Avid Bioservices Inc (CDMO)

[stockaxe]

Funny enough...I thought this quarter was pretty good in the context of the industry environment. They continue to grow revenue and maintain backlog despite a large portion of their bookings (early stage) basically at zero because of the environment. They are winning projects from other CDMOs that should reap major dividends in 18-24 months and could very well fill the facilities. If biotech funding were to actually come back, I think you'd see another $30-$50mm in revenue from early stage projects start to pile in. If funding is weak through the end of 2025 (which would be 4 years...kind of unprecedented), I still think Avid grows and will generate good EBITDA. What people here can't seem to understand is that incremental revenue has a 70% margin. Do that math. If they add $50mm in revenue from today's base, that's an incremental $35mm of gross profit. Gross margin and profits will very quickly rebound because of this operating leverage. The Company had decent bookings and continued on its path in a weak environment and in what is usually a slower quarter for bookings. Absent the slowdown in biotech funding, I think they would have filled facilities by the end of calendar 2024. I think that has probably been pushed by a year, but the stock will react well before they fill the facilities.