What happened
Shares of Avid Bioservices (CDMO 0.41%) were down more than 12% Thursday afternoon after falling as much as 17% earlier in the day. The drop came after the biologics contract development and manufacturing organization (CDMO) released fourth-quarter and full-year fiscal 2023 earnings. Avid's stock is down more than 2% so far this year.
So what
The healthcare company's shares fell when its earnings per share (EPS) dropped for both the fourth quarter and the year. It reported fourth-quarter EPS of $0.00, down from $1.65 in the fourth quarter of fiscal 2022. Full-year EPS was $0.01, compared to EPS of $1.84 for 2022. The reasons given for the lowered EPS were increased expenses for compensation and benefits, legal, accounting, and other professional services.
There were some positive notes in the report. The company cited increased manufacturing runs and process development services for boosting revenue. Fourth-quarter revenue was $39.8 million, up 28% year over year, while yearly revenue was up 25% to $149.3 million.
Now what
Investors are concerned with the company's declining margins and a somewhat underwhelming 2024 revenue forecast of between $145 million and $165 million. They may have to be patient as the company's two big projects should eventually pay off. It has a mammalian cell manufacturing and process development facility in the works, which Avid said could add $120 million in annual revenue. The company also has a cell and gene therapy facility expansion that is scheduled to finish later this year.
The high cost and failure rate of developing drugs has given rise to more specialization in the industry and this helps Avid and other CDMOs. According to one report, the pharmaceutical CDMO industry is expected to have a 7% compound annual growth rate over the next seven years.
