Lifecore Biomedical, Inc. Q3 FY2025 earnings call

• Strong revenue growth: 26% increase in revenue compared to the prior year period, with adjusted EBITDA and margins improving.
• Quality: Successful FDA inspection in March, followed by five positive customer audits, including a due diligence audit with a large multinational pharma company.
• Growth: Achieved milestones in commercial business expansion and pipeline advancement, signed two new business wins and made progress on additional projects. Supported a key customer's aseptic fill/finish expansion, qualified hyaluronic acid for the Japanese market, and advanced late-stage pipeline programs with various milestones.
• Workforce productivity: Despite a 20% reduction in manufacturing workforce over 18 months, maintained production volumes, demonstrating performance-based culture.
• Business development: Accelerated efforts, with progress seen in new business opportunities and site transfer of product from a large multinational pharma company.

For the 3 months ended September 30, 2025, revenues were $31.1 million, a 26% increase from $24.7 million in the comparable prior period. HA manufacturing revenues increased by $4.8 million, primarily due to increased demand from a customer's supply chain initiatives. CDMO revenues increased by $1.6 million, with $2.6 million from higher sales volumes and $0.3 million from pricing, partially offset by $1.3 million from lower development revenue. Gross profit was $7.8 million, up from $5.4 million in the prior period. HA manufacturing gross profit increased by $4.3 million due to increased sales volume and manufacturing absorption, while CDMO gross profit decreased by $1.9 million due to lower development revenues and product mix/costing issues, partially offset by favorable manufacturing absorption.

• For the 7-month transition period from May 26 to December 31, 2025: Revenue expected to be $74 million to $76 million, net loss $18.4 million to $16.4 million, adjusted EBITDA $12 million to $14 million.
• Stub period (May 26 - September 30, 2025): Revenue $39.8 million, remaining stub period (Q4 2025) revenue guidance $34 million to $36 million (midpoint $35 million), adjusted EBITDA remaining stub period guidance $7 million to $9 million (midpoint $8 million).

None explicitly detailed in the transcript beyond general forward-looking statement disclaimers regarding potential differences between projected and actual results, which can be found in the earnings press release and SEC filings.

Q: Maybe first up, obviously, with the stub period, it makes it a little bit difficult to run the math here, but I'm trying to get a sense for what the missing month would have been or what that would have meant implied maybe even for Q4, just as we're looking at the period-to-period numbers.

A: Matt, thanks for your question. So the June estimated revenues were about $8.7 million with about $6.6 million of that coming from CDMO revenues and $2.1 million from HA revenues. So year-to-date, through September 30, the stub period revenue is expected to be approximately $39.8 million. So that leaves for the remaining stub period revenue guidance for Q4 to be in a range of $34 million to $36 million or about $35 million at the midpoint, which represents for the fourth quarter, about an 8% increase over the comparable prior year quarter. And then for adjusted EBITDA, June estimated adjusted EBITDA was $1.5 million. So year-to-date through September 30, the stub period adjusted EBITDA would have been approximately $4.6 million. So that leaves the remaining stub period guidance to be in a range of $7 million to $9 million or about $8 million at the midpoint for Q4.

Q: Given the recent manufacturing capacity announcements, can you just talk about how early conversations are progressing given the current macro dynamics and how those might translate to the pipeline over time?

A: Hannah, thanks for the question. This is Paul. I think that the -- I'll call it, the regionalization of manufacturing and the investments that have been announced recently are only a tailwind for CDMOs in general and certainly for Lifecore. We have seen a buoying in our pipeline of, I would say, commercial site transfer opportunities from other regions, whether it's Asia, Europe, Israel, India that heretofore, we haven't seen. I've been in this commercial side of the CDMO business now, had exposure to it for 31 years, and I've never seen this many or this amount or percentage of commercial site transfers become -- that you have the opportunity to compete on. So I look at it as only buoying the market from a CDMO perspective.

Q: You recently won a tech transfer for a commercial product from a large pharma company. I know those types of transfers typically take over a year to complete. But what are you expecting in terms of the time line for this particular agreement?

A: Lucas, this is Paul. Thanks for the question. We expect that, that commercial site transfer will take approximately 24 to 30 months. We're working with our customer on the exact time line, but we'll obviously work to accelerate as quickly as we can. But based on current projections, I would anticipate 24 to 30 months.

Q: Kind of piggybacking a little bit off the last question in terms of the commercial injectable win. Just hoping if you could give a little bit more context here. So it was helpful that 24 to 30 months potentially as being sort of fully ramped commercially, but wondering if you expect revenues before this full transfer is complete and if you expect to be the sole product manufacturer? And just anything you can give in terms of the scope of the contract in terms of annual revenue expected?

A: No. Christine, thank you so much for the question. We do expect to be the sole manufacturer and fully qualified. Based on 2025 revenues, once this product is commercialized, demand remains the same, we anticipate this will be a top 5 customer or top 5 product at Lifecore and consume, I will say, material capacity within the facility between 5% and 10%. We will make what I call or characterize as onetime development revenue where we qualify and validate the program and product within our facility. And then once we get regulatory approval, obviously, we'll get into that recurring revenue cadence.