Release Date: September 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Avid Bioservices Inc (CDMO, Financial) reported strong revenues of $40.2 million for Q1 fiscal 2025, a 6% increase compared to the same period last year.
- Gross profit improved to $5.7 million or 14% gross margin, up from $4.1 million or 11% gross margin in the prior year period.
- The company signed $66 million in new project agreements, setting a record high backlog of $219 million.
- A significant majority of new signings are projects with new customers, including another large pharma client.
- The company is seeing a good mix of early and late-stage programs, providing a balance between near and longer-term revenues.
Negative Points
- SG&A expenses increased by 30% to $8.2 million, primarily due to higher compensation, benefits, and consulting fees.
- Net loss for the quarter was $5.5 million, or $0.09 per share, compared to a net loss of $2.1 million or $0.03 per share in the prior year period.
- Cash and cash equivalents decreased to $33.4 million from $38.1 million at the end of April 2024.
- The company continues to face challenges in the cell and gene therapy market, with demand lagging behind traditional biologics.
- There is uncertainty regarding the impact of the Bio Secure Act on customer behavior and future business from China.
Q & A Highlights
Q: Congratulations on the strong bookings quarter. Can you discuss the mix of new bookings and how it might affect your backlog burn rate over the next few quarters?
A: The mix of new bookings includes a better proportion of early-phase clients compared to prior quarters. This will likely accelerate the backlog burn rate slightly, but not dramatically.
Q: Can you provide more details on the two PPQ campaigns you won this quarter?
A: One is a commercial product being outsourced from internal manufacture, and the other is a Phase 3 program coming from another CDMO. We don't forecast future revenues but these wins are significant.
Q: Any updates on your large pharma strategy and changes in demand from these customers?
A: No recent changes in demand from large pharma. The strategy is progressing as expected, though some areas have developed quicker than anticipated. Overall, we are roughly in line with our expectations.
Q: How is the cell and gene therapy market performing compared to traditional biologics?
A: The cell and gene therapy market is still lagging behind traditional biologics. We haven't seen a significant catch-up, but we are having interesting conversations that may convert into orders in the next quarter or two.
Q: What are your thoughts on the Bio Secure Act and its impact on your business?
A: Competing against Asian competitors, particularly Chinese, is a regular challenge. About half of our pipeline from China is likely Bio Secure-related. The act could drive decision-making, but its full impact remains to be seen.
Q: Will the usual seasonal shutdown period be lighter this year due to new facilities and equipment?
A: This year, we still need to maintain and calibrate the new facilities, so the shutdown period will not be significantly lighter. We are trying new methods to reduce the scope of future shutdowns.
Q: How much of the new orders are in the cell and gene therapy area?
A: A small proportion of the new orders are in the cell and gene therapy area. We don't break out these numbers, but they are not material in the overall scheme.
Q: Is the backlog duration extending beyond a year, and how does the mix of new signings affect this?
A: The mix of new signings this quarter includes a higher proportion of early-phase projects, slightly accelerating the backlog burn rate. However, the overall impact is not material.
Q: Any new regulatory developments in Europe that could benefit your position?
A: There are some rumblings about potential similar actions in Europe, but nothing definitive. For now, the Bio Secure Act in the US is the primary regulatory development.
Q: Can you provide an update on Halozyme's revenue contribution and your expectations for fiscal 2025?
A: The relationship with Halozyme remains strong. We aim to grow along with Halozyme while diversifying our customer base. The trend of Halozyme becoming a smaller proportion of our business is expected to continue.
Q: What are your expectations for adjusted EBITDA margin in fiscal 2025?
A: We aim to continue growing adjusted EBITDA as we approach our guidance for the year. While quarters can be lumpy, we expect to see similar growth patterns as in previous quarters.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
