AMRI second-quarter adjusted EPS increases to $0.06

AMRI (NASDAQ: AMRI) today reported financial and operating results for the second quarter ended June 30, 2010.

Financial and operational highlights for the quarter and other recent events include:

  • 5% contract revenue growth over second quarter 2009 driven by growth at international Discovery and Development/Small Scale operations
  • Adjusted EPS of $0.06 compared to $0.01 for second quarter 2009
  • Overall gross margin increase to 15% from 5% for second quarter 2009
  • Adjusted operating income of $2.8 million as compared to $0.4 million for the second quarter 2009
  • Acquisition of Hyaluron Inc. providing entry into the sterile fill and finish manufacturing market
  • The grant of a preliminary injunction against Dr. Reddy's preventing the launch of a generic version of Allegra® D-24
  • Commenced enrollment for Phase I study of ALB-127158(a), a novel MCH1 receptor antagonist offering a potential new approach for the treatment of obesity

Second Quarter 2010 Results

Total revenue for the second quarter of 2010 was $49.5 million, a decrease of 4% compared to total revenue of $51.3 million reported in the second quarter of 2009.

Total contract revenue for the second quarter of 2010 was $40.7 million, an increase of 5% compared to total contract revenue of $38.8 million reported in 2009. 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 $11.5 million, consistent with the second quarter of 2009
  • Development/Small Scale Manufacturing contract revenue for the second quarter was $8.2 million, an increase of 1% from $8.1 million in 2009
  • Large Scale Manufacturing contract revenue for the second quarter was $21 million, an increase of 10% from $19.2 million in 2009

Recurring royalties in the second quarter of 2009 were $8.7 million, an increase of 3% compared to recurring royalties of $8.5 million reported in 2009. AMRI earns royalties from worldwide 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®.

Total revenue in the second quarter of 2009 included milestone revenue of $4 million resulting from the company's 2005 licensing agreement with BMS.

Net loss under U.S. GAAP was $(3.9) million, or $(0.13) per basic and diluted share in the second quarter of 2010. Net loss under U.S. GAAP includes the impact of restructuring and asset impairment charges associated with the May 2010 reorganization of U.S. operations totaling $5.3 million or $0.17 per basic and diluted share net of tax, as well as costs related to our acquisition of Hyaluron Inc. of $0.5 million or $0.02 per basic and diluted share. The costs related to the acquisition of Hyaluron Inc. include legal and other professional fees and other costs directly related to the acquisition. Excluding these items, net income on an adjusted basis in the second quarter of 2010 was $1.7 million, or $0.06 per basic and diluted share.

For a reconciliation of net income and earnings per diluted share as reported to adjusted net income and earnings per diluted share for the 2010 and 2009 reporting periods, please see Table 1 at the end of this press release.

Year-to-Date

Total revenue for the six-month period ended June 30, 2010 was $98.8 million, a decrease of 6% compared to $105.3 million for the same period in 2009.

Total contract revenue for the first six months of 2010 of $79.6 million represented a decrease of 3% over the same period in 2009.

  • Contract revenue for Discovery Services in the six-month period ended June 30, 2010 was $23.9 million, an increase of 4% from $23.1 million in 2009
  • Contract revenue for Development/Small Scale Manufacturing in the six-month period ended June 30, 2010 was $16.8 million, a decrease of 12% from $19 million in 2009
  • Contract revenue for Large Scale Manufacturing in the six-month period ended June 30, 2010 was $38.9 million, a decrease of 3% compared to $39.9 million in the six-month period ended June 30, 2009

Recurring royalties from Allegra® for the first six months of 2010 were $19.2 million, a decrease of 1% compared to royalty revenue of $19.3 million in 2009.

Total revenue in the first half of 2009 included milestone revenue of $4 million resulting from the company's 2005 licensing agreement with BMS.

Net loss under U.S. GAAP in the first half of 2010 was $(3.9) million or $(0.12) per basic and diluted share, compared to net income of $2.1 million or $0.07 per basic and diluted share in the first half of 2009. Adjusted net income for the first half of 2010 was $2.4 million or $0.08 per basic and diluted share.

For a reconciliation of net income and earnings per diluted share as reported to adjusted net income and earnings per diluted share for the 2010 and 2009 reporting periods, please see Table 1 at the end of this press release.

AMRI Chairman, President and CEO Thomas E. D'Ambra said, "Our second quarter results reflect the continued shift in demand from our customers for services in Asia and Europe, as evidenced by the significant contributions made by our international locations to our financial performance as compared to AMRI's second quarter performance in 2009. Our ability to deliver high value services combined with our more cost effective facilities in Asia is driving demand throughout our organization. We are also excited about the opportunities now available to us through our recent acquisition of Hyaluron, providing us with immediate entry into the rapidly growing pre-filled syringe market. We are already realizing cross selling benefits between our organizations and we are optimistic about the growth and revenue synergy opportunities this acquisition offers."

Dr. D'Ambra continued, "On the R&D front, our programs for anti-cancer and obesity continue to make forward progress. We are particularly pleased to have just announced the initiation of a Phase I clinical trial for the lead compound in our obesity program, further affirming the value of our R&D organization that has delivered four compounds into Phase I clinical trials since being formed only six years ago."

Liquidity and Capital Resources

At June 30, 2010, AMRI had cash, cash equivalents and marketable securities of $60.4 million, compared to $111.1 million at December 31, 2009.

The decrease of $50.7 million in cash, cash equivalents and marketable securities in the first half of 2010 was due primarily to the purchase of Hyaluron Inc. for approximately $27.5 million, including acquisition costs of $0.7 million, and the purchase of Excelsyn Ltd. for approximately $19.4 million, including acquisition costs of $0.9 million, as well as capital expenditures of $5.3 million. These expenditures were partially offset by cash generated from operations, excluding acquisition costs of $2.5 million. Cash generated from operations in the second quarter, excluding acquisition costs, was $7.8 million. Through July 30, 2010, we have repurchased 743,000 shares of AMRI stock at a total cost of $4.5 million under our current $10 million share repurchase program.

Total debt at June 30, 2010 was $13.2 million, down from $13.5 million at December 31, 2009. Cash, cash equivalents, and marketable securities, net of debt, were $47.2 million at June 30, 2010. Total common shares outstanding, net of treasury shares, were 31,791,214 at June 30, 2010.

2010 Financial Guidance Update

AMRI Chief Financial Officer Mark T. Frost provided contract revenue and EPS guidance for the third quarter and the full year 2010. "In the third quarter, we expect contract revenue to range from $43 million to $46 million, an increase of up to 16% from third quarter 2009 levels. For the full year 2010, we expect contract revenue to range from $175 million to $181 million, an increase of up to 15% versus 2009."

Mr. Frost continued, "With regard to our royalty revenues from worldwide sales of Allegra® and certain generic forms of Allegra®, we expect third quarter royalties of approximately $6 million to $7 million and expect full year 2010 royalties of approximately $31 million to $33 million. For the third quarter, we expect adjusted loss per share to range from $(0.11) to $(0.08). For the full year we expect adjusted EPS to range from $(0.02) to $0.02."

Recent Highlights

Recent noteworthy announcements or milestones at AMRI include the following:

  • The acquisition of Hyaluron Inc., expanding AMRI's contract manufacturing capabilities to include cGMP manufacturing and sterile filling of parenteral drugs to the biopharmaceutical industry.
  • The grant of a preliminary injunction to prevent Dr. Reddy's Laboratories, Ltd. and Dr. Reddy's Laboratories, Inc. (Dr. Reddy's) from the commercial distribution of generic versions of Allegra-D® 24 Hour (fexofenadine HCl 180 mg and pseudoephedrine HCl 240 mg) Extended-Release Tablets in the United States.
  • The repositioning of AMRI to meet a continued shift in demand from customers for services in Asia and Europe, including the execution of activities related to international facility, capability and workforce expansion, and significant cost reduction activities at U.S. operations.
  • The approval of a new share repurchase program of up to $10 million by the company's board of directors.
  • The publication of on-going results from its Phase I clinical study on its novel tubulin inhibitor, ALB 109564(a), indicating that the drug is well tolerated at the doses tested with neither dose limiting toxicities nor serious adverse events.
  • The extension of a research/manufacturing agreement with Schering Corporation ("Schering"), a subsidiary of Merck & Co., Inc., to provide global integrated drug discovery services from the U.S., as well as through the company's subsidiaries in India, Hungary and Singapore.
  • The initiation of a research collaboration with Navigen Pharmaceuticals, Inc. focused on the development of new drug therapies to provide fully integrated drug discovery services including assay development, screening, in vitro ADMET, computer-aided drug discovery (CADD) and medicinal chemistry.
  • The five year extension and expansion of AMRI's ongoing research collaboration with CHDI Foundation, Inc. (CHDI), focused on the discovery of new therapeutic agents for the treatment of Huntington's disease (HD).
Source:

AMRI

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