Albany, NY (November 6, 2012) — AMRI (NASDAQ: AMRI) today reported financial and operating results for the third quarter and year-to-date period ended September 30, 2012.
Highlights for the third quarter include:
• 14% Increase in Large Scale Manufacturing Revenue Compared With Prior Year
• Third Consecutive Quarter of Year-Over-Year Improvement in Contract Margin
• Raises 2012 EPS and Royalty Revenue Guidance and Reaffirms and Tightens 2012 Contract Revenue Guidance
• Sequential Improvement in Discovery Services Revenue
• Positive Operating Cash Flow
• New Royalty Stream from a Long-Standing Customer on a Generic Commercial Product Launch Raising Overall Royalty Revenue for 2012
• Milestone Recognized for Selection of Fourth Compound for Advancement Under Terms of Bristol Myers Squibb (BMS) License Agreement
Third Quarter 2012 Results
Total revenue for the third quarter of 2012 was $55.8 million, an increase of 11% compared to the third quarter of 2011.
Total contract revenue for the third quarter of 2012 was $45.6 million, an increase of 4% compared to total contract revenue of $43.8 million reported in the third 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 third quarter was $8.9 million, consistent with amounts reported in 2011
• Development/Small-Scale Manufacturing contract revenue for the third quarter was $7.4 million, a decrease of 20% from $9.2 million in 2011
• Large-Scale Manufacturing contract revenue for the third quarter was $29.3 million, an increase of 14% from $25.7 million in 2011
Royalty revenue in the third quarter of 2012 was $9.4 million, an increase of 45% from $6.5 million in the third quarter of 2011. AMRI earns royalties from worldwide net sales of the non-sedating antihistamine Allegra® (Telfast® outside the United States), as well as certain generic forms of Allegra®, for patents relating to the active ingredient in Allegra®. Royalty revenue for the third quarter of 2012 also includes $3.3 million earned by the Company under a longstanding contract pursuant to which the Company provides the active pharmaceutical ingredient for a generic product, which is manufactured in the Company's Rensselaer, N.Y. facility, and is also eligible for royalties on net sales of the final drug product. Royalty revenue from this product in the third quarter reflects launch quantity net sales of the product.
Total revenue in the third quarter of 2012 includes milestone revenue of $0.8 million resulting from the Company's 2005 licensing agreement with BMS. This milestone recognizes the selection of a fourth compound for possible advancement.
Net loss under U.S. GAAP was $(2.1) million, or $(0.07) per basic and diluted share in the third quarter of 2012, compared to a net loss of $(5.9) million, or $(0.19) per basic and diluted share for the third quarter of 2011. Adjusted net loss for the third quarter of 2012 was break even, or $(0.00) per basic and diluted share, and excludes additional restructuring charges primarily related to the closure of our Hungary facility and certain executive transition costs. Adjusted net loss for the third quarter of 2011was $(5.7) million or $(0.19) per basic and diluted share.
Total revenue for the nine-month period ended September 30, 2012 was $159.5 million, a decrease of $1.6 million or 1% compared to $161.1 million for the same period in 2011.
Total contract revenue for the first nine months of 2012 was $130.7 million, an increase of $0.5 million or 0.4% from $130.2 million for the same period in 2011.
• Contract revenue for Discovery Services in the nine-month period ended September 30, 2012 was $27.2 million, a decrease of 5% from $28.5 million in 2011.
• Contract revenue for Development/Small-Scale Manufacturing in the nine-month period ended September 30, 2012 was $25.2 million, a decrease of 12% from $28.7 million in 2011.
• Contract revenue for Large-Scale Manufacturing in the nine-month period ended September 30, 2012 was $78.3 million, an increase of 7% compared to $73 million 2011.
Recurring royalties for the first nine months of 2012 were $27.9 million, consistent with the first nine months of 2011. Recurring royalties from Allegra ® for this period were $24.6 million, a decrease of 12% compared to 2011. The remaining year-to-date royalty revenue is related to the generic launch discussed above.
Total revenue for the nine months ended September 30, 2012 and 2011 include milestone revenue of $0.8 million and $3 million, respectively, primarily from the Company's 2005 licensing agreement with BMS.
Net loss under U.S. GAAP for the nine months ended September 30, 2012 was $(5.7) million or $(0.19) per basic and diluted share, compared to net loss of $(7.9) million or $(0.26) per basic and diluted share for the nine months ended September 30, 2011. Adjusted net income for the nine months ended September 30, 2012 was $2.4 million or $0.08 per basic and diluted share and excludes certain restructuring and asset impairment charges primarily related to our exit from the Hungary operation and executive transition costs incurred during the period. Adjusted net loss for the nine months ended September 30, 2011 was $(6.7) million or $(0.22) per basic and diluted share. For a reconciliation of net (loss) and (loss) per diluted share as reported to adjusted net income and earnings 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, "The quarter marks year-over-year and sequential improvement in revenue for our contract services business driven by continued strength in our large scale manufacturing operations. Although contract service operating margins in the quarter were impacted by the underlying mix of services within each segment, this was offset by the favorable impact of royalties received on product sales from the commercial launch of an FDA approved generic product by one of our customers. On balance, we remain confident in our ability to drive improved financial performance given the positive underlying trends in our business, including continued improvement in customer orders and inquiries, the significant number of products in our pipeline approaching PDUFA dates over the next 24 months, and our ongoing commitment to optimizing our cost structure."
Dr. D'Ambra continued, "SMARTSOURCING™ is a highly competitive, customer-centric approach for serving clients that has enabled AMRI to strengthen its customer base with global pharmaceutical and biotechnology companies, government agencies and academic institutions. In addition to the recently announced agreement with Knopp Biosciences and the multi-year extension of our agreement with Shire, we are actively pursuing several other opportunities with existing and new customers that could potentially provide AMRI with a stronger, more diverse business base as we enter 2013. Although the global economy remains challenging, our outlook for the market remains unchanged with anticipated growth in R&D spending and incremental increases in the level of outsourcing across the biopharmaceutical industry over the coming year. With SMARTSOURCING™, which empowers clients to better balance risk, enhance flexibility, and obtain tailored solutions that meet their specific needs, AMRI is well positioned to benefit from these market trends."
Liquidity and Capital Resources
At September 30, 2012, AMRI had cash, cash equivalents and restricted cash of $20.7 million, compared to $18.4 million at June 30, 2012. These amounts include $5 million of restricted cash, which was pledged to collateralize the Company's term loan and line of credit.
Total debt at September 30, 2012 was $8 million, unchanged from June 30, 2012. Cash, cash equivalents and restricted cash, net of debt, were $12.7 million at September 30, 2012, compared to $10.4 million at June 30, 2012. The increase in cash and cash equivalents for the quarter ended September 30, 2012 was comprised of cash from operations of $4.5 million, partially offset by capital expenditures of $2.7 million. Total common shares outstanding, net of treasury shares, were 30,924,980 at September 30, 2012.
2012 Financial Guidance
AMRI Chief Financial Officer and Treasurer Michael Nolan provided contract revenue guidance for the fourth quarter and full year 2012. "Building off the momentum we saw in large scale manufacturing in the third quarter, we anticipate sequential growth in fourth quarter contract revenue with a range of $50 to 56 million. With this outlook we are tightening our range and reconfirming the top end of our full year contract revenue guidance at $180 - $186 million, an increase of up to 10% versus 2011. Based on the addition of a new royalty stream, we expect total royalty revenue to increase by $2 million to a range of $34 to $36 million. Considering this we have increased our full year adjusted earnings per diluted share estimate from a range of $0.10 to $0.16 to a range of $0.16 to $0.20. To reach this we expect fourth quarter adjusted earnings per diluted share in the range of $0.08 to $0.12."
Mr. Nolan continued, "AMRI continues to benefit from previous restructuring actions resulting in both improvements in contract margins and lower SG&A and R&D spend. In addition, operating cash flow was $4.5 million for the quarter, which represents continued improvement in the Company's financial position. Extending existing relationships and securing new contracts along with the announcement of our new royalty stream demonstrates the value AMRI brings to our customers."
Recent noteworthy announcements or milestones at AMRI include the following:
• The appointment of Michael Nolan Vice President, Chief Financial Officer and Treasurer
• The promotion of Steven R. Hagen, Ph.D., to Senior Vice President of Pharmaceutical Development and Manufacturing
• A five-year extension of an API supply agreement with Shire Pharmaceuticals
• A strategic contract with Knopp Biosciences
• The promotion of Daniel Conlon to Senior Director of Business Development
Third Quarter Conference Call
The Company will hold a conference call at 10:00 a.m. ET on November 6, 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 1-888-364-3108 (domestic calls) or 1-719-457-2645 (international calls) at 9:45 a.m. ET and entering passcode 8248928. 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.