Avid Bioservices says it has worked aggressively to expand since becoming a pure-play CDMO but needs increased customer diversification and capacity utilization to secure future growth.
After selling off its internal monoclonal antibody programs to Oncologie and dropping its Peregrine Pharmaceuticals tag, Avid Bioservices completed its transition to a pure contract development and manufacturing organization (CDMO).
Six months on, the firm has reported a 62% year-on-year drop in its fourth quarter revenues to US$6.9 million (€5.9 million) and a fall in margins, with gross margin for the period being negative 28%.
Avid had previously predicted the decrease in revenues due to a slowing in demand from its two lead customers, CEO Roger Lias told stakeholders, while the margins “were mostly driven by idle capacity during the fiscal year, and a batch failure caused by a component issue outside of Avid’s control during the quarter.”
Lias admitted margins are below expectations for the business, and will continue to be impacted until capacity utilization is increased.
“It’s important to note that installation of our large scale fleet by 2,000 liters manufacturing capacity in the Myford [Irvine, California] facility occurred in calendar year 2017, and the new capacity by definition always begins life empty,” he said.
“To affect the required improvements, we continue an aggressive effort to both expand our customer base and to extent current client projects to increase our backlog and enhance capacity utilization.”
When Avid was the third-party services attachment to Peregrine Pharmaceuticals, the firm had a “significant reliance on a small customer base, leaving us vulnerable to such demand fluctuations,” Lias said.
“Since January, we’ve been working aggressively to increase market visibility and to expand and diversify our client base. To that end, we’ve successfully secured mostly new customers that are currently in varying stages of being on-boarded and revenue generation, and we are in active discussions with many additional potential customers.”
The CDMO now has six customers, Avid added on the call, including Acumen Therapeutics and Oncologie, which retained the CDMO after acquiring Avid’s bavituximab and its other phosphatidylserine-targeting programs. Avid has not revealed its other customers.
To further grow its customer base, VP of Business Operations Tracy Kinjerski said Avid needs to have “continued market focus and increased reach” and so has strengthened its business development team through the additions of Sandra Carbonneau and Michael Faughnan.
“Their primary focus will be to cover the US and Canada with Sandy overseeing the eastern regions of North America and Michael overseeing the western region,” Kinjerski told investors on the call.
“Both Sandy and Mike are industry veterans with very long direct biologic CDMO experience at companies such as Cytovance Biologics, Lonza and WuXi Biologics. Along with considerable knowledge of the biotherapeutics market and services, both Sandy and Mike, bring with them a wide network of industry contacts.”
Avid’s focus for now is filling its mammalian cell culture facility, but Lias highlighted some areas where the CDMO could look to in the near future, in particular through M&A.
These include strengthening of Avid’s drug product manufacture, microbial fermentation, and the expansion of development services in areas such as cell line development, cell banking formulation development, and analytical services.
“We will assess future growth opportunities in the coming months,” he said. “Beyond these areas, we watch with interest the growth in demand for services related to biosimilars manufacturer associated with gene therapy and immuno-cellular therapy such as CAR-T products.”