Avid Bioservices Reports Financial Results for Second Quarter Fiscal 2020 and Recent Developments
December 09 2019 - 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 second quarter of fiscal 2020
ended October 31, 2019.
Highlights Since July 31,
2019
“During the second quarter of 2020, we
strengthened multiple core areas of our business,” said Rick
Hancock, interim president and chief executive officer of
Avid. “Our business development effort continues to
be wide reaching and robust. Our reputation in
the industry for quality and regulatory success continues to grow
allowing us to engage with a broadening pool of
potential new customers and expand our relationships
with existing customers.
“Operationally, we continue to improve and
enhance our equipment, facilities and systems. The
opening of our new process development lab, the successful
completion of our annual maintenance overhaul, and the planned
installation of a new pharmaceutical grade water system
in calendar 2020 all reflect the dedication we have to maintaining
the highest standards possible.
“The revenues for this quarter were the highest
since Avid transitioned to a pure-play CDMO in January 2018, and we
achieved 18% gross margin, which represents a significant increase
year-over-year as well as quarter-over-quarter. Expenses
remained in line with expectations and our backlog continues to be
strong. Also important, during the quarter we approached
breakeven income from operations.
“Productivity
and efficiency contributed significantly to Avid’s
strong second quarter results, and we expect that our
financial performance will continue to track positively with these
factors. We believe that Avid has turned an
important corner, creating a stronger platform from
which to achieve sustainable profitability.”
Financial Highlights and Guidance
- The company is confirming prior revenue guidance for the full
fiscal year 2020 of $64 million - $67
million.
- Revenue was $18.3 million for the second quarter of
fiscal 2020, an increase of 80% as compared to
$10.2 million for the second quarter of last fiscal
year. For the six months ended October 31, 2019, revenues
were $33.6 million, a 47% increase as compared to revenues of
$22.8 million during the prior period. Increases during both
current-year periods were primarily due to an increase in the
number of in-process and completed manufacturing runs as a result
of growing demand from a more diversified client base.
- As of October 31, 2019, revenue backlog was
approximately $52 million, a decrease of 16% as compared to
the first quarter of fiscal 2020. The company expects to
recognize the majority of this backlog within the next 12
months.
- Gross margin for the second quarter of fiscal 2020 of 18% was
up significantly compared to a gross margin of 3% in the prior
period. Gross margin for the six months ended October
31, 2019 was 13%, up significantly compared to 7% in
the prior period. These increases were primarily attributed
to the increased number of manufacturing runs, partially
offset by costs associated with the hiring of personnel to
accommodate growth in production demand, increases in other
compensation expenses, and equipment repairs.
- Selling, general and administrative expenses (“SG&A”) for
the second quarter of fiscal 2020 were $3.5 million compared
to $2.8 million for the second quarter of last year. The
increase was primarily attributed to payroll and related costs, and
stock-based compensation. For the first six months of fiscal
2020, SG&A expenses were $8.0 million compared to $6.0
million for the first six months of fiscal 2019. The
increases in SG&A during the six-month period were primarily
attributed to payroll and related costs, including one-time
employee separation-related expenses, and increased stock-based
compensation.
- In September 2019, the company recognized
a one-time loss of $0.4 million in connection
with the termination of a non-manufacturing facility
lease, which reduces our future lease and related payments by
approximately $1.3 million over the next four years.
Additionally, the lease termination released $0.3 million of
restricted cash that was pledged as collateral under a letter of
credit required by the terminated lease back to the company.
The lease termination of this redundant warehouse space has no
impact on our future expansion plans, as the company continues to
have 42,000 square feet available within our Myford
facility.
- For the second quarter of fiscal 2020, the company
recorded a consolidated net loss attributable to common
stockholders of $1.9 million or $0.03 per
share, compared to a consolidated net loss attributable
to common stockholders of $2.9
million or $0.05 per share, for the prior year
period. For the first six months of fiscal 2020, the company
recorded a consolidated net loss attributable to common
stockholders of $6.1 million or $0.11 per
share, compared to a consolidated net loss attributable to common
stockholders of $5.9 million or $0.11 per share, for
the prior year period.
- Avid reported $34.0 million in cash and cash
equivalents as of October 31, 2019, 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
- Launched expanded process development (PD) facility
and services. This purpose-built state-of-the-art facility,
which houses Avid’s expanded upstream and downstream process
development capabilities, represents an important new opportunity
for the company by allowing us to expand our existing relationships
and attract new business by offering support to customers that seek
to outsource their PD work.
- Expanded scope of work with multiple existing customers to
increase the number of manufacturing batches and/or scale of
production.
- Appointed Richard (Rich) Richieri as chief operations
officer. Mr. Richieri will oversee Process Development,
Clinical and Commercial Manufacturing, Technical Support and
Facilities. In this role, Mr. Richieri will be focused on
streamlining operations, building internal efficiencies and
strategic planning for future growth. Mr. Richieri has over
25 years of biopharmaceutical industry experience spanning the
areas of drug discovery, CGMP operations, contract manufacturing
and process development. Mr. Richieri previously spent 15
years with Avid Bioservices and its former parent
company, Peregrine Pharmaceuticals, including the role of
senior vice president of manufacturing. During that time, he was
instrumental in launching, building and growing Avid’s CDMO
business and helping the company diversify its production
capabilities.
- Initiated final design stage for the construction of a new
pharmaceutical grade water system in the Myford
facility. Installation of this system will supply water to
multiple manufacturing systems, a critical step in creating
the manufacturing efficiencies required to increase output and
strengthen margins. The company expects the system to be
installed in calendar 2020.
Conference Call
Avid will host a conference call and webcast
this afternoon, December 9, 2019, at 4:30 PM
ET (1:30 PM PT).
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 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 which could 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 October
31, |
|
Six Months Ended October 31, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
|
|
|
|
|
|
|
|
|
|
Revenues |
$ |
18,313 |
|
|
$ |
10,178 |
|
|
$ |
33,567 |
|
|
$ |
22,767 |
|
Cost of revenues |
|
14,953 |
|
|
|
9,844 |
|
|
|
29,121 |
|
|
|
21,241 |
|
Gross profit |
|
3,360 |
|
|
|
334 |
|
|
|
4,446 |
|
|
|
1,526 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative |
|
3,534 |
|
|
|
2,816 |
|
|
|
7,993 |
|
|
|
6,031 |
|
Loss on lease termination |
|
355 |
|
|
|
— |
|
|
|
355 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
3,889 |
|
|
|
2,816 |
|
|
|
8,348 |
|
|
|
6,031 |
|
|
|
|
|
|
|
|
|
Operating loss |
|
(529 |
) |
|
|
(2,482 |
) |
|
|
(3,902 |
) |
|
|
(4,505 |
) |
Interest and other income,
net |
|
99 |
|
|
|
119 |
|
|
|
308 |
|
|
|
181 |
|
Loss from continuing operations before income taxes |
|
(430 |
) |
|
|
(2,363 |
) |
|
|
(3,594 |
) |
|
|
(4,324 |
) |
Income tax benefit |
|
— |
|
|
|
173 |
|
|
|
— |
|
|
|
173 |
|
Loss from continuing operations,
net of tax |
|
(430 |
) |
|
|
(2,190 |
) |
|
|
(3,594 |
) |
|
|
(4,151 |
) |
Income from discontinued operations, net of tax |
|
— |
|
|
|
739 |
|
|
|
— |
|
|
|
739 |
|
|
|
|
|
|
|
|
|
Net loss |
$ |
(430 |
) |
|
$ |
(1,451 |
) |
|
$ |
(3,594 |
) |
|
$ |
(3,412 |
) |
|
|
|
|
|
|
|
|
Comprehensive loss |
$ |
(430 |
) |
|
$ |
(1,451 |
) |
|
$ |
(3,594 |
) |
|
$ |
(3,412 |
) |
|
|
|
|
|
|
|
|
Series E preferred stock
accumulated dividends |
|
(1,442 |
) |
|
|
(1,442 |
) |
|
|
(2,523 |
) |
|
|
(2,523 |
) |
|
|
|
|
|
|
|
|
Net loss attributable to
common stockholders |
$ |
(1,872 |
) |
|
$ |
(2,893 |
) |
|
$ |
(6,117 |
) |
|
$ |
(5,935 |
) |
|
|
|
|
|
|
|
|
|
Basic and diluted net (loss)
income per common share attributable to common stockholders: |
|
|
|
|
|
|
|
|
Continuing operations |
$ |
(0.03 |
) |
|
$ |
(0.06 |
) |
|
$ |
(0.11 |
) |
|
$ |
(0.12 |
) |
Discontinued operations |
|
— |
|
|
|
0.01 |
|
|
|
— |
|
|
|
0.01 |
|
Net loss per share
attributable to common stockholders |
$ |
(0.03 |
) |
|
$ |
(0.05 |
) |
|
$ |
(0.11 |
) |
|
$ |
(0.11 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average basic and
diluted shares outstanding |
|
56,253 |
|
|
|
56,009 |
|
|
|
56,210 |
|
|
|
55,889 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVID BIOSERVICES, INC.CONDENSED
CONSOLIDATED BALANCE SHEETS(In thousands, except par
value)
|
October 31,2019 |
|
April 30,2019 |
ASSETS |
(unaudited) |
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
33,960 |
|
|
$ |
32,351 |
|
Accounts receivable |
|
7,422 |
|
|
|
7,374 |
|
Contract assets |
|
6,110 |
|
|
|
4,327 |
|
Inventory |
|
7,809 |
|
|
|
6,557 |
|
Prepaid expenses and other current assets |
|
926 |
|
|
|
709 |
|
Total current assets |
|
56,227 |
|
|
|
51,318 |
|
Property and equipment, net |
|
26,990 |
|
|
|
25,625 |
|
Operating lease right-of-use
assets |
|
21,381 |
|
|
|
— |
|
Restricted cash |
|
350 |
|
|
|
1,150 |
|
Other assets |
|
302 |
|
|
|
302 |
|
Total assets |
$ |
105,250 |
|
|
$ |
78,395 |
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
6,126 |
|
|
$ |
4,352 |
|
Accrued payroll and related costs |
|
3,360 |
|
|
|
3,540 |
|
Contract liabilities |
|
22,199 |
|
|
|
14,651 |
|
Operating lease liabilities |
|
1,241 |
|
|
|
— |
|
Other current liabilities |
|
746 |
|
|
|
619 |
|
Total current liabilities |
|
33,672 |
|
|
|
23,162 |
|
|
|
|
|
Operating lease liabilities, less
current portion |
|
22,394 |
|
|
|
— |
|
Deferred rent, less current
portion |
|
— |
|
|
|
2,072 |
|
Other long-term liabilities |
|
— |
|
|
|
93 |
|
|
|
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
Preferred stock, $0.001 par value; 5,000 shares authorized;1,648
shares issued and outstanding at October 31, 2019 and April 30,
2019, respectively |
|
2 |
|
|
|
2 |
|
Common stock, $0.001 par value; 150,000 shares authorized; 56,338
and 56,136 shares issued and outstanding at October 31, 2019 and
April 30, 2019, respectively |
|
56 |
|
|
|
56 |
|
Additional paid-in capital |
|
613,325 |
|
|
|
613,615 |
|
Accumulated deficit |
|
(564,199 |
) |
|
|
(560,605 |
) |
Total stockholders’ equity |
|
49,184 |
|
|
|
53,068 |
|
Total liabilities and stockholders’ equity |
$ |
105,250 |
|
|
$ |
78,395 |
|
|
|
|
|
|
|
|
|
Contacts:Stephanie Diaz
(Investors)
Tim Brons (Media)Vida Strategic Partners
Vida Strategic
Partners415-675-7401
415-675-7402sdiaz@vidasp.com
tbrons@vidasp.com
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