|AMRI CEO William Marth|
Contract drug developer AMRI ($AMRI) watched its shares plummet after underperforming in the third quarter, an earnings miss the company blamed on declining demand, spiking costs and bad weather in the desert.
The New York company swung to an $8.6 million net loss on $62.5 million in total revenue, coming in well below what analysts expected. In light of the earnings miss, AMRI is scaling back its revenue and profit projections for the full year, reducing its best-case sales scenario by about 8% to $261 million and cutting its earnings-per-share guidance by 20% to 73 cents.
That sent the company's shares down more than 20% on Wednesday morning, rattling investor confidence in AMRI's long-term plan to wean itself off of royalty revenue and establish a durable development and manufacturing operation.
Accounting for its disappointing quarter, AMRI cited lower-than-expected demand in its discovery and API manufacturing businesses. Making matters worse, inclement weather in Albuquerque, NM, forced it to suspend work at Oso Biopharmaceuticals, a contractor it purchased for $110 million earlier this year.
"Costs associated with this activity--together with facility downtime--increased our operating costs and contributed to the quarterly earnings loss," AMRI CEO William Marth said in a statement. "We have been working closely with our customers to not only provide a continued supply of product during this disruption but have also taken steps to upgrade the facility to ensure we can supply our customers' growing needs longer term."
AMRI expects to get Oso back online by mid-month, Marth said, and the company is forecasting a return to predictable growth next year. For 2015, AMRI is projecting contract revenue to come in between $310 million and $345 million a 27% increase at the midpoint.
The company has spent the past few years working to reduce its dependence on royalty revenue, tied largely to Sanofi's ($SNY) Allegra, focusing instead on contract manufacturing. In addition to the Oso deal, AMRI traded $41 million this year for Cedarburg Pharmaceuticals, another outsourcing outfit, and the company has gradually moved away from some slower-growing early-stage services.
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