After three delays, Catalent has finally released its quarterly earnings. In the end, the news wasn’t nearly as bad as expected.
The CDMO giant, which has been plagued by major production problems at three of its sites, has made a slight adjustment to its revenue projection for the year. Now, 2023 sales are expected to come in between $4.23 billion and $4.33 billion as opposed to a previous projection of $4.25 billion to $4.35 billion.
Early in the year, Catalent projected 2023 revenue would fall between $4.63 billion and $4.88 billion.
The relatively good news seemed to surprise investors as Catalent’s share price increased by 11% by noon on Monday. Overall this year, the stock has declined by 4%.
Before Monday, the company had appeared to lay the groundwork to report a massive revenue decline.
In April, Catalent said it had suffered unexpected production delays at its gene therapy manufacturing site in Harmans, Maryland, which would “significantly reduce” revenue. Catalent added that problems at its sites in Bloomington, Indiana, and Brussels, Belgium, prevented the company from reaching production targets.
Along with those revelations, Catalent said that its chief financial officer, Thomas Castellano, had stepped down and was replaced by Ricky Hopson, who was promoted from his prior post as division head for clinical development and supply.
Then more than a month ago, Catalent said it was delaying its quarterly earnings announcement from May 8 to May 15 because it had “identified significant issues with its forecasts over the past year” and was preparing to reduce its revenue guidance by more than $400 million.
Later in the month, Catalent revealed another delay to its quarterly report, and CEO Alessandro Maselli apologized during a conference call.
“This is not at all the call that we expected,” Maselli said. “Our financial performance and operational execution have all fallen significantly short of our expectations and our primary focus.”
Monday, Catalent said that its quarterly revenue came in at $1.04 billion, a 19% decline from the same quarter a year ago. Still, the number topped analyst expectations of $952 million.
The company also tweaked its earnings projections for the year. Catalent now expects earnings to fall between $169 million and $210 million, a slight decline from its May range of $187 million to $228 million but way down from its window earlier this year of $567 million to $648 million.
Catalent recorded an impairment charge of $210 million, which is attributed to “our lower growth expectation for our consumer health business,” Maselli said Monday in a conference call.
The company also revealed a $26 million deduction caused by a revenue recognition error related to a contract modification last year for a customer at its Bloomington site, Maselli added during the call.
“The fundamentals of our business remain strong, with durable customer demand for our global services and our talented colleagues continuing to deliver on some of the most complex and significant programs in the CDMO industry,” Maselli said in a release.
Over the last few years, Catalent was flying high on COVID-19 manufacturing contracts from the likes of Moderna, Johnson & Johnson and AstraZeneca. But that pandemic windfall wasn't fated to last: In February, Catalent reported weaker second-quarter sales, which it blamed on “a substantial decrease in COVID-19-related” sales.
Catalent also stumbled last year at its Brussels plant in producing Novo Nordisk’s Wegovy. In a seven-observation FDA Form 483, regulators chided Catalent for failing to thoroughly investigate batch failures or discrepancies and other shortfalls.
The problems might have damaged Catalent's chance for a major M&A score as Bloomberg reported that Danaher ditched a plan to pursue an acquisition of the company. The publication first reported in February that Danaher was interested in buying the CDMO at a “significant premium.”