AMRI second quarter total revenue increases 9% to $53.9 million

Albany Molecular Research, Inc.Aug 8 2011

AMRI (NASDAQ: AMRI) today reported financial and operating results for the second quarter ended June 30, 2011.

Financial highlights for the second quarter include:

• 18% growth in Development/Small Scale Manufacturing contract revenue over second quarter 2010
• 21% growth in Large Scale Manufacturing contract revenue over second quarter 2010
• Received $3 million milestone payment resulting from AMRI's collaboration with Bristol-Myers Squibb (BMS) for the initiation of a phase II study

Second Quarter 2011 Results

Total revenue for the second quarter of 2011 was $53.9 million, an increase of 9% compared to total revenue of $49.5 million reported in the second quarter of 2010.

Total contract revenue for the second quarter of 2011 was $43.5 million, an increase of 7% compared to total contract revenue of $40.7 million reported in the second quarter of 2010. Total contract revenue encompasses revenue from AMRI's Discovery Services, Development and Small Scale Manufacturing, and Large Scale Manufacturing business components.

• Discovery Services contract revenue for the second quarter was $8.9 million, a decrease of 25% from $12.0 million in 2010
• Development/Small Scale Manufacturing contract revenue for the second quarter was $9.1 million, an increase of 18% from $7.7 million in 2010
• Large Scale Manufacturing contract revenue for the second quarter was $25.5 million, an increase of 21% from $21.0 million in 2010

Recurring royalties in the second quarter of 2011 were $7.4 million, a decrease of 15% from $8.7 million in the second quarter of 2010. AMRI earns royalties from worldwide sales of the non-sedating antihistamine Allegra^® (Telfast^® outside the United States), as well as certain generic and OTC forms of Allegra^®, for patents relating to the active ingredient in Allegra^®.

Total revenue in the second quarter of 2011 includes milestone revenue of $3 million resulting from the company's 2005 licensing agreement with BMS.

Net loss under U.S. GAAP was $(0.6) million, or $(0.02) per basic and diluted share in the second quarter of 2011, compared to a net loss of $(3.9) million, or $(0.13) per basic and diluted share for the second quarter of 2010. Net loss, as adjusted was $(0.5) million, or $(0.02) per basic and diluted share.

Year-to-Date

Total revenue for the six-month period ended June 30, 2011 was $110.8 million, an increase of $12.0 million or 12% compared to $98.8 million for the same period in 2010.

Total contract revenue for the first six months of 2011 was $86.4 million, an increase of $6.8 million or 9% from $79.6 million for the same period in 2010.

• Contract revenue for Discovery Services in the six-month period ended June 30, 2011 was $19.6 million, a decrease of 20% from $24.5 million in 2010
• Contract revenue for Development/Small Scale Manufacturing in the six-month period ended June 30, 2011 was $19.5 million, an increase of 20% from $16.2 million in 2010
• Contract revenue for Large Scale Manufacturing in the six-month period ended June 30, 2011 was $47.3 million, an increase of 22% compared to $38.9 million in the six-month period ended June 30, 2010

Recurring royalties from Allegra^® for the first six months of 2011 were $21.4 million, an increase of 12% compared to royalty revenue of $19.2 million in 2010.

Total revenue in the first half of 2011 includes milestone revenue of $3.0 million resulting from the company's 2005 licensing agreement with BMS.

Net loss under U.S. GAAP in the first half of 2011 was $(2.0) million or $(0.07) per basic and diluted share, compared to net loss of $(3.9) million or $(0.12) per basic and diluted share in the first half of 2010. Net loss, as adjusted for the first half of 2011 was $(1.0) million or $(0.03) per basic and diluted share.

For a reconciliation of net loss and loss per diluted share as reported to adjusted net loss and adjusted loss per diluted share for the 2011 and 2010 reporting periods, please see Table 1 at the end of this press release.

AMRI Chairman, President and CEO Thomas E. D'Ambra said, "During the second quarter we experienced continued strength in our development and large scale API manufacturing operations as both biotech and pharmaceutical companies maintain focus on their late-stage portfolios. In discovery services, our Singapore operation also continues to show strength, although this was offset by the continued market slowdown for outsourced discovery services. Given the increased RFP activity we are experiencing, we believe we are at a turning point in the discovery market, and remain optimistic that the market will recover in 2012 as pharmaceutical companies move more decisively to outsource high-end discovery and biotech services.

Dr. D'Ambra went on to say, "We continue to make significant progress on our proprietary development portfolio, having recently received an additional $3 million milestone payment from Bristol-Myers Squibb resulting from a Phase 2 clinical trial. We also recently saw the successful completion of a Phase 1 clinical study for our novel MCH-1 receptor antagonist for obesity."

Liquidity and Capital Resources

At June 30, 2011, AMRI had cash, cash equivalents and marketable securities of $28.7 million, compared to $41.5 million at December 31, 2010.

Total debt at June 30, 2011 was $9.6 million, compared to $13.2 million at December 31, 2010. Cash, cash equivalents, and marketable securities, net of debt, were $19.1 million at June 30, 2011, compared to $28.3 million at December 31, 2010. The decrease in cash and equivalents was primarily due to capital expenditures of $5.8 million, principal payments on debt of $3.6 million, and cash used in operations of $3.8 million. Cash used in operations during the first half of 2011 includes a payment of $4.8 million made in the first quarter associated with the company's settlement of a 2010 arbitration matter. The company generated $6.3 million in cash from operations during the second quarter of 2011. Total common shares outstanding, net of treasury shares, were 30,595,142 at June 30, 2011.

2011 Financial Guidance

AMRI Chief Financial Officer Mark T. Frost provided contract revenue guidance for the third quarter and full year 2011. "In the third quarter, we expect contract revenue to range from $43 million to $47 million, an increase of up to 10% versus 2010. For the full year 2011, we continue to expect contract revenue to range from $179 million to $187 million, an increase of up to 15% versus 2010."

Mr. Frost continued, "As per our practice for the last two quarters, we will be continuing our approach of not providing royalty revenue or earnings guidance as we believe there will be continued volatility in the United States Allegra^® OTC conversion process. Our practice will be revisited as we enter 2012. We estimate gross margins will be consistent with prior year while research and development expense is expected to decrease between 10-15% and selling, general and administrative expense should be flat to down ~5% with the prior year."

Recent Highlights

Recent noteworthy announcements or milestones at AMRI include the following:

• The successful completion of a Phase I clinical study on novel MCH₁ receptor antagonist, ALB-127158. The results indicate that ALB-127158 is well tolerated at the doses tested and shows preliminary evidence of efficacy.
• The strategic alliance with Proteros Biostructures GmbH, an expert in the areas of protein crystallization and X-ray structural analysis. This partnership provides both companies an opportunity to offer its customers a more comprehensive portfolio of drug discovery services.
• The promotion of Takeshi Yura, Ph.D. to senior director of drug discovery services at its Singapore subsidiary, assuming leadership of the site's chemistry, biology and R&D operations.
• The successful outcome of an unannounced abbreviated FDA inspection of one of the company's Albany, NY research facilities in June 2011 with no issuance of a Form 483.
• The first FDA inspection of the company's UK facility in July 2011 with no issuance of a Form 483, exemplifying AMRI's global commitment to quality.