- Drug contractor Catalent on Monday said it will delay release of its latest earnings statement as it works to resolve a series of operational and financial issues that will lower the company’s net revenue and adjusted earnings by hundreds of millions of dollars.
- Catalent had previously scheduled for Tuesday an earnings call to discuss its third fiscal quarter results, but now will not file its quarterly report with regulators until May 15. In a statement Monday, the company said it found “significant issues” with its financial forecasts over the past year, compounding previously identified productivity problems at three of its largest manufacturing plants.
- Shares in Catalent, which is one of the largest development and manufacturing contractors for the drug industry, sank by more than one-quarter Monday morning, shaving more than $2 billion off of the company’s valuation.
Catalent shares have steadily dropped in value over the past year as business has slowed, particularly due to declining demand for services related to COVID-19 vaccine production. That weakness has reportedly drawn potential suitors, with Bloomberg reporting last month that Danaher briefly explored an acquisition.
Shares fell further in mid-April, when Catalent disclosed “productivity challenges and higher-than-expected costs” at factories in Maryland, Indiana and Brussels, Belgium. The company also announced the departure of Thomas Castellano, its chief financial officer since June 2021.
Catalent previously said it expected those production problems to have a materially negative impact on its third fiscal quarter financial results and overall business outlook. On Monday, it revealed forecasting challenges and “potential non-cash adjustments” to its operations that will further weigh on its financial reporting.
“We are dissatisfied with our recent results and are taking the necessary steps to address the issues that negatively impacted our performance, which fell well short of our prior projections,” said Catalent CEO Alessandro Maselli in the company’s statement.
Taking all three problems together, Catalent expects to reduce its fiscal 2023 net revenue and adjusted earnings before interest, taxes, depreciation and amortization by more than $400 million each. It will also recognize an impairment charge of more than $200 million to goodwill associated with its consumer health business.
Catalent’s difficulties could spark some concerns among the biotech and pharmaceutical companies with which it contracts. Sarepta Therapeutics, for instance, relies on Catalent for manufacturing of its Duchenne muscular dystrophy gene therapy, which is in the final stages of Food and Drug Administration review. Elsewhere, Novo Nordisk’s struggles to supply its weight loss treatment Wegovy were due in part to issues at Catalent’s Brussels plant.
However, Maselli said in Catalent’s statement Monday that it expects to “sufficiently service” its customers’ supply orders.
“Our reduced outlook for fiscal 2023 was not due to any GMP compliance issue or the loss of any customer or canceled order,” Maselli said.
Shares in Catalent were down nearly 27% by late Monday morning.