Avid Bioservices Inc (CDMO)

[Dragon Lady]

10K Filing: AVID EXTREMELY HIGH RISK

1) It's beyond CLEAR (no way to spin it) that they are now a CONTRACT MANUFACTURING biz and not much else. They completely re-wrote their 10-K format even, to focus highly on that reality and then "mention" Bavi and any "trials" as almost a side issue- as only things that "might" come later and as very small projects/efforts and subjugated to the contract manufacturing biz efforts

2) The AVID biz is outlined as VERY HIGH RISK IMO. They spell it out clear as day- that the whole thing is presently riding on a few, a few, a few "customers" only. Lose one even, and you can kiss that ole "backlog" a blah, blah, blah goodbye. Simple as that.

From the 10-K, PAGE 9:

"Customers

Contract manufacturing revenue has historically been derived from a small customer base. These third-party customers typically do not enter into long-term commitments because their need for product supply depends on a variety of factors, including the products stage of development, their financial resources, and, the market demand with respect to commercial products. Our future results of operations could be adversely affected if revenue from any one of our primary customers is significantly reduced or eliminated. During fiscal years 2016, 2015 and 2014, Avid’s total revenue generated from third-party customers amounted to $44,357,000, $26,744,000, and $22,294,000, respectively, of which 69%, 79% and 91%, respectively, was derived from Halozyme Therapeutics, Inc. In addition, contract manufacturing from third-party customers outside the United States represented less than 1% of the contract manufacturing revenue recognized during fiscal years 2016, 2015 and 2014. Refer to Note 10, “Segment Reporting” to the accompanying consolidated financial statements for additional financial information regarding Avid’s customer concentration and geographic areas of its customers.
"

ONE, ONE FREAKING CUSTOMER presently accounts for a vast majority of their biz and "revenues". Look that customer up on the net- it's a development stage company itself, Halozyme Therapeutics. Meaning it's HIGH RISK and could go belly up or fail an FDA approval or any of 100's of failure scenarios. They, PPHM, looks to me, like they've BET THE FREAKING FARM on a biz model that presently has a FEW CUSTOMERS.

http://www.halozyme.com/homepage/default.aspx

MOST of their "revenues" coming from ONE FREAKING CUSTOMER- ole Halozme. That's a stunner to me.

I've personally seen "backlogs" vanish, get cancelled, faster than one can spit- for any number of reasons. Economy goes bad, biz segment cools, lost funding to said customer, customer finds better/cheaper manufacturer somewhere else- usually off-shore overseas, and on and on and on. Seen it more times than I can count in a variety of industries- including medical.

From 10-K, PAGE 10:

"Competition

The CDMO and pharmaceutical and biotechnology industries are intensely competitive. Our competition in the CDMO market includes full-service contract manufacturers and large pharmaceutical companies offering third-party manufacturing services to fill their excess capacity. Also, large pharmaceutical companies have been seeking to divest portions of their manufacturing capacity, and any such divested businesses may compete with us in the future. In addition, most of our competitors may have substantially greater financial, marketing, technical or other resources than we do. Moreover, additional competition may emerge and may, among other things, result in a decrease in the fees paid for our services, which would affect our results of operations and financial condition.

Our competition in the pharmaceutical and biotechnology industry includes several pharmaceutical and biotechnology companies actively engaged in research and development of immunotherapy-based products that have commenced clinical trials with, or have successfully commercialized, these products. Some or all of these companies may have greater financial resources, larger technical staffs and larger research budgets than we have, as well as greater experience in developing products and running clinical trials.

With respect to our lead immunotherapy candidate, bavituximab, in February 2016, we discontinued our Phase III SUNRISE trial for the treatment of NSCLC. We are currently conducting an extensive review and analysis of the available clinical data and testing the numerous collected biomarkers samples in order to determine if certain subgroups or other patient characteristics benefited more from bavituximab. In addition, in June 2016 we announced our strategy to focus exclusively on small, early stage clinical trials combining bavituximab with immune stimulating therapies Therefore, our immediate competition is currently undefined until we have additional data from the Phase III SUNRISE trial or from other planned trials."

10-K, PAGE 11 (NOTICE, they expect TWO FREAKING YEARS OF CONTINUED LOSSES and likely dilution via tapping their equity line until AVID is profitable, aka before they stop SHARE DILUTION) - read it, it's in black n white and PLAIN ENGLISH:

"If we cannot obtain additional funding, our product development efforts may be reduced or discontinued and we may not be able to expand our contract manufacturing business.

At April 30, 2016, we had $61,412,000 in cash and cash equivalents. We have expended substantial funds on the research and development of our product candidates, and funding the operations of Avid. As a result, we have historically experienced negative cash flows from operations since our inception and we expect negative cash flows from operations to continue for at least the next two fiscal years before we believe we can generate sufficient revenue from Avid’s contract manufacturing services to achieve profitability. Therefore, unless and until we are able to generate sufficient revenue from Avid’s contract manufacturing services or from the sale or licensing of our product candidates under development, we expect such losses to continue for at least the next two fiscal years.

Our ability to continue to fund our operations is highly dependent on the amount of cash and cash equivalents on hand combined with our ability to raise additional capital to support our future operations through one or more methods, including but not limited to, (i) raising additional capital in the equity markets, (ii) generating additional revenue from Avid, or (iii) licensing or partnering our product candidates in development.

Historically, we have funded a significant portion of our operations through the issuance of equity. During fiscal year 2016, we raised $45,872,000 in aggregate gross proceeds from the sale of shares of our common stock (as described in Note 5 to the accompanying audited consolidated financial statements). Subsequent to April 30, 2016 and through July 14, 2016, we raised an additional $2,169,000 in aggregate gross proceeds from the sale of shares of our common stock (as described in Note 12 to the accompanying audited consolidated financial statements). As of July 14, 2016, $112,445,000 remained available to us under our two effective shelf registration statements, which allows us from time to time to offer and sell shares of our common stock or preferred stock, in one or more offerings, either individually or in combination."

TWO YEARS more of LOSSES and they only "feel" that they have approx 12 MONTHS of freaking "cash-on-hand" at this point. ONE LOUSY YEAR of cash they're stating they're gonna BURN, BURN in their cash burner furnace. The employee count swelled massively- eating up any AVID "growth" looks like to me- their expense control is ZIP IMO.

They've got a very high risk biz model they're pursuing here IMO. They really only have a few customers (really ONE CUSTOMER who's presently supplying the bulk of their "revenues", and that company is highly speculative in and of itself)- if ONE were to cancel in the next 6 months for example, this whole thing goes bust into real penny land, worse than even now looks like to me, maybe even a possible BK scenario given the mass bloat and continual hiring and cost increases they keep incurring. They really don't have much here- they're out on a limb, a shoe string, a extreme risk profile and ZERO possibility of any FDA approved products or anything that's gonna drive their market cap or share price big time, not that I can see?????

10-K PAGE 13:

"Because a significant portion of our contract manufacturing revenue comes from a limited number of customers, any decrease in sales to these customers could harm our business, results of operations and financial condition.

Contract manufacturing revenue has historically been derived from a small customer base. These third-party customers typically do not enter into long-term commitments because their need for product supply depends on a variety of factors, including the products stage of development, their financial resources, and, the market demand with respect to commercial products. Our future results of operations could be adversely affected if revenue from any one of our primary customers is significantly reduced or eliminated."

10-K, PAGE 22 (They're gonna CONTINUE TO DILUTE and rely on dumping shares for funding- it's not even debatable, they state it clear as day):

"The sale of substantial shares of our common stock may depress our stock price.

As of April 30, 2016, there were 236,930,485 shares of our common stock outstanding. Substantially all of these shares are eligible for trading in the public market, subject in some cases to volume and other limitations. The market price of our common stock may decline if our common stockholders sell a large number of shares of our common stock in the public market, or the market perceives that such sales may occur.

In addition, our common stock outstanding as of April 30, 2016 excludes the following common shares reserved for future issuance:

· 39,561,165 common shares reserved for issuance under outstanding option grants and available for issuance under our stock incentive plans;
· 1,408,659 common shares reserved for and available for issuance under our 2010 Employee Stock Purchase Plan (the “Employee Stock Purchase Plan”);
· 273,280 common shares issuable upon exercise of outstanding warrants; and
· 45,745,760 common shares issuable upon conversion of our outstanding Series E Preferred Stock.

In addition, we expect we will continue to need to raise substantial additional capital to fund our operations and to support the expansion of our manufacturing operations for at least the next two fiscal years before we believe we can generate sufficient revenue from Avid’s contract manufacturing services to achieve profitability. If we raise additional funds by issuing equity securities, the market price of our securities may decline and our existing stockholders may experience significant dilution."

Looks weak here, real, real weak IMO. Yesterday revealed a tremendous amount of info as to what they DO NOT HAVE versus what they have- and they ain't got much IMO. Whole new ball game and biz model- they trash canned their old plans AGAIN, and did a pivot and are "betting the farm" on this whole "new" plan thingy. ANOTHER one in how many years of mass failures???? A Kinger special, a big ole gamble with long odds IMO.