Avid Bioservices, Inc. (NASDAQ: CDMO) is a dedicated contract development and manufacturing organization (CDMO) that provides a comprehensive range of services from process development to Current Good Manufacturing Practices (CGMP) clinical and commercial manufacturing of biologics for the biotechnology and biopharmaceutical industries. The company has faced a challenging fiscal year in 2024, but has positioned itself for a promising future.
Financials
For the fiscal year ended April 30, 2024, Avid Bioservices reported annual revenue of $139.9 million, a decrease of approximately 6% compared to $149.3 million in the prior year. The decrease in revenues was primarily attributed to fewer manufacturing runs, a reduction in process development services from early-stage programs, and a reduction of revenue for changes in estimated variable consideration under a contract where uncertainties have been resolved.
The company's annual net loss for fiscal 2024 was $140.8 million, or $2.23 per basic and diluted share. This significant loss was largely driven by a $118.5 million valuation allowance recorded against the company's deferred tax assets due to the net cumulative loss incurred over the three-year period ended April 30, 2024. Excluding this one-time tax charge, the company's adjusted net loss for the full fiscal year was $22.3 million, or $0.35 per basic and diluted share.
Annual operating cash flow for fiscal 2024 was $10.9 million, while annual free cash flow was negative $20.9 million, reflecting the company's significant capital investments to expand its manufacturing capacity and technical capabilities.
Quarterly Performance
In the fourth quarter of fiscal 2024, Avid Bioservices reported revenues of $43 million, an 8% increase compared to $39.8 million in the same prior year period. This represented the highest quarterly revenues in the company's history. Gross profit for the fourth quarter was $5.5 million, or a 13% gross margin, compared to $8.4 million, or 21% gross margin, in the prior year period. The decrease in gross margin was primarily driven by lower manufacturing volumes and increased costs related to the company's capacity and technical capability expansions.
Guidance and Outlook
For fiscal year 2025, Avid Bioservices is providing revenue guidance of $160 million to $168 million, representing growth of approximately 17% at the midpoint compared to fiscal 2024. The company cites multiple positive indicators supporting this outlook, including a strong backlog of $193 million at the end of fiscal 2024, growing interest in its newly completed manufacturing facilities, and an improving financial environment for the broader biotechnology industry.
Business Overview
Avid Bioservices operates two main business segments: manufacturing and process development. Manufacturing revenue generally represents revenue from the manufacturing of customer products, while process development revenue represents revenue from services associated with the custom development of a manufacturing process and analytical methods for a customer's product.
The company has made significant investments in expanding its manufacturing capacity and technical capabilities over the past three years. In late fiscal 2023, Avid completed the expansion of its mammalian cell manufacturing facilities. During fiscal 2024, the company also completed the construction of a new cell and gene therapy (CGT) manufacturing facility. With these expansions, Avid has dramatically increased its annual revenue-generating capacity from approximately $120 million in fiscal 2021 to more than $400 million today.
These facility enhancements have enabled Avid to better serve both new and existing biotech customers, as well as address the needs of large pharmaceutical companies. The company has seen growing interest in its expanded capabilities, with the completion of multiple process performance qualification (PPQ) campaigns in its new CGT facility in just over a year of operation.
Risks and Challenges
Avid Bioservices has faced several challenges in recent years, including the impact of the broader biotechnology funding environment on its customer base. The company's results in fiscal 2024 were negatively affected by fewer manufacturing runs, a reduction in process development services, and a terminated project related to the insolvency of a smaller customer.
Additionally, the company's significant investments in capacity expansion and technical capabilities have resulted in increased costs, which have weighed on its profitability. Avid has had to navigate the ramp-up of its new facilities and the associated depreciation expense, as well as higher labor and overhead costs.
Looking ahead, the company will need to continue to effectively manage its capacity utilization and operational efficiency to drive margin improvement. The successful onboarding and execution of new programs in both its mammalian and CGT facilities will be critical to achieving its financial targets.
Liquidity
As of April 30, 2024, Avid Bioservices had cash and cash equivalents of $38.1 million. The company also has access to a $50 million revolving credit facility, which was undrawn as of the end of the fiscal year.
Avid's capital expenditures totaled $29.4 million in fiscal 2024, primarily related to the expansion of its manufacturing facilities. The company expects total capital expenditures of approximately $32 million for fiscal 2025 as it continues to invest in its infrastructure to support future growth.
Conclusion
Avid Bioservices has navigated a challenging fiscal year in 2024, marked by a significant net loss due to one-time tax charges and increased costs associated with its capacity expansion initiatives. However, the company has positioned itself for a promising future, with a strong backlog, growing interest in its expanded capabilities, and an improving outlook for the broader biotechnology industry. As Avid continues to ramp up its new facilities and drive operational efficiency, investors will be closely watching the company's ability to translate its investments into improved financial performance and sustainable growth.