It turns out the reports of Avid Bioservices Inc.’s demise were an exaggeration.
The Tustin-based pharmaceutical contract manufacturer (Nasdaq: CDMO) saw a huge turnaround in investor sentiment after reporting fourth-quarter results that topped analysts’ consensus estimates.
On the following day, its shares climbed 40% to $5.60. A trading session later, they climbed another 8.9% to $6.10 and a $373 million market cap.
“Fiscal 2019 was a fundamentally transformative year for Avid as the team successfully achieved a number of critical goals,” interim Chief Executive Rick Hancock said in a statement.
“Based on our current backlog, as well as forecasts from our customers, we believe the company will achieve sustainable growth going forward. Avid is stronger today than it has been at any point in the past,” he said.
The company on June 27 reported revenue almost tripled to $17.1 million from a year ago and a 2 cent loss, which topped the consensus of three analysts for $15.7 million in sales and a 3 cent loss. The company forecast fiscal 2020 sales of $64 million to $67 million, which implies a 22% midpoint annual sales increase from $53.6 million in fiscal 2019.
It could go much higher, according to one analyst.
“While current projects average around $3 million to $5 million, an approved product can drive tens of millions of revenue,” Janney Montgomery Scott analyst Paul Knight wrote in an analyst report.
“Avid has about $100 million of built capacity and another $100 million of expansionary capacity,” Knight said.
Turnaround
It’s quite a turnaround from a couple months ago.
In the week following the unexpected departure of Chief Executive Roger Lias in May, its shares declined 24% to a 52-week low of $3.37.
The biopharmaceutical and manufacturing company that produces raw materials derived from mammalian cell cultures has gone through a tumultuous period.
The turmoil began in 2017 when shares fell to around $2 from almost $16 in 2014. Investors called for the company, then-named Peregrine Pharmaceuticals, to cease clinical activities of its cancer drug to become a pure-play contract development and manufacturing services provider. Investors also called for the company to change its board and management.
Chief Executive Steven King departed, replaced by Lias, who was had just joined a few months prior as president. Chief Financial Officer Paul Lytle left in early 2018.
Profitable Quarter
In the company’s first full quarter as a dedicated contract manufacturer, it reported income from operations of $200,000, the first period of positive income since announcing its move to this strategy in January 2018.
It also reported cash from operations of $5.6 million, increasing its cash and equivalents to $32.4 million.
Customers continue to be “very healthy” and able to access the funds needed to bring drugs to market, Hancock said.
“We see the industry as very, very strong,” he told analysts.
“We continue to be in a sweet spot for where a lot of those drugs are being developed. So not really huge blockbuster products, but more niche orphan indications and follow along biosimilars that really fit very well with our capacity.”
