Avid Bioservices Reports Financial Results for Third Quarter Fiscal 2020 and Recent Developments
March 10 2020 - 4:05PM
Avid Bioservices, Inc. (NASDAQ:CDMO) (NASDAQ:CDMOP), a
dedicated biologics contract development and manufacturing
organization (CDMO) working to improve patient lives by providing
high quality development and manufacturing services to
biotechnology and pharmaceutical companies, today announced
financial results for the third quarter and first nine months of
fiscal 2020 ended January 31, 2020.
Highlights Since October 31,
2019
“During the third quarter of 2020,
Avid strengthened both its project pipeline and backlog, and
the fundamentals of the business remained strong,” said Rick
Hancock, interim president and chief executive officer of
Avid. “However, the company faced production
challenges during the period related to a problem with a
specific piece of equipment which resulted in the termination of
in-process manufacturing runs, and the postponement of several
other manufacturing runs scheduled to commence during the third
quarter. Though we are now implementing the necessary
corrections, the temporary production interruption resulted in
lower revenue and profits for the third quarter, and we expect it
to also impact revenues and profits for the fourth quarter of
fiscal 2020. For this reason, we are adjusting our revenue
guidance for fiscal 2020 to $55 - $59 million versus our prior
guidance of $64 - $67 million. It is our expectation that
this problem will be behind us soon, and as such, we anticipate
that the impact will be contained to fiscal 2020.
“While we are disappointed that this temporary
operational setback will negatively impact our fiscal 2020 results,
we anticipate that we will be able to recover those revenues
in fiscal 2021. We remain optimistic about Avid’s
growth potential.
“Critical to achieving this growth is the
continued expansion of Avid’s customer and project base. To lead
this effort, we recently welcomed Timothy Compton to the Avid team
as our chief commercial officer. During the third quarter,
Tim launched the first phase of an aggressive business development
campaign. As a result, we signed agreements to add one
new customer and multiple additional manufacturing campaigns with
existing customers during the period.
“With respect to operations, we continue to make
progress on projects to optimize our existing Myford facility while
finalizing plans for its future expansion. We will continue
to update you moving forward as these plans progress.”
Financial Highlights and Guidance
- The company is adjusting revenue guidance for the full fiscal
year 2020 to $55 million to $59 million from prior
full fiscal year 2020 guidance of $64 million to $67
million.
- Revenue was $13.6 million for the third quarter of
fiscal 2020, consistent with $13.8 million for the third
quarter of last fiscal year. For the nine months ended
January 31, 2020, revenues were $47.2 million, a 29% increase
as compared to revenues of $36.5 million during the same prior year
period. The slight decrease during the third quarter of
fiscal 2020 can primarily be attributed to a decrease in process
development revenue, combined with the impact of the production
interruption described above, which were largely offset by an
increase in the number of in-process and completed manufacturing
runs conducted during the quarter compared to the same prior year
quarter. Likewise, the increase during the first nine months
of fiscal 2020 was primarily due to an increase in the number of
in-process and completed manufacturing runs, a result of growing
demand from a more diverse client base, partially offset by a
decrease in process development revenue and the third quarter
production interruption.
- As of January 31, 2020, revenue backlog was
approximately $58 million, an increase of 12% compared to the
second quarter of fiscal 2020. The company expects to
recognize the majority of this backlog within the next 12
months.
- Gross margin for the third quarter of fiscal 2020 was 6%, a
decrease compared to the 15% gross margin for the third quarter of
fiscal 2019. The decrease in gross margin for the quarter was
primarily attributed to the costs associated with the
aforementioned production interruption, an increase in depreciation
expense from the acquisition of new equipment, and a net decrease
in revenues. Gross margin for the nine months ended
January 31, 2020 was 11%, up slightly compared to 10% in
the prior year period. This increase was primarily due to an
increase in manufacturing runs, partially offset by costs
associated with payroll and related costs, higher facility and
equipment related costs primarily associated with the production
interruption described above, increased depreciation expense from
the acquisition of new equipment, and general equipment repairs and
maintenance costs.
- Selling, general and administrative expenses (“SG&A”) for
the third quarter of fiscal 2020 were $3.0 million, a decrease
of 8% compared to $3.2 million for the third quarter of fiscal
2019. This decrease was primarily due to a decrease in
accrued bonuses for fiscal 2020, partially offset by an increase in
employee separation costs. For the first nine months of
fiscal 2020, SG&A expenses were $11.0 million, an 19% increase
compared to $9.3 million for the first nine months of fiscal
2019. The increase in SG&A was primarily attributed
to employee separation-related expenses and increased
stock-based compensation. When excluding the
separation-related expenses, SG&A increased by 10% during the
first nine months of fiscal 2020 as compared to the prior
year.
- For the third quarter of fiscal 2020, the company
recorded a consolidated net loss attributable to common
stockholders of $3.5 million or $0.06 per
share, compared to a consolidated net loss attributable to common
stockholders of $2.6 million or $0.05 per
share, for the third quarter of fiscal 2019. For
the first nine months of fiscal 2020, the company recorded a
consolidated net loss attributable to common stockholders
of $9.3 million or $0.17 per share, compared to a consolidated
net loss attributable to common stockholders of $8.2 million or
$0.15 per share, for the first nine months of fiscal 2019.
- Avid reported $30.7 million in cash and cash
equivalents as of January 31, 2020, compared to $32.4
million on April 30, 2019.
More detailed financial information and analysis
may be found in Avid Bioservices’ Quarterly Report on Form 10-Q,
which will be filed with the Securities and Exchange
Commission today.
Recent Corporate
Developments
- Appointed Timothy (Tim) Compton as chief commercial
officer. Mr. Compton has extensive experience in commercial
operations, including sales team management, business development,
marketing and corporate development. In his new role, he will
be responsible for driving the continued growth of Avid’s CDMO
business, including the ongoing expansion of the company’s
commercial and clinical client base.
- Expanded our customer base with the addition of one new
customer and executed multiple project expansion orders with
existing customers representing additional revenue backlog of $20
million during the third quarter.
- Advanced planning and design to both enhance our Myford
facility, and support its future expansion. These near-term
improvements include installing a pharmaceutical grade water
system, and upgrading key IT systems and general
infrastructure. We expect the installation and validation of
the water system to take place in late calendar year 2020 and the
IT system enhancements and general infrastructure upgrades to be
complete by the end of fiscal 2021.
Conference Call
Avid will host a conference call and webcast
this afternoon, March 10, 2020, at 4:30 PM EDT (1:30
PM PDT).
To listen to the conference call, please dial
(877) 312-5443 or (253) 237-1126 and request the Avid
Bioservices conference call. To listen to the live webcast, or
access the archived webcast, please
visit: http://ir.avidbio.com/events.cfm.
About Avid
Bioservices, Inc.
Avid Bioservices is a dedicated contract
development and manufacturing organization (CDMO) focused on
development and CGMP manufacturing of biopharmaceutical products
derived from mammalian cell culture. The company provides a
comprehensive range of process development, high quality CGMP
clinical and commercial manufacturing services for the
biotechnology and biopharmaceutical industries. With 25 years of
experience producing monoclonal antibodies and recombinant proteins
in batch, fed-batch and perfusion modes, Avid's services include
CGMP clinical and commercial product manufacturing, purification,
bulk packaging, stability testing and regulatory strategy,
submission and support. The company also provides a variety of
process development activities, including cell line development and
optimization, cell culture and feed optimization, analytical
methods development and product
characterization. www.avidbio.com
Forward-Looking Statements
Statements in this press release, which are not
purely historical, including statements regarding Avid
Bioservices' intentions, hopes, beliefs, expectations,
representations, projections, plans or predictions of the future,
are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. The forward-looking
statements involve risks and uncertainties including, but not
limited to, the risk the company may not achieve positive cash flow
or EBITDA, the risk the company may experience delays in engaging
new clients, the risk that the company may not be successful in
executing client projects, the risk that the production challenges
experienced by the company during the third quarter of fiscal year
2020 may not be fully resolved during the fourth quarter of fiscal
year 2020 or may reoccur in the future causing a negative impact on
revenue and profits, the risk that the company is unable to recover
during fiscal year 2021 the revenues lost or to be lost during
fiscal year 2020 due to the terminated and postponed manufacturing
runs, the risk that clients for whom the company has
completed process validation campaigns may not receive regulatory
approval to market their products, the risk that the company may
experience technical difficulties in completing client projects due
to unanticipated equipment and/or manufacturing facility issues
which could result in projects being terminated or delay delivery
of products to customers, revenue recognition and receipt of
payment or the loss of the customer, the risk that one or more
existing customers terminates its contract prior to completion or
reduces or delays its demand for development or manufacturing
services, the risk that the company may experience delays in the
installation of the pharmaceutical grade water system in the Myford
facility, and the risk that the company may need to use the
majority of its cash to fund operations, thereby delaying the
in-process upgrades to its process development capabilities and
contemplated expansion plans. Our business could be affected by a
number of other factors, including the risk factors listed from
time to time in our reports filed with the Securities and
Exchange Commission including, but not limited to, our annual
report on Form 10-K for the fiscal year ended April 30, 2019,
as well as any updates to these risk factors filed from time to
time in our other filings with the Securities and Exchange
Commission. We caution investors not to place undue reliance on the
forward-looking statements contained in this press release, and we
disclaim any obligation, and do not undertake, to update or revise
any forward-looking statements in this press release except as may
be required by law.
AVID
BIOSERVICES, INC. |
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
LOSS |
|
(Unaudited)(In
thousands, except per share information) |
|
|
|
|
Three Months Ended January
31, |
|
|
Nine Months Ended January
31, |
|
|
|
2020 |
|
|
|
2019 |
|
|
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
|
Revenues |
$ |
13,585 |
|
|
$ |
13,781 |
|
|
$ |
47,152 |
|
|
$ |
36,548 |
|
Cost of revenues |
|
12,800 |
|
|
|
11,731 |
|
|
|
41,921 |
|
|
|
32,972 |
|
Gross profit |
|
785 |
|
|
|
2,050 |
|
|
|
5,231 |
|
|
|
3,576 |
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
Selling, general and
administrative |
|
2,996 |
|
|
|
3,242 |
|
|
|
10,989 |
|
|
|
9,273 |
|
Loss on lease termination |
|
— |
|
|
|
— |
|
|
|
355 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
2,996 |
|
|
|
3,242 |
|
|
|
11,344 |
|
|
|
9,273 |
|
|
|
|
|
|
|
|
|
Operating loss |
|
(2,211 |
) |
|
|
(1,192 |
) |
|
|
(6,113 |
) |
|
|
(5,697 |
) |
Interest and other income,
net |
|
107 |
|
|
|
9 |
|
|
|
415 |
|
|
|
190 |
|
Loss from continuing operations before income taxes |
|
(2,104 |
) |
|
|
(1,183 |
) |
|
|
(5,698 |
) |
|
|
(5,507 |
) |
Income tax benefit |
|
— |
|
|
|
44 |
|
|
|
— |
|
|
|
217 |
|
Loss from continuing operations,
net of tax |
|
(2,104 |
) |
|
|
(1,139 |
) |
|
|
(5,698 |
) |
|
|
(5,290 |
) |
Income from discontinued operations, net of tax |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
739 |
|
|
|
|
|
|
|
|
|
Net loss |
$ |
(2,104 |
) |
|
$ |
(1,139 |
) |
|
$ |
(5,698 |
) |
|
$ |
(4,551 |
) |
|
|
|
|
|
|
|
|
Comprehensive loss |
$ |
(2,104 |
) |
|
$ |
(1,139 |
) |
|
$ |
(5,698 |
) |
|
$ |
(4,551 |
) |
|
|
|
|
|
|
|
|
Series E preferred stock
accumulated dividends |
|
(1,442 |
) |
|
|
(1,442 |
) |
|
|
(3,604 |
) |
|
|
(3,604 |
) |
|
|
|
|
|
|
|
|
Net loss attributable to
common stockholders |
$ |
(3,546 |
) |
|
$ |
(2,581 |
) |
|
$ |
(9,302 |
) |
|
$ |
(8,155 |
) |
|
|
|
|
|
|
|
|
|
Basic and diluted net (loss)
income per common share attributable to common stockholders: |
|
|
|
|
|
|
|
|
Continuing operations |
$ |
(0.06 |
) |
|
$ |
(0.05 |
) |
|
$ |
(0.17 |
) |
|
$ |
(0.16 |
) |
Discontinued operations |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.01 |
|
Net loss per share
attributable to common stockholders |
$ |
(0.06 |
) |
|
$ |
(0.05 |
) |
|
$ |
(0.17 |
) |
|
$ |
(0.15 |
) |
|
|
|
|
|
|
|
|
Weighted average basic and
diluted shares outstanding |
|
56,404 |
|
|
|
56,069 |
|
|
|
56,275 |
|
|
|
55,949 |
|
AVID
BIOSERVICES, INC. |
CONDENSED
CONSOLIDATED BALANCE SHEETS |
(Unaudited)(In
thousands, except par value) |
|
|
January 31,2020 |
|
April 30,2019 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
30,687 |
|
|
$ |
32,351 |
|
Accounts receivable |
|
10,151 |
|
|
|
7,374 |
|
Contract assets |
|
6,111 |
|
|
|
4,327 |
|
Inventory |
|
9,565 |
|
|
|
6,557 |
|
Prepaid expenses and other current assets |
|
763 |
|
|
|
709 |
|
Total current assets |
|
57,277 |
|
|
|
51,318 |
|
Property and equipment, net |
|
26,850 |
|
|
|
25,625 |
|
Operating lease right-of-use
assets |
|
20,437 |
|
|
|
— |
|
Restricted cash |
|
350 |
|
|
|
1,150 |
|
Other assets |
|
302 |
|
|
|
302 |
|
Total assets |
$ |
105,216 |
|
|
$ |
78,395 |
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
5,332 |
|
|
$ |
4,352 |
|
Accrued payroll and related costs |
|
2,985 |
|
|
|
3,540 |
|
Contract liabilities |
|
26,355 |
|
|
|
14,651 |
|
Operating lease liabilities |
|
1,172 |
|
|
|
— |
|
Other current liabilities |
|
710 |
|
|
|
619 |
|
Total current liabilities |
|
36,554 |
|
|
|
23,162 |
|
|
|
|
|
Operating lease liabilities, less
current portion |
|
21,584 |
|
|
|
— |
|
Deferred rent, less current
portion |
|
— |
|
|
|
2,072 |
|
Other long-term liabilities |
|
— |
|
|
|
93 |
|
Total liabilities |
|
58,138 |
|
|
|
25,327 |
|
|
|
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
Preferred stock, $0.001 par value; 5,000 shares authorized;
1,648 shares issued and outstanding at January 31, 2020 and April
30, 2019, respectively |
|
2 |
|
|
|
2 |
|
Common stock, $0.001 par value; 150,000 shares authorized;
56,479 and 56,136 shares issued and outstanding at January 31, 2020
and April 30, 2019, respectively |
|
56 |
|
|
|
56 |
|
Additional paid-in capital |
|
613,323 |
|
|
|
613,615 |
|
Accumulated deficit |
|
(566,303 |
) |
|
|
(560,605 |
) |
Total stockholders’ equity |
|
47,078 |
|
|
|
53,068 |
|
Total liabilities and stockholders’ equity |
$ |
105,216 |
|
|
$ |
78,395 |
|
Contacts:
Stephanie Diaz (Investors)
Vida Strategic Partners
415-675-7401
sdiaz@vidasp.com
Tim Brons (Media)
Vida Strategic Partners
415-675-7402
tbrons@vidasp.com
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