Lifecore Biomedical Further Strengthens Financial Position Through Sale of Excess Capital Equipment for $17 Million

Rhea-AI Summary

Lifecore Biomedical (NASDAQ: LFCR) has announced the sale of its unused 10-head isolator filler for $17 million to a non-competitive buyer. The company received $7 million upfront, with the remaining amount to be paid in three installments over the next 18 months.

This strategic move follows the recent installation of a high-speed 5-head filler, which has doubled the company's available capacity. The new equipment supports up to $300 million in annual revenue, sufficient for Lifecore's mid-term and long-term growth objectives. The company is currently engaging with customers to utilize the new 5-head filler's speed and aseptic isolation capabilities.

Positive

• Sale of excess equipment generates $17 million in cash
• Current capacity supports up to $300 million in annual revenue
• Recently installed 5-head filler doubles production capacity
• Immediate cash injection of $7 million improves liquidity

Negative

• None.

Insights

Financial Analyst

The sale of excess equipment for $17 million represents a strategic financial move for Lifecore Biomedical. The transaction structure, with $7 million upfront and the remainder spread over 18 months, provides immediate liquidity while maintaining a steady future cash flow stream. The company's current $300 million revenue capacity with the 5-head filler suggests they've made a prudent decision to monetize redundant assets. This optimization of capital equipment aligns with efficient asset management principles and strengthens the balance sheet.

Here's what makes this particularly noteworthy for investors:

• The sale doesn't compromise growth potential since existing capacity supports the company's mid-term revenue targets
• The structured payment plan provides predictable cash inflows for the next 18 months
• The transaction demonstrates management's focus on capital efficiency and balance sheet optimization

Manufacturing Operations Expert

The strategic decision to sell the 10-head isolator filler while retaining the recently installed 5-head system demonstrates sophisticated capacity planning. The 5-head filler's GMP-ready status means immediate revenue generation potential without the overhead of excess capacity.

Key operational implications:

• The qualified 5-head system provides sufficient capacity headroom for current demand
• Modern isolator technology in the 5-head system offers enhanced sterility assurance
• Reduced maintenance and validation costs by operating optimized equipment levels

The decision to maintain streamlined operations while monetizing surplus equipment indicates mature operational management and positions Lifecore competitively in the CDMO space.

Company Believes it is Well Positioned for Mid-Term and Long-Term Growth as
Current Capacity Continues to Support up to $300 Million in Annual Revenue

CHASKA, Minn., Jan. 07, 2025 (GLOBE NEWSWIRE) --  Lifecore Biomedical, Inc. (NASDAQ: LFCR) (“Lifecore”), a fully integrated contract development and manufacturing organization (“CDMO”), today announced that it has entered into a sales agreement with a non-competitive buyer for the company’s previously purchased, but not yet installed, high-speed, multi-purpose 10-head isolator filler. Under the terms of the agreement, the buyer will pay Lifecore an aggregate purchase price of $17 million in exchange for the 10-head filler. Lifecore received $7 million at closing and anticipates receiving the remaining payments in three tranches over the next 18 months.

“As we continue to execute our growth strategy, we have continued to carefully examine all aspects of the business to identify opportunities for right-sizing and efficiency,” said Ryan Lake, chief financial officer of Lifecore. “With the recent installation of our high-speed 5-head filler, we have built $300 million of revenue-generating capacity to support our mid-term and long-term revenue growth objectives. Accordingly, we felt that the sale of the 10-head filler, which we believe represented excess capital equipment, represented a compelling opportunity to monetize unused equipment and enhance our financial position. Moving forward, we intend to continue to carefully evaluate equipment expenditures to ensure that future capital investments are aligned with projected operational needs.”

In September, Lifecore announced that it had successfully installed and qualified a new high-speed, multi-purpose 5-head isolator filler, doubling the available capacity it has to offer existing and future customers. With the 5-head filler GMP-ready, the company is engaging in discussions with customers to take advantage of the speed and aseptic isolation benefits of this state-of-the-art, multi-container filler.

About Lifecore Biomedical

Lifecore Biomedical, Inc. (Nasdaq: LFCR) is a fully integrated contract development and manufacturing organization (CDMO) that offers highly differentiated capabilities in the development, fill and finish of sterile injectable pharmaceutical products in syringes, vials, and cartridges, including complex formulations. As a leading manufacturer of premium, injectable-grade hyaluronic acid, Lifecore brings more than 40 years of expertise as a partner for global and emerging biopharmaceutical and biotechnology companies across multiple therapeutic categories to bring their innovations to market. For more information about the company, visit Lifecore’s website at www.lifecore.com.

Important Cautions Regarding Forward-Looking Statements

This press release contains forward-looking statements regarding future events and our future results that are subject to the safe harbor created under the Private Securities Litigation Reform Act of 1995 and other safe harbors under the Securities Act of 1933 and the Securities Exchange Act of 1934. Words such as “anticipate”, “estimate”, “expect”, “project”, “plan”, “intend”, “believe”, “may”, “might”, “will”, “should”, “can have”, “likely” and similar expressions are used to identify forward-looking statements. In addition, all statements regarding our anticipated future operating and financial expectations and opportunities, customer opportunities and relationships are forward-looking statements. All forward-looking statements involve certain risks and uncertainties that could cause actual results to differ materially, including such factors among others, as the company’s ability to successfully enact its business strategies, including with respect to installation, capacity generation and its ability to attract demand for its services, and its ability expand its relationship with its existing customers or attract new customers; the impact of inflation on Lifecore’s business and financial condition; the receipt of payments required by the sales agreement; changes in business conditions and general economic conditions both domestically and globally, including rising interest rates and fluctuation in foreign currency exchange rates; Lifecore’s ability to access sufficient capital to fund its business strategies; and other risk factors set forth from time to time in Lifecore’s SEC filings, including, but not limited to, the Annual Report on Form 10-K for the year ended May 26, 2024 (the “2024 10-K”). For additional information about factors that could cause actual results to differ materially from those described in the forward-looking statements, please refer to our filings with the Securities and Exchange Commission, including the risk factors contained in the 2024 10-K. Forward-looking statements represent management’s current expectations as of the date hereof and are inherently uncertain. Except as required by law, we do not undertake any obligation to update forward-looking statements made by us to reflect subsequent events or circumstances.

FAQ

How much did Lifecore Biomedical (LFCR) sell its 10-head isolator filler for?

Lifecore Biomedical sold its 10-head isolator filler for $17 million, with $7 million received at closing and the remainder to be paid in three tranches over 18 months.

What is Lifecore Biomedical's (LFCR) current revenue capacity after installing the new 5-head filler?

After installing the new 5-head filler, Lifecore Biomedical's current capacity supports up to $300 million in annual revenue.

When will Lifecore Biomedical (LFCR) receive the remaining payment for the 10-head filler sale?

Lifecore Biomedical will receive the remaining payments in three tranches over the next 18 months following the initial $7 million payment.

How has the new 5-head filler installation affected Lifecore Biomedical's (LFCR) production capacity?

The installation of the new high-speed 5-head isolator filler has doubled Lifecore Biomedical's available capacity for existing and future customers.