Catalent Inc (CTLT) Faces Headwinds with Q2 Fiscal 2024 Results
Net Revenue: Q2'24 net revenue decreased by 10% to $1.03 billion year-over-year.
Net Loss: Reported a net loss of $(204) million in Q2'24 compared to a net income of $81 million in Q2'23.
Adjusted EBITDA: Adjusted EBITDA fell by 56% to $124 million in Q2'24.
Liquidity: Raised $600 million in term loans, resulting in ~$1.3 billion in total available liquidity as of December 31, 2023.
Merger Agreement: Announced an all-cash acquisition by Novo Holdings valued at $16.5 billion.
On February 9, 2024, Catalent Inc (NYSE:CTLT), a global leader in development and manufacturing solutions for the pharmaceutical industry, released its 8-K filing, reporting financial results for the second quarter of fiscal 2024, which ended December 31, 2023. The company, which operates under four segments: biologics, softgel and oral technologies, oral and specialty delivery, and clinical supply services, has faced significant challenges this quarter, primarily due to a decline in COVID-19 related demand.
Performance Overview
Catalent reported a decrease in net revenue of 10% as reported, or 11% in constant currency, compared to the same quarter in the previous year. Excluding COVID-related revenue, which was approximately $260 million in Q2'23 and around $75 million in Q2'24, the company saw an increase of 8% compared to Q2'23. However, the net loss for Q2'24 was significant at $(204) million, a stark contrast to the $81 million net income reported in Q2'23. This loss was primarily due to the aforementioned decline in COVID-related demand.
Adjusted EBITDA for the quarter was $124 million, a decrease of 56% as reported, or 57% in constant currency, compared to Q2'23. The company's liquidity position remains strong, with the raising of $600 million in term loans and a total available liquidity of approximately $1.3 billion as of December 31, 2023.
Financial Highlights and Challenges
The Biologics segment experienced a significant decrease in net revenue and segment EBITDA, with a year-over-year change of (24)% and (79)%, respectively. The Pharma and Consumer Health segment saw a modest increase in net revenue of 3% year-over-year but experienced a decrease in segment EBITDA of (6)%.
Catalent's balance sheet reflects a total debt of $5.01 billion, with net debt (total debt minus cash and equivalents) at $4.78 billion as of December 31, 2023. The company's net leverage ratio increased to 10.3x, compared to 7.6x at the end of the previous quarter.
"I am proud of the progress the Catalent team made in our second quarter and our ongoing momentum, including strong non-COVID sequential revenue growth in both the Biologics and PCH segments," said Alessandro Maselli, President and Chief Executive Officer of Catalent. "Our commitment to providing customers with premium development and manufacturing solutions is our north star and our recently announced transaction with Novo Holdings is further proof of that."
Merger and Outlook
On February 5, 2024, Catalent announced a merger agreement with Novo Holdings A/S, which will acquire Catalent in an all-cash transaction valued at $16.5 billion on an enterprise value basis. The transaction is expected to close towards the end of the calendar year 2024, subject to customary closing conditions.
In light of the pending merger, Catalent will not host an earnings conference call and will no longer provide forward-looking guidance. This strategic move is expected to enhance Catalent's offerings and accelerate investment in the business, benefiting current and prospective pharma and biotech customers.
Conclusion
The second quarter of fiscal 2024 has been challenging for Catalent, with significant decreases in net revenue and adjusted EBITDA. The decline in COVID-related demand has had a notable impact on the company's financial performance. However, the announced acquisition by Novo Holdings may provide the resources needed to strengthen Catalent's market position and enhance its service offerings. Investors and stakeholders will be watching closely as the company navigates through these changes and works towards closing the merger agreement.
Explore the complete 8-K earnings release (here) from Catalent Inc for further details.
This article first appeared on GuruFocus.
