EAST RUTHERFORD, N.J., Aug. 02, 2018 (GLOBE NEWSWIRE) -- Cambrex Corporation (NYSE: CBM), a leading manufacturer of small molecule innovator and generic Active Pharmaceutical Ingredients (APIs), reports results for the second quarter ended June 30, 2018.

Highlights

• Net revenue increased 13% to $152.0 million compared to $134.6 million in the same quarter last year. Excluding the impact of adopting the new revenue standard, ASC 606 – Revenue from Contracts with Customers, net revenue decreased 1%.
• GAAP Diluted EPS from continuing operations increased 61% to $1.21 per share from $0.75 per share in the same quarter last year. The 2018 results reflect a lower tax rate as a result of tax reform in the United States. Excluding the impact of adopting ASC 606, Diluted EPS from continuing operations was $0.87 per share.
• EBITDA increased 22% to $52.2 million compared to $42.6 million in the same quarter last year. Adjusted EBITDA, which excludes the impact of adopting ASC 606, decreased to $37.2 million from $42.6 million in the same quarter last year (see table at the end of this release).
• Net cash was $171.3 million at the end of the quarter, a decrease of $16.2 million during the quarter.
• The Company continues to expect full year 2018 Adjusted net revenue growth, which excludes the impact of foreign currency and adoption of ASC 606, to be between -2% and 2% compared to 2017 and Adjusted EBITDA to be between $150 and $160 million. This does not include the impact of the Halo acquisition (see Financial Expectations – Continuing Operations section below for related explanations and additional financial guidance).
• Entered into a definitive agreement to acquire Halo Pharma, a leading dosage form Contract Development and Manufacturing Organization (CDMO) specializing in product development and commercial manufacturing, for approximately $425 million in total cash consideration.

“Our recent accomplishments mark significant progress toward our goals of investing in increased capacity and expanding our capabilities in order to take advantage of favorable industry trends and provide best-in-class services for our global customers. Most notably, we were pleased to announce the agreement to acquire Halo Pharma, which expands our offerings into finished dose development and manufacturing, while diversifying our customer base and accelerating our revenue growth,” commented Steven M. Klosk, President and Chief Executive Officer.

“We are also encouraged by second quarter performance across our three product categories. We recently added a new late-stage clinical project to our innovator portfolio with the potential to generate between $5 million and $10 million in peak API sales. This brings the total to three new late-stage projects added during the first half of 2018, with the combined potential to generate greater than $25 million in API revenue. Sales of generic APIs and controlled substances were also strong in the quarter.”

Basis of Reporting

The Company has provided a reconciliation of GAAP to adjusted (i.e. Non-GAAP) amounts at the end of this press release. Cambrex management believes that the adjustments provide useful information to investors due to the magnitude and nature of certain amounts recorded under GAAP.

Second Quarter 2018 Operating Results – Continuing Operations

Net revenue was $152.0 million, an increase of $17.5 million, or 13%, compared to the second quarter of 2017. Excluding a 2% favorable impact of foreign exchange compared to the second quarter of 2017, net revenue increased 11%. The increase in volumes is driven by higher custom development products, generic APIs and the adoption of ASC 606, which accelerated revenue recognition for a portion of Cambrex’s portfolio, enabling revenues for certain products to be recognized over time, rather than upon delivery to the customer. Cambrex elected the modified retrospective method which did not require prior periods to be restated. The increases were partially offset by lower pricing. Excluding the impact of adopting ASC 606, net revenue decreased 1%.

Gross margins were flat at 43% versus the same quarter last year. Excluding the impact of adopting ASC 606, gross margin was 37%.

Selling, general and administrative expenses were $16.0 million, compared to $18.1 million in the same quarter last year. This decrease was primarily due to lower personnel related costs.

Research and development expenses were $4.1 million, compared to $4.5 million in the same quarter last year. This decrease was primarily driven by the timing of spending on the development of generic drug products.

Operating profit was $44.7 million compared to $35.0 million in the same quarter last year. The increase was primarily the result of higher gross profit and lower operating expenses as described above. Excluding the impact of adopting ASC 606, operating profit was $29.7 million. Adjusted EBITDA was $37.2 million compared to $42.6 million in the same quarter last year (see table at the end of this press release).

Income tax expense was $8.7 million resulting in an effective tax rate of 18% compared to $9.2 million and an effective tax rate of 27% in the same quarter last year. The reduction in the effective tax rate reflects the impact of tax reform in the United States.

Income from continuing operations was $40.9 million or $1.21 per share compared to $25.1 million or $0.75 per share in the same quarter last year. Excluding the impact of adopting ASC 606, Diluted EPS from continuing operations was $0.87 per share.

Adjusted income from continuing operations was $24.7 million or $0.74 per share, compared to $25.4 million or $0.76 per share in the same quarter last year (see table at the end of this press release).

Capital expenditures were $8.9 million and depreciation and amortization was $7.5 million compared to $10.7 million and $7.6 million, respectively, in the same quarter last year.

Net cash was $171.3 million at the end of the second quarter, a decrease of $16.2 million during the quarter.

Financial Expectations – Continuing Operations

The following table shows the Company’s current expectations for its full year 2018 financial performance versus its expectations from the previous quarter. These expectations do not reflect the impact of the acquisition of Halo Pharma on 2018 results. The Company expects to issue revised guidance in our third quarter call once the acquisition has closed.

Consistent with the Company’s usual guidance practices, these financial expectations are for continuing operations and exclude the impact of any potential acquisitions, divestitures, restructuring activities, outcomes of tax disputes and the adoption of ASC 606 which became effective January 1, 2018. Adjusted net revenue growth expectations exclude the impact of foreign exchange and the adoption of ASC 606. EBITDA, Adjusted EBITDA and Adjusted income from continuing operations per share for 2018 will be computed on a basis consistent with the reconciliation of the current quarter financial results in the tables at the end of this press release. Free cash flow is defined as the change in debt, net of cash during the year. Adjusted effective tax rate excludes certain effects of share-based payments that were possibly deferred under the previous guidance. The tax rate will be sensitive to the Company’s geographic mix of income, changes in the tax laws or rates within the countries in which the Company operates and the effects of certain share-based payments.

The financial information contained in this press release is unaudited, subject to revision and should not be considered final until the Company’s Form 10-Q for second quarter 2018 is filed with the SEC.

About Cambrex

Cambrex Corporation is an innovative life sciences company that provides products, services and technologies to accelerate the development and commercialization of small molecule therapeutics. The Company offers Active Pharmaceutical Ingredients (APIs), advanced intermediates and enhanced drug delivery products for branded and generic pharmaceuticals. Development and manufacturing capabilities include enzymatic biotransformations, high potency APIs, high energy chemical synthesis, controlled substances and continuous processing. For more information, please visit www.cambrex.com.