Q1 2021 Avid Bioservices Inc Earnings Call
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Mode.
Later, we'll conduct a question answer session and instructions will follow at that time.
As a reminder, this conference call maybe recorded.
I'd now like to hand, the conference over to 10 brands of habits Investor Relations Group. Please go ahead.
Thank you good afternoon, and thank you for joining us on today's call, we have Nick Green, President and CEO, Dan Hart, Chief Financial Officer, Intimacy Compton Chief Commercial officer.
Today, we will be providing an overview of avid bioservices contract development in manufacturing business, including updates on corporate activities and financial results for the quarter ended July 31st 2020.
After our prepared remarks, we will welcome your questions.
Before we begin I'd like to caution that comments made during this conference call. Today September 1st 2020 will contain certain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
Concerning the current belief of the company, which involves a number of assumptions risks and uncertainties actual results could differ from these statements and the company undertakes no obligation to revise or update any statements made today I.
I encourage you to review all of the company's filings with the Securities and Exchange Commission concerning these and other matters.
With that I will turn the call over to Nick Green Abbott's, President and CEO.
Thank you Tim.
Thank you everybody who's dialed in and also to those who are participating today by webcast.
I officially joined US in late July and that's truly enjoyed my first month on the job.
Despite the challenges presented by the pandemic my family and I have successfully relocated to Orange county, and settling into a new community well.
My first few weeks of do nothing but confirmed my view that I believe of it to be a strong and state of the company with significant opportunity for growth.
This is especially true given our focus on biologics, which is growing faster than many other sectors in the industry.
As I returned to the USA from my time abroad, I can't help but feel that obviously is well positioned to benefit from some of the industry trends, we have seen developing recently.
Given the broad and deep talent devoted employees, our quality facilities systems expertise and commitment to excellence that fuels are working at adopted I am confident that the company will continue to thrive.
As I begin what I believe will be an exciting and successful time without good I would like to thank my predecessor recount Coke for his contributions over the last year.
And the rigs leadership of it has evolved into the growth organization. It is today and I. Thank him on the board for interesting me with the future of the company.
I will now address address all financial business development and operational achievements for the period.
From a financial perspective in the first quarter was particularly strong as we significantly exceeded revenue expectations as well as are the key metrics.
And business development, we expanded our customer base with the addition of three new customers each of which brings an exciting new project in the manufacturing portfolio.
Lastly, I've its operational activities include the completion of multiple production runs that validated the remediation activities, we undertook in late fiscal 20.
As well as the continued development of our plans to provide additional capacity.
Tim and I will provide additional details on the business development and operations. Following an overview of a first quarter financial results and so that I turn the call over to die. Thank you Nick before I begin I'd like to recommend that everyone participating on today's call referred to our 10-Q filing with the Securities Exchange Commission.
Which we filed today for additional details.
I'll now provide an overview of our financial results from continuing operations for the first quarter ended July 31 2020.
Revenues for the first quarter fiscal 2021 were 25.4 million, a 66% increase compared to revenues of 15.3 million recorded during the first quarter fiscal 2000.
The increase in revenue was primarily due to two factors.
One being the growth in the number and scale of in process and or completed manufacturing runs during the quarter, including 4.3 million from the completed manufacturer of all batches that had been deferred from prior periods due to a previously disclosed equipment issue.
The other being 3.1 million fees received from a customer that reaches inventory requirements with fewer than expected runs therefore, not utilizing all the reserve capacity that had been scheduled for the third quarter fiscal 21.
Gross margin for the first quarter fiscal 21 was 34% up significantly compared to a gross margin of 7% for the first quarter fiscal 2000.
The increase in gross margin for the 21 quarter was primarily due to increased manufacturing revenue from the growth in the number and scale of manufacturing runs and the previously mentioned fees associated with the customers unused capacity.
I will now address operating expenses.
Total SGN expenses for the first quarter fiscal 21 were 3.8 million a decrease compared to 4.5 million recorded in the first quarter fiscal 2000.
The decrease in estimated was primarily due to a decrease in separation related expenses, partially offset by a net increase in payroll and related costs.
For the first quarter fiscal 21, the company recorded a consolidated net income attributable to common stockholders of 3.3 million a six cents per basic and diluted share.
That's compared to a consolidated net loss attributable to common stockholders of 4.6 million or eight cents per basic and diluted share for the first quarter fiscal 2000.
Our backlog at the end of the first quarter fiscal 21 was 60 million.
Compared to 65 million at the end of fiscal 2000.
Despite the quarter over quarter decrease it is important to note that when subtracting the batches differed from the second half fiscal 2000 in the backlog. During Q1 21 remained consistent as compared to Q4 20.
Despite the significant increase in revenue during the period.
The company expects to recognize the majority of this backlog in fiscal year 21.
Our cash and cash equivalents as of July 31st 2020, or 28.2 million as compared to 36.3 million as of the prior fiscal year ended April Thirtyth 2021.
This decrease in cash was primarily due to the repayment of our note payable under the Paycheck protection program loan a 4.4 million.
And the timing of changes in operating assets and liabilities during the period.
We're very happy to report the strong start to the year and while we remain optimistic that we will see continued revenue growth. This year, we're cautioning against using our first quarter revenues as a new benchmark as the deferred batches from the third and fourth quarters of fiscal 2000, and the previously mentioned fees associated with the customers unused capacity.
Both contributed meaningfully to the topline during the period.
This concludes my financial overview I'll now turn the call over to Tim for an update on business development activities and achievements for the quarter.
Thanks, Dan.
During the fourth quarter the efforts of our bit development team paid up nicely with signing of 20 million to new business.
Which includes three new customers.
Each of these new customers brings an exciting project to our portfolio and we are thrilled to have earned their business.
In early August we announced that high advanced Biotherapeutics has selected avid to provide process development.
Ill address manufacturing cgmp manufacturing services to support development of Itll be 3001.
A novel antibody cytokine engraft protein.
In related news last quarter, we announced that haven't had entered into a cool market ingredient harijan biodefense.
Our leading contract research research organization focused on accelerating preclinical biologics development.
We're already seeing the benefit of this collaboration as cell line development could be for I'll be 3001 are currently being conducted by erosion under its of contracting agreement with Abbott.
On August Twentyth, we announced that orogenic Inc. has lifted average to provide analytical met development process development and drug substance manufacturing services and support orogenic novel Cobot, 19th pipe coating vaccine candidate technical too.
The company is currently conducting cell line development analytical method visibility.
And qualification activities and once complete tends to advance a program to upstream and downstream process development.
While this program is early we're very pleased to be working with Oragenics.
And on August 26, we announced that Matt biopharmaceutical has selected Abbott with a clinical development of a novel monoclonal anti viral antibody.
David is currently working to transfer the existing process into its process development laboratory and plan to conduct scale up and ultimately provide GMP manufacturing from our Myford facility.
During the first quarter. Our team also entered into a co marketing agreement with Argonaut manufacturing services to support drug product manufacturing. This partnership is designed to offer customers that with upstream and downstream process development contract manufacturing services, along the Argonauts parental drug product fill finish services.
To support the efficient delivery of cgmp parental drug products for use the clinical trial.
Through the collaborations with both urgent and argonaut evident strategically established an end to end option for customers seeking support from early cell line development drug product manufactured.
We're already seeing value from these relationships and we believe they will contribute significantly to have its growth going forward.
Despite the impact of Coca 19 globally, our business development team has adapted well to the new normal and continue to deliver growth opportunity.
We continue to engage at a high level with prospective and existing customers you a virtual format and we have observed no slowdown in our activity.
Thankfully, we have experienced no business development related interruption.
The results of the pandemic and we are hopeful that this will continue.
This concludes my business development overview, and I'll now hand, the call back over to Nick Nick.
Thank you Tim.
I'd like to expand on Tim's final comments to address of its broader operations within the context of covers 90.
Despite the disruption caused globally by the pandemic. We are fortunate that we have not experienced any interruption to our operations.
Today, we have observed no material impact to our production programs.
Our supply chain and our employees remain healthy unproductive.
Management continues to take every precaution unfold as state and local guidelines to assure the continued safety and well being of our team members and we are hopeful that our operations will remain on impacted.
During and subsequent to the quarter, we made progress with a number of important operational projects.
I'd first like to address the equipment tissue that intuitive to several production rooms during the third and fourth quarters and fiscal 20.
As we reported last quarter the specific piece of equipment in question is now operational.
Following efforts to investigate and remediate the problem during the fourth quarter. We have now validated these efforts by competing multiple successful revenue generating prediction campaigns using this equipment.
Importantly assignment reported earlier on all of the delayed 20 batches 2020 batches, rather have now been completed.
At the very end of July of it also initiated its annual preventative maintenance shutdown.
In prior years this process temporarily reduces available capacity, which as usual we expect to have some impact on our fiscal quarter to 22 in Q1 financial results.
Lastly, we continue to make progress without expansion plans as we continue to see growth in customer demand the ability to access additional capacity grows excrete increasingly important.
As I am using the team and considering the importance of this to the future of the business I am in the process of reviewing the design funds and does it until their requirements head of making a final decision with respect to the best path forward for the business.
I think function of this nature. It typically takes up to 24 months to complete and as such we are keen to not only move swiftly but also thoughtfully.
In closing I can say that I believe the accomplishments of the first quarter have established a good momentum for the rest of the yet to come.
During the quarter, our business development team signed 20 million in project orders with new customers as well as with existing customers.
Looking ahead, we see growth in manufacturing demand and expect to continue to do expand our production pipeline.
Financially we believe this demand we will continue to drive our topline growth with margins improving in line.
While we are not currently in a position to project sustainable quarter to quarter profitability. We are focused on extending this performance across our fiscal yet.
This concludes my prepared remarks today, we can now go we'll open the line to call for questions.
Operator.
Thank you as a reminder to ask a question you wanting to press Star then one on your Touchstone telephone it withdraw your question from the Q. Please press the pound key.
Please standby well, we compile the culinary roster.
Our first question comes from Matt Hewitt with Craig Hallum. Your line is now open.
Good afternoon. Thank you for taking the questions and welcome Nick.
Thanks very much much.
Regarding the three new customer wins, obviously, a nice cadence there as we let up to the report today would you use it sounds like one of them came via the new partners, but maybe talk about the pipeline of opportunities there how the other two came about and where are you know what you're seeing from a development standpoint I guess.
Over the remainder of the year.
Yes, Thanks, Matt just Tim I'm happy to address that so.
The other opportunities came from just our typical BD activities.
Here at the organization, we have a strong pipeline our pipeline continues to grow for new opportunities on a monthly basis.
As you know some some sales cycles are short.
Sales cycles, along just really depending on the absolute needed the customer and how fast they need to move.
When selecting a partner like avid.
And so like I said, we have the number of opportunities in that pipeline and we look to continue to add new customers throughout the year.
Great and then.
The there was obviously a benefit to I think largely due to the fees, but even if you back off of that 3.1 million.
Your gross margin when it come in at 24.5% roughly that's still a big step up from the last couple of quarters and quite frankly last couple of years, how should we be thinking about gross margin for the remainder of the year.
Hi, Matt.
Gross margin for the year gross margin will continue to track in line with revenue growth.
As we noted in our prepared remarks, there are couple items that went into this first quarter.
That's a help absorb some of our largely fixed costs.
So going forward as I've mentioned in the passing that we'll continue to move our margins forward.
34% is a significant margin for us for the first quarter and as we.
See the ups and downs in the quarters going forward, that's will be a little bit more in line with that net number 2024% as you mentioned.
Okay, Great and then maybe one last question then I'll hop back into the queue.
With the with these new two new partnerships.
As you are having discussions with customers are you getting.
The response essentially we're glad that you've got this now or you know what what are you hearing from customers regarding goes to relationships and how does that really kind of build the pipeline for you in an addition to the to the internal work that you've been doing thank you.
Hi, Matt is Tim again, I assume by partnerships, you're talking about the co marketing agreements with Argonaut, an urgent correct.
Yes so.
We're seeing typically with our request for pulled from our customers. They're looking for an end in service offering these starting out, especially from the earlier development program starting on cell line development.
And so simply by providing them and an option to work with one of the one of our partners on the cell line development is beneficial and keeps us at the table with that prospective customer early on in the development.
Of the program otherwise, we would likely come to the table after cell line development is completed.
And then going at the other ended the spectrum looking at the drug product.
We're also getting requests for drug product and so there we would connect them with our with our co marketing partner there at the Argonaut manufacturing services.
But again you know each of these co marketing agreements are.
Non exclusive and.
Really to the tough satisfying the customer needs in working with them to provide a flexible solution for them.
Understood. Thank you.
Thank you and our next question comes on Jacob Johnson with Stephens. Your line is now open.
Hey, Thanks, Congrats on a really strong quarter and welcome to add a deck I guess first question just on capacity in the early saying your comments you talked about that need to expand capacity to meet customer demand. Maybe can you remind us where you are in revenue capacity roughly today and then.
If you break ground. Shortly do you think you'll have enough time to bring this capacity online or in time to to meet that the projected demand you're seeing it sounds like you're moving pretty swiftly.
[noise] Jacob I'll start that so the current installed capacity we have in our two plants can get us roughly 200 100 plus million dollars in revenue.
If we were to expand our current facilities.
You know that footprint, if we work as we talked in the past looking at the overall myford footprint.
We have the ability to expand into the second half of my for an expanding into the second half because we don't have a lot of redundant utilities that we'll have to put in.
We could add up to capacity revenue generating capacity of up to another.
Another 100 100 plus million revenue. So current installed base today is 100 million. If we were to fully built out our myford, we could get to to 200 250.
Yeah. Jake of this mix speaking just to add a little bit to of color to that I mean, what are the things that are I and we are looking out at the moment is is sort of a critical path analysis of all the various activities within the operations.
Back to try and determine whether there are opportunities to free capacity and the shorter term as well as the the overall expansion, which effectively IDE study significant amount of expansion and take somewhat longer to do so to give you an exact percentage all depends on which portion of the critical part of the critical path you.
Measured against that a if it will have that are not concluded in the not too distant future and probably be reporting how we're going to move forward I'm not in that and the next a in the next few months.
Great. Thanks for that Nick and then maybe a question high level question for you Nick.
Hi.
Yeah, Dave maybe 32 on the job here it out.
[laughter] would be interested in your your high level thoughts on habit strategy going forward are there any therapeutic areas for capabilities that maybe had not been historical focus having said that there would be interesting to you or just sort or any other high level thoughts on the strategy going forward.
A little early to give you a strategy so going forward, we're actually embarking on that process as we speak into assumes we finished the goals.
With investors following a following this call so.
Certainly in terms of what I've seen I think there's plenty of opportunity I think have been delighted with the with open mindedness or the management team to be Frank.
People are open to different ideas and suggestions and.
And thoughts, which I think is always very healthy in terms of.
Developing the strategy going forward.
I think it'd be fully for me to suggest that I had a magic wand and I was also isn't going to walk in and 32 days and presented them with a new strategy that was that was going to.
Reveal a a bright future, but I think there's lots and lots of opportunity, but as both internally and improving the way we operate.
As well as externally and looking at the services.
On the way that we service our clients. So I think sort of next quarter call I'd be more than happy to.
To give you my views on how we're going to we're going to move the organization forward, but don't don't envisage that being.
So maybe thats driven by a lack of opportunities are quite a country.
Understood I'll try again next quarter.
[laughter] last question for you.
You reiterated guidance for the year understanding theres some onetime benefited in the corridor to keep you I think there's the seasonal maintenance period. It and also the fact, it's one quarter end, but just anything else you would call out as supply you guys didn't raise guidance. Following obviously really strong start to the year.
I think there was a couple of things in their jacked up the first one is if it's our first quarter and as we discussed in his prepared remarks, there were a couple of things at the first quarter that helped elevate that top line.
We do have our shutdown that we do in the second quarter every year you know as we look at where we're at today. In addition, the uncertainty with the pandemic you know we're comfortable with where we're at looking at our forecast moving forward. So that's why we redid reiterated our guidance, so 70 61 million.
Got it thanks for taking my questions guys.
Thank you and I'm showing no further questions in the queue at this time I'd like to turn the call back to Nick Green for any closing remarks.
Thank you operator, thank you to everyone participating on today's call.
I'm pleased to be innovated this exciting time and the company's evolution and have a great deal of optimism for the future of the business and I'm very happy to be working alongside.
Exceptional employees.
In closing I'd like to thank our dedicated employees, many of whom a weighted average daily working through the challenges presented by Kovac 19, both at home under work. They work to ensure that we are able to deliver commercial on clinical products, we need to supply to patients in need.
None of this success will be possible without the hard work commitment to our employees and I am grateful for their dedication.
Thank you again for participating in today's call and thank you for your continued supportive of it bio services.
Ladies and gentlemen, thanks for your participation on today's conference. This does conclude your program and you may now disconnect.
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