration, suspension or termination would adversely affect the rights of an optionee under any option granted prior to that date, the approval of such optionee. Without further action by our board of directors, the 2007 Employee Share Incentive Plan will terminate in 2017.

Employment Agreements

In June 2012, we entered into a new three-year employment contract with Dr. Ge Li for his continued service through May 31, 2015.

The board of directors may terminate employment of a founder for cause at any time in accordance with PRC labor laws, or without cause with three months’ prior written notice. In the event of a dismissal without cause, the founder is entitled to receive an amount equal to 12-18 months’ compensation, depending on the individual, and is entitled to be vested in all granted options. No annual bonus is payable upon such termination.

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A founder may terminate his employment at any time for good reason, including (a) a significant change in his position with our company or change to his duties or responsibilities that materially reduces his level of responsibility, (b) a change in his principal place of employment in the PRC to a place where the city size and/or the residents’ average living standards declines by 10% or (c) our failure to perform under the executive employment agreement, our violation of relevant labor laws or regulations or our infringement of any of his rights or interests. When a founder terminates his executive employment agreement for good reason, he is entitled to receive an amount equal to 12-18 months’ compensation, depending on the individual, and is also entitled to vesting of all granted options. A founder may also terminate his employment other than for good reason with six months’ prior written notice. Under such circumstances, the founder is entitled to receive an amount equal to 6-12 months’ compensation, depending on the individual, and is also entitled to exercise all vested options held, and any unvested options will lapse and terminate. Each founder is fully indemnified by our company against all costs, charges, losses, expenses and liabilities incurred by him in the execution and discharge of the duties of his office, including circumstances under which the directors and officers insurance policies maintained by us are insufficient to cover the founder’s loss.

Each founder has agreed that during the term of the executive employment agreement and for a period of three years after the termination thereof, he will not use, exploit or divulge to any person any trade secrets, confidential knowledge or information or any financial, marketing or trading information or know-how relating to us and other shareholders of us, and will not make any announcement on any matter concerning the executive employment agreement. In addition, each founder has agreed that he will not compete with us by taking up any executive position in any company other than us and will commit most of his efforts toward the development of our business and operations while he is employed by us.

We have also entered into an employment agreement with each of our other executive officers. Under these agreements, we may terminate their employment at any time without notice if they commit a serious breach of any of the provisions of the agreement, are found guilty of grave misconduct or willful neglect in the discharge of their employment duties or are convicted of a criminal offense other than one that, in our reasonable opinion, does not affect their position as an employee. These agreements generally include a covenant that prohibits such officers from engaging in any activities that compete with our business for a period of one year after the termination of their employment contracts with us. It may be difficult or costly for us to seek to enforce the provisions of these agreements.

C. Board Practices

Duties of Directors

Under Cayman Islands law, our directors have a duty of loyalty to act honestly and in good faith with a view to our best interests. Our directors also have a duty to exercise the care, diligence and skills that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of care to us, our directors must ensure compliance with our amended and restated memorandum and articles of association, as may be amended from time to time. Our articles of association govern the way our company is operated and the authority granted to the directors to manage the daily affairs of our company. A shareholder has the right to seek damages if a duty owed by our directors is breached.

Terms of Directors and Executive Officers

We have a classified board of nine directors in three classes, serving staggered terms. The terms of Xuesong (Jeff) Leng, Zhaohui Zhang and Ning Zhao expire at our 2015 annual meeting, the terms of office of Dr. Ge Li, Stewart Hen and Walter T. Kwauk expire at our 2016 annual meeting and the terms of office of Xiaozhong Liu, Kian-Wee Seah and William R. Keller expire at our 2017 annual meeting.

Our directors hold office until their term of office expires or until they resign or are removed from office by special resolution of our shareholders. A director will be removed from office automatically if, among other things, the director becomes bankrupt or suspends payments to his creditors, dies or becomes of unsound mind. Our executive officers are elected by, and serve at the discretion of, our board of directors.

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Board Committees

Five of our nine board members—Kian-Wee Seah, Xuesong (Jeff) Leng, Stewart Hen, Walter T. Kwauk and William R. Keller —satisfy the independence requirements of the New York Stock Exchange Listed Company Manual, or NYSE Manual, Section 303A.02. Our board of directors has established an audit committee, a compensation committee, a corporate governance and nominations committee and a strategy and finance committee.

Audit Committee

Our audit committee currently consists of Walter T. Kwauk, Kian-Wee Seah and Xuesong (Jeff) Leng. Our board of directors has determined that each is an “independent director” within the meaning of NYSE Manual, Section 303A.02, and meets the criteria for independence set forth in Section 10A(m)(3) of the Exchange Act. Walter T. Kwauk is the chairman of our audit committee and meets the criteria of an audit committee financial expert, as set forth under the applicable rules of the SEC. As of the date of this annual report on Form 20-F, Mr. Kwauk serves on the audit committee of three public companies: Sinosoft Technology Group Ltd., China Fordoo Holdings Ltd. and Alibaba Group Holding Ltd. In conjunction with his appointment as a director and audit committee member, our board of directors has determined that such simultaneous service would not impair Mr. Kwauk’s ability to effectively serve on our audit committee or as our audit committee chair.

Our audit committee is responsible for, among other things:

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Compensation Committee

Our current compensation committee consists of Kian-Wee Seah, Xuesong (Jeff) Leng and Stewart Hen. Kian-Wee Seah is the chairman of our compensation committee. Our board of directors has determined that Kian-Wee Seah, Xuesong (Jeff) Leng and Stewart Hen each are “independent directors” within the meaning of NYSE Manual Section 303A.02. Prior to March 2014, Dr. Ge Li served as a member of our compensation committee. He resigned from the compensation committee in March 2014 to make the committee fully independent.

Our compensation committee is responsible for:

Corporate Governance and Nominations Committee

Our corporate governance and nominations committee currently consists of William R. Keller, Dr. Ge Li and Walter T. Kwauk. William R. Keller is the chairman of our corporate governance and nominations committee. Our board of directors has determined William R. Keller and Walter T. Kwauk are “independent directors” within the meaning of NYSE Manual Section 303A.02.

Our corporate governance and nominations committee is responsible for, among other things;

Strategy and Finance Committee

Our strategy and finance committee consists of Dr. Ge Li, William R. Keller and Stewart Hen. Stewart Hen is the chairman of our strategy and finance committee. Our strategy and finance committee is responsible for, among other things, oversight of our strategic plan and evaluating opportunities to enhance shareholder value. The strategy and finance committee will maintain a cooperative, interactive strategic-planning process with management, including the identification and setting of strategic goals and expectations; the review of potential acquisitions, joint ventures and strategic alliances; and the periodic review of the capital allocation strategy of the company.

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Corporate Governance

Our board of directors has adopted a code of business conduct and ethics, which is applicable to all of our directors, officers and employees. Our code of business conduct and ethics is publicly available on our website.

In addition, our board of directors has adopted a set of corporate governance guidelines. The guidelines reflect certain guiding principles with respect to the structure of our board of directors, procedures and committees. These guidelines are not intended to change or interpret any law or our amended and restated memorandum and articles of association.

Interested Transactions

A director may vote with respect to any contract or transaction in which he or she is interested, provided that the nature of the interest of any director in such contract or transaction is disclosed by him or her at or prior to its consideration and any vote in that matter.

Remuneration and Borrowing

The directors may determine remuneration to be paid to the directors. The compensation committee will assist the directors in reviewing and approving the compensation structure for the directors. The directors may exercise all the powers of our company to borrow money and to mortgage or charge its undertaking, property and uncalled capital and to issue debentures or other securities, whether outright or as security for any debt obligations of our company or of any third party.

Qualification

There is no shareholding qualification for directors.

Summary of Corporate Governance Differences

As a foreign private issuer with shares listed on the NYSE, we are required by Section 303A.11 of the NYSE Manual to disclose any significant ways in which our corporate governance practices differ from those followed by U.S. domestic companies under NYSE listing standards. A summary of the differences between our current corporate governance practices and the NYSE corporate governance requirements applicable to domestic U.S. companies can be found on our website at http://www.wuxiapptec.com under Investor Relations. For additional information, see Item 16G, “Corporate Governance.”

D. Employees

As of December 31, 2014, we had 8,837 employees, of which 8,131 were based in China and 706 were based in the United States. Among our employees, 6,842 were science professionals with advanced degrees, including 520 with Ph.D.s and 3,033 with Master’s degrees. As of April 3, 2015, we had 9,082 employees, 8,344 based in China and 738 based in the United States.

We offer our employees both a base salary and a performance-based bonus and rewards for exceptional performance. As required by PRC regulations, our China-based employees participate in various employee benefit plans that are organized by municipal and provincial governments, including benefit plans relating to pensions, work-related injury benefits, maternity insurance, medical insurance and unemployment. We are required under PRC law to make contributions to the employee benefit plans for our China employees at specified percentages of the salaries, bonuses and certain allowances of our employees, up to a maximum amount specified by the local government from time to time.

E. Share Ownership

The following table and related footnotes set forth information with respect to the beneficial ownership, within the meaning of Rule 13d-3 under the Exchange Act, of our ordinary shares as of April 3, 2015 for:

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See “—B. Compensation” for more details on options and restricted shares granted to our directors and executive officers.

The number of ordinary shares outstanding in calculating the percentages for each listed person includes the ordinary shares underlying unexercised options held by such person. The percentage of beneficial ownership of each listed person is based on 566,609,595 ordinary shares outstanding as of April 3, 2015, as well as, where applicable, ordinary shares underlying stock options exercisable within 60 days. The calculation does not include up to an aggregate of 21,326,562 shares reserved for issuance in connection with our Employee Share Incentive Plan.

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JPMorgan Chase Bank, N.A. has advised us that, as of April 3, 2015, 68,866,543 ADSs, representing 550,932,344 underlying ordinary shares, were held of record by Cede & Co., (DTC) and 122 ADSs, representing 976 underlying ordinary shares, were held by 12 registered shareholders domiciled in the United States. To our knowledge, we are not owned or controlled, directly or indirectly, by another corporation, by any foreign government or by any other natural or legal persons, severally or jointly. None of our shareholders has different voting rights from other shareholders. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.

A. Major Shareholders

Please refer to Item 6.E, “Directors, Senior Management and Employees—Share Ownership.”

B. Related Party Transactions

Transactions with Certain Directors, Executive Officers, Shareholders and Affiliates

Export Agent Arrangements

Historically, we have relied on export agents to sell our manufactured products. Between January 1, 2005, and December 31, 2008, we entered into export agent agreements with Shanghai Lechen International Trade Co., Ltd., or Shanghai Lechen, for exporting advanced intermediates and APIs. Shanghai Lechen is owned by the parents of Dr. Ning Zhao, our director and the wife of Dr. Ge Li, our Chairman and Chief Executive Officer. As amended, under the agreement, Shanghai Lechen was entitled to receive a 0.8% commission on the exported amounts during 2012, 0.8% during 2013 and 0.8% during 2014. In connection with this arrangement, we paid $91,625, $80,162 and $89,459 to Shanghai Lechen in 2012, 2013 and 2014, respectively. The arrangement agreement is automatically renewable on an annual basis. We are currently reviewing our internal resources and expertise to evaluate the option of handling the export transactions directly. Until then, we will continue to engage an export agent for these transactions.

Others

We provide R&D service for WuXi MedImmune. WuXiPRA provides us with clinical research service. In 2014, WASH and WuXiPRA entered into loan agreements in the amount of $1.9 million. WAHK entered into loan agreements in the amount of $0.3 million.

Employment Agreements

See Item 6.B, “Directors, Senior Management and Employees—Compensation—Employment Agreements.”

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WuXi Healthcare Ventures Fund II

In March 2015, our board of directors approved an anchor investment commitment of up to $50 million in a newly formed venture fund, WuXi Healthcare Ventures Fund II, with expected total commitments of approximately $200 million. WuXi Healthcare Healthcare Ventures Fund II is being formed to invest in healthcare companies in the U.S. and China. The general partners of WuXi Ventures are expected to consist of three operating partners and two non-operating partners (Dr. Ge Li and Edward Hu).

The investment is subject to negotiation of definitive terms by our audit committee, with the assistance of outside counsel, and the approval of the terms and related agreements by our audit committee. In considering the potential anchor investment, our board of directors considered, among other things, the possible benefits of continued venture investment in healthcare companies and of investing alongside other outside investors; the advisability of Dr. Li’s and Mr. Hu’s involvement to assist in the related fundraising and investment activities; and the time and other commitments expected of Dr. Li and Mr. Hu (it being determined that these activities would not meaningfully interfere with their WuXi responsibilities). See Item 4.B, “Information on the Company—Business Overview—WuXi Venture Fund; WuXi Healthcare Ventures Fund II.”

Share Options/ STA Share Purchases

See Item 6.B, “Directors, Senior Management and Employees—Compensation—Compensation of Directors and Officers.”

C. Interests of Experts and Counsel

Not applicable.

A. Consolidated Statements and Other Financial Information

We have appended consolidated financial statements filed as part of this annual report on Form 20-F. See Item 18, “Financial Statements.”

Legal Proceedings

None of our legal entities have been involved in any legal action in which claimed amounts exceed $500,000. From time to time, we may be subject to various claims and legal actions arising in the ordinary course of business.

Dividend Policy

We intend to retain all available funds and any future earnings of the company for use in the operation and expansion of our business and do not anticipate paying any cash dividends directly on our ordinary shares, or indirectly on our ADSs, for the foreseeable future. Future cash dividends, if any, will be paid at the discretion of our board of directors and will depend upon our future operations and earnings, capital requirements and surplus, general financial conditions, shareholders’ interests, contractual restrictions and other factors as our board of directors may deem relevant. We can pay dividends only out of profits or other distributable reserves.

In addition, our ability to pay dividends depends substantially on the payment of dividends to us by our operating subsidiaries in China and in the United States. Each of these operating subsidiaries may pay dividends only out of its accumulated distributable profits, if any, determined in accordance with its articles of association and the accounting standards and regulations in China. WXAT, being a wholly owned foreign enterprise, is required to set aside at least 10% of its after-tax profits of the preceding year as its reserve funds. It may stop such setting aside if the aggregate amount of the reserve funds has already accounted for more than 50% of its registered capital. Moreover, upon a board resolution, it may set aside certain amounts from its after-tax profits of the preceding year as bonus and welfare funds for staff and workers. The other main operating subsidiaries in China are equity joint ventures that are required to set aside reserve funds, bonus and welfare funds for staff and workers and development funds, the percentage of which must be determined by the board of directors. Further, if any subsidiary incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other payments to us. Any limitation on the payment of dividends by our subsidiaries could materially and adversely limit our ability to grow, make investments or undertake acquisitions that could benefit our businesses, allow us to pay dividends and otherwise fund and conduct our businesses. See Item 3.D, “Key Information—Risk Factors—Risks Relating to China—We rely principally on dividends and other distributions on equity paid by our operating subsidiaries to fund cash and financing requirements, and limitations on the ability of our operating subsidiaries to pay dividends to us could have a material adverse effect on our ability to conduct our business.”

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Under the EIT Law and its implementation rules issued by the PRC State Council, both of which became effective on January 1, 2008, dividends from our PRC subsidiaries to us may be subject to a 10% withholding tax if such dividend is derived from profits generated after January 1, 2008. If we are deemed to be a PRC resident enterprise, the withholding tax may be exempted, but we will be subject to a 25% tax on our global income, and our non-PRC investors may be subject to PRC income tax withholding at a rate of 10% or 20%. See Item 10.E, “Additional Information—Taxation—People’s Republic of China Taxation.”

We neither declared nor paid any dividends in 2012, 2013 or 2014 to our shareholders, nor do we have any present plan to pay any cash dividends on our ordinary shares in the foreseeable future. See Item 5.B, “Operating and Financial Review and Prospects—Liquidity and Capital Resources—Financing Activities.”

B. Significant Changes

None.

A. Offering and Listing Details

Price Range of Our ADSs

Our ADSs are listed for trading on the NYSE under the symbol “WX “and have been listed since August 9, 2007. The following table sets forth the high and low closing trading prices of our ADSs on the NYSE for the periods indicated:

B. Plan of Distribution

Not applicable.

C. Markets

See Item 9.A above.

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D. Selling Shareholders

Not applicable.

E. Dilution

Not applicable.

F. Expenses of the Issue

Not applicable.

A. Share Capital