Albany Molecular Research Inc. (AMRI)
Q1 2008 Earnings Call
May 5, 2008 10:00 am ET
Thomas D'Ambra - Chairman, President and CEO
Mark Frost - CEO
Previous Statements by AMRI
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Thank you, Tamara. Good morning ladies and gentlemen, welcome to the conference call segment of AMRI's first quarter 2007 earnings announcement. This call is a follow-up to our press release issued earlier this morning on Business Wire.
With me is Mark Frost, AMRI's Chief Financial Officer. Mark will discuss financial results and guidance, I would then provide additional comments. Mark?
Thank you, Tom. Before we begin, I would like to note that much of our discussion today might be termed forward-looking other than historical facts our statements may contain projections, estimates and other forward-looking statements that involve a number of risk and uncertainties including those discussed in the company's annual report on Form 10-K for the year ended December 31, 2007 as filed with the Securities and Exchange Commission on March 17, 2008 and the company's other SEC Filings.
While these statements represent managements current judgment on the future direction of the company's business. Such risks and uncertainties could cause actual results to differ materially from any future performance suggested herein. The company undertakes no obligation to release publicly the results of any revisions to these forward-looking statements to reflect events or circumstances arising after the date here.
I am now going to present financial results for the first quarter, an updated financial guidance for the second quarter and full year 2008. Further details are included in our press release issued earlier today over Business Wire.
We delivered a very positive quarter with improved profitability in our core contract services business. I'd like to underscore some operating highlights and key metrics on a year-over-year basis. These include over 30% contract revenue growth in our Discovery/ Development/Small Scale Lab business. Strong improvement in DDS gross margin sequentially by 400 basis points to 32%, compared with 28% in quarter four 2007 and an improvement of 500 basis points compared with 27% reported in quarter one 2007.
In addition, despite a soft production quarter at our US large scale manufacturing, improvement in DDS and strong Allegra sales enabled us to match our prior year performance and AMRI delivered adjusted EPS of $0.10.
Turning to the financial results for the first quarter of 2008, all comparisons are on a year-over-year basis. Total revenue was $53.6 million, an increase of 11% compared to $48.4 million in 2007. Total contract revenue was $45.3 million, an increase of 10%, compared to $41.2 million in 2007. Total contracts revenue encompasses revenue from AMRI’s Discovery Services, Development/Small Scale Manufacturing, and Large Scale Manufacturing business components.
Contract revenue from Discovery Services was $13.3 million, an increase of 34% from $9.9 million in 2007. Growth in this area was driven by all demand in all of our Discovery Services facilities including the US, Europe and Singapore. In particular, we saw a return of large pharmas utilizing our US medicinal chemistry service, as well as we realized further traction in selling the capabilities of our Singapore research center.
Contract revenue from Development/Small Scale Manufacturing was $13.2 million, an increase of 29% compared to $10.3 million in 2007. Most of the growth came from continued organic demand from specialty pharma biotech customers in the US, as well as the growing acceptance of our new research center in Hyderabad, India, which is now beginning to book additional work from US and European customers.
Contract revenue for Large Scale Manufacturing was $18.7 million, a decrease of 11% compared to $21 million in 2007. As discussed on our quarter four 2007 earnings call, a few items contributed to this decrease. First as expected, our other legacy commercial products did not experience reorders, which contributed $5 million of quarter one 2007 revenues. Also the DEA quota issue we previous discussed related to Vyvanse continued in quarter one 2008, as we had expected.
As we have stated in the past, customer delivery patterns cause greater volatility in revenue for this business segment.
With 16 customer compounds in late stage clinical trials, including one of these compounds undergoing validation production runs in 2008, and another readying for a possible commercial launch in late 2008, or early 2009, we remain optimistic about the long-term potential for our manufacturing capabilities and capacity. As the market continues to look for high quality and consistent manufacturers with global capabilities, we remain confident we can secure further commercial supply agreements, as some of these products transition into commercial production.
Recurring royalties from Allegra were $8.2 million, which is up 15% from $7.1 million in 2007. AMRI earns royalties from worldwide sales of the non-sedating antihistamine Allegra, as well as the authorized generic for patents relating to the active ingredient. The Allegra product experienced strong growth in international markets, which contributed to the overall positive royalty performance versus 2007.
Adjusted net income in the first quarter of 2008, which excludes the $1.6 million or $0.05 per diluted share adjustment to decrease income tax expense, due to the resolution of an outstanding income tax examination was $3.1 or $0.10 per diluted share, compared to net income $3.2 million or $0.10 per diluted share in 2007.