Avid Bioservices Announces Certain Preliminary Financial Results for Third Quarter Ended January 31, 2024

Rhea-AI Summary

Avid Bioservices, Inc. (NASDAQ:CDMO) announced preliminary earnings estimates for the third quarter and nine months ended January 31, 2024. Revenues decreased by 11% in the third quarter but increased by 33% compared to the previous quarter. The company signed new orders totaling $41 million, resulting in a record high revenue backlog of $206 million. Gross profit margins decreased due to fewer manufacturing runs and increased costs. SG&A expenses decreased by 10% in the third quarter. Operating loss was $4.0 million for the quarter. Avid is maintaining revenue guidance for the full fiscal year 2024 and completed its CGT facility expansion.

Positive

• The company reported a decrease in revenues by 11% for the third quarter of fiscal 2024 compared to the same prior year period.
• Avid signed new orders totaling $41 million during the third quarter, resulting in a record high revenue backlog of $206 million.
• Gross profit margins decreased due to fewer manufacturing runs and increased costs related to capacity and technical expansions.
• SG&A expenses decreased by 10% in the third quarter of fiscal 2024 compared to the same period in the prior year.
• Operating loss for the third quarter was $4.0 million, a decrease compared to the same period in the prior year.
• Avid completed its cell and gene therapy facility expansion, increasing its revenue generating capacity to approximately $400 million annually.

Negative

• The decrease in revenues for the third quarter and nine months ended January 31, 2024 compared to the same prior year periods was primarily attributed to fewer manufacturing runs and a reduction in process development services from early-stage customers.
• Gross margins were impacted by changes in estimated variable consideration under a contract, a terminated project, and delays in recognizing revenues for a customer product.
• Operating loss for the first nine months of fiscal 2024 was $17.4 million, a decrease compared to the same period in the prior year.

Financial Analyst

The revenue and earnings data released by Avid Bioservices indicate a notable decline in their year-over-year quarterly performance, with revenues decreasing by 11% from the previous year's same quarter. This is a significant metric for investors as it reflects the company's ability to maintain or grow its business. The reported increase in backlog to a record $206 million, however, suggests a potential for future revenue growth, which is a positive indicator for the company's long-term prospects. Additionally, the completion of the CGT facility expansion could be a strategic move to diversify and expand service offerings, potentially leading to increased market share and customer base in the high-growth cell and gene therapy sector.

From a financial perspective, the gross margin contraction to 7% from 26% in the prior year's quarter is concerning as it may reflect increased costs or pricing pressures that could impact profitability. Investors will need to monitor whether this is a temporary fluctuation or indicative of a longer-term trend. The maintenance of revenue guidance despite the setbacks suggests management's confidence in the company's recovery and growth trajectory. However, the operating loss increase points to the need for careful expense management and operational efficiency improvements.

Market Research Analyst

The biologics CDMO industry is highly competitive and sensitive to technological advancements and capacity expansions. Avid Bioservices' completion of its CGT facility positions the company to capitalize on the burgeoning cell and gene therapy market. This strategic investment could be seen as a move to future-proof the company against industry shifts towards personalized medicine. The reported 33% increase in revenue compared to the previous quarter indicates a recovery trajectory, which is critical for investor confidence.

However, the decrease in process development services from early-stage customers could signal a shift in the industry's development pipeline or a change in customer preferences, which may require strategic adjustments from Avid. The reduction in SG&A expenses reflects a prudent approach to cost management, which is essential in periods of revenue decline. An analysis of the competitive landscape and Avid's positioning within the industry would be crucial to understand the potential impact on the company's market share and future revenue streams.

Biotech Industry Expert

The biotech sector is known for its volatility and reliance on continuous innovation and pipeline development. Avid Bioservices' preliminary earnings report shows a decrease in manufacturing runs and process development services, which could be indicative of broader industry trends or company-specific challenges. The completion of the CGT facility is a significant milestone and reflects an industry-wide pivot towards advanced therapies. The expertise required to manufacture these therapies is substantial and Avid's expanded capacity may provide a competitive advantage in attracting partnerships with biotech firms focusing on CGT.

The ability to maintain a high revenue backlog is a positive sign of client trust and demand for Avid's services. However, the reported decrease in gross profit and operating losses raises questions about the company's cost structure and operational efficiencies. Investors and industry stakeholders will be interested in how Avid plans to optimize its expanded capabilities to improve profitability and how it will navigate the competitive landscape of contract development and manufacturing in the biotech sector.

TUSTIN, Calif., March 06, 2024 (GLOBE NEWSWIRE) -- Avid Bioservices, Inc. (NASDAQ:CDMO), 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 preliminary earnings estimates for the third quarter and nine months ended January 31, 2024.

The company expects results in the third quarter of fiscal 2024 to include:

Revenues & Backlog

• Revenues for the third quarter of fiscal 2024 were $33.8 million, representing an 11% decrease as compared to revenues of $38.0 million recorded in the same prior year period and a 33% increase as compared to revenues of $25.4 million recorded in the second quarter of fiscal 2024. For the first nine months of fiscal 2024, revenues were $96.9 million, a decrease of approximately 11% compared to $109.5 million in the same prior year period. The decrease in revenues for the third quarter and nine months ended January 31, 2024 compared to the same prior year periods was primarily attributed to fewer manufacturing runs and a reduction in process development services from early-stage customers. Additionally, the first nine months revenues were also impacted by a reduction of revenue for changes in estimated variable consideration under a contract where uncertainties have been resolved.
• The company’s commercial team signed multiple new orders during the third quarter of fiscal 2024, totaling approximately $41 million net, and resulting in record high revenue backlog of $206 million, representing an increase of 17% compared to $176 million at the end of the same quarter last year. These orders span a broad range of the company’s capabilities and are primarily from later-stage projects. The company anticipates a significant amount of its backlog will be recognized as revenue over the next five fiscal quarters.

Gross Profit

• Gross profit for the third quarter of fiscal 2024 was $2.4 million (7% gross margin), compared to $9.8 million (26% gross margin) in the third quarter of fiscal 2023 and a gross loss of $4.7 million (negative 18% gross margin) in the second quarter of fiscal 2024. Gross profit for the first nine months of fiscal 2024 was $1.8 million (2% gross margin), compared to a gross profit of $23.1 million (21% gross margin) for the same period during fiscal 2023.   The decrease in gross margin for the three and nine months ended January 31, 2024 compared to the same prior year periods was primarily driven by fewer manufacturing runs, a reduction in process development services from early-stage customers, and an increase in our costs related to expansions of both the company’s capacity and technical capabilities.  Gross margins during the nine months ended January 31, 2024, were also impacted by a reduction of revenue for changes in estimated variable consideration under a contract where uncertainties have been resolved, a terminated project relating to the insolvency of one of the company’s smaller customers, and a delay in the ability to recognize revenues of a customer product pending the implementation of a process change.
  

Selling, General and Administrative (SG&A) Expenses

• SG&A expenses for the third quarter of fiscal 2024 were $6.4 million, a decrease of 10% compared to $7.1 million recorded for the third quarter of fiscal 2023 and a decrease of 3% compared to $6.6 million recorded for the second quarter of fiscal 2024. SG&A expenses for the first nine months of fiscal 2024 were $19.2 million, a decrease of approximately 6% compared to $20.3 million recorded in the same prior year period. The decrease in SG&A for both the three and nine months ended January 31, 2024 compared to the same prior year periods was primarily due to decreases in compensation and benefit related expenses, and consulting fees.
  

Operating Income (Loss)

• Operating loss for the third quarter of fiscal 2024 was $4.0 million, a decrease compared to operating income of $2.7 million recorded for the third quarter of fiscal 2023 and an increase compared to an operating loss of $11.2 million recorded for the second quarter of fiscal 2024. Operating loss for first nine months of fiscal 2024 was $17.4 million compared to operating income of $2.8 million for the first nine months of fiscal 2023. The decrease in operating income for the three and nine months ended January 31, 2024 compared to the same prior year periods was driven by a decrease in gross profit partially offset by reduced SG&A.
  

Other Items

• The company is maintaining revenue guidance for full fiscal year 2024 of $137mm to $147mm.
• On January 31, 2024, Avid reported cash and cash equivalents of $30.7 million, compared to $38.5 million on April 30, 2023.
• During the quarter, Avid marked the completion of its cell and gene therapy (or CGT) facility, representing the final step in a three-year expansion program that has dramatically increased the company’s service offerings and revenue generating capacity. Avid estimates that its combined mammalian and CGT facilities now have a total revenue generating capacity of up to approximately $400mm annually.
  

About Avid Bioservices, Inc. 

Avid Bioservices (NASDAQ:CDMO) is a dedicated contract development and manufacturing organization (CDMO) focused on development and CGMP manufacturing of biologics. The company provides a comprehensive range of process development, CGMP clinical and commercial manufacturing services for the biotechnology and biopharmaceutical industries. With 30 years of experience producing biologics, 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 cell line development, 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 that could cause actual results to differ materially from those expressed or implied by the forward-looking statements, including, but not limited to, the risk the company may experience delays in engaging new customers, the risk that the company may not be successful in executing customers projects, the risk that changing economic conditions may delay or otherwise adversely impact the realization of the company’s backlog, the risk that the company may not be able to convert its backlog into revenue within the contemplated time periods, the risk that the company may experience technical difficulties in completing customer 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 which could adversely affect guided fiscal 2024 revenues, the risk that our reported financial results may differ from the preliminary financial results included herein as a result of financial close and review procedures, the risk that expanding into a new biologics manufacturing capability may distract senior management’s focus on the company’s existing operations, the risk that the company may experience delays in hiring qualified individuals into the cell and gene therapy business, the risk that the company may experience delays in engaging customers for the cell and gene therapy business, and the risk that the cell and gene therapy business may not become profitable for several years, if ever. 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, 2023, 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.

FAQ

What were the revenues for the third quarter of fiscal 2024?

Revenues for the third quarter of fiscal 2024 were $33.8 million.

What was the gross profit for the third quarter of fiscal 2024?

Gross profit for the third quarter of fiscal 2024 was $2.4 million.

What were the SG&A expenses for the first nine months of fiscal 2024?

SG&A expenses for the first nine months of fiscal 2024 were $19.2 million.

What was the operating loss for the third quarter of fiscal 2024?

Operating loss for the third quarter of fiscal 2024 was $4.0 million.

What is Avid Bioservices' revenue guidance for full fiscal year 2024?

The company is maintaining revenue guidance of $137mm to $147mm for full fiscal year 2024.

What did Avid Bioservices complete during the quarter?

Avid marked the completion of its cell and gene therapy (CGT) facility expansion during the quarter.