Catalent has cut its 2023 forecast after lower COVID-19 related product demand, inflation and currency headwinds impacted Q1 biologics revenue.
The contract development manufacturing organization (CDMO) reported revenue for the three months ended September 30 of $1.02 billion, roughly the same as it was in the comparable period in 2021. Meanwhile, net income fell 52% to $61 million.
The contribution from Catalent‚Äôs biologics business ‚Äď which includes large molecule drug development and manufacturing as well as cell and gene therapies related activities ‚Äď declined 2% to $523 million.
In contrast, Catalent‚Äôs pharma and healthcare business brought in revenue of $499 million in the period, up 11% year-on-year.
CEO Alessandro Maselli shared details of Catalent‚Äôs first quarter performance on the call, explaining a delayed payment of $54 million from Janssen ‚Äď for a COVID-19 vaccine related fill-finish contract – had had an impact.
‚ÄúIn the first quarter were initially expected to include $54 million of revenues and adjusted EBITDA related to the resolution of take-or-pay contracts for fill and finish of the Janssen viral vector COVID-19 vaccine at our Bloomington and Anagni sites.‚ÄĚ
He said that the delay ‚Äúreflect[s] the changing demand patterns for the COVID-19 vaccines,‚ÄĚ adding that Catalent had accepted it ‚Äúin order to accommodate these long-standing and significant customer as we set a new and strengthened framework for our growing partnership.‚ÄĚ
Maselli said ‚Äúthe debt recognition of the related revenue will occur in the second quarter of this fiscal year.‚ÄĚ
Cell and gene therapy
According to Maselli, Catalent‚Äôs non-COVID-19 related business performed well in the first quarter, with revenue increasing 20% thanks to demand from the advanced therapy and traditional pharma sectors.
‚ÄúThe growth in our non-COVID [related business] was driven by our cell and gene therapy offerings in our biologics segment, as well as our clinical development services in our pharma and consumer segment, which is starting to benefit from commercial synergies under the new organizational structure.‚ÄĚ
The US CDMO revised down its forecast for fiscal 2023, predicting full year revenue in the $4,625 million to $4,875 million range which is down from the previous forecast of $4,975 million to $5,225 million.
CFO Tom Castellano told analysts on the firm‚Äôs Q1 call the new outlook assumes the challenging macroeconomic environment will persist longer than originally expected.
‚ÄúFX [foreign exchange rates] continues to be a headwind with an incremental impact of approximately one percentage point on both revenue and adjusted EBITDA versus our previous guidance.‚ÄĚ
Castellano also pointed to COVID related volume declines, inflationary and supply chain pressures, start-up costs related to the acquisition of a cell therapy facility in Princeton from Erytech Pharma and a vaccine plant in Oxford, UK as other headwinds.
‚ÄúSo, after taking into account these considerations our revised expected organic constant currency net revenue growth rate in fiscal 2023 is expected to be essentially flat at the midpoint of the guidance range‚ÄĚ he said.