Avid Bioservices Inc. (Nasdaq: CDMO) in Tustin reported fourth-quarter and fiscal-year results last week, marking year one of its remaking—a new name, business plan, management and board.
Chief Executive Roger Lias said he’s extremely pleased with the speed and efficiency of the transition to a pure-play biologics contract development and manufacturing service provider.
“Fiscal 2019 will be our first full year as a focused [contract development and manufacturing organization] business, and we are excited about the market opportunity,” he said, pointing to demand from the biotechnology and pharmaceutical industries.
Revenue for the fourth quarter and fiscal year 2018 was $53.6 million compared to $57.6 million a year earlier. Lias attributed the decline to a previously announced cut in business from one of its largest customers but said the top line follows earlier announced revenue guidance. Guidance for fiscal 2019 is conservative, ranging from $51 million to $55 million.
Company shares recently traded at $5.65 for a $315 million market cap, and up 46% year-to-date.
New Hires
The former subsidiary of Peregrine Pharmaceuticals Inc. was the cash-generating unit that funded clinical development of the parent company’s immunotherapy cancer drug. Avid was profitable—it reported $57 million in revenue in the 2017 fiscal year, up 30% year-over-year, according to audited financial statements—but Peregrine wasn’t. The drug developer reported $28 million in losses last year and $56 million in 2016 due to research and development spending.
The new focus means a new leadership team with contract development and manufacturing know-how. Lias, who was named president and chief executive in December after joining the company three months earlier, has more than 20 years of related experience, including senior management positions at Oklahoma City, Okla.-based Cytovance Biologics and KBI Biopharma Inc. in Durham, N.C. He succeeded Steve King, who headed both Peregrine and Avid.
On the earnings call, Lias announced the new members of the leadership team, including Vice President of Process Sciences Magnus Schroeder, previously a director of downstream process development at Seattle-based CMC Biologics; Sandra Carbonneau, director of business development for the Eastern region; and Michael Faughnan, senior director of business development for the Western region.
It also named Dan Hart chief financial officer, effective Aug. 1. Hart, who most recently held the same role with residential real estate services and management provider ENO Holdings, replaced Paul Lytle, who resigned in May.
Earlier this year, Avid reshuffled its seven-member board, replacing four directors with ones bringing contract development and manufacturing experience. They include independent appointee Joseph Carleone, who’s board chairman of AMPAC Fine Chemicals LLC in Rancho Cordova, a manufacturer of active pharmaceutical ingredients, and previously president and chief executive of American Pacific Corp. in Las Vegas, which makes specialty chemical and propulsion products.
Opportunity
Drug development is out of Avid’s picture. In February it sold its clinical-stage immunotherapy cancer drug to Boston-based Oncologie Inc. The oncology therapeutics company is responsible for all future research, development and commercialization of the candidate and related intellectual property costs.
Avid will receive $8 million in upfront payments over six months and is eligible to get up to $95 million if Oncologie is successful.
Lias said the market for contract development and manufacturing is robust and that Avid is well-situated “to take on the earlier phase work and to meet the needs of that entrepreneurial side of the market and the earlier phase clinical,” as well as later-phase work with “releasing commercial products to the marketplace,” where it has over 15 years of experience.
The global pharmaceutical contract development and manufacturing industry totaled $52 billion in 2016 and is projected to grow at an annual rate of 6% to 7%, according to a September report by Ernst & Young.
Avid has more than 6,000 square feet of process development laboratory space, including a legacy Franklin facility and a new Myford facility. Lias said Myford is about 50% built out and that the company has the opportunity “to build out the remainder of that facility, which will be an additional 40,000-plus square feet.”
