UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 11, 2019
AVID BIOSERVICES, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 001-32839 | 95-3698422 | ||
| (State of other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) | ||
| 2642 Michelle Drive, Suite 200, Tustin, California 92780 | ||||
| (Address of Principal Executive Offices) | ||||
| Registrant’s telephone number, including area code: (714) 508-6100 | ||||
| Not Applicable | ||||
| (Former name or former address, if changed since last report) | ||||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425).
o Soliciting material pursuant to Rule 14A-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933(§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
o Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
| ITEM 2.02 | RESULTS OF OPERATIONS AND FINANCIAL CONDITION |
On March 11, 2019, Avid Bioservices, Inc. (the “Company”) issued a press release to report the Company’s financial results for the third quarter ended January 31, 2019. A copy of the press release is attached to this Current Report on Form 8-K as Exhibit 99.1. No additional information is included in this Current Report on Form 8-K.
The information included in this Current Report on Form 8-K, including the exhibit hereto, shall not be deemed “filed” for purposes of, nor shall it be deemed incorporated by reference in, any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as expressly set forth by specific reference in such a filing.
| ITEM 7.01 | REGULATION FD DISCLOSURE |
On March 11, 2019, at 4:30 p.m. EDT/1:30 p.m. PDT, the Company will host a conference call to discuss its third quarter ended January 31, 2019 financial results. The webcast of the conference call will be archived on the Company’s website for approximately 30 days.
| ITEM 9.01 | FINANCIAL STATEMENTS AND EXHIBITS |
(d) Exhibits. The following material is filed as an exhibit to this Current Report on Form 8-K:
Exhibit
Number
99.1 Press Release issued March 11, 2019.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| AVID BIOSERVICES, INC. | ||
| Date: March 11, 2019 | By: | /s/ Daniel R. Hart |
| Daniel R. Hart Chief Financial Officer | ||
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EXHIBIT INDEX
Exhibit Number | Description | |
| 99.1 | Press Release issued March 11, 2019. |
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Exhibit 99.1
| Contacts: | |
| Stephanie Diaz (Investors) | Tim Brons (Media) |
| Vida Strategic Partners | Vida Strategic Partners |
| 415-675-7401 | 415-675-7402 |
| sdiaz@vidasp.com | tbrons@vidasp.com |
Avid Bioservices Reports Financial Results for
Third Quarter Fiscal 2019 and Recent Developments
-- Achieved Revenue of $13.8 Million, an Increase of 102%
Compared to Prior Year Quarter --
-- Signed Project Expansion Orders with Existing Customers Representing $23.8 Million --
-- Completed Process Validation Campaign for Future Commercial Production with Other Validations Ongoing --
TUSTIN, Calif., March 11, 2019 – Avid Bioservices, Inc. (NASDAQ:CDMO) (NASDAQ:CDMOP), a dedicated biologics contract development and manufacturing organization (CDMO) working to improve patient lives by providing high quality development and manufacturing services to biotechnology and pharmaceutical companies, today announced financial results for the third quarter of fiscal year (FY) 2019 ended January 31, 2019, and provided an update on its contract manufacturing operations, and other corporate highlights.
Highlights Since October 31, 2018
“The third quarter was busy and productive as reflected by our strong financial results,” said Roger Lias, Ph.D., president and chief executive officer.
“Our process development group is increasingly busy, now contributing over 20% of revenues. With respect to new projects, we continue to see growth in the number of RFPs received. We are increasingly recognized as an attractive service-provider within the biologics outsourcing market and continue to work diligently to close new business opportunities.
“Importantly, we continue to successfully expand our scopes of work with existing customers, and during the third quarter, we expanded multiple ongoing projects. Since the beginning of fiscal 2019, project expansion orders from our current clients have increased by 68%, demonstrating the significant contribution that existing customers make to our business.
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“Looking to future growth, we are pleased to report that we have recently completed a process validation campaign for one of our clients and have others ongoing. These validation campaigns precede commercial production. Pending completion of pivotal clinical trials and regulatory approval, each of these validations is highly likely to result in future production in support of product launch.
“During the past 12 months we have significantly diversified our client base, thus reducing risk and building a pipeline of future manufacturing opportunities. We have built commercial and operational infrastructure to support growth, right-sized the organization, significantly cut costs, and increased capacity utilization resulting in improved margins. As a result, we are firmly on-track towards profitability and positive EBITDA.
“Driving these achievements is the truly exceptional team at Avid Bioservices whose dedication and hard work have contributed to our successes to-date. Together we continue to execute to-plan as we build a sustainably profitable and admired company and firmly establish Avid Bioservices as an acknowledged leader in the CDMO sector.”
Financial Highlights and Guidance
| · | Contract manufacturing revenue was $13.8 million for the third quarter of FY 2019, an increase of 102% compared to $6.8 million for the third quarter of FY 2018. This increase is primarily due to increased demand from a more diversified client base. |
| · | Revenue backlog grew significantly during the third quarter from existing customers. As of January 31, 2019 revenue backlog was $43 million, the majority of which is expected to be recognized in FY 2020. |
| · | Gross margin for the third quarter was a positive 15%, a significant improvement compared to a gross margin of negative 61% during the prior year period. The increase in gross margin for the quarter was primarily attributed to our product mix and volume. |
| · | Selling, general and administrative expenses for the third quarter of FY 2019 were $3.2 million, a 33% decrease compared to $4.8 million for the third quarter of FY 2018. |
| · | For the third quarter of FY 2019, the company recorded consolidated net loss attributable to common stockholders of $2.6 million, or $0.05 per share, compared to a consolidated net loss attributable to common stockholders of $12.4 million, or $0.28 per share, for the third quarter of FY 2018. |
| · | Avid reported $27.8 million in cash and cash equivalents as of January 31, 2019, compared to $42.3 million on April 30, 2018. |
| · | The company expects to end the fiscal year within the lower half of its revenue guidance of $51 million - $55 million. |
More detailed financial information and analysis may be found in Avid Bioservices’ Quarterly Report on Form 10-Q, which will be filed with the Securities and Exchange Commission today.
Recent Developments
| · | Signed project expansion orders during the third quarter with current clients representing future revenue in the amount of $23.8 million. |
| · | Completed a process validation campaign for future commercial production during the third quarter and have other process validations ongoing. |
| · | Process development operations contributed over 20% of revenue during the third quarter. |
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Conference Call
Avid will host a conference call and webcast this afternoon, March 11, 2019, at 4:30 PM EDT (1:30 PM PDT).
To listen to the conference call, please dial (877) 312-5443 or (253) 237-1126 and request the Avid Bioservices conference call. To listen to the live webcast, or access the archived webcast, please visit: http://ir.avidbio.com/events.cfm.
About Avid Bioservices, Inc.
Avid Bioservices is a dedicated contract development and manufacturing organization (CDMO) focused on development and CGMP manufacturing of biopharmaceutical products derived from mammalian cell culture. The company provides a comprehensive range of process development, high quality CGMP clinical and commercial manufacturing services for the biotechnology and biopharmaceutical industries. With 25 years of experience producing monoclonal antibodies and recombinant proteins in batch, fed-batch and perfusion modes, Avid's services include CGMP clinical and commercial product manufacturing, purification, bulk packaging, stability testing and regulatory strategy, submission and support. The company also provides a variety of process development activities, including cell line development and optimization, cell culture and feed optimization, analytical methods development and product characterization. www.avidbio.com
Forward-Looking Statements
Statements in this press release, which are not purely historical, including statements regarding Avid Bioservices' intentions, hopes, beliefs, expectations, representations, projections, plans or predictions of the future, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements involve risks and uncertainties including, but not limited to, the risk the company may not achieve cash flow or EBITDA positive, the risk the company may experience delays in engaging new clients, the risk that the company may not be successful in executing client projects, the risk that the company may experience technical difficulties in completing client projects which could delay delivery of products to customers, revenue recognition and receipt of payment or the loss of the customer, the risk that one or more existing customers terminates its contract prior to completion or reduces or delays its demand for development or manufacturing services, and the risk that the company may need to use the majority of its cash to fund operations, thereby delaying the in-process upgrades to its process development capabilities and contemplated expansion plans. Our business could be affected by a number of other factors, including the risk factors listed from time to time in our reports filed with the Securities and Exchange Commission including, but not limited to, our annual report on Form 10-K for the fiscal year ended April 30, 2018, as well as any updates to these risk factors filed from time to time in our other filings with the Securities and Exchange Commission. We caution investors not to place undue reliance on the forward-looking statements contained in this press release, and we disclaim any obligation, and do not undertake, to update or revise any forward-looking statements in this press release except as may be required by law.
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avid bioservices, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS and comprehensive loss (UNAUDITED)
(in thousands, except share and per share information)
Three Months Ended January 31, | Nine Months Ended January 31,
| |||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| Contract manufacturing revenue | $ | 13,781 | $ | 6,819 | $ | 36,548 | $ | 46,678 | ||||||||
| Cost of contract manufacturing | 11,731 | 10,951 | 32,972 | 47,641 | ||||||||||||
| Gross profit (loss) | 2,050 | (4,132 | ) | 3,576 | (963 | ) | ||||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative | 3,242 | 4,824 | 9,273 | 12,273 | ||||||||||||
| Restructuring charges | – | – | – | 1,258 | ||||||||||||
| Total operating expenses | 3,242 | 4,824 | 9,273 | 13,531 | ||||||||||||
| Operating loss | (1,192 | ) | (8,956 | ) | (5,697 | ) | (14,494 | ) | ||||||||
| Interest and other income, net | 9 | 28 | 190 | 65 | ||||||||||||
| Loss from continuing operations before income taxes | $ | (1,183 | ) | $ | (8,928 | ) | $ | (5,507 | ) | $ | (14,429 | ) | ||||
| Income tax benefit | 44 | – | 217 | – | ||||||||||||
| Loss from continuing operations | $ | (1,139 | ) | $ | (8,928 | ) | $ | (5,290 | ) | $ | (14,429 | ) | ||||
| Income (loss) from discontinued operations, net of tax | – | (2,076 | ) | 739 | (10,404 | ) | ||||||||||
| Net loss | $ | (1,139 | ) | $ | (11,004 | ) | $ | (4,551 | ) | $ | (24,833 | ) | ||||
| Comprehensive loss | $ | (1,139 | ) | $ | (11,004 | ) | $ | (4,551 | ) | $ | (24,833 | ) | ||||
| Series E preferred stock accumulated dividends | (1,442 | ) | (1,442 | ) | (3,604 | ) | (3,604 | ) | ||||||||
| Net loss attributable to common stockholders | $ | (2,581 | ) | $ | (12,446 | ) | $ | (8,155 | ) | $ | (28,437 | ) | ||||
| Basic and diluted weighted average common shares outstanding | 56,068,844 | 45,225,804 | 55,949,164 | 45,032,335 | ||||||||||||
| Basic and diluted net (loss) income per common share attributable to common stockholders: | ||||||||||||||||
| Continuing operations | $ | (0.05 | ) | $ | (0.23 | ) | $ | (0.16 | ) | $ | (0.40 | ) | ||||
| Discontinued operations | – | (0.05 | ) | 0.01 | (0.23 | ) | ||||||||||
| Net loss per share attributable to common stockholders | $ | (0.05 | ) | (0.28 | ) | $ | (0.15 | ) | $ | (0.63 | ) | |||||
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avid bioservices, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share information)
January 31, 2019 | April 30, 2018 | |||||||
| Unaudited | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 27,758 | $ | 42,265 | ||||
| Trade and other receivables | 7,885 | 3,754 | ||||||
| Contract assets | 3,912 | – | ||||||
| Inventories | 8,660 | 16,129 | ||||||
| Prepaid expenses | 567 | 679 | ||||||
| Assets of discontinued operations | – | 5,000 | ||||||
| Total current assets | 48,782 | 67,827 | ||||||
| Property and equipment, net | 25,876 | 26,479 | ||||||
| Restricted cash | 1,150 | 1,150 | ||||||
| Other assets | 302 | 304 | ||||||
| Total assets | $ | 76,110 | $ | 95,760 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 2,916 | $ | 1,909 | ||||
| Accrued payroll and related costs | 2,549 | 2,564 | ||||||
| Contract liabilities | 14,620 | 27,935 | ||||||
| Other current liabilities | 638 | 905 | ||||||
| Liabilities of discontinued operations | 125 | 4,550 | ||||||
| Total current liabilities | 20,848 | 37,863 | ||||||
| Deferred rent, less current portion | 2,105 | 2,159 | ||||||
| Capital lease, less current portion | 93 | – | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock—$0.001 par value; 5,000,000 shares authorized; 1,647,760 shares issued and outstanding at January 31, 2019 and April 30, 2018, respectively | 2 | 2 | ||||||
| Common stock—$0.001 par value; 150,000,000 shares authorized; 56,072,291 and 55,689,222 shares issued and outstanding at January 31, 2019 and April 30, 2018, respectively | 56 | 55 | ||||||
| Additional paid-in capital | 613,947 | 614,810 | ||||||
| Accumulated deficit | (560,941 | ) | (559,129 | ) | ||||
| Total stockholders’ equity | 53,064 | 55,738 | ||||||
| Total liabilities and stockholders’ equity | $ | 76,110 | $ | 95,760 | ||||
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