Societal CDMO, Inc. (“Societal”; NASDAQ: SCTL), a contract
development and manufacturing organization (CDMO) dedicated to
solving complex formulation and manufacturing challenges primarily
in small molecule therapeutic development, today reported financial
results for the first quarter ended March 31, 2023.
“The company’s many achievements in 2022 placed
Societal in an overall stronger financial position and paved the
way for growth in 2023 and beyond. In the first quarter, we
continued to build on that momentum,” said David Enloe, chief
executive officer of Societal CDMO. “During the first quarter, we
won multiple key projects that we expect will continue to feed our
backlog, our manufacturing pipeline and our capacity utilization
during the year. Notable among these is the project recently
announced with a new customer, Longboard Pharmaceuticals. This
project will span a range of Societal’s offerings including
technology transfer and analytical method validation activities to
support Longboard’s lead asset, LP352, a 5-HT2C receptor
superagonist.
“Subsequent to the quarter end, we also
announced that the company had signed work order extensions with
multiple existing customers. While securing new customers remains
an important objective for the company, being awarded expansion
projects by our existing customers is an equally important area of
growth for the company. During the first quarter, we signed
multiple work expansion agreements spanning the company’s
analytical services, to manufacturing, to product encapsulation and
packaging.
“Another important event for Societal during the
first quarter was the approval by the FDA of the company as a
manufacturer of a commercial tablet product. This approval is the
first for Societal for the manufacture of a commercial tablet,
reflecting both the company’s ongoing expansion of capabilities as
well as our success in building Societal’s reputation as a
CDMO-of-choice. We are delighted to have been entrusted with the
production of this important product, and we expect to begin
manufacturing it later this year in our Gainesville, Georgia
facility.
“This continued momentum, combined with our line
of sight into the balance of the year, give us confidence in
reaffirming our 2023 revenue guidance of between $94 and $100
million, with an EBITDA, as adjusted*, of between $15 and $18
million.”
First Quarter 2023 and Other Recent
Developments
Business Development:
- New and expanded customer projects. During the
quarter, the company signed $4.8 million in sales by adding four
new customers and expanded project agreements across 12 existing
programs, all while maintaining the company’s sales win rate at
elevated levels. The new business includes formulation and
analytical method development, cGMP manufacturing, stability
studies, packaging and logistics services.
Corporate Events:
- Granted FDA approval for
manufacture of first commercial tablet product. During the
quarter, the United States Food and Drug Administration (FDA)
approved the company as a manufacturer of a commercial tablet
product. This FDA approval adds to the company’s FDA approved
product armamentarium and represents the first commercial tablet
that Societal has been approved to manufacture, and the company
will generate commercial manufacturing revenue from the product at
its Gainesville, Georgia facilities later this year.
- Comments to Lannett
Restructuring Support Agreement and bankruptcy filing.
Societal CDMO owns the NDA and the drug master file for Verapamil,
a long-approved calcium channel blocker for the treatment of
hypertension. Lannett has served as the company’s marketing partner
for the Verapamil PM and Verelan SR formulations since 2014. In
July 2022, the company entered into an amendment to its license and
supply agreement with Lannett which provided Societal CDMO with
improved overall economics, increases in manufacturing prices, and
potential new GMP manufacturing agreements targeting injectable
products for multiple additional Lannett development projects. In
addition, the agreement provided Societal CDMO with options to
engage with alternative marketing partners under certain
conditions.Societal CDMO believes that Lannett’s recent
Restructuring Support Agreement positions Lannett to continue to
execute as a marketing partner to Societal CDMO in the near-term.
However, it is important to note that Societal CDMO is first and
foremost committed to protecting and expanding the distribution of
the company’s Verapamil PM and Verelan SR products. For that
reason, Societal CDMO has been carefully monitoring Lannett’s
circumstances over the past 12 months, and expects that, should it
be necessary, any transition from Lannett to another marketing
partner would take place with limited disruption to the sales of
Verapamil PM and Verelan SR.
Financial Results for the Three Months
Ended March 31, 2023
Revenues for the quarter ended March 31,
2023 were $21.5 million. This represents a slight increase compared
to revenues of $21.2 million recorded during the prior year period.
The increase of $0.3 million was primarily driven by an increase in
revenue from the company’s largest commercial customer Teva,
correlated with pull through in demand resulting from market share
gains against the sole competitor for the Verapamil SR products,
partially offset by lower revenues from product sales to Lannett
due to timing of customer orders.
Cost of sales for the quarter ended
March 31, 2023 was $19.3 million compared to $16.2 million for
the comparable period of 2022. The increase of $3.1 million was
primarily due to mix of revenue and related cost absorption,
including increased costs associated with the new aseptic
fill/finish line as we expand capabilities and increased material
costs.
Selling, general and administrative expenses for
the first quarter of 2023 were $4.6 million, compared to $5.7
million recorded in the 2022 period. The decrease of $1.1 million
was primarily related to lower public company costs and
administrative costs than the prior year.
Interest expense was $2.1 million for the three
months ended March 31, 2023, a decrease compared to $3.4
million for the comparable period of 2022. The decrease of $1.3
million was primarily due to a significantly reduced amount of
aggregate principal and lower interest rates under the company's
refinanced debt as compared to the borrowings outstanding during
the period ended March 31, 2022.
For the quarter ended March 31, 2023, the
company recorded a net loss of $4.7 million or $0.06 per diluted
share, as compared to a net loss of $4.3 million or $0.08 per
diluted share, for the comparable period of 2022. EBITDA, as
adjusted* for the period was $0.6 million compared to $2.8 million
in the prior year period. The $2.2 million decrease in EBITDA is
primarily due to mix of revenue and related cost absorption offset
by reduced selling, general and administrative costs.
* EBITDA, as adjusted is non-GAAP financial
measures (see reconciliation of non-GAAP financial measures at the
end of this release).
Non-GAAP Financial Measures
To supplement Societal’s financial results
determined by U.S. generally accepted accounting principles
(“GAAP”), the company monitors certain non-GAAP information for the
business, including EBITDA, as adjusted. The company believes that
these non-GAAP financial measures are helpful in understanding the
business as they are useful to investors in allowing for greater
transparency of supplemental information used by management. These
measures are used by investors, as well as management in assessing
the company’s performance. Non-GAAP financial measures should be
considered in addition to, but not as a substitute for, reported
GAAP results. Further, Non-GAAP financial measures, even if
similarly titled, may not be calculated in the same manner by all
companies, and therefore should not be compared. Please see the
section of this press release titled “Reconciliation of GAAP to
Non-GAAP Financial Measures” for a reconciliation of non-GAAP
financial measures to their most directly comparable GAAP
measures.
Webcast
Societal management will be hosting a webcast
today, May 10, 2023, beginning at 4:30 p.m. ET. The webcast may be
accessed via "Investor Events" in the Investor section of the
company's website, https://ir.societalcdmo.com/events. An archived
webcast will be available on the company's website approximately
two hours after the event and will be available for 30 days.
About Societal CDMO
Societal CDMO (NASDAQ: SCTL) is a bi-coastal
contract development and manufacturing organization (CDMO) with
capabilities spanning pre-Investigational New Drug (IND)
development to commercial manufacturing and packaging for a wide
range of therapeutic dosage forms with a primary focus on small
molecules. With an expertise in solving complex manufacturing
problems, Societal is a leading CDMO providing therapeutic
development, end-to-end regulatory support, clinical and commercial
manufacturing, aseptic fill/finish, lyophilization, packaging and
logistics services to the global pharmaceutical market.
In addition to our experience in handling DEA
controlled substances and developing and manufacturing
modified-release dosage forms, Societal has the expertise to
deliver on our clients’ pharmaceutical development and
manufacturing projects, regardless of complexity level. We do all
of this in our best-in-class facilities, which total 145,000 square
feet, in Gainesville, Georgia and San Diego, California.
Societal CDMO: Bringing Science to Society. For
more information about Societal’s customer solutions, visit
societalcdmo.com.
Cautionary Statement Regarding Forward
Looking Statements
This press release includes forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934.
These statements, among other things, relate to the company’s
financial guidance; ability to manage costs and to achieve its
financial goals; to operate under lending covenants; to close its
land sale transaction on the anticipated timeline; and to maintain
relationships with CDMO commercial partners and develop additional
commercial partnerships. The words "anticipate", "believe",
"correlate", "could", "estimate", “upcoming”, "expect", "intend",
"may", "plan", "predict", "project", "will" and similar terms and
phrases may be used to identify forward-looking statements in this
press release. Our operations involve risks and uncertainties, many
of which are outside our control, and any one of which, or a
combination of which, could materially affect our results of
operations and whether the forward-looking statements ultimately
prove to be correct. Factors that could cause the company’s actual
outcomes to differ materially from those expressed in or underlying
these forward-looking statements include, but are not limited to,
unstable market and macroeconomic conditions, including any adverse
impact on the customer ordering patterns or inventory rebalancing
or disruption in raw materials or supply chain; demand for the
company’s services, which depends in part on customers’ research
and development funding, their clinical plans and the market
success of their products; customers' changing inventory
requirements and manufacturing plans; customers and prospective
customers decisions to move forward with the company’s
manufacturing services; the average profitability, or mix, of the
products the company manufactures; the company’s ability to enhance
existing or introduce new services in a timely manner; fluctuations
in the costs, availability, and suitability of the components of
the products the company manufactures, including active
pharmaceutical ingredients, excipients, purchased components and
raw materials, or the company’s customers facing increasing or new
competition; the Company’s ability to collect on customers’
receivable balances; the extent to which health epidemics and other
outbreaks of communicable diseases could disrupt our operations;
and other risks and uncertainties discussed in our filings with the
Securities and Exchange Commission at www.sec.gov. These
forward-looking statements are based on information currently
available to us, and we assume no obligation to update any
forward-looking statements except as required by applicable
law.
|
SOCIETAL
CDMO, INC. AND SUBSIDIARIES Summary of Operating Results
(Unaudited) |
|
|
Three months ended March 31, |
|
|
|
|
|
|
|
(dollars in thousands, except per share
amounts) |
2023 |
|
|
2022 |
|
|
Change |
|
|
% |
|
Revenue |
$ |
21,527 |
|
|
$ |
21,194 |
|
|
$ |
333 |
|
|
2 |
% |
Cost of sales |
|
19,279 |
|
|
|
16,114 |
|
|
|
3,165 |
|
|
20 |
% |
Gross margin |
|
10 |
% |
|
|
24 |
% |
|
|
|
Selling, general and administrative expenses |
|
4,662 |
|
|
|
5,710 |
|
|
|
(1,048 |
) |
|
-18 |
% |
Amortization of intangible assets |
|
184 |
|
|
|
221 |
|
|
|
(37 |
) |
|
-17 |
% |
Total operating expenses |
|
24,125 |
|
|
|
22,045 |
|
|
|
2,080 |
|
|
9 |
% |
Operating loss |
|
(2,598 |
) |
|
|
(851 |
) |
|
|
(1,747 |
) |
|
205 |
% |
Interest expense |
|
(2,145 |
) |
|
|
(3,418 |
) |
|
|
1,273 |
|
|
-37 |
% |
Interest income |
|
131 |
|
|
|
5 |
|
|
|
126 |
|
|
2520 |
% |
Loss before income taxes |
|
(4,612 |
) |
|
|
(4,264 |
) |
|
|
(348 |
) |
|
8 |
% |
Income tax expense |
|
72 |
|
|
|
— |
|
|
|
72 |
|
|
n/a |
|
Net loss |
$ |
(4,684 |
) |
|
$ |
(4,264 |
) |
|
$ |
(420 |
) |
|
10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share, diluted |
$ |
(0.06 |
) |
|
$ |
(0.08 |
) |
|
$ |
0.02 |
|
|
-25 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA, as adjusted* |
$ |
609 |
|
|
$ |
2,761 |
|
|
$ |
(2,152 |
) |
|
-78 |
% |
* EBITDA, as adjusted, is a non-GAAP financial
measure (see reconciliation of non-GAAP financial measures at the
end of this release).
SOCIETAL CDMO, INC. AND
SUBSIDIARIES Reconciliation of GAAP to Non-GAAP Measures
(Unaudited)
To supplement the company’s financial results
determined by U.S. generally accepted accounting principles
(“GAAP”), the company has disclosed in the tables below the
following non-GAAP information about EBITDA, as adjusted.
EBITDA, as adjusted, is net income or loss as
determined under GAAP excluding interest expense, income tax
expense, depreciation, amortization, non-cash stock-based
compensation, costs related to the acquisition and integration of
IriSys, and costs related to the debt refinancing.
The company believes that non-GAAP financial
measures are helpful in understanding its business as it is useful
to investors in allowing for greater transparency of supplemental
information used by management. EBITDA, as adjusted is used by
investors, as well as management in assessing the company’s
performance. Non-GAAP financial measures should be considered in
addition to, but not as a substitute for, reported GAAP results.
Further, Non-GAAP financial measures, even if similarly titled, may
not be calculated in the same manner by all companies, and
therefore should not be compared.
First quarter results
|
Three months ended March 31, |
|
(amounts in
thousands) |
2023 |
|
|
2022 |
|
Net loss (GAAP) |
$ |
(4,684 |
) |
|
$ |
(4,264 |
) |
Interest
expense, net |
|
2,014 |
|
|
|
3,413 |
|
Income tax
expense |
|
72 |
|
|
|
— |
|
Depreciation |
|
1,905 |
|
|
|
1,792 |
|
Amortization
of intangible assets |
|
184 |
|
|
|
221 |
|
Stock-based
compensation |
|
1,044 |
|
|
|
1,479 |
|
Refinancing,
deal and integration costs (a) |
|
74 |
|
|
|
120 |
|
EBITDA, as adjusted |
$ |
609 |
|
|
$ |
2,761 |
|
2023 guidance compared to 2022 full year
results
|
Year ending / ended December 31, |
|
(amounts in
thousands) |
2023 |
|
|
2022 |
|
|
(estimate) |
|
|
|
|
Net loss
(GAAP) |
$(7,500) -
(4,500) |
|
|
$ |
(19,881 |
) |
Interest expense, net |
|
8,200 |
|
|
|
14,059 |
|
Income tax
expense |
|
100 |
|
|
|
1,105 |
|
Depreciation |
|
8,200 |
|
|
|
7,413 |
|
Amortization
of intangible assets |
|
900 |
|
|
|
905 |
|
Stock-based
compensation |
|
5,000 |
|
|
|
5,426 |
|
Refinancing,
deal and integration costs (a) |
|
100 |
|
|
|
7,774 |
|
EBITDA, as adjusted |
$15,000 - 18,000 |
|
|
$ |
16,801 |
|
|
a) Costs related to the December 2022 debt refinancing and the
acquisition and integration of IriSys. |
Contacts
Stephanie Diaz (Investors)
Vida Strategic Partners
(415) 675-7401
sdiaz@vidasp.com
Tim Brons (Media)
Vida Strategic Partners
(415) 675-7402
tbrons@vidasp.com
Ryan D. Lake (CFO)
Societal CDMO
(770) 531-8365
ryan.lake@societalcdmo.com
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