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 fourth quarter and full fiscal year 2020,
ended April 30, 2020.
Highlights Since January 31,
2020
“The fourth quarter of fiscal 2020 was a very
productive period, generating higher than anticipated revenues,”
said Rick Hancock, interim president and chief executive officer of
Avid. “As discussed previously, the production interruption
and revenue deferral that took place during the third quarter of
fiscal 2020 required the company to lower revenue guidance for the
year. While this interruption caused us to fall short of our
originally stated revenue guidance, the productivity during the
fourth quarter allowed us to exceed our re-stated guidance for the
fiscal year, sign $23 million in project expansion orders with
existing customers during the fourth quarter, and end the fiscal
year with a strong backlog.
“Avid also significantly strengthened its
management team in recent weeks. First, we were pleased to
announce the appointment of Nicholas Green, as the company’s new
president and CEO. Nick, who will join the team on July 30,
comes to Avid with many years of experience driving growth and
expansion for multiple key CDMOs around the world, and we are very
pleased to have him leading the company’s future
strategy.
“During the fourth quarter, the company also
added two senior directors to our business development team with
proven track records in growing CDMOs. They are responsible
for driving business growth in North America, Europe and
Asia. This expanded and highly experienced business
development team has quickly elevated our level of engagement with
both existing customers and prospective customers.
Additionally, our new team is in discussions with multiple parties
regarding potential novel programs to combat COVID-19, and we hope
to have the opportunity to support the fight against this global
pandemic. Based on this sharp increase in business
development activity, combined with the growth of existing customer
forecasts, we expect to significantly increase our capacity
utilization in the quarters ahead.
“To accommodate this anticipated increase in
demand, during the fourth quarter, the company initiated the
pre-engineering, design and permitting work required to allow us to
break ground on a facility expansion at the appropriate time.
While a specific kick-off date has not yet been established for
this expansion, we believe that customer demand will require
additional capacity and we are actively moving forward to prepare
for this growth opportunity.
“Regarding the equipment issue and production
interruption that we reported last quarter, I can confirm that the
specific piece of equipment in question is now operational.
However, this project is being executed in three phases:
investigation, remediation, and confirmation. We are
currently progressing though the confirmation stage during which we
are running multiple revenue-generating production campaigns to
confirm the successful remediation of the equipment issue. We
expect this work to be completed in the coming months.
“While we faced a number of challenges in fiscal
2020, we are very encouraged by the events of, and subsequent to,
the fourth quarter. In particular, we are pleased to welcome
a new and highly experienced CEO to lead Avid into its next phase
of growth. During the fourth quarter, we also significantly
strengthened our business development team, signed multiple project
expansion orders with existing customers, and finished the year
with a record $65 million backlog. The company continues to
have strong relationships with its customers as evidenced by their
forecasted growth in demand for fiscal 2021 and beyond, and we
expect the number of projects from new customers to grow nicely
moving forward. Finally, in the era of COVID-19, it is
important to note that Avid, as a critical supplier, has lost no
signed business during this period and continues to operate at
full-scale while maintaining social distancing requirements.
This is due in large part to our exceptional employees who have
been diligent in their daily work and who remain productive and
committed to excellence despite the hardships posed by the
pandemic. We expect each of these factors to contribute to
meaningful growth in fiscal 2021.”
Financial Highlights and
Guidance
- The company is providing revenue
guidance for the full fiscal year 2021 of $76
million to $81 million.
- Revenues for the fourth quarter of
fiscal 2020 were $12.6 million, a 26% decrease compared to revenues
of $17.1 million recorded during the fourth quarter of fiscal
2019. The year-over-year decline in revenue was primarily
attributable to the interruption of production which began during
the third quarter and continued into the fourth quarter of fiscal
2020, as a result of a problem with a specific piece of
equipment. Despite this decline, fourth quarter 2020 revenues
were stronger than expected based on our revised guidance for the
quarter due primarily to an increase in customer projects.
For the full fiscal year 2020, revenues were $59.7 million, an 11%
increase as compared to revenues of $53.6 million in the prior year
period. This increase was primarily the result of continued
growth in the number and scope of customer projects.
- As of April 30,
2020, revenue backlog was $65 million, an increase of 12%
compared to $58 million at the end of the third quarter of fiscal
2020, and an increase of 41% compared to $46 million at the end of
last fiscal year. The company expects to recognize the
majority of this backlog during fiscal 2021.
- Gross margin for the fourth quarter
of fiscal 2020 was a negative 10% compared to a gross
margin of 21% for the fourth quarter of fiscal 2019. The
decrease in gross margin for the 2020 quarter was primarily
attributed to the costs associated with the production interruption
described earlier, an increase in depreciation expense from the
acquisition of new equipment, and a net decrease in revenue. Gross
margin for the full fiscal year 2020 was 7%, a decrease compared to
13% in the prior year period. This decrease was primarily due
to higher facility and equipment related costs primarily associated
with the production interruption during the second half of fiscal
2020, the planned growth costs associated with payroll and related
costs, and an increase in depreciation expense from the acquisition
of new equipment.
- Selling, general and administrative
expenses (“SG&A”) for the fourth quarter of fiscal 2020 were
$3.5 million, a slight decline compared to $3.6 million recorded
for the fourth quarter of fiscal 2019. For the full fiscal
year 2020, SG&A expenses were $14.5 million, a 13% increase
compared to $12.8 million for the prior year. The increase in
SG&A for the year was primarily attributed to employee
separation-related expenses, recruiting fees and increased
stock-based compensation. When excluding the
separation-related expenses, SG&A increased 3% during fiscal
2020 as compared to the prior year.
- For the fourth quarter of fiscal
2020, the company recorded a consolidated net loss attributable to
common stockholders of $6.2 million or $0.11 per share, as compared
to a consolidated net loss attributable to common stockholders of
$1.1 million or $0.02 per share, for the fourth quarter of fiscal
2019. For the full fiscal year 2020, the company
recorded a consolidated net loss attributable to common
stockholders of $15.2 million or $0.27 per share, compared to a
consolidated net loss attributable to common stockholders of $8.9
million or $0.16 per share, for fiscal 2019.
- Avid reported $36.3
million in cash and cash equivalents as of April 30, 2020, a
12% increase as compared to $32.4 million as of the prior fiscal
year ended April 30, 2019. The company also achieved positive
free cash flow, measured as the change in cash from operations net
of capital expenditures, of $2.0 million for the full fiscal year
2020.
More detailed financial information and analysis
may be found in Avid Bioservices’ Annual Report on Form 10-K, which
will be filed with the Securities and Exchange
Commission today.
Recent Corporate
Developments
- Appointed Nicholas (Nick) Green as
president and chief executive officer. Mr. Green has more
than 30 years of experience in the industry. He has held a number
of senior management roles, most recently serving as president and
CEO of Therapure Biopharma, with prior positions as managing
director of Nipa Laboratories Ltd., head of the Life Science
Division of Clariant International Ltd. in the USA, president and
CEO of Rhodia Pharma Solutions Ltd. and president of Codexis,
Inc.’s Pharma Division. Mr. Green holds a BSc (Hons) in
Chemistry from Queen Mary College in London and an MBA from the
University of Huddersfield.
- Significantly strengthened the
business development team with the appointment of two senior
directors with responsibility for driving CDMO business growth
within North America, Europe and
Asia. Jason C. Brady, Ph.D. serves as senior director of
business development for eastern North America, as well as
Europe. Sylvia Hinds serves as senior director of
business development for western North America in addition to
the Asia Pacific region.
- Signed project expansion orders for
$23 million during the quarter with existing customers.
During fiscal 2020, the company signed new business orders for $80
million as compared to $55 million during fiscal 2019.
- Entered into a co-marketing
agreement with Aragen Bioscience, a leading contract research
organization (CRO) focused on accelerating pre-clinical biologics
product development to provide clients with an integrated
“sequence-to-manufacturing” service. Under terms of the
non-exclusive agreement, the companies will offer customers
Aragen’s cell line development expertise integrated with Avid’s
upstream and downstream process development and analytical services
to drive efficiencies and reduce overall timelines for delivering
CGMP bulk drug substances.
- Avid was named a recipient of five
2020 Contract Manufacturing Organization (CMO) Leadership
Awards in the following categories: Capabilities, Expertise,
Reliability, Compatibility and Service. Presented by the
industry publication Life Science Leader and based on
market research and surveys conducted by Industry Standard
Research (ISR), these awards are intended to honor those
companies in the contract manufacturing space that provide their
customers with the industry’s highest level of
service.
- Restored operation of the specific
piece of equipment that caused an interruption of production in the
third and fourth quarters of fiscal 2020. This project is
being executed in three phases: investigation; remediation; and,
confirmation. To date, Avid believes it has successfully
completed the first two stages by identifying and remediating the
source of the problem. The company is currently progressing
through the confirmation stage, during which it is running multiple
revenue-generating production campaigns. The company will not
be able to confirm a full resolution until it completes the
confirmation stage. It is expected that this work will be
completed in the coming months.
- Initiated the pre-engineering,
design and permitting work required to allow the company to break
ground on a facility expansion at the appropriate time. While a
specific kick-off date has not yet been established for this
expansion, the company believes that customer demand will require
additional capacity and Avid is proactively working to prepare for
this growth.
Conference Call
Avid will host a conference call and webcast
this afternoon, June 30, 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/investor-events.
About Avid
Bioservices, Inc.
Avid Bioservices is a dedicated contract
development and manufacturing organization (CDMO) focused on
development and CGMP manufacturing of biopharmaceutical drug
substances derived from mammalian cell culture. The company
provides a comprehensive range of process development, CGMP
clinical and commercial manufacturing services for the
biotechnology and biopharmaceutical industries. With 27 years of
experience producing monoclonal antibodies and recombinant
proteins, Avid's services include CGMP clinical and commercial drug
substance manufacturing, bulk packaging, release and stability
testing and regulatory submissions support. For early-stage
programs the company provides a variety of process development
activities, including upstream and downstream development and
optimization, analytical methods development, testing and
characterization. The scope of our services ranges from
standalone process development projects to full development and
manufacturing programs through commercialization.
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 were 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 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 result in 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 need to raise
additional capital to fund its contemplated expansion plans, and
the risk that the commencement of such expansion plans may be
delayed. 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, 2020, 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.
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AVID
BIOSERVICES, INC. |
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
LOSS |
(in
thousands, except per share information) |
|
|
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|
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Three Months Ended |
|
Twelve Months Ended |
|
April 30, |
|
April 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
$ |
12,550 |
|
|
$ |
17,055 |
|
|
$ |
59,702 |
|
|
$ |
53,603 |
|
Cost of revenues |
|
13,849 |
|
|
|
13,407 |
|
|
|
55,770 |
|
|
|
46,379 |
|
Gross (loss) profit |
|
(1,299 |
) |
|
|
3,648 |
|
|
|
3,932 |
|
|
|
7,224 |
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
Selling, general and
administrative |
|
3,528 |
|
|
|
3,573 |
|
|
|
14,517 |
|
|
|
12,846 |
|
Loss on lease termination |
|
— |
|
|
|
— |
|
|
|
355 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
3,528 |
|
|
|
3,573 |
|
|
|
14,872 |
|
|
|
12,846 |
|
|
|
|
|
|
|
|
|
Operating (loss) income |
|
(4,827 |
) |
|
|
75 |
|
|
|
(10,940 |
) |
|
|
(5,622 |
) |
Interest and other income,
net |
|
59 |
|
|
|
92 |
|
|
|
474 |
|
|
|
282 |
|
(Loss) income from continuing
operations before income taxes |
$ |
(4,768 |
) |
|
$ |
167 |
|
|
$ |
(10,466 |
) |
|
$ |
(5,340 |
) |
Income tax benefit |
|
— |
|
|
|
67 |
|
|
|
— |
|
|
|
284 |
|
(Loss) income from continuing
operations, net of tax |
|
(4,768 |
) |
|
|
234 |
|
|
|
(10,466 |
) |
|
|
(5,056 |
) |
Income from discontinued
operations, net of tax |
|
— |
|
|
|
102 |
|
|
|
— |
|
|
|
841 |
|
|
|
|
|
|
|
|
|
Net (loss) income |
$ |
(4,768 |
) |
|
$ |
336 |
|
|
$ |
(10,466 |
) |
|
$ |
(4,215 |
) |
|
|
|
|
|
|
|
|
Comprehensive (loss)
income |
$ |
(4,768 |
) |
|
$ |
336 |
|
|
$ |
(10,466 |
) |
|
$ |
(4,215 |
) |
|
|
|
|
|
|
|
|
Series E preferred stock
accumulated dividends |
|
(1,442 |
) |
|
|
(1,442 |
) |
|
|
(4,686 |
) |
|
|
(4,686 |
) |
|
|
|
|
|
|
|
|
Net loss attributable to
common stockholders |
$ |
(6,210 |
) |
|
$ |
(1,106 |
) |
|
$ |
(15,152 |
) |
|
$ |
(8,901 |
) |
|
|
|
|
|
|
|
|
Basic and diluted net (loss)
income per common share attributable to common stockholders: |
|
|
|
|
|
|
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Continuing operations |
$ |
(0.11 |
) |
|
$ |
(0.02 |
) |
|
$ |
(0.27 |
) |
|
$ |
(0.17 |
) |
Discontinued operations |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.01 |
|
Net loss per share
attributable to common stockholders |
$ |
(0.11 |
) |
|
$ |
(0.02 |
) |
|
$ |
(0.27 |
) |
|
$ |
(0.16 |
) |
|
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|
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|
Weighted average basic and
diluted shares outstanding |
|
56,482 |
|
|
|
56,080 |
|
|
|
56,326 |
|
|
|
55,981 |
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AVID
BIOSERVICES, INC. |
CONSOLIDATED BALANCE SHEETS |
(In
thousands, except par value) |
|
|
April 30, |
|
April 30, |
|
2020 |
|
2019 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
36,262 |
|
|
$ |
32,351 |
|
Accounts receivable |
|
8,606 |
|
|
|
7,374 |
|
Contract assets |
|
3,300 |
|
|
|
4,327 |
|
Inventory |
|
10,883 |
|
|
|
6,557 |
|
Prepaid expenses |
|
712 |
|
|
|
709 |
|
Total current assets |
|
59,763 |
|
|
|
51,318 |
|
Property and equipment,
net |
|
27,105 |
|
|
|
25,625 |
|
Operating lease right-of-use
assets |
|
20,100 |
|
|
|
— |
|
Restricted cash |
|
350 |
|
|
|
1,150 |
|
Other assets |
|
302 |
|
|
|
302 |
|
Total assets |
$ |
107,620 |
|
|
$ |
78,395 |
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
5,926 |
|
|
$ |
4,352 |
|
Accrued payroll and related costs |
|
3,019 |
|
|
|
3,540 |
|
Note payable |
|
4,379 |
|
|
|
— |
|
Contract liabilities |
|
29,120 |
|
|
|
14,651 |
|
Operating lease liabilities |
|
1,228 |
|
|
|
— |
|
Other current liabilities |
|
808 |
|
|
|
619 |
|
Total current liabilities |
|
44,480 |
|
|
|
23,162 |
|
Operating lease liabilities,
less current portion |
|
21,244 |
|
|
|
— |
|
Deferred rent, less current
portion |
|
— |
|
|
|
2,072 |
|
Other long-term
liabilities |
|
— |
|
|
|
93 |
|
Total liabilities |
|
65,724 |
|
|
|
25,327 |
|
|
|
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
Preferred stock, $0.001 par value; 5,000 shares authorized; |
|
|
|
|
|
|
|
1,648 shares issued and outstanding at respective dates |
|
2 |
|
|
|
2 |
|
Common stock, $0.001 par value; 150,000 shares authorized; |
|
|
|
|
|
|
|
56,483 and 56,135 shares issued and outstanding at respective
dates |
|
56 |
|
|
|
56 |
|
Additional paid-in capital |
|
612,909 |
|
|
|
613,615 |
|
Accumulated deficit |
|
(571,071 |
) |
|
|
(560,605 |
) |
Total stockholders’ equity |
|
41,896 |
|
|
|
53,068 |
|
Total liabilities and stockholders’ equity |
$ |
107,620 |
|
|
$ |
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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