The CDMO announced financial results on Tuesday, November 1 for the first quarter of fiscal 2023, which ended September 30, 2022.
It reported Q1 2023 net revenue of US$1.02bn as flat on a reported basis or a 4% increase in cross currency compared to Q1 of fiscal 2022.
Organic, constant-currency net revenue decreased by 1%, compared to the same quarter in the year prior, while net earnings attributable to common shareholders and earnings per basic and diluted share were zero, said the CDMO.
Adjusted EBITDA was US$187m or 18% of net revenue, compared to US$252m or 25% of net revenue, in the first quarter a year ago.
The first quarter results were initially expected to include $54m of revenue and adjusted EBITDA related to a settlement of previously executed take-or-pay contracts for fill and finish of a viral vector COVID-19 vaccine but Catalent received the related payment in October and thus it now expects to recognize the revenue and reflect the adjusted EBITDA in Q2.
The company’s updated FY 2023 financial guidance projects net revenue of between $4,625m and $4,875m, down from the previous forcast of $4,975-$5,225m.
Alessandro Maselli, CEO, Catalent, on a call with analysts yesterday, was optimistic: “While we have revised our fiscal 2023 guidance to account for near-term headwinds, we remain confident that we have taken actionable steps to provide the necessary growth levers to position us for long-term growth."
Catalent’s biopharma and consumer health pipelines remain robust, he said, but the CDMO is starting to experience signs of cash-sensitive decisions by some of its customers. This is most evident in relationship to inventory levels for finished goods or customers’ prioritization of candidates as they progress through the pipeline, added the chief executive.
“Our adjusted forecast also reflects these new trends. Finally, after several years of elevated levels of capital expenditures, we have made the fiscally prudent decision to rephase some of our CapEx spending planned for this year to maximize utilization, increase free cash flow as we load our balance sheet.”
In a note on the results, JP Morgan analyst, Julia Qin, said that, although the quarter was a soft start to the year, the team views the guidance cut as a prudent move in light of macro uncertainties and investor concern about the previous forecasts.
"That said, while the new guidance should leave Catalent in a better position to deliver upside, the macro-driven parma and consumer health (PCH) destocking and biologics pipeline activity slowdown are worth monitoring."
The CEO also addressed the recent FDA audits at Catalent’s Bloomington, Indiana facility and its Brussels site that led to Form 483 observations, saying quality and compliance are central to everything the company does.
“We believe that the responses by our Bloomington and Brussels teams will comprehensively address the recent FDA observations and they've already deployed all necessary resources to implement the changes to which we have committed in a timely manner.”
While there will be some near-term negative P&L effects as the company addresses those observations, he said the overall related remediation costs are not a notable factor in its revised full year outlook.