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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 8, 2022

 

 

 

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

 

__________________________________

(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:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425).
Soliciting material pursuant to Rule 14A-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each Class Trading Symbol Name of each exchange on which registered
Common Stock, $0.001 par value per share CDMO The NASDAQ Stock Market LLC

 

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).

   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. ☐

 

 

   

 

 

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

 

On March 8, 2022, Avid Bioservices, Inc. (the “Company”) issued a press release to report the Company’s financial results for the third quarter ended January 31, 2022. 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 8, 2022, at 4:30 p.m. EST/1:30 p.m. PST, the Company will host a conference call to discuss its third quarter ended January 31, 2022 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 8, 2022.
104 Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

 

 

 

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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 8, 2022 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 8, 2022.
104 Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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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 Ended January 31, 2022 and Recent Developments

 

-- Recorded Third Quarter Revenue of $31.5 Million --

 

-- Myford South and Viral Vector Facilities Construction Continues On Schedule --

 

-- Signed $52 Million in Net New Business Orders and Ended the Quarter with a Backlog of $140 Million;

Highest Backlog To Date --

 

 

TUSTIN, Calif., March 8, 2022 -- Avid Bioservices, Inc. (NASDAQ:CDMO), 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 2022, ended January 31, 2022.

 

Highlights from the Quarter Ended January 31, 2022, and Other Events:

 

“I am pleased to report another successful quarter for Avid. Our financial and operational performance were strong, demonstrating year-over-year growth in revenues, gross margin, net income and adjusted EBITDA. This represents our seventh consecutive quarter of operational profitability,” stated Nicholas Green, president and chief executive officer of Avid Bioservices.

 

“Fueling this growth has been the success of our business development team. They continue to achieve robust new business signings, as evidenced by our current backlog of $140 million – our highest backlog to date. We expect this trend to continue as we increase capacity, expand our commercial team and broaden our services, including our recent expansion into the cell and gene therapy sector of the market.

 

“Finally, to support growth today and in the future, the company continues to execute a strategically phased expansion plan that allows us to align spending with increasing market demand. This is highlighted by our downstream expansion, which came on line this quarter just in time to support our increased backlog, up from $120 million last quarter to $140 million.

 

“The company expects to launch its new viral vector business in two phases with process and analytical development suites launching in mid calendar 2022 and GMP manufacturing suites coming on line approximately one year later. In addition, we anticipate the completion of the Myford South facility expansion in early calendar 2023. Combined, we expect these expansions to organically increase the company’s total annual revenue generating capacity from approximately $120 million to in excess of $350 million in a period of three years.”

 

 

 

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Financial Highlights and Guidance

 

·The company is reiterating revenue guidance for fiscal 2022 of $115 million to $117 million, a 20-22% increase over fiscal 2021.

 

·Revenues for the third quarter of fiscal 2022 were $31.5 million, representing a 44% increase compared to $21.8 million recorded in the prior year period. The increase in revenues for the quarter can primarily be attributed to an increase in the scope of in-process and completed manufacturing runs and an increase in process development revenues primarily associated with services provided to new customers as compared to the prior year period. For the first nine months of fiscal 2022, revenues were $88.4 million, a 29% increase compared to $68.3 million in the prior year period. The increase in revenues for the nine months of fiscal 2022 as compared to the prior year period can primarily be attributed to an increase in the number and scope of in-process and completed manufacturing runs, in unutilized reserved capacity fees, and in process development revenues.

 

·As of January 31, 2022, revenue backlog was $140 million, representing a net increase of 17% compared to $120 million at the end of the same quarter last year. The company expects to recognize the majority of this backlog over the next twelve months.

 

·Gross margin for the third quarter of fiscal 2022 was 29%, compared to a gross margin of 28% for the third quarter of fiscal 2021. Gross margin for the first nine months of fiscal 2022 was 34% compared to 31% for the prior year period. The increases in gross margin for the quarter and the first nine months were primarily from higher manufacturing and process development revenues during the periods, partially offset by increases in planned growth costs including compensation and benefits, stock-based compensation, and facility and equipment related costs.

 

·Selling, general and administrative expenses (“SG&A”) for the third quarter of fiscal 2022 were $5.8 million, an increase of 45% compared to $4.0 million recorded for the third quarter of fiscal 2021. The increase in SG&A for the third quarter was primarily due to stock-based compensation, compensation and benefits, and facility and related expenses. For the first nine months of fiscal 2022, SG&A expenses were $15.3 million as compared to $12.0 million for the prior year period. The increase in SG&A during the nine months was primarily due to stock-based compensation, facility and related expenses, advertising costs, compensation and benefits, and legal and accounting fees.

 

·For the third quarter of fiscal 2022, the company recorded net income attributable to common stockholders of $2.2 million or $0.04 per basic and diluted share, as compared to net income attributable to common stockholders of $0.8 million or $0.01 per basic and diluted share, for the third quarter of fiscal 2021. For the first nine months of fiscal 2022, the company recorded net income attributable to common stockholders of $12.1 million or $0.20 per basic and $0.19 per diluted share, compared to net income attributable to common stockholders of $5.6 million or $0.10 per basic and diluted share, for the fiscal 2021 period. 

 

·Avid reported $150.0 million in cash and cash equivalents as of January 31, 2022 compared to $169.9 million as of the prior fiscal year ended April 30, 2021.

 

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.

 

 

 

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Recent Corporate Developments

 

·Drew Brennan, general manager of Avid’s viral vectors business, has successfully recruited key leadership for the viral vector business to manage process development, quality, operations and facilities. The process of adding additional strength and depth to the team is also well underway, as is the construction of our 53,000 square foot dedicated viral vector facility in Costa Mesa, CA.  

 

·The company’s commercial team signed multiple new orders during the third quarter, totaling approximately a net $52 million.  These projects span all areas of the business, from process development to commercial manufacturing. 

 

·Phase I of the company’s Myford, mammalian facility was completed and is now operational, increasing annual revenue generating capacity from $120 million to $170 million. This expansion was strategically timed to accommodate the company’s growing backlog, which reached $140 million by the end of the third quarter. The company currently expects to complete the second phase of our Myford South expansion, which includes both upstream and downstream GMP manufacturing suites, during the first quarter of calendar 2023. With respect to the viral vectors business, the company expects to bring its process and analytical development capacity on line in mid-calendar 2022 and ultimately the GMP manufacturing suites on line approximately one year later. Please visit the Avid website Facilities page for more information about the company’s expansions and videos documenting progress (https://avidbio.com/expansion-updates/).

 

Statement Regarding Use of Non-GAAP Financial Measures

 

The company uses certain non-GAAP financial measures such as non-GAAP adjusted net income, free cash flow, as well as adjusted EBITDA. The company uses these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. The company believes that they provide useful information about operating results, enhance the overall understanding of our operating performance and future prospects, and allow for greater transparency with respect to key metrics used by management in our financial and operational decision making. These non-GAAP financial measures exclude amounts that the company does not consider part of ongoing operating results when planning and forecasting and when assessing the performance of the organization and our senior management. The company computes non-GAAP financial measures using the same consistent method from quarter to quarter and year to year, and may consider whether other significant items that arise in the future should be excluded from our non-GAAP financial measures.

 

The company reports non-GAAP financial measures in addition to, and not as a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. generally accepted accounting principles (GAAP). These non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles, differ from GAAP measures with the same names, and may differ from non-GAAP financial measures with the same or similar names that are used by other companies. The company believes that non-GAAP financial measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP financial measures, and encourages investors to carefully consider our results under GAAP, as well as the supplemental non-GAAP information and the reconciliations between these presentations, to more fully understand our business.

 

Non-GAAP net income excludes stock-based compensation; business transition and related costs including corporate initiatives into new business activities such as our expansion into viral vectors for the cell and gene therapy sector of the market and other costs directly associated with such activities, and severance and related expenses; non-cash interest expense on convertible senior notes for the accretion of the issuance costs associated with our convertible senior notes; and other income or expense items. Adjusted EBITDA excludes non-cash operating charges for stock-based compensation, depreciation and amortization as well as non-operating items such as interest income, interest expense, gain or loss on disposal or sale of assets, and income tax expense or benefit. For the reasons explained above, adjusted EBITDA also excludes certain business transition and related costs. The company also uses measures such as free cash flow, which represents cash flow from operations less cash used in the acquisition and disposition of capital.

 

Additionally, non-GAAP net income and adjusted EBITDA are key components of the financial metrics utilized by the company’s compensation committee to measure, in part, management’s performance and determine significant elements of management’s compensation. The company encourages investors to carefully consider its results under GAAP, as well as its supplemental non-GAAP information and the reconciliation between these presentations, to more fully understand its business. Reconciliations between GAAP and non-GAAP financial measures included at the end of this press release.

 

 

 

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Conference Call

 

Avid will host a conference call and webcast this afternoon, March 8, 2022, at 4:30 PM EST (1:30 PM PST).

 

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: https://ir.avidbio.com/investor-events. 

 

About Avid Bioservices, Inc. 
 

Avid Bioservices (NASDAQ:CDMO), an S&P SmallCap 600 company, is a dedicated contract development and manufacturing organization (CDMO) focused on development and CGMP manufacturing of biologics. The company provides a comprehensive range of process development, CGMP clinical and commercial manufacturing services for the biotechnology and biopharmaceutical industries. With 28 years of experience producing monoclonal antibodies and recombinant proteins, Avid's services include CGMP clinical and commercial drug substance manufacturing, bulk packaging, release and stability testing and regulatory submissions support. For early-stage programs the company provides a variety of process development activities, including upstream and downstream development and optimization, analytical methods development, testing and characterization. The scope of our services ranges from standalone process development projects to full development and manufacturing programs through commercialization. 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 that the ongoing COVID-19 pandemic will adversely affect our or our customers’ business and operations, 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 due to unanticipated equipment and/or manufacturing facility issues which could result in projects being terminated or delay delivery of products to customers, revenue recognition and receipt of payment or result in 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 which could adversely affect guided fiscal 2022 revenues, the risk that the completion of the second phase of the Myford expansion and/or the viral vector facility may be delayed, may cost more than anticipated or may not increase revenue generating capacity by the amounts contemplated, the risk that expanding into a new biologics manufacturing segment may distract senior management’s focus on the company’s existing operations and/or its current expansion of the Myford facility, the risk that the company may experience delays in hiring qualified individuals into the viral vector business, the risk that the company may experience delays in engaging initial customers for the viral vector business, and the risk that the viral vector business may not become profitable for several years, if ever. 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, 2021, 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 INCOME

(Unaudited)

(In thousands, except per share information)

 

  

Three Months Ended

January 31,

 

Nine Months Ended

January 31,

   2022  2021  2022  2021
             
Revenues  $31,508   $21,806   $88,371   $68,262 
Cost of revenues   22,421    15,604    58,707    47,098 
Gross profit
   9,087    6,202    29,664    21,164 
                     
Operating expenses:                    
Selling, general and administrative   5,818    4,018    15,311    12,009 
Total operating expenses   5,818    4,018    15,311    12,009 
Operating income   3,269    2,184    14,353    9,155 
Interest expense   (718)       (2,125)   (4)
Other income (expense), net   (303)   23    (154)   70 
Net income  $2,248   $2,207   $12,074   $9,221 
Comprehensive income  $2,248   $2,207   $12,074   $9,221 
Series E preferred stock accumulated dividends       (1,442)       (3,604)
Net income attributable to common stockholders  $2,248   $765   $12,074   $5,617 
                     
Net income per share attributable to common stockholders:                    
Basic  $0.04   $0.01   $0.20   $0.10 
Diluted  $0.04   $0.01   $0.19   $0.10 
                     
Weighted average common shares outstanding:
                    
Basic   61,631    58,865    61,394    57,349 
Diluted   63,872    60,097    63,711    58,058 

 

- Continued -

 

 

 

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avid bioservices, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(In thousands, except par value)

 

  

January 31,

2022

 

April 30,

2021

ASSETS          
Current assets:          
Cash and cash equivalents  $149,957   $169,915 
Accounts receivable, net   28,009    18,842 
Contract assets   3,344    6,112 
Inventory   21,054    11,871 
Prepaid expenses   1,126    1,064 
Total current assets   203,490    207,804 
           
Property and equipment, net   69,395    37,455 
Operating lease right-of-use assets   37,508    18,691 
Other assets   3,352    1,210 
Restricted cash   350    350 
Total assets  $314,095   $265,510 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities:          
Accounts payable  $6,456   $9,257 
Accrued compensation and benefits   7,742    8,794 
Contract liabilities   58,991    50,769 
Current portion of operating lease liabilities   2,624    1,355 
Other current liabilities   1,489    761 
Total current liabilities   77,302    70,936 
           
Convertible senior notes, net   139,313    96,949 
Operating lease liabilities, less current portion   38,683    19,889 
Finance lease liabilities, less current portion   2,222     
Total liabilities   257,520    187,774 
           
Commitments and contingencies          
           
Stockholders’ equity:          
Preferred stock, $0.001 par value; 5,000 shares authorized; no shares issued and outstanding at respective dates        
Common stock, $0.001 par value; 150,000 shares authorized; 61,725 and 61,069 shares issued and outstanding at respective dates   62    61 
Additional paid-in capital   603,488    637,534 
Accumulated deficit   (546,975)   (559,859)
Total stockholders’ equity   56,575    77,736 
Total liabilities and stockholders’ equity  $314,095   $265,510 

 

- Continued -

 

 

 

 6 

 

 

avid bioservices, INC.

ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP FINANCIAL MEASURES

(Unaudited)

(In thousands)

 

  

Three Months Ended

January 31,

 

Nine Months Ended

January 31,

   2022  2021  2022  2021
GAAP net income attributable to common stockholders  $2,248   $765   $12,074   $5,617 
Stock-based compensation   2,111    999    5,352    2,754 
Business transition and related costs   834    8    1,771    220 
Non-cash interest expense    257        766     
Preferred stock accumulated dividends       1,442        3,604 
Adjusted net income  $5,450   $3,214   $19,963   $12,195 
                     
                     
GAAP net income attributable to common stockholders  $2,248   $765   $12,074   $5,617 
Depreciation and amortization   1,024    856    3,060    2,540 
Interest expense   718        2,125    4 
Other (income) expense, net   303    (23)   154    (70)
Stock-based compensation   2,111    999    5,352    2,754 
Business transition and related costs   834    8    1,771    220 
Preferred stock accumulated dividends       1,442        3,604 
Adjusted EBITDA  $7,238   $4,047   $24,536   $14,669 
                     
                     
GAAP net cash provided by operating activities  $5,192   $5,189   $8,853   $13,322 
Purchase of property and equipment   (20,021)   (2,737)   (31,845)   (5,717)
Free cash flow  $(14,829)  $2,452   $(22,992)  $7,605 

 

###

 

 

 

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