Societal CDMO Reports Fourth Quarter and Full Year 2022 Financial Results
Societal CDMO (NASDAQ: SCTL) reported a Q4 2022 revenue of $24.3 million, marking a 9% increase year-over-year. The clinical trial materials development sector grew by 58% in 2022, expanding the customer base significantly. The company executed a strategic multi-step plan that strengthened its financial position, including raising approximately $35.6 million from public offerings and securing a $36.9 million debt facility with improved terms. However, a net loss of $9.2 million was recorded for Q4 2022 compared to a $2.4 million loss in the previous year, attributed to refinancing costs.
- Q4 2022 revenue increased by 9% to $24.3 million.
- Clinical trial materials development grew by 58% in 2022.
- Executed strategic transactions to reduce debt significantly, improving net debt leverage ratio from >6x to >2x EBITDA.
- Raised approximately $35.6 million through public offerings.
- Secured a new $36.9 million debt facility under favorable terms.
- Recorded a net loss of $9.2 million in Q4 2022, up from $2.4 million the previous year.
- Total cash decreased from $25.2 million at the end of 2021 to $15.0 million by December 31, 2022.
Recorded Q4 Revenue of
Clinical Trial Materials Development Business Grew by
Executed Multi-Step Strategy Resulting in Reduction of Debt and Strengthened Financial Position
Company to Host Webcast Today at 4:30 p.m. ET
SAN DIEGO and GAINESVILLE, Ga., March 01, 2023 (GLOBE NEWSWIRE) -- Societal CDMO, Inc. (“Societal CDMO”; NASDAQ: SCTL), a contract development and manufacturing organization (CDMO) dedicated to solving complex formulation and manufacturing challenges primarily in small molecule therapeutic development, today reported financial results for the fourth quarter and year ended December 31, 2022.
“One year ago, the company outlined an aggressive roadmap for 2022, including objectives spanning sales and marketing, corporate identity, facilities and capabilities, stakeholder engagement and finally, our financial position. During the year, we successfully met each of these goals, creating a stronger and more capable CDMO,” said David Enloe, chief executive officer of Societal CDMO. “Our expanding customer base includes businesses ranging from early-stage development to commercially mature, and the economic and industry-related factors impacting their decisions are distinct. During 2022, Societal employed a segment-specific sales approach that accounts for important factors such as different decision-making processes, key drivers and metrics of success, project management and the approach to creating productive relationships with our clients. These strategic steps contributed to strong sales in 2022 with our clinical trial support business (non-legacy) growing
“As a complement to our evolved sales and marketing approach, during the year, the company changed its name from Recro Pharma to Societal CDMO and adopted the tag line, ’Bringing Science to Society.’ We believe this new identity, hand-in-hand with our bespoke approach to sales and marketing, signals the corporate transformation that is underway and the company’s commitment to our people, our customers, the communities in which we operate and most of all, the patients we ultimately serve.
“During the year, we achieved multiple other important milestones including expanding and optimizing our technical capabilities with the launch of our new aseptic fill/finish and lyophilization services. We also made substantial investments toward enhancing both our customer and employee experiences. Yet, perhaps one of the most significant achievements during the year was the execution of a multi-step strategy that substantially strengthened our financial position. The concurrent, multiple transactions we successfully executed included selling unused land adjacent to our Gainesville, GA facility for approximately
“Given the successes of 2022, we look ahead with great optimism. We cannot emphasize more strongly how pleased we are to begin 2023 from a renewed position of financial strength.”
Fourth Quarter 2022 and Other Recent Developments
Business Development:
- New and expanded customer projects. During the quarter, the company signed
$9.5 million in new and expanded project agreements, representing the second consecutive quarter of highest signed business in Company history. The new projects span clinical trial services, analytical method, tech transfer, formulation development, cGMP manufacturing, and packaging services.
Corporate Achievements:
- Company completes multi-transaction strategy to recast capital structure including reduction and refinancing of outstanding debt. In addition to significantly reducing the company’s total debt, the transactions helped improve the company’s net debt leverage ratio from greater than six times EBITDA to just over two times EBITDA, immediately reducing Societal CDMO’s annual interest burden by an estimated
$6 million with the potential to increase that number to approximately$7 million annually.- In December 2022, the company executed a sale and leaseback transaction for its Gainesville, Georgia, manufacturing site and campus with Tenet Equity, yielding
$39 million in non-dilutive gross proceeds. Upon closing, Societal CDMO entered into a 20-year lease agreement with Tenet Equity, with multiple renewal options. This transaction does not impact Societal CDMO’s other facilities, including its development, high potency and clinical packaging site also located in Gainesville, Georgia, and its development and sterile vial fill/finish & lyophilization facility in San Diego, California. - In December 2022, the company closed concurrent public offerings of common stock and preferred stock, generating gross proceeds of approximately
$35.6 million , prior to deducting the underwriting discounts and estimated offering expenses. RBC Capital Markets acted as sole book-running manager for the offerings. - Also in December 2022, the company secured a new debt facility for
$36.9 million from Royal Bank of Canada. The facility is in the form of a three-year Term A Loan bearing interest at the floating Secured Overnight Financing Rate (SOFR) plus an initial base rate of4.5% per annum. The terms of the new debt facility significantly improve upon the terms of the company’s previous credit facility with Athyrium, which carried an interest rate of approximately13% and held a near-term maturity date of December 31, 2023. - In August 2022, the company signed a sales and purchase agreement to sell approximately 121 acres of lakefront land for approximately
$9.1 million . The unused land is located adjacent to Societal’s manufacturing facility in Gainesville, Georgia. Subject to completion of diligence, we expect the sale to close in the second half of 2023, with the proceeds further strengthening the company’s financial position.
- In December 2022, the company executed a sale and leaseback transaction for its Gainesville, Georgia, manufacturing site and campus with Tenet Equity, yielding
Financial Results for the Three Months Ended December 31, 2022
Revenues for the quarter ended December 31, 2022 were
Cost of sales for the quarter ended December 31, 2022 was
Selling, general and administrative expenses for the fourth quarter of 2022 were
Interest expense was
For the quarter ended December 31, 2022, the company recorded a net loss of
Financial Results for the Twelve Months Ended December 31, 2022
Revenue for the year ended December 31, 2022 was
Cost of sales for the year ended December 31, 2022 was
Selling, general and administrative expenses for the year ended December 31, 2022 were
Interest expense was
For the year ended December 31, 2022, Societal reported a net loss of
At December 31, 2022, Societal had cash and cash equivalents of
2023 Guidance
For the full year 2023, the company is projecting revenue of between
* EBITDA, as adjusted and Historical EBITDA, as adjusted* are non-GAAP financial measures (see reconciliation of non-GAAP financial measures at the end of this release).
Non-GAAP Financial Measures
To supplement Societal’s financial results determined by U.S. generally accepted accounting principles (“GAAP”), the company monitors certain non-GAAP information for the business, including EBITDA, as adjusted, and previously Historical EBITDA, as adjusted. The company believes that these non-GAAP financial measures are helpful in understanding the business as they are useful to investors in allowing for greater transparency of supplemental information used by management. These measures are used by investors, as well as management in assessing the company’s performance. Non-GAAP financial measures should be considered in addition to, but not as a substitute for, reported GAAP results. Further, Non-GAAP financial measures, even if similarly titled, may not be calculated in the same manner by all companies, and therefore should not be compared. Please see the section of this press release titled “Reconciliation of GAAP to Non-GAAP Financial Measures” for a reconciliation of non-GAAP financial measures to their most directly comparable GAAP measures.
Webcast
Societal CDMO management will be hosting a webcast today, March 1, 2023, beginning at 4:30 p.m. ET. The webcast may be accessed via "Investor Events" in the Investor section of the company's website, https://ir.societalcdmo.com/events. An archived webcast will be available on the company's website approximately two hours after the event and will be available for 30 days.
About Societal CDMO
Societal CDMO (NASDAQ: SCTL) is a bi-coastal contract development and manufacturing organization (CDMO) with capabilities spanning pre-Investigational New Drug (IND) development to commercial manufacturing and packaging for a wide range of therapeutic dosage forms with a primary focus in the area of small molecules. With an expertise in solving complex manufacturing problems, Societal CDMO is a leading CDMO providing therapeutic development, end-to-end regulatory support, clinical and commercial manufacturing, aseptic fill/finish, lyophilization, packaging and logistics services to the global pharmaceutical market.
In addition to our experience in handling DEA controlled substances and developing and manufacturing modified-release dosage forms, Societal CDMO has the expertise to deliver on our clients’ pharmaceutical development and manufacturing projects, regardless of complexity level. We do all of this in our best-in-class facilities, which total 145,000 square feet, in Gainesville, Georgia and San Diego, California.
Societal CDMO: Bringing Science to Society. For more information about Societal CDMO’s customer solutions, visit societalcdmo.com.
Cautionary Statement Regarding Forward Looking Statements
This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements, among other things, relate to the company’s financial guidance; ability to manage costs and to achieve its financial goals; to operate under lending covenants; to close its land sale transaction on the anticipated timeline; and to maintain relationships with CDMO commercial partners and develop additional commercial partnerships. The words "anticipate", "believe", "correlate", "could", "estimate", “upcoming”, "expect", "intend", "may", "plan", "predict", "project", "will" and similar terms and phrases may be used to identify forward-looking statements in this press release. Our operations involve risks and uncertainties, many of which are outside our control, and any one of which, or a combination of which, could materially affect our results of operations and whether the forward-looking statements ultimately prove to be correct. Factors that could cause the company’s actual outcomes to differ materially from those expressed in or underlying these forward-looking statements include, but are not limited to, unstable market and macroeconomic conditions, including any adverse impact on the customer ordering patterns or inventory rebalancing or disruption in raw materials or supply chain; demand for the company’s services, which depends in part on customers’ research and development funding, their clinical plans and the market success of their products; customers' changing inventory requirements and manufacturing plans; customers and prospective customers decisions to move forward with the company’s manufacturing services; the average profitability, or mix, of the products the company manufactures; the company’s ability to enhance existing or introduce new services in a timely manner; fluctuations in the costs, availability, and suitability of the components of the products the company manufactures, including active pharmaceutical ingredients, excipients, purchased components and raw materials, or the company’s customers facing increasing or new competition; the Company’s ability to collect on customers’ receivable balances; the extent to which health epidemics and other outbreaks of communicable diseases could disrupt our operations; and other risks and uncertainties discussed in our filings with the Securities and Exchange Commission at www.sec.gov. These forward-looking statements are based on information currently available to us, and we assume no obligation to update any forward-looking statements except as required by applicable law.
SOCIETAL CDMO, INC. AND SUBSIDIARIES
Summary of Operating Results
(Unaudited)
Three months ended December 31, | |||||||||||||||
(dollars in thousands, except per share amounts) | 2022 | 2021 | Change | % | |||||||||||
Revenue | $ | 24,279 | $ | 22,303 | $ | 1,976 | 9 | % | |||||||
Cost of sales (excluding amortization of intangible assets) | 17,437 | 15,706 | 1,731 | 11 | % | ||||||||||
Gross margin | 28 | % | 30 | % | |||||||||||
Selling, general and administrative expenses | 6,009 | 5,298 | 711 | 13 | % | ||||||||||
Amortization of intangible assets | 220 | 202 | 18 | 9 | % | ||||||||||
Total operating expenses | 23,666 | 21,206 | 2,460 | 12 | % | ||||||||||
Operating income | 613 | 1,097 | (484 | ) | -44 | % | |||||||||
Interest expense | (3,681 | ) | (3,454 | ) | (227 | ) | 7 | % | |||||||
Loss on extinguishment of debt | (4,996 | ) | — | (4,996 | ) | n/a | |||||||||
Loss before income taxes | (8,064 | ) | (2,357 | ) | (5,707 | ) | 242 | % | |||||||
Income tax expense | 1,105 | — | 1,105 | n/a | |||||||||||
Net loss | $ | (9,169 | ) | $ | (2,357 | ) | $ | (6,812 | ) | 289 | % | ||||
Loss per share, diluted | $ | (0.15 | ) | $ | (0.04 | ) | $ | (0.11 | ) | 275 | % | ||||
Historical EBITDA, as adjusted* | $ | 5,327 | $ | 3,254 | $ | 2,073 | 64 | % |
Year ended December 31, | |||||||||||||||
(dollars in thousands, except per share amounts) | 2022 | 2021 | Change | % | |||||||||||
Revenue | $ | 90,214 | $ | 75,360 | $ | 14,854 | 20 | % | |||||||
Cost of sales (excluding amortization of intangible assets) | 67,076 | 55,537 | 11,539 | 21 | % | ||||||||||
Gross margin | 26 | % | 26 | % | |||||||||||
Selling, general and administrative expenses | 21,954 | 18,374 | 3,580 | 19 | % | ||||||||||
Amortization of intangible assets | 905 | 1,037 | (132 | ) | -13 | % | |||||||||
Total operating expenses | 89,935 | 74,948 | 14,987 | 20 | % | ||||||||||
Operating income | 279 | 412 | (133 | ) | -32 | % | |||||||||
Interest expense | (14,059 | ) | (15,134 | ) | 1,075 | -7 | % | ||||||||
(Loss) gain on extinguishment of debt | (4,996 | ) | 3,352 | (8,348 | ) | -249 | % | ||||||||
Loss before income taxes | (18,776 | ) | (11,370 | ) | (7,406 | ) | 65 | % | |||||||
Income tax expense | 1,105 | — | 1,105 | n/a | |||||||||||
Net loss | $ | (19,881 | ) | $ | (11,370 | ) | (8,511 | ) | 75 | % | |||||
Loss per share, diluted | $ | (0.34 | ) | $ | (0.26 | ) | $ | (0.08 | ) | 31 | % | ||||
Historical EBITDA, as adjusted* | $ | 16,195 | $ | 16,599 | $ | (404 | ) | 2 | % |
* Historical EBITDA, as adjusted, is a non-GAAP financial measure (see reconciliation of non-GAAP financial measures at the end of this release).
SOCIETAL CDMO, INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Measures
(Unaudited)
To supplement the company’s financial results determined by U.S. generally accepted accounting principles (“GAAP”), the company has disclosed in the tables below the following non-GAAP information about EBITDA, as adjusted and Historical EBITDA, as adjusted.
EBITDA, as adjusted, is net income or loss as determined under GAAP excluding interest expense, income tax expense, depreciation, amortization, non-cash stock-based compensation, costs related to the acquisition and integration of IriSys, and costs related to the debt refinancing.
Historical EBITDA, as adjusted, is net income or loss as determined under GAAP excluding interest expense, income tax expense, depreciation, amortization, non-cash stock-based compensation, costs related to the acquisition and integration of IriSys, and costs related to the debt refinancing, as well as the impact of Accounting Standards Update 2014-09 in order to remove the impact of the timing of revenue recognized from profit-sharing arrangements upon transfer of control of the product, which more closely aligns revenue with expected cash receipt, and forgiveness of the COVID-19 relief note.
The company believes that non-GAAP financial measures are helpful in understanding its business as it is useful to investors in allowing for greater transparency of supplemental information used by management. EBITDA, as adjusted and Historical EBITDA, as adjusted, are used by investors, as well as management in assessing the company’s performance. Non-GAAP financial measures should be considered in addition to, but not as a substitute for, reported GAAP results. Further, Non-GAAP financial measures, even if similarly titled, may not be calculated in the same manner by all companies, and therefore should not be compared.
Fourth quarter and full year results
Three months ended December 31, | Year ended December 31, | ||||||||||||||
(amounts in thousands) | 2022 | 2021 | 2022 | 2021 | |||||||||||
Net loss (GAAP) | $ | (9,169 | ) | $ | (2,357 | ) | $ | (19,881 | ) | $ | (11,370 | ) | |||
Interest expense | 3,681 | 3,454 | 14,059 | 15,134 | |||||||||||
Income tax expense | 1,105 | — | 1,105 | — | |||||||||||
Depreciation | 1,901 | 1,728 | 7,413 | 6,531 | |||||||||||
Amortization of intangible assets | 220 | 209 | 905 | 1,037 | |||||||||||
Stock-based compensation | 1,279 | 133 | 5,426 | 6,514 | |||||||||||
Deal and integration costs (a) | 386 | 956 | 943 | 2,222 | |||||||||||
Refinancing costs and losses (b) | 6,831 | — | 6,831 | — | |||||||||||
Forgiveness of COVID-19 relief note (c) | — | — | — | (3,352 | ) | ||||||||||
Revenue recognition (d) | (907 | ) | (869 | ) | (606 | ) | (117 | ) | |||||||
Historical EBITDA, as adjusted | 5,327 | 3,254 | 16,195 | 16,599 | |||||||||||
Eliminate revenue recognition adjustment | 907 | 869 | 606 | 117 | |||||||||||
EBITDA, as adjusted | $ | 6,234 | $ | 4,123 | $ | 16,801 | $ | 16,716 |
2023 guidance compared to 2022 full year results
Year ending / ended December 31, | |||||||
(amounts in thousands) | 2023 | 2022 | |||||
(estimate) | |||||||
Net loss (GAAP) | $ | (19,881 | ) | ||||
Interest expense | 8,200 | 14,059 | |||||
Income tax expense | 100 | 1,105 | |||||
Depreciation | 8,300 | 7,413 | |||||
Amortization of intangible assets | 900 | 905 | |||||
Stock-based compensation | 5,000 | 5,426 | |||||
Deal and integration costs (a) | — | 943 | |||||
Refinancing costs and losses (b) | — | 6,831 | |||||
EBITDA, as adjusted | $ | 16,801 |
- Costs related to the acquisition and integration of IriSys.
- In December 2022, as a result of the refinancing the credit agreement with Athyrium, the Company recorded a loss on extinguishment of debt for the write-off of unamortized deferred financing costs and incurred other associated costs.
- In 2021, the Company received forgiveness of principal and interest on a note issued under a Federal COVID-19 relief program and recorded a gain on extinguishment of debt.
- To exclude the impact of Accounting Standards Update 2014-09, "Revenue Recognition," related to non-cash changes in its contract asset.
FAQ
What were Societal CDMO's Q4 2022 earnings results?
How much did Societal CDMO grow its clinical trial materials development business in 2022?
What financial steps did Societal CDMO take in 2022?
What is Societal CDMO's revenue guidance for 2023?