Editor’s (re)View: CDMO earnings season shows strength of Siegfried, weakness of Charles River
This week, the fourth-quarter 2024 earnings season was in full swing with companies like Charles River Laboratories and Siegfried reporting very different results. For Charles River, there was positive news as the company’s Q4 revenue of $1 billion beat the analysts’ consensus estimate. However, its contract development and manufacturing organizations (CDMO) business continued to be a financial drag.
While Charles River’s revenue in its manufacturing segment increased 1.6% compared to the prior-year period, it was partially offset by lower revenue in the CDMO business — a problem that is expected to persist in 2025.
This year, Charles River expects that lower commercial revenue in the CDMO business will reduce consolidated revenue by approximately 1% and the manufacturing segment’s growth rate by more than 5%, weighed down by the previously announced loss of revenue from two commercial cell and gene therapy clients.
Making matters worse for Charles River, William Blair analyst Max Smock in a note to investors said that one of Charles River’s CDMO clients was issued a Complete Response Letter by the FDA that “resulted in a clinical hold on that client’s new drug application and prompted an FDA inspection at Charles River’s facility, which resulted in the company receiving an FDA 483 notice that it is now responding to and remedying.”
Smock warned that “this public disruption could have a chilling effect on new CDMO client demand at a pivotal point right when Charles River was beginning to establish its reputation in the CDMO business.”
Siegfried scores
The Q4 and full-year 2024 results announced this week by Swiss-based CDMO Siegfried were decidedly more positive than Charles River’s news.
Morningstar analyst Rachel Elfman in a note to investors described Siegfried’s year-end results as “solid” and in line with expectations, highlighted by net sales of approximately CHF 1.3 billion, representing growth of 3.5% compared with the prior-year period. Elfman highlighted the company’s drug substances business, which accounted for nearly 70% of overall revenue and grew 4.5% from the prior-year period, offsetting the impact of destocking.
“Drug products reported growth in line with the prior year, despite the phasing out of significant vaccine sales in 2024, which demonstrates healthy demand for Siegfried’s outsourced services even with these vaccine challenges,” Elfman wrote.
Siegfried is on a roll, according to Elfman, who noted that the company’s growth over the last 14 years has allowed it to become a leading CDMO. “Since 2010, sales have quadrupled and the workforce has grown fivefold,” she said. “The company has expanded from three manufacturing sites to 13 across seven countries.”
Rovi disappoints
While Siegfried has a healthy outlook for 2025 as strong outsourcing demand supports growth, Spanish CDMO Rovi reported in a regulatory filing earlier this month that its 2024 earnings before interest, taxes, depreciation, and amortization (EBITDA) levels will be lower than the market consensus.
The company said that its EBITDA levels will be lower — within a range of 10% to 15% — than analysts’ consensus estimates for last year.
“This revision of the market consensus in relation to the EBITDA is due basically to lower expected activity in the contract manufacturing business (CDMO) during the fourth quarter of 2024,” Rovi said in its filing with the National Securities Market Commission, which is responsible for the oversight and regulation of the capital markets sector of Spain’s financial services industry.
Rovi’s full results for 2024 will be published on Feb. 25, according to the filing. “At that time, the company will provide information on the situation and an analysis of its guidance for 2025.”
