Pharma Contract Service Provider Avid Bioservices Reports Negative Gross Margin In Q3, Issues Meek Outlook

Avid Bioservices Inc CDMO reported Q2 FY24 sales of $25.4 million, down 27% Y/Y, primarily attributed to fewer year-to-date manufacturing runs, a reduction in process development services from early-stage customers, and a reduction of revenue for changes in estimated variable consideration under a contract where uncertainties have been resolved.

Analyst consensus stood at $33.21 million. As of October 31, 2023, the company's revenue backlog was $199 million, up 35%.

The gross margin was negative 18% compared to 12% for the same period in the prior year, primarily driven by lower manufacturing volumes and costs related to expanding capacity and technological capabilities.

During the quarter, Avid completed the construction of its manufacturing suites within its new cell and gene therapy (CGT) development and CGMP manufacturing facility, as scheduled. 

Avid estimates that its combined facilities now have a total revenue-generating capacity of up to approximately $400 million annually. Avid plans to commemorate the completion of the CGT facility by hosting a celebratory grand opening in January 2024.

"Second quarter revenues were impacted by a number of factors, requiring us to decrease our revenue guidance for the 2024 full fiscal year," stated Nick Green, president and CEO of Avid Bioservices.

"Despite the challenges of the first half of fiscal 2024, our current backlog and pipeline position us well to generate cash from operations in the near term and significant growth in the medium-term and beyond. For these reasons, we believe the second half of the year holds great promise and opportunity for Avid," Green added.

Guidance: Avid Bioservices lowered its FY24 sales guidance to $137 million-$147 million, compared to prior guidance of $145 million-$165 million and consensus of $154.09 million.

Price Action: CDMO shares traded 22.30% lower at $4.11 during the after-hours session on Thursday.