Catalent beats on revenues and earnings ahead of closing Accucaps deal

New Jersey-based CDMO Catalent grew its revenues in the second quarter but saw a significant fall in net earnings, but still beat analysts forecasts. It has its acquisition of Accucaps to look forward to, which will solidify its place in the softgel market.

The company on Monday reported second quarter earnings of $483.7 million, up 10% in constant currency. It reported net earnings of $0.14 per diluted share, down 37% from the $0.24 per share from a year ago. Its adjusted net income of $0.27 a share beat analysts forecasts by a penny a share. Revenues outperformed the Street’s expectation by about $11 million.

The company said its expects full year revenue in the range of $1.94 billion to $1.98 billion and adjusted net income in the range of $168 million to $183 million. It said it intends to make capital investments of between $130 million to $135 million.  

"We're pleased with our performance during the second quarter, where we recorded double-digit revenue growth on a constant currency basis and announced our second strategic acquisition of the fiscal year," CEO John Chiminski, said in a statement. "Once closed later this year, the acquisition of Accucaps will add extensive softgel development and manufacturing capabilities in North America, as we continue to build on our market-leading position in the softgel space. Additionally, the integration of the Pharmatek acquisition announced during the first quarter is progressing according to our expectations and is already creating value for the company and our shareholders."

2016 was a busy year for Catalent in M&A. Catalent CFO Matt Walsh told investors in August that Catalent expected M&A to play a part in its growth as the market consolidates. A month later it bought San Diego-based Pharmtek to get spray drying technology, then several months later made it struck a deal to buy Canada-based Accucaps, a developer and manufacturer of over-the-counter, high potency and conventional pharmaceutical softgels.

In a call with investors Monday, Chiminski told analysts the Accucaps deal come with a slate of business that's complementary to what Catalent is doing in North America, as well as high potent generic pharmaceutical products and some OTC clients, the kinds of business that Catalent had foregone in North America because it was at capacity at its  St. Petersburg, FL facility.

“So, by bringing these two facilities and their book of business into the company, it allows us to further expand our footprint in North America,” the CEO said. “Although we are by far the largest player in the softgel market, we really want to continue to keep our very strong position there.”

Asked in the call if the competitive outlook changes now that Swiss CDMO Lonza is getting into capsule making business with a deal for Capsugel, Chiminski said it is too soon to know.

It was rumored last year that Lonza had was interested in buying Catalent but in December, Lonza announced a $5.5 billion deal to acquire the U.S.-based contract capsule and drug producer Capsugel to create another sizable force in contract manufacturing. The deal is expected to close in Q2 2017.