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Cambrex Misses on Q4 Earnings, Shares Down

Zacks Equity Research

Cambrex Corporation (CBM) reported fourth quarter 2013 earnings of 30 cents. The fourth quarter earnings were below the Zacks Consensus Estimate of 32 cents and $1.44 per share recorded in the year-ago period. Fourth quarter 2012 earnings included the impact of an income tax benefit of $37.9 million.

The company’s net revenues for the reported quarter increased 47.3% year over year to $103.0 million. Revenues were above the Zacks Consensus Estimate of $96 million.

Cambrex' 2013 earnings of 98 cents per share were above the Zacks Consensus Estimate of 85 cents. Year-ago earnings (including a tax benefit of $31.9 million) were $2.09 per share.

Net revenues during the year increased 15.1% year over year to $318.2 million. Revenues beat the Zacks Consensus Estimate of $316 million.

Quarterly Highlights

Custom development revenues increased 12.1% to $40.8 million, driven by sales of commercial launch material. The company expects 2014 custom development revenues to decrease to $28 million – $32 million as some of the late phase products have been shifted to the custom manufacturing category. Cambrex has 13 phase III candidates in the segment.

Custom manufacturing revenues were $24.3 million in the fourth quarter 2013 compared with $32.9 million in the year-ago quarter due to the unfavorable timing of orders. Cambrex expects 2014 revenues in this segment to be between $160 million and $165 million.

Sales of generic active pharmaceutical ingredients (APIs) in the fourth quarter were down 7% (in constant currency terms) year over year to $23 million due to lower levels of generic orders in the U.S. Cambrex has 15 candidates in the segment. Revenues from this segment are expected to increase in the low-to-mid single-digit range in 2014.

Sales of controlled substances were $12.2 million, up from $4.5 million in the year-ago quarter. The company expects 2014 controlled substances revenues to be between $44 million and $48 million.

Sales of active ingredients utilizing drug delivery technology primarily related to nicotine replacement therapy were $2.7 million during the quarter as compared to $4.4 million in the fourth quarter 2012. The company expects drug delivery revenues to remain flat in 2014.

In the fourth quarter of 2013, research and development (R&D) expenses were $2.8 million, up 26.4% year over year. The company expects R&D to increase in 2014. Selling, general and administrative expenses increased 28.9% to $14.7 million, reflecting higher personnel expenses.

2014 Outlook

For 2014, earnings are expected in the range of 99 cents to $1.10 per share on the back of 8%–12% sales growth at constant currency. Although, the pre-earnings Zacks Consensus Estimate stood at $1.05, within the guidance range, investors had expected a better guidance. Consequently, the stock fell 14.16% after the earnings release.

Cambrex expects first quarter 2014 to be soft and most of the growth to be recorded from the second quarter onwards.

Our Take

Cambrex’ fourth quarter results were mixed. Although revenues surpassed expectations, earnings missed the same. We are nevertheless pleased with the company’s robust pipeline and new product launches.

Cambrex currently has a Zacks Rank #1 (Strong Buy). Other stocks, worth considering, include Alexion Pharmaceuticals, Inc. (ALXN), Emergent BioSolutions, Inc. (EBS) and Actelion Ltd. (ALIOF). All three sport a Zacks Rank #1.

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