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Albany Molecular Research, Inc. (AMRI)
Q2 2008 Earnings Call Transcript
August 6, 2008 10:00 am ET
Thomas D'Ambra – Chairman, CEO & President
Mark Frost – CFO
Russell Silverstri – SKIRITAI Capital
Andrew Weinberger – Galleon Capital Management
Tim Evans – Jefferies & Co.
Previous Statements by AMRI
» Albany Molecular Research Q4 2008 Earnings Call Transcript
» Albany Molecular Research, Inc. Q3 2008 Earnings Call Transcript
» Albany Molecular Research Inc. Q1 2008 Earnings Call Transcript
Thank you, Abe [ph]. Good morning, ladies and gentlemen. Welcome to the conference call segment of the Albany Molecular Research 2008 Q2 earnings announcement. This call is a follow up to our press release issued this morning on business wire.
With me is Mark Frost, AMRI's Chief Financial Officer. The second quarter 2008 was a continuation from the first quarter of the solid growth in contract business, along with an important milestone and resulting payment from BMS for the following of the Canadian equivalent of an IMD. Given these results and as we've indicated in the press release, we are raising guidance for the full year on both contract revenue and earnings.
I'm going to turn the call over to Mark for his comments, after which I will have some additional remarks. Mark?
Thank you, Tom. Before we begin, I would like to note that much of our discussion 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 risks 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 filed on March 17th, 2008, and the company's other SEC filings.
While these statements are management's current judgment on the future direction of the Company's business, such risks and uncertainties could cause actual results to differ material 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.
Now I'm going to present financial results for the second quarter along with contract revenue and earnings guidance for the Q3 and full-year 2008. Further details are included in the press release issued earlier today.
AMRI delivered another quarter of strong earnings growth. Growth was fueled by strength in discovery services and development and small scale contract service areas, both of which delivered 40% plus revenue growth for the quarter. Large scale margins were up on a quarter-over-quarter basis on lower revenue due primarily to improved overhead absorption.
Operating highlights and key metrics on a year-over-year basis include adjusted diluted EPS of $0.24 compared to $0.14 on adjusted basis in Q2 2007. 54% contract revenue growth and discovery services, 43% contract revenue growth in small-scale development. $4 million in milestone revenue from Bristol-Myers Squibb as a result of their filing of the Canadian equivalent of an IMD. A 45% improvement in EBITDA from $10.7 million to $15.5 million.
Operating income for our core contract business increased by 91% to $3.2 million. Included in our Q2 GAAP results, is $2 million in charges related to the restructuring of our European operation, which Tom will provide more color on later in the call. During Q2 2008 our phase one, phase two customer pipeline increased by 10% from 50 compounds to 55 compounds.
Now, I'm going to turn to financial results for the Q2. All comparisons on a year-over-year basis. Total revenue was $57.9 million, an increase of 17% compared to $49.4 million in 2007. Total contract revenue was $46.4 million, an increase of 16% compared to 39.9 million in 2007. Total contract revenue encompasses revenue for AMRI's discovery services, development and small scale manufacturing and large scale manufacturing business components.
Contract revenue from discovery services was $14.8 million, an increase of 54% over $9.7 million in 2007. Growth drivers were the US and Singapore as well as our natural product deals. Contract revenue from the development and small scale manufacturing was $15.2 million, an increase of 43% compared to $10.6 million in 2007.
Continued organic demand from specialty pharma, biotech customers in the US was the primary driver of revenue growth as well as our Hyderabad, Indian operation started to make a contribution. Contract revenue from large scale manufacturing was $16.3 million, a decrease of 17% compared to $19.6 million in 2007. The decrease results primarily from lower GE Healthcare shipments and reduced shipments of other commercial products including Vyvanse where there were no shipments in the quarter. We are expecting our next shipments of Vyvanse to be in Q1 next year.
We earned $4 million in milestones from the filing by BMS of the equivalent of an IMD in Canada related to our 2005 licensing agreement. This compares with $1.6 million in milestones in the prior year.
Recurring royalties from Allegra in Q2 2008 were $7.6 million, a decrease of 3% from 2007. AMRI earns royalties from worldwide sales of nonsedating antihistamine Allegra, as well as the authorized generics for patents relating to the active ingredient.
Net income in the Q2 2008 on adjusted basis was $7.7 million or $0.24 per diluted share compared to $4.6 million or $0.14 per diluted share in 2007. Net income in the Q2 of 2008 includes $2 million of charges or $0.06 per diluted share related to the structuring of our European operations.