Executive Summary / Key Takeaways

• Lifecore Biomedical is executing a strategic transformation, leveraging its specialized contract development and manufacturing organization (CDMO) capabilities and hyaluronic acid (HA) expertise to target sustainable double-digit growth and enhanced profitability.
• Recent operational achievements, including the completion of a capacity expansion project with a new 5-head isolator filler, have more than doubled aseptic capacity and expanded service offerings to new modalities, positioning the company for significant market capture.
• Financial performance in Q3 2025 demonstrated strong momentum with a 26% revenue increase and a shift to positive adjusted EBITDA, supported by disciplined cost control and improved workforce productivity.
• Despite near-term revenue headwinds in fiscal year 2025 due to customer inventory rebalancing and project timing, management reaffirms guidance and projects a robust calendar second half of 2025, with midterm objectives targeting double-digit revenue growth and over 25% adjusted EBITDA margins.
• The company's strengthened liquidity, strategic partnerships, and a growing late-stage development pipeline underscore its potential to capitalize on favorable industry trends like the regionalization of injectable manufacturing and the expanding prefilled syringe market.

A Specialized CDMO's Strategic Evolution

Lifecore Biomedical, Inc., founded in 1965, has meticulously transformed into a fully integrated contract development and manufacturing organization (CDMO) based in Chaska, Minnesota. This evolution, culminating in a name change from Landec Corporation in November 2022 and the divestiture of its food businesses, underscores a focused commitment to the high-growth biomedical sector. The company's core business revolves around the development, fill, and finish of complex sterile injectable pharmaceutical products, complemented by its foundational expertise in hyaluronic acid (HA) manufacturing. Lifecore's strategic pivot is well-timed, aligning with significant industry tailwinds, including the ongoing regionalization of injectable manufacturing in the United States and the fact that approximately 50% of the U.S. drug development pipeline consists of injectables.

Lifecore's overarching strategy is a three-pronged approach: maximizing existing customer relationships, advancing its robust development pipeline toward commercialization, and aggressively pursuing new business opportunities. This strategy is designed to drive a 12% revenue compound annual growth rate (CAGR) and elevate adjusted EBITDA margins to over 25% in the coming years. The company's journey, while marked by past public reporting challenges and legal matters, has seen diligent remediation efforts, with all SEC filings now current and key legal disputes reaching resolution, allowing management to fully concentrate on growth.

Technological Edge and Expanded Capacity Drive Competitive Advantage

At the heart of Lifecore's competitive differentiation lies its proprietary technology in pharmaceutical-grade hyaluronic acid manufacturing. Utilizing a fermentation-based process, Lifecore produces non-animal-sourced HA in bulk form, which is then formulated and filled into syringes, vials, and cartridges for a broad spectrum of medical applications, including ophthalmic and orthopedic procedures. This specialized expertise provides tangible benefits, offering customers high-quality, biocompatible materials crucial for sensitive injectable products. The company's ability to develop and qualify its HA to meet stringent specifications, such as those for the Japanese market, further solidifies its technical leadership and supports future demand inflection points with key customers.

A significant operational milestone was the completion of a capacity expansion project by September 30, 2025, which more than doubled Lifecore's overall aseptic capacity. Central to this expansion is the new high-speed, multipurpose 5-head isolator filler, now GMP-ready. This state-of-the-art system is designed for vials, cartridges, and prefilled syringes, increasing the company's maximum revenue-generating capacity to approximately $300 million annually. Crucially, this technological upgrade expands Lifecore's service offerings beyond complex, highly viscous formulations to include less viscous, less complex protein, peptide, and antibody products, significantly broadening its addressable market. The "so what" for investors is clear: this technological advancement and capacity expansion create a stronger competitive moat, enable higher revenue potential, and position Lifecore to capture a larger share of the growing sterile injectables market, potentially leading to improved margins through increased utilization and diversified product mix.

Strategic Initiatives Fueling Commercial Momentum

Lifecore's three-pronged growth strategy is yielding tangible results. The company is strengthening relationships with existing commercial customers, exemplified by significant milestones in supporting the aseptic fill/finish expansion program for a key customer. This includes successfully producing qualification batches on the new 5-head isolator filler to support European and Asian markets, a critical step toward a projected doubling of aseptic fill/finish demand from this customer in 2027.

The advancement of Lifecore's development pipeline is also a key focus. The company boasts a promising late-stage pipeline of 11 programs with potential launch dates between 2026 and 2029. Management believes that a modest 50% conversion rate of these programs could provide meaningful revenue potential in the mid and long term. Recent achievements include the installation and operational qualification of automated manufacturing equipment for a large pharma customer's program, with validation batches expected in early 2026, and the completion of critical development work for another late-stage customer, setting the stage for validation batches in the first half of 2026. Furthermore, the company has initiated transfer work for a GLP-1 program, highlighting its expansion into high-demand therapeutic areas.

Aggressive new business development is the third pillar of growth. Lifecore signed two new customers in Q3 2025 and an additional two subsequent to quarter-end. A particularly significant win is a commercial site transfer for a leading injectable pharmaceutical product from a large multinational pharmaceutical company. This opportunity is expected to make the multinational company one of Lifecore's top customers once commercialized, consuming between 5% and 10% of the facility's capacity, with the transfer anticipated to take approximately 24 to 30 months. This success underscores Lifecore's proven regulatory track record and technical expertise in fill-finish operations. The company's new sales strategy has expanded its target market, leading to a significantly grown business development pipeline with over fifty new opportunities, of which more than 30% involve large multinational pharmaceutical companies. A collaboration agreement with PolyPeptide Laboratories, Inc. (PPL), announced on October 28, 2025, aims to offer an integrated, end-to-end solution for peptide-based pharmaceutical customers in the U.S., with GLP-1s explicitly contemplated as part of this broader initiative.

Operational excellence and disciplined cost control are integral to Lifecore's strategy. The company has improved workforce productivity by over 20% in the past year, maintaining similar production volumes despite a more than 20% reduction in its manufacturing workforce over the last 18 months. Further efficiencies are expected from the launch of a new enterprise resource planning (ERP) system in Q1 2026, which aims to strengthen inventory control, support financial management, and reduce costs. The recent hiring of a Head of Business Transformation further emphasizes the commitment to optimizing the cost structure and maximizing EBITDA opportunities.

Financial Performance and Liquidity Profile

Lifecore's recent financial performance reflects the early successes of its strategic initiatives. For the three months ended September 30, 2025, total revenues increased by 26% to $31.11 million compared to the comparable prior period. This growth was primarily driven by a substantial 107% increase in HA manufacturing revenues to $9.36 million, largely due to increased customer demand and supply chain initiatives. CDMO revenues also saw an 8% increase to $21.75 million, benefiting from higher sales volumes and pricing.

Gross profit for the quarter surged by 45% to $7.79 million, primarily due to a $4.3 million increase in HA manufacturing gross profit from higher sales volume and manufacturing absorption. While CDMO gross profit saw a $1.9 million decrease due to lower development revenue and product mix, this was partially offset by favorable manufacturing absorption. Selling, general, and administrative (SG&A) expenses decreased significantly by $5.9 million to $8.90 million, reflecting a $2.2 million reduction in recurring expenses and a $3.7 million reduction in non-recurring legacy matters. These improvements contributed to a net loss of $10 million, an improvement from $16.2 million in the prior comparable period, and a positive adjusted EBITDA of $3.1 million, a $4.9 million increase from a negative $1.8 million in the prior period.

The company's liquidity position has been materially strengthened. As of September 30, 2025, Lifecore held $18.86 million in cash and cash equivalents. In June 2025, an accelerated payment of $10 million from the sale of excess equipment further bolstered the balance sheet. The company also repaid $2.50 million on its revolving credit facility and had approximately $23.60 million available for borrowing under the $40 million facility as of September 30, 2025. A $24.3 million PIPE offering in October 2024 and the restructuring of its revolving credit facility in November 2024, which included a three-year extension and reduced interest rates, have provided significant financial stability. While Lifecore expects to burn cash in the first half of fiscal year 2025, it anticipates being cash neutral in the second half, including capital expenditures. The company's material contractual obligations for the next five years primarily relate to its debt and lease obligations, with the aggregate liquidation preference of the Series A Redeemable Convertible Preferred Stock standing at $47.50 million as of September 30, 2025, which Lifecore is considering financing alternatives for.

Competitive Landscape and Strategic Positioning

Lifecore operates in a competitive CDMO market, positioning itself as a specialized player with a strong focus on pharmaceutical-grade hyaluronic acid and complex sterile injectables. While larger, more diversified competitors like Catalent (CTLT), Lonza Group AG (LZAGY), and Thermo Fisher Scientific Inc. (TMO) offer a broader range of drug delivery solutions and global scale, Lifecore differentiates itself through its deep expertise and technical capabilities in niche areas.

Catalent, a leader in drug delivery technologies and biologics manufacturing, boasts a wider global footprint and extensive technological capabilities. Lonza excels in biologics, cell and gene therapies, with significant R&D investments. Thermo Fisher, a major scientific services provider, offers a vast product portfolio and advanced technological integration. Against these giants, Lifecore's specialized offerings in HA-based products provide a unique value proposition, potentially leading to stronger customer loyalty in specific medical applications like ophthalmology and orthopedics. The company's new 5-head isolator filler, with its expanded capacity and ability to handle less viscous products, allows Lifecore to compete more effectively in a broader segment of the injectable market, challenging the scale advantages of its larger rivals.

Lifecore's competitive advantages stem from its proprietary HA technology, which can offer superior product performance and faster innovation cycles for niche formulations, potentially translating into stronger margins through pricing power. Its integrated CDMO services foster streamlined partnerships for clinical studies, enhancing operational and capital efficiency. However, Lifecore faces vulnerabilities due to its smaller scale, which can lead to higher operating costs and potentially slower innovation in broader biologics compared to its larger counterparts. Barriers to entry in the CDMO industry, such as stringent regulatory approvals, specialized expertise, and high capital requirements, generally favor established players like Lifecore, protecting its niche while also benefiting larger competitors. Lifecore's strategy to expand its commercial team and engage with multinational pharmaceutical companies for dedicated capacity discussions directly addresses these competitive dynamics, aiming to leverage its technical excellence and U.S.-based manufacturing advantage.

Outlook and Future Growth Trajectory

Lifecore's management has provided clear guidance for the upcoming periods, reflecting both near-term challenges and strong long-term growth aspirations. For the approximately seven-month transition period from May 26 to December 31, 2025, the company expects revenues of $74 million to $76 million, a net loss ranging from $18.4 million to $16.4 million, and adjusted EBITDA between $12 million and $14 million. This guidance implies a robust calendar Q4 2025, with projected revenues of $34 million to $36 million (an approximate 8% increase year-over-year) and adjusted EBITDA of $7 million to $9 million.

Despite these positive short-term trends, the fiscal year 2025 (ending May 25, 2025) revenue guidance remains flat at $126.5 million to $130 million. This is primarily attributed to a key customer's global inventory rebalancing initiative, the absence of new commercial launches from the development pipeline due to FDA approval timing, a small commercial customer moving production in-house (a $3.2 million headwind in FY24), and the completion of a $5 million development services project in Q4 FY24 that will not recur. Adjusted EBITDA for fiscal year 2025 is guided to be $19 million to $21 million, with margins of 15.3% to 16.2%. Management anticipates gross margins to decline by 225 to 275 basis points due to product mix and increased depreciation, but expects operating expenses to decrease by 200 to 250 basis points from workforce reductions. Capital expenditures are projected to decline to $10 million to $14 million in fiscal year 2025.

Looking beyond fiscal year 2025, Lifecore is highly confident in achieving its medium-term objectives of double-digit revenue growth and adjusted EBITDA margins exceeding 25%. The company expects the back half of calendar year 2026 to be stronger than the first half, with a revenue split of approximately 45% in the first half and 55% in the back half. Long-term, management foresees an additional $1.5 million per quarter reduction in SG&A expenses as legacy matters are resolved. The new ERP system, going live in Q1 2026, is a key catalyst for further cost reduction and efficiency gains.

Risks and Challenges

While Lifecore's strategic direction is promising, investors should be aware of several risks and challenges. The company is still managing legacy legal proceedings, including an investor dispute, a class action complaint (though an agreement in principle for settlement has been reached), an SEC subpoena related to past financial restatements, and ongoing Yucatan litigation. The ultimate outcomes and financial impacts of these matters remain uncertain. Furthermore, material weaknesses in internal control over financial reporting persist, though a remediation plan, including the ERP implementation, is underway.

The obligation to redeem the Series A Redeemable Convertible Preferred Stock, with an aggregate liquidation preference of $47.50 million as of September 30, 2025, presents a significant liquidity consideration, as internally generated cash is not expected to be sufficient. The company's reliance on a few key customers for a substantial portion of its revenue also poses a concentration risk, as evidenced by the current inventory rebalancing initiative by a major customer. Macroeconomic factors, including inflation, interest rates, and global instability, could also impact operations and financial performance.

Conclusion

Lifecore Biomedical stands at a pivotal juncture, having successfully navigated a period of significant internal transformation and administrative challenges. The company's focused strategy on leveraging its differentiated HA technology and expanded CDMO capabilities, particularly with the new 5-head isolator filler, positions it for substantial growth in the sterile injectables market. Despite near-term revenue flatness in fiscal year 2025 due to specific customer dynamics, the underlying operational improvements, robust pipeline, and aggressive business development efforts are setting the stage for a compelling long-term growth trajectory.

The commitment to achieving double-digit revenue growth and over 25% adjusted EBITDA margins in the midterm, supported by disciplined cost management and strategic capacity expansion, underscores the core investment thesis. While legacy legal and financial obligations present ongoing considerations, Lifecore's strengthened liquidity, strategic partnerships, and proven technical expertise provide a solid foundation. The company's ability to capitalize on industry tailwinds and its technological leadership in specialized injectables will be critical determinants of its success in becoming a leader in the CDMO sector.