Q2 2021 Highlighted by Revenues of
Multiple New Business Agreements Continue to Expand and Diversify Customer Base and Pipeline
Company Closes Public Financing Raising Net Proceeds of
Company to Host Conference Call Today at
“This is a very exciting time at Recro, and today, the company is pleased to report strong second quarter earnings. During the quarter, with the addition of new projects for Astex Pharmaceuticals and Ensysce Biosciences, as well as a new unnamed customer, we continued to expand and diversify our customer base, reduce our portfolio concentration risk, strengthen both our top-line and margins, and continue to generate strong positive cash flow as we progress toward long-term profitability,” said
“Recro also significantly strengthened its financial position during the period with the closing of an oversubscribed underwritten public offering in May that raised net proceeds of
“And finally, during and subsequent to the second quarter, the company continued to expand and enhance the business through leadership and talent. In June, Recro announced the appointment of
“In closing, I believe the last six months, and Q2 in particular, have been validating for the company. We continue to execute our newly implemented strategy and have seen early and impressive results. Our team continues to grow, bringing superb CDMO experience and other talent critical to building an exceptional organization. Today, we have a stronger, more diverse customer base and a portfolio spanning the entire biopharma product life cycle, from preclinical projects to mature commercial programs. Our financial status has improved significantly since the end of fiscal 2020 with the completion of a successful financing, and the restructuring and reduction of the company’s outstanding debt. And finally, we continue to make progress enhancing the company’s capabilities and competencies, which will to be critical to our efforts to drive continued growth of our business, both through organic and inorganic activities.”
Second Quarter 2021 and Other Recent Highlights
Strengthened leadership and organizational improvements:
- In June, Recro announced the appointment of
Laura L. Parks , Ph.D. to its board of directors.Dr. Parks recently served on the executive leadership team at Patheon, a global biopharma CDMO, until its acquisition by Thermo Fischer Scientific in 2017. In this role, she led strategic commercial and operational initiatives including development and execution of an end-to-end pharmaceutical services offering, as well as global strategic enterprise accounts organization. Prior to Patheon,Dr. Parks served as president ofDSM Pharmaceuticals and vice president of Solae, a division of DuPont.
- In July, Recro announced the appointment of
Erica Raether as the company’s inaugural vice president of people, culture and ESG. This new position will be critical given Recro’s commitment to achieving sustainable growth and profitability, and doing so with a mindset towards advancing our diversity, equity and inclusion efforts as well as running our operations in a sustainable, responsible manner.Ms. Raether most recently served as theU.S. vice president of human resources and was a member of the global leadership team at Ajinomoto Bio Pharma Services, the global CDMO arm of Ajinomoto Co., which employs approximately 1,800 individuals and operates inEurope ,India ,Japan and the US.
New business growth:
- New manufacturing customers. During the second quarter, the company signed a development and cGMP manufacturing agreement with a new, unnamed client. Under the terms of the agreement, Recro will provide early-stage development and manufacturing services to support the client’s ongoing clinical development of an orally administered, minimally-absorbed investigational compound. The company also announced the signing of a new development agreement with
Astex Pharmaceuticals, Inc. , a leading developer of novel therapeutics for cancer.
- Existing customer project expansions. During the second quarter, the company announced the signing of additional agreements with an existing customer, Ensysce Biosciences, Inc. Under these new agreements, Recro will provide early-stage development and manufacturing services to support two of Ensysce’s development programs. Recro and Ensysce have already commenced the initial phase of these projects.
- Clinical trial support services. During the second quarter, the company expanded the clinical capabilities of its growing Clinical Trial Services (CTS) offerings. Included among the newly added CTS capabilities are clinical-scale sachet and blister packaging for clinical trial pharmaceuticals. These services provide a new offering with which to support the company’s existing clients, and attract new clients. Further, the shorter sales and earnings cycles of these services allow for a more rapid and efficient contribution to revenue.
During the quarter, Recro also successfully established a relationship with a European Union Qualified Person (or QP) for its CTS offerings following a successful review process. A QP declaration is required for any biotechnology or pharmaceutical company seeking to conduct a clinical trial inEurope using a drug product manufactured in a non-EU country. Based on the results of the QP’s audit, the QP organization has agreed that it can represent Recro’s clients for release of materials in the EU, allowing Recro, for the first time, to support theEurope -based clinical trial efforts of its customers.
Other corporate and financial developments:
- Closed public underwritten offering in
May 2021 . During the second quarter, Recro closed an underwritten public offering of 15,333,332 shares of its common stock, including 1,999,999 shares sold pursuant to the underwriters’ full exercise of their option to purchase additional shares to cover over-allotments, at a public offering price of$2.25 per share. The net proceeds to Recro from this offering were approximately$32.1 million . Recro intends to use the net proceeds from the offering for general corporate purposes, which may include repayment of a portion of outstanding debt and future acquisitions.
Financial Results for the Three Months Ended
At
Revenues for the quarter ended
Cost of sales for the quarter ended
Selling, general and administrative expenses for the second quarter were
Interest expense was
For the quarter ended
Financial Results for the Six Months Ended
Revenue for the six months ended
Cost of sales for the six months ended
Selling, general and administrative expenses for the six months ended
Interest expense was
For the six months ended
*EBITDA, as adjusted is a non-GAAP financial measure (see reconciliation of non-GAAP financial measures in this release).
Non-GAAP Financial Measures
To supplement our financial results determined by
Conference call and webcast
Recro management will be hosting a conference call and webcast today beginning at
About Recro
Recro (
In addition to our experience in handling DEA controlled substances and developing and manufacturing modified release oral solid dosage forms, Recro 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 120,000 square feet, in
For more information about Recro’s CDMO solutions, visit recrocdmo.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 increased leverage and associated lending covenants; to pay its debt under its credit agreement and to maintain relationships with CDMO commercial partners and develop additional commercial partnerships. The words "anticipate", "believe", "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 the ongoing economic and social consequences of the COVID-19 pandemic, 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 and the clinical plans and 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. These forward-looking statements should be considered together with the risks and uncertainties that may affect our business and future results presented herein along with those risks and uncertainties discussed in our filings with the
Consolidated Balance Sheets
(Unaudited)
(amounts in thousands, except share and per share data) | |||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 45,724 | $ | 23,760 | |||
Accounts receivable | 12,813 | 9,033 | |||||
Contract asset | 7,350 | 7,330 | |||||
Inventory | 7,878 | 11,612 | |||||
Prepaid expenses and other current assets | 2,028 | 2,334 | |||||
Total current assets | 75,793 | 54,069 | |||||
Property, plant and equipment, net | 41,867 | 43,841 | |||||
Intangible assets, net | — | 700 | |||||
4,319 | 4,319 | ||||||
Other assets | 451 | 486 | |||||
Total assets | $ | 122,430 | $ | 103,415 | |||
Liabilities and shareholders’ equity (deficit) | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 1,155 | $ | 1,804 | |||
Current portion of debt | — | 1,474 | |||||
Accrued expenses and other current liabilities | 4,148 | 4,525 | |||||
Total current liabilities | 5,303 | 7,803 | |||||
Debt, net | 89,780 | 108,097 | |||||
Other liabilities | 931 | 1,615 | |||||
Total liabilities | 96,014 | 117,515 | |||||
Commitments and contingencies | |||||||
Shareholders’ equity (deficit): | |||||||
Preferred stock, | — | — | |||||
Common stock, | 465 | 286 | |||||
Additional paid-in capital | 265,862 | 219,998 | |||||
Accumulated deficit | (239,911 | ) | (234,384 | ) | |||
Total shareholders’ equity (deficit) | 26,416 | (14,100 | ) | ||||
Total liabilities and shareholders’ equity (deficit) | $ | 122,430 | $ | 103,415 |
Consolidated Statements of Operations
(Unaudited)
Three months ended | Six months ended | ||||||||||||||
(amounts in thousands, except share and per share data) | 2021 | 2020 | 2021 | 2020 | |||||||||||
Revenue | $ | 18,017 | $ | 15,522 | $ | 34,820 | $ | 37,299 | |||||||
Operating expenses: | |||||||||||||||
Cost of sales (excluding amortization of intangible assets) | 12,334 | 11,634 | 26,671 | 29,888 | |||||||||||
Selling, general and administrative | 3,787 | 4,259 | 8,470 | 9,705 | |||||||||||
Amortization of intangible assets | 54 | 646 | 700 | 1,292 | |||||||||||
Total operating expenses | 16,175 | 16,539 | 35,841 | 40,885 | |||||||||||
Operating income (loss) | 1,842 | (1,017 | ) | (1,021 | ) | (3,586 | ) | ||||||||
Interest expense | (3,960 | ) | (4,995 | ) | (7,858 | ) | (10,118 | ) | |||||||
Gain on extinguishment of debt | 3,352 | — | 3,352 | — | |||||||||||
Net income (loss) | $ | 1,234 | $ | (6,012 | ) | $ | (5,527 | ) | $ | (13,704 | ) | ||||
Income (loss) per share, basic and diluted | $ | 0.03 | $ | (0.25 | ) | $ | (0.16 | ) | $ | (0.58 | ) | ||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 39,018,730 | 23,577,255 | 34,403,935 | 23,486,011 | |||||||||||
Diluted | 39,352,054 | 23,577,255 | 34,403,935 | 23,486,011 |
Reconciliation of GAAP to Non-GAAP Measures
(Unaudited)
To supplement our financial results determined by
EBITDA, as adjusted, is net income or loss as determined under GAAP excluding interest, depreciation, amortization, non-cash stock-based compensation and charges related to reductions in force as well as the impact of Accounting Standards Update 2014-09 in order to remove the impact of the timing of revenue recognized from profit-sharing arrangements upon transfer of control of the product, which more closely aligns revenue with expected cash receipt.
We believe that non-GAAP financial measures are helpful in understanding our 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 our 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.
Second quarter results
Three months ended | |||||||
(amounts in millions) | 2021 | 2020 | |||||
Net income (loss) (GAAP) | $ | 1.2 | $ | (6.0 | ) | ||
Interest expense | 4.0 | 5.0 | |||||
Depreciation | 1.5 | 1.4 | |||||
Amortization of intangible assets | 0.1 | 0.7 | |||||
Stock-based compensation | 2.0 | 2.5 | |||||
Reduction in force (a) | — | 0.2 | |||||
Revenue recognition (b) | — | 0.9 | |||||
Gain on extinguishment of debt (c) | (3.4 | ) | — | ||||
EBITDA, as adjusted | $ | 5.4 | $ | 4.7 |
First half results
Six months ended | |||||||
(amounts in millions) | 2021 | 2020 | |||||
Net loss (GAAP) | $ | (5.5 | ) | $ | (13.7 | ) | |
Interest expense | 7.9 | 10.1 | |||||
Depreciation | 3.0 | 3.0 | |||||
Amortization of intangible assets | 0.7 | 1.3 | |||||
Stock-based compensation | 5.1 | 5.7 | |||||
Reduction in force (a) | — | 1.0 | |||||
Revenue recognition (b) | 0.3 | — | |||||
Gain on extinguishment of debt (c) | (3.4 | ) | — | ||||
EBITDA, as adjusted | $ | 8.1 | $ | 7.4 |
Full year guidance
Year ended | |||||||
(amounts in millions) | 2021 | 2020 | |||||
(estimate) | |||||||
Net loss (GAAP) | $ | (27.5 | ) | ||||
Interest expense | 14.2 | 19.2 | |||||
Depreciation | 6.2 | 6.9 | |||||
Amortization of intangible assets | 0.7 | 2.6 | |||||
Stock-based compensation | 7.8 | 10.1 | |||||
Reduction in force (a) | — | 1.1 | |||||
Revenue recognition (b) | 0.7 | 1.6 | |||||
Gain on extinguishment of debt (c) | (3.4 | ) | — | ||||
EBITDA, as adjusted | $ | 14.0 |
a) | In the first half of 2020, two reductions in force were executed that affected approximately 15% of the work force and were driven by lower commercial volumes. |
b) | To exclude the impact of Accounting Standards Update 2014-09, "Revenue Recognition," related to non-cash changes in our contract asset. |
c) | In |
ContactsStephanie Diaz (Investors)Vida Strategic Partners (415) 675-7401 sdiaz@vidasp.comTim Brons (Media)Vida Strategic Partners (415) 675-7402 tbrons@vidasp.comRyan D. Lake (CFO) Recro (770) 531-8365 ryan.lake@recroCDMO.com
Source:
2021 GlobeNewswire, Inc., source