Web Press Release No. 178
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August 4, 2005
Albany Molecular Research, Inc. Posts Solid Second Quarter Results
Robust Development Contract Revenue Trend Continues,
Allegra Royalties Beat Expectations;
Company Raises Full Year Earnings Guidance
Albany, NY (August 4, 2005) -- Albany Molecular Research, Inc. (Nasdaq: AMRI) today reported financial results for the quarter and six-month period ending June 30, 2005.
Highlights from the second quarter include:
- Diluted EPS of $0.23, exceeding the company's estimate of $0.18 to $0.20.
- Total contract revenue of $35.9 million, exceeding the company's estimate of $32 to $35 million.
- A 34% year-over-year quarterly increase in development and small scale manufacturing contract revenue. Year to date, development contract revenue is up 35% over the comparable 2004 period.
- A 44% year-over-year quarterly increase in large scale manufacturing revenue. Excluding the impact of a request for accelerated delivery of one product from GE Healthcare, the company's largest manufacturing customer, the increase was 22%.
Second Quarter Results
Total revenue for the second quarter of 2005 was $51.8 million, an increase of 23% compared to total revenue of $42.0 million in the second quarter of 2004.
Total contract revenue for the second quarter of 2005 was $35.9 million, an increase of 28% compared to total contract revenue of $28.1 million during the second quarter of 2004. Total contract revenue encompasses revenue from AMRI's large scale manufacturing, development and small scale manufacturing, and discovery services.
Contract revenue for large scale manufacturing in the second quarter of 2005 was $22.6 million, an increase of 44% compared to $15.7 million in 2004. Contract revenue from development and small scale manufacturing services in the second quarter of 2005 was $7.0 million, an increase of 34% from $5.2 million in 2004. Contract revenue for discovery services in the second quarter of 2005 was $6.3 million, a decrease of 12% from $7.1 million during 2004. Contract revenue for large scale manufacturing services in the second quarter of 2005 was favorably impacted by $2.7 million as a result of a request for accelerated delivery of one product to GE Healthcare. As previously disclosed, GE has requested accelerated delivery of this product, resulting in a shift of all contract revenue for this product for the full year to the first half of the year.
Recurring royalties from Allegra in the second quarter of 2005 were $15.9 million, a 14% increase from $13.9 million in the second quarter of 2004. AMRI earns royalties from worldwide sales of the non-sedating antihistamine Allegra® (Telfast® outside the United States) for patents relating to the active ingredient in Allegra.
Net income in the second quarter of 2005 was $7.3 million, or $0.23 per diluted share, compared to a net loss of $20.8 million, or ($0.65) per diluted share, in the second quarter of 2004. Included in net income for the second quarter of 2004 was $3.5 million in pre-tax charges, or ($0.09) per diluted share, related to the restructuring of the company's Mount Prospect Research Center, and $25.9 million in non-cash pre-tax charges, or ($0.74) per diluted share, to reduce the carrying value of certain assets.
AMRI Chairman, President and Chief Executive Officer Thomas E. D'Ambra, Ph.D. said, "AMRI turned in another solid performance in the second quarter, marking the second consecutive quarter of year-over-year growth in contract revenue. Our performance in the second quarter was boosted by the continuing trend of escalating contract revenue in our development and small scale manufacturing business, along with another strong quarter from Allegra and the additional contract revenue associated with the accelerated delivery schedule to GE Healthcare. When leveling revenue for the impact of the accelerated delivery schedule of this product, large scale manufacturing revenue in the second quarter of 2005 still increased by 22% over the same period in 2004. We are seeing strong growth in the manufacturing of clinical trial materials at Organichem, and are actively taking steps to capitalize on this trend. We remain optimistic going forward and, as discussed in our earnings guidance, we are projecting full year increases in total contract revenue-including revenue from large scale manufacturing-over 2004 levels."
Total revenue for the six-month period ending June 30, 2005 was $100.5 million, an increase of $17.7 million, or 21%, compared to total revenue of $82.8 million during the same period in 2004.
Total contract revenue for the first six months of 2005 increased 23% to $72.6 million, compared to total contract revenue of $58.9 million for the comparable period in 2004.
Contract revenue for large scale manufacturing in the six-month period ending June 30, 2005 was $45.6 million, an increase of 40% compared to $32.5 million in 2004. Contract revenue from development and small scale manufacturing services for the six-month period ending June 30, 2005 was $13.8 million, an increase of 35% from $10.2 million in 2004. Contract revenue for discovery services in the period ending June 30, 2005 was $13.2 million, a decrease of 19% from $16.3 million in 2004. Contract revenue for large scale manufacturing services in the first half of 2005 was favorably impacted by $8.4 million as a result of GE Healthcare's delivery schedule.
Recurring royalty revenue for the first half of 2005 increased by 17% to $27.9 million, compared to $23.9 million during the first six months of 2004.
Net income for the six month period ending June 30, 2005 was $12.9 million, or $0.40 per diluted share, compared to a net loss of $18.0 million, or ($0.57) per diluted share, for the six-month period ending June 30, 2004. Included in net income for the second half of 2004 were the second quarter pre-tax charges of $3.5 million, or ($0.09) per diluted share relating to the Mount Prospect restructuring and the non-cash $25.9 million, or ($0.74) per diluted share, pre-tax charge to reduce the carrying value of certain assets, as well as a first quarter charge of $3.1 million, or ($0.06) per diluted share, related to the issuance of warrants to Bristol Myers Squibb.
Liquidity and Capital Resources
At June 30, 2005, AMRI had cash, cash equivalents and investments of $143.3 million, compared to $138.4 million at March 31, 2005. The net increase of $4.9 million in cash, cash equivalents and investments in the second quarter of 2005 was due primarily to cash generated from operations of $10.4 million, partially offset by $4.9 million in purchases of property plant and equipment and $1.3 million in principal repayments on outstanding debt. Total debt at June 30, 2005 was $50.8 million, compared to $52.1 million at March 31, 2005. Total common shares outstanding, net of treasury shares, at June 30, 2005 were 32,320,449. On June 30, 2005, the company amended its credit facility to extend the maturity date on its revolving line of credit from February 2006 to June 2010.
Chief Financial Officer Mark T. Frost provided earnings guidance for the third quarter of 2005 and updated guidance for the full year 2005. Mr. Frost said, "In the third quarter, we project diluted earnings per share to range from $0.09 to $0.12. As previously discussed, we expect contract revenue at our large scale manufacturing subsidiary to decrease significantly in the second half, compared to 2004 levels, due to GE Healthcare's accelerated delivery schedule for one of its products. Even without sales of this large scale product in the third quarter, we project total contract revenue to range from $29 million to $32 million, an increase of up to 11% from 2004 levels. Conversely, however, the acceleration of these shipments accounted for an additional $8.4 million in large scale manufacturing contract revenue in the first half of 2005. GE Healthcare is not expected to make any further purchases of this product. Going forward, we expect that the loss of revenue from this product will be at least partially offset by increased revenue from the manufacturing of clinical trial materials."
Mr. Frost continued, "Turning to Allegra, we estimate that third quarter 2005 royalties from sales of Allegra will be flat to 5% higher than in the third quarter of 2004. To date, we are not aware of any guidance provided by Sanofi-Aventis on Allegra. Should Sanofi-Aventis provide guidance in the future, we would expect to revise our royalty estimates accordingly."
Mr. Frost noted, "We are raising guidance for the full year from a range of $0.51 to $0.56 per diluted share to a range of $0.57 to $0.62 per diluted share. The increase reflects projected increases in contract revenue, the increase in Allegra royalties during the second quarter, and our projected increase in Allegra royalties for the full year. We are tightening the range of contract revenue guidance, and revising our full year 2005 total contract revenue projections from a range of $126 million to $132 million to a range of $128 million to $132 million, a 5% to 9% increase from full year 2004 levels. For the full year, we are projecting royalties from sales of Allegra to range from $50 million to $52 million, an increase of 4% to 8% compared to the full year 2004."
Proprietary R&D Update
During the second quarter, the company remained on course to move forward with pharmacokinetic, toxicology and genotoxicity studies on two potential drug candidates from its proprietary drug discovery platform. One candidate has been prioritized; initial toxicology protocols have been designed and studies are on course to start in early August. Pending favorable results in these studies, the company remains on track to file an Investigational New Drug submission with the U.S. Food and Drug Administration during the first quarter of 2006. At the same time, the company continues to actively seek a licensee to develop this technology.
Recent noteworthy announcements or milestones at AMRI include the following:
Second Quarter Conference Call
- The initiation of a two-year research collaboration with the National Institute of Neurological Disorders and Stroke aimed at developing novel treatments for spinal muscular atrophy in which AMRI will provide fee-for-service medicinal chemistry lead optimization.
- Completion of two separate FDA inspections at AMRI's 21 Corporate Circle facility and at Organichem; both completed with no FDA Form 483 being issued.
- The opening of a new 3,500 square foot Quality Control laboratory at the company's large scale manufacturing subsidiary, Organichem Corporation.
- The signing of an MOU at the company's Singapore Research Centre with the Institute of Chemical and Engineering Sciences (ICES), setting the stage for collaborations on training and R&D projects.
- The appointment of KPMG LLP as the company's independent registered public accounting firm for the fiscal year 2005.
The company will hold a conference call at 10:00 a.m. Eastern Time on August 4, 2005 to discuss its quarterly results and business highlights and prospects. During the conference call, the company may discuss information not previously disclosed to the public. Individuals interested in listening to the conference call should dial 800-510-9834 (for domestic calls) or 617-614-3669 (for international calls) at 9:45 a.m. and reference the AMRI Second Quarter 2005 Earnings Release conference call. Replays of the call will be available for seven days following the call beginning at 12:00 p.m. on August 4, 2005. To access the replay by telephone, please call 888-286-8010 (for domestic calls) or 617-801-6888 (for international calls) and use access code 62029345. In addition, replays of the call will be available for twelve months on the company's website at www.albmolecular.com/investor/investcc.html
About Albany Molecular Research, Inc.
Albany Molecular Research, Inc. is a leading research, drug discovery, development and manufacturing company built on a chemistry platform of comprehensive and integrated technologies, resources and capabilities. The company conducts research and development with many leading pharmaceutical and biotechnology companies and for its own internal discovery programs, and provides cGMP manufacturing of active pharmaceutical ingredients through its wholly owned subsidiary, Organichem Corporation.
This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. These statements include, but are not limited to, statements regarding the company's estimates of earnings for the third quarter of 2005 and for the full year 2005, statements made by the company's chief executive officer and chief financial officer, trends in pharmaceutical and biotech outsourcing and demand for the company's development and manufacturing services, the expected level of contract revenues for AMRI for the third quarter of 2005 and for the full year 2005, expected future sales of Allegra and AMRI's Allegra-related royalties for the third quarter of 2005 and the full year 2005, the expected submission of an IND application and commencement of Phase I trials, and management's initiatives to sustain the company's momentum and long-term growth. Readers should not place undue reliance on our forward-looking statements. The company's actual results may differ materially from such forward-looking statements as a result of numerous factors, some of which the company may not be able to predict and may not be within the company's control. Factors that could cause such differences include, but are not limited to, the existence of deficiencies and/or material weaknesses in the company's internal controls over financial reporting, the company's ability to attract and retain experienced scientists, trends in pharmaceutical and biotechnology companies outsourcing chemical research and development, including continued softness in these markets, sales of Allegra (including any deviations in estimates provided by Sanofi-Aventis) and the company's receipt of significant royalties from the Allegra license agreement, the risk that Allegra may be approved for over-the-counter use, the over-the-counter sale of Claritin, the over-the-counter sale of generic alternatives for the treatment of allergies and the risk of new product introductions for the treatment of allergies, the company's ability to enforce its intellectual property and technology rights, the company's ability to successfully develop novel compounds and lead candidates in its collaborative arrangements, the company's ability to take advantage of proprietary technology and expand the scientific tools available to it, the ability of the company's strategic investments and acquisitions to perform as expected and any goodwill impairment related to such investments and acquisitions, the risks posed by international operations to the company, and the company's ability to effectively manage its growth, as well as those discussed in the company's Annual Report on Form 10-K for the year ended December 31, 2004 as filed with the Securities and Exchange Commission on March 16, 2005, and the company's other SEC filings. Earnings guidance offered by senior management today represents a point-in-time estimate and is based on information as of the date of this press release. Senior management has made numerous assumptions in providing this guidance which, while believed to be reasonable, may not prove to be accurate. Numerous factors, including those noted above, may cause actual results to differ materially from the guidance provided. The company expressly disclaims any current intention or obligation to update the guidance provided or any other forward-looking statement in this press release to reflect future events or changes in facts assumed for purposes of providing this guidance or otherwise affecting the forward-looking statements contained in this press release.
Contact: David Albert, 518-464-0279
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