ALBANY, N.Y. /PRNewswire/ -- AMRI
(NASDAQ: AMRI) today reported financial and operating results for
the second quarter ended June 30, 2015.
Highlights:
"We
are very pleased to present another strong financial quarter, with
all our divisions achieving excellent results,"
said William S. Marth, AMRI's president and chief executive
officer. "Notably, recent acquisitions, combined with the cost
reduction initiatives and efficiency efforts we've made to date,
are contributing to continued strong contract margin
performance.
The
recent addition of Gadea Pharmaceutical Group will significantly
expand our capabilities in technically complex active
pharmaceutical ingredients and will extend our reach into many new
markets. Based on our strong pipeline of business and the addition
of Gadea, we remain confident that the positive trends we are
seeing will continue in the second half of the year and look
forward to providing investors with our outlook for the remainder
of the year in mid-September."
Second Quarter 2015 Results
Total
revenue for the second quarter of 2015 was $89.5 million, an increase of 31% compared to total
revenue of$68.2 million reported in the second quarter of
2014.
Total
contract revenue for the second quarter of 2015
was $85.2 million, an increase of 39% compared to total
contract revenue of $61.5 million reported in the second quarter of
2014. Adjusted contract margins were 26% for the second quarter of
2015, compared with 27% for the second quarter of 2014. Margins
benefited from recent acquisitions and the impact of the cost
reduction initiatives and facility optimization activities, offset
by product mix within the Active Pharmaceutical Ingredients (API)
segment. Adjusted contract margins exclude purchase accounting
depreciation and amortization, as well as share-based compensation
expense that are included under U.S. GAAP. For a
reconciliation of U.S. GAAP contract margins as reported to
adjusted contract margins for the 2015 and 2014 reporting periods,
please see Table 1 at the end of press release.
Royalty revenue in the second quarter of 2015 was $4.3 million, a decrease of 36% from $6.7 million in the second quarter of 2014 due
primarily to lower royalties on Allegra (fexofenadine) products.
Royalty revenue for the second quarter of 2015
includes $1.8 million of royalties from the fexofenadine
products and $2.5 million from the net sales of certain
amphetamine salts sold by Allergan (formerly Actavis).
Net
income under U.S. GAAP was $2.3 million, or $0.07 per diluted share, in the second quarter of
2015, compared to U.S. GAAP net income of $3.7 million, or $0.11 per diluted share for the second quarter of
2014. Net income on an adjusted non-GAAP basis in the second
quarter of 2015 was $7.4 million or $0.22 per diluted share, compared to adjusted net
income of $7.2 million or $0.22 per diluted share for 2014. For a
reconciliation of U.S. GAAP net income and earnings per diluted
share as reported to adjusted net income and earnings per diluted
share for the 2015 and 2014 reporting periods, please see Tables 2
and 3 at the end of this press release.
Beginning in the second quarter 2015, AMRI implemented an updated
non-GAAP definition, which includes the impact of cash interest
expense and excludes the impact of non-cash stock-based
compensation, both of which had previously been excluded and
included, respectively in the Company's calculations of these
non-GAAP financial measures. These changes have redefined non-GAAP
cost of contract revenue, SG&A, interest expense, net income,
and EBITDA financial measures from the prior non-GAAP definition.
We believe these financial measures provide investors with
appropriate non-GAAP measurements that emphasize the cash earnings
potential of the business and better reflect the underlying
financial performance of the business. Historic non-GAAP reported
operating results have been adjusted to match this new
definition.
Year-to-Date Results
Total
revenue for the six-month period ended June 30, 2015 was $171.4 million, an increase of 34% compared to total
revenue of $127.5 million reported in the second quarter of
2014.
Total
contract revenue for the first six months of 2015
was $160.4 million, an increase of 43% compared to total
contract revenue of $112.5 million in 2014. Adjusted contract margins
were 25% for the first six months of 2015, compared with 23% for
2014.
Royalty revenue in the first six months of 2015
was $11.0 million, a decrease of 27% from $15.0 million in 2014 due primarily to lower
royalties on Allegra (fexofenadine) products. Royalty revenue for
the first six months of 2015 includes $5.6 million of royalties from the fexofenadine
products and $5.4 million from the net sales of certain
amphetamine salts sold by Allergan.
Net
income under U.S. GAAP was $0.1 million, or $0.00 per diluted share, in the first six months of
2015, compared to U.S. GAAP net income of $7.2 million, or $0.22 per diluted share in 2014. Net income on an
adjusted non-GAAP basis in the first six months of 2015
was $13.8 million or $0.42 per diluted share, compared to adjusted net
income of $12.3 million or $0.38 per diluted share for 2014.
Segment Results
Drug
Discovery Services (DDS)
Three
Months Ended
Six Months
Ended
June
30,
June
30,
(Unaudited; $ in
thousands)
2015
2014
2015
2014
DDS Contract
Revenue
$ 23,363
$ 19,125
$ 42,627
$ 38,115
Cost of Contract
Revenue
17,438
15,428
32,194
31,055
Contract Gross
Profit
5,925
3,697
10,433
7,060
Contract Gross
Margin
25.4%
19.3%
24.5%
18.5%
Adjusted Contract
Gross Profit (1) (2)
6,493
3,823
11,157
7,311
Adjusted Contract
Gross Margin (1) (2)
27.8%
20.0%
26.2%
19.2%
(1) Refer to Table
1 included in this release for the reconciliation of U.S. GAAP
contract gross profit and contract gross margin to
adjusted contract
gross profit and adjusted contract gross margin as a percentage of
contract revenue.
(2) A portion of
the 2014 amounts were reclassified from DDS to API to better align
business activities within our reporting segments.
Discovery and Development Services (DDS) contract revenue for the
second quarter of 2015 increased 22% to$23.4 million, compared to $19.1 million the second quarter of 2014, primarily
due to $4.1 million of incremental revenues from the
acquisition of SSCI in February 2015. DDS adjusted contract margins increased to
28% from 20% in the second quarter of 2014, driven by the margins
realized on SSCI revenues, as well as the benefits of cost
reduction initiatives and facility optimization.
For
the first half of 2015, DDS contract revenue increased 12%
to $42.6 million from $38.1 million in 2014. Incremental SSCI revenues and
increased Singapore and insourcing revenues were partially
offset by decreased U.S. discovery and development revenues. DDS
adjusted gross margins increased to 26% in 2015 from 19% in 2014,
driven by the margins realized on SSCI revenues, as well as the
benefits of cost reduction initiatives and facility
optimization.
Active
Pharmaceutical Ingredients (API)
Three
Months Ended
Six Months
Ended
June
30,
June
30,
(Unaudited; $ in
thousands)
2015
2014
2015
2014
API Contract
Revenue
$ 39,997
$ 39,610
$ 77,845
$ 69,370
Cost of Contract
Revenue
28,434
26,469
57,016
49,714
Contract Gross
Profit
11,563
13,141
20,829
19,656
Contract Gross
Margin
28.9%
33.2%
26.8%
28.3%
Adjusted Contract
Gross Profit (1)
11,776
13,261
21,219
19,801
Adjusted Contract
Gross Margin (1)
29.4%
33.5%
27.3%
28.5%
(1) Refer to Table
1 included in this release for the reconciliation of U.S. GAAP
contract gross profit and contract gross margin to
adjusted contract
gross profit and adjusted contract gross margin as a percentage of
contract revenue.
(2) A portion of
the 2014 amounts were reclassified from DDS to API to better align
business activities within our reporting segments.
API
contract revenue for the second quarter of 2015 was consistent with
2014. API adjusted contract margins for the second quarter of 2015
decreased to 29% from 34% in the second quarter of 2014, due to the
mix of business within the segment.
For
the first half of 2015, API contract revenue increased 12%
to $77.8 million from $69.4 million in 2014, due primarily to an increase
in commercial product sales and a full year of revenue from
Cedarburg Pharmaceuticals, which was acquired in April 2014.
Excluding the acquisition of Cedarburg, API contract revenue
increased 8% compared to the first half of 2014. API adjusted gross
margins decreased to 27% in 2015 from 29% in 2014, due to the mix
of business within the segment.
Drug
Product Manufacturing (DPM)