Reorganization at key client Halozyme will not hit revenues says Avid Bioservices, which predicts ongoing facility revamp and expanding customer base to drive growth in the rest of FY2020.

Halozyme Therapeutics recently said it would focus on its Enhanze delivery technology after HALO-301 – its candidate pancreatic cancer drug – fell short in Phase III trials.

The San Diego biotech will close its oncology operations and reduce its headcount by approximately 55%, or approximately 160 positions. (Read Xconomy’s report here).

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But the reorganization is not likely to have an impact on biopharma contract development and manufacturing organization (CDMO) Avid Bioservices, which counts Halozyme as its largest customer. Avid first entered into a manufacturing contract with the firm in 2004 and produces recombinant human hyaluronidase enzyme for both Halozyme and its partners

“We’ve obviously had significant discussions with Halozyme. As we understand it, we won’t have any negative impact for the discontinuation of one of their products,” Avid’s CEO Rick Hancock said on his firm’s recent Q2 call.

“Halozyme, as they have stated, will be very, very focused on their Enhanze platform and the materials that we produce here at Avid supports that Enhanze platform. So, no negative impact can be anticipated there” he said.

Results

For the three months ended October 31, Avid saw revenue of $18.3 million (€16.4 million), up 80% on the comparable period last year.

Chief financial officer Dan Hart told analysts on the call revenue growth was “the result of an increase in the number of in-process and completed manufacturing runs during the quarter, primarily for our largest customer.”

The extra manufacturing also boosted Avid’s gross margins according to Hart, who said the additional revenue “was more than enough to offset the unexpected costs incurred at the beginning of our fiscal year.”

Those unexpected costs were related to “unplanned equipment repairs” carried out in Q1.

Hancock added, “Productivity and efficiency contributed significantly to Avid’s strong second quarter results, and we expect that our financial performance will continue to track positively with these factors.”

Manufacturing growth

Avid also predicted increased manufacturing activity and the expansion of its client base would be a growth driver.

The CDMO cited the roll out of its process development services in October as a growth opportunity.

It predicted the services – based at a recently expanded facility in Orange County, California – will allow it to expand “existing relationships and attract new business.”

The CDMO said it has “expanded the scope of work with multiple existing customers to increase the number of manufacturing batches and/or scale of production.”

Avid also confirmed it will continue to upgrade its manufacturing capacity next year. The firm said it has started the final design stage for a new water system at its facility in Myford.

“Installation of this system will supply water to multiple manufacturing systems, a critical step in creating the manufacturing efficiencies required to increase output and strengthen margins.” The firm says the system to be installed in calendar 2020.

On the call, Hancock flagged up more potential expansions at Myford, explaining Avid is poised to use a further 42,000 square feet of space at the site when the need arises.

“We’re preparing contingency plans to build that out as soon as the demand is solid. It will probably be based on continuing to increase the use of the existing facility.”