AMRI Announces Second Quarter 2012 Results
Albany, NY (August 1, 2012) — AMRI (NASDAQ: AMRI) today reported financial and operating results for the second quarter ended June 30, 2012.
Financial and Operational Highlights for the second quarter include:
• $2.2 Million Improvement In Net Income, As Adjusted, To $1.7 Million Compared With Prior Year
• Generated Positive Free Cash Flow in Quarter
• Completed Relocation of Custom Library Synthesis Resources to India
• Raising Full Year Earnings Guidance
Second Quarter 2012 Results
Total revenue for the second quarter of 2012 was $50 million, a decrease of 7% compared to total revenue of $53.9 million reported in the second quarter of 2011.
Total contract revenue for the second quarter of 2012 was $42.4 million, a decrease of 3% compared to total contract revenue of $43.5 million reported in the second quarter of 2011. Total contract revenue encompasses revenue from AMRI’s Discovery Services, Development and Small Scale Manufacturing, and Large Scale Manufacturing business components.
• Discovery Services contract revenue for the second quarter was $8.6 million, a decrease of 3% from $8.9 million in 2011
• Development/Small Scale Manufacturing contract revenue for the second quarter was $8.1 million, a decrease of 11% from $9.1 million in 2011
• Large Scale Manufacturing contract revenue for the second quarter saw continued positive momentum at $25.7 million compared to $25.5 million in 2011
Recurring royalties in the second quarter of 2012 were $7.5 million, an increase of 1% from $7.4 million in the second quarter of 2011. AMRI earns royalties from worldwide sales of the non-sedating antihistamine Allegra® (Telfast® outside the United States), as well as certain OTC forms of Allegra®, for patents relating to the active ingredient in Allegra®.
Total revenue in the second quarter of 2012 includes milestone revenue of $0.1 million resulting from a development and supply agreement at the Company’s Rensselaer, New York manufacturing facility. Total revenue in the second quarter of 2011 included milestone revenue of $3.0 million resulting from the Company’s 2005 licensing agreement with BMS.
Net income, as adjusted, was $1.7 million, or $0.06 per basic and diluted share compared to adjusted net loss of $(0.5) million or $(0.02) per basic and diluted share in the second quarter of 2011. Net income under U.S. GAAP was $0.3 million, or $0.01 per basic and diluted share in the second quarter of 2012, compared to a net loss of $(0.6) million, or $(0.02) per basic and diluted share for the second quarter of 2011. During the second quarter of 2012, net income under U.S. GAAP included restructuring charges of $1.4 million net of tax, or $0.05 per diluted share, primarily related to the Company’s decision to cease all operations at its facility in Budapest, Hungary.
Total revenue for the six-month period ended June 30, 2012 was $103.7 million, a decrease of $7.1 million or 6% compared to $110.8 million for the same period in 2011.
Total contract revenue for the first six months of 2012 was $85.1 million, a decrease of $1.3 million or 2% from $86.4 million for the same period in 2011.
• Contract revenue for Discovery Services in the six-month period ended June 30, 2012 was $18.2 million, a decrease of 7% from $19.6 million in 2011
• Contract revenue for Development/Small Scale Manufacturing in the six-month period ended June 30, 2012 was $17.9 million, a decrease of 8% from $19.5 million in 2011
• Contract revenue for Large Scale Manufacturing in the six-month period ended June 30, 2012 was $49.0 million, an increase of 4% compared to $47.3 million in the six-month period ended June 30, 2011
Recurring royalties from Allegra® for the first six months of 2012 were $18.5 million, a decrease of 14% compared to royalty revenue of $21.4 million in 2011.
Net income, as adjusted for the first half of 2012 was $2.4 million or $0.08 per basic and diluted share compared to adjusted net loss of $(1) million or $(0.03) per basic and diluted share in the first half of 2011. Net loss under U.S. GAAP in the first half of 2012 was $(3.6) million or $(0.12) per basic and diluted share, compared to net loss of $(2) million or $(0.07) per basic and diluted share in the first half of 2011. During the first half of 2012, net loss under U.S. GAAP included asset impairment charges of $3.9 million, net of tax, or $0.13 per diluted share and restructuring charges of $2.1 million, net of tax, or $0.07 per diluted share, primarily related to the Company’s decision to cease all operations at its facility in Budapest, Hungary.
For a reconciliation of net income (loss) and income (loss) per diluted share as reported to adjusted net income (loss) and adjusted income (loss) per diluted share for the 2012 and 2011 reporting periods, please see Table 1 at the end of this press release.
AMRI Chairman, President and CEO Thomas E. D’Ambra said, “Although contract revenue declined slightly from the prior year period, we continued to deliver solid earnings growth as a result of the strategic operational actions taken in 2011. During the quarter, we showed improvement in our Burlington aseptic formulation and fill operations with additional contracts and strong proposal activity. In addition, our large scale manufacturing segment continues to drive new opportunities, bringing the number of products in our pipeline approaching PDUFA dates in the next 12 months to four, and a total of seven with PDUFA dates anticipated in the next 24 months. Overall, we continue to believe the improved operational footprint and recent additions to our India and UK operations will enable us to better leverage the broad capabilities and technologies across AMRI to drive profitable growth as we move forward.”
Dr. D’Ambra continued, “The global pharmaceutical and biotechnology industry continues to seek innovative partners that can better balance risk, enhance flexibility and deliver business models tailored to their unique needs. SMARTSOURCING™, as the cornerstone of AMRI’s business model, meets these needs head on by leveraging AMRI’s range of global capabilities and technologies, providing real choices for our customer without compromising on expectations, timelines or quality. With anticipated growth in global spending on pharmaceutical products resulting from growth in emerging markets, global launches of new molecular entities and the focus on increased access to pharmaceuticals globally, we believe SMARTSOURCING™ will drive increased demand for our range of services in the future to help clients effectively address these market trends.”
Liquidity and Capital Resources
At June 30, 2012, AMRI had cash and cash equivalents of $18.4 million, compared to $12.7 million at March 31, 2012. Cash and cash equivalents at June 30, 2012 includes $5 million of restricted cash which was pledged to collateralize a line of credit.
Total debt at June 30, 2012 was $8 million, compared to $5.4 million at March 31, 2012. Cash and cash equivalents, net of debt, were $10.4 million at June 30, 2012, compared to $7.3 million at March 31, 2012. The increase in cash and equivalents for the quarter ended June 30, 2012 was primarily due to cash generated from operations of $5.6 million and net proceeds received from the Company’s new credit facility of $2.6 million, partially offset by capital expenditures of $2.2 million. Total common shares outstanding, net of treasury shares, were 30,811,913 at June 30, 2012.
2012 Financial Guidance
AMRI Chief Financial Officer Mark T. Frost provided contract revenue guidance for the third quarter and full year 2012. “In the third quarter, we expect contract revenue to range from $43 million to $46 million. For the full year 2012, we continue to expect contract revenue to range from $176 million to $186 million, an increase of up to 10% versus 2011.”
Mr. Frost continued, “We are forecasting third quarter royalties of $6 to $7 million and have narrowed our full year 2012 range to $32 to $34 million. We are raising again our contract gross margin estimate for the year to range from 8-11% but continue to expect volatility between the quarters related to sales mix. Research and development expense is expected to be $1 million for the year and selling, general, and administrative expense will be reduced by approximately 3% to 5% compared with the prior year. Reflecting the volatility between quarters, our adjusted earnings per diluted share for quarter three is expected to be $(0.04) to zero but we are raising our full year adjusted earnings per diluted share estimate to range from $0.10 - $0.16.”
Recent noteworthy announcements or milestones at AMRI include the following:
• Contracted by Cardium Therapeutics and its subsidiary, Tissue Repair Company to manufacture sterile pre-filled syringes in support of the U.S. introduction of Excellagen®
• Expanded our global medicinal and computational chemistry capabilities in India, complementing the existing capabilities in the U.S. and Singapore
• Appointed Ian Shott as President of AMRI Europe
• AMRI India received the SilverShield Award from Abbott Health Care Pvt. Ltd.
Second Quarter Conference Call
The Company will hold a conference call at 10:00 a.m. ET on Wednesday, August 1, 2012, to discuss its quarterly results, business highlights and prospects. During the conference call, the company may discuss information not previously disclosed to the public.
The conference call can be accessed by dialing 888-417-8462 (domestic calls) or 719-325-2450 (international calls) at 9:45 a.m. ET and entering passcode 7242377. The webcast will be available live via the Internet and can be accessed on the company's website at www.amriglobal.com.
Replays of the webcast can also be accessed for up to 90 days after the call via the investor area of the company's website at www.amriglobal.com/investor_relations/.
Non-GAAP Adjustment Items
To supplement our financial results prepared in accordance with U.S. GAAP, we have presented non-GAAP measures of income(loss) from operations, net income(loss) and earnings(loss) per diluted share adjusted to exclude certain restructuring charges, purchase accounting adjustments, asset impairment charges, business acquisition charges, real property tax adjustments, FDA remediation costs and arbitration charges in the 2012 and 2011 periods. We believe presentation of these non-GAAP measures enhances an overall understanding of our historical financial performance because we believe they are an indication of the performance of our base business. Management uses these non-GAAP measures as a basis for evaluating our financial performance as well as for budgeting and forecasting of future periods. For these reasons, we believe they can be useful to investors. The presentation of this additional information should not be considered in isolation or as a substitute for income (loss) from operations, net income (loss) or earnings (loss) per diluted share prepared in accordance with U.S. GAAP.
Albany Molecular Research, Inc. (AMRI) is a global contract research and manufacturing organization offering customers fully integrated drug discovery, development, and manufacturing services. For over 21 years AMRI has demonstrated its adaptability as the pharmaceutical and biotechnology industries have undergone tremendous change in response to multiple challenges. This experience, a track record of success and locations in the United States, Europe and Asia now provides our customers with SMARTSOURCING™, a full range of value-added opportunities providing customers informed decision-making, enhanced efficiency and more successful outcomes at all stages of the pipeline. AMRI has also successfully partnered R&D programs and is actively seeking to out-license its remaining programs for further development.
This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. These statements include, but are not limited to, statements regarding the Company's estimates of revenue and earnings per share for the third quarter and full year 2012, statements made by the Company's chief executive officer and chief financial officer, including statements under the caption “2012 Financial Guidance,” statements regarding the cost saving expected from certain restructuring activities, statements regarding the strength of the Company's business and prospects including the expected revenue to be derived from the sale of the Allegra product, and statements concerning the Company's momentum and long-term growth. Readers should not place undue reliance on our forward-looking statements. The Company's actual results may differ materially from such forward-looking statements as a result of numerous factors, some of which the Company may not be able to predict and may not be within the Company's control. Factors that could cause such differences include, but are not limited to, the Company's ability to attract and retain experienced scientists, trends in pharmaceutical and biotechnology companies' outsourcing of chemical research and development, including softness in these markets, sales of Allegra ® and the impact of the "at-risk" launch of generic Allegra ® and the conversion by Sanofi of Allegra to an OTC product on the Company's receipt of significant royalties under the Allegra ® license agreement, the over-the-counter sale of Claritin, and competitive alternatives, including generic products for the treatment of allergies and the risk of new product introductions for the treatment of allergies including generic forms of Allegra ® , the risk that the Company will not be able to replicate either in the short or long term the revenue stream that has been derived from the royalties payable under the Allegra ® license agreements, the success of the Company's collaborations with customers including the collaboration with Bristol-Myers Squibb Company related to biogenic amine reuptake inhibitors, the risk that clients may terminate or reduce demand under any strategic or multi-year deal, the Company's ability to enforce its intellectual property and technology rights, the Company's ability to successfully develop novel compounds and lead candidates in its collaborative arrangements, the Company's ability to integrate the acquisitions closed during 2010 and make such acquisitions accretive to the Company's business model, the Company's ability to take advantage of proprietary technology and expand the scientific tools available to it, the ability of the Company's strategic investments and acquisitions to perform as expected, as well as those risks discussed in the Company's Annual Report on Form 10-K for the year ended December 31, 2011 as filed with the Securities and Exchange Commission on March 15, 2012, and the Company's other SEC filings. Revenue and other financial guidance offered by senior management today represent a point-in-time estimate and are based on information as of the date of this press release. Senior management has made numerous assumptions in providing this guidance which, while believed to be reasonable, may not prove to be accurate. Numerous factors, including those noted above, may cause actual results to differ materially from the guidance provided. The Company expressly disclaims any current intention or obligation to update the guidance provided or any other forward-looking statement in this press release to reflect future events or changes in facts assumed for purposes of providing this guidance or otherwise affecting the forward-looking statements contained in this press release.