Catalent Inc. shares traded at their lowest in three years following cuts to its annual financial outlook that hurt investor confidence in the contract drug manufacturer.
The company expects to reduce its guidance for net revenue and adjusted earnings before interest, taxes, depreciation and amortization by at least $400 million each, according to a statement Monday, and to push back the release of its third-quarter earnings results until May 15. The shares sank to about $34, their lowest price since March 2020. The drop of as much as 28% was the biggest since April 14.
That was the day Catalent said its financial results would be affected by high costs and production issues at three plants and announced a new interim chief financial officer, following Thomas Castellano’s departure from the company. Days later, Bloomberg reported that Danaher Corp. was no longer considering a takeover of Catalent, according to people familiar with the situation. Danaher had earlier made overtures to the company valuing it at a significant premium.
The Monday warning “is the latest (and perhaps largest) shoe to drop” at Catalent, Stephens Inc. analysts led by Jacob Johnson said in a note to clients. “This raises a variety of questions including the impact to potential strategic interest.”
Bank of America Securities Inc. analysts downgraded Catalent to underperform from neutral, saying they “lack confidence in quick recovery.” The announcement was “a much steeper cut than what had been anticipated” and raises further questions about Catalent’s operational issues, wrote analysts Derik de Bruin and Michael Ryskin.
In April, Catalent said revenue was hit after its Maryland manufacturing site was unable to ramp up production capacity for a customer’s product as quickly as anticipated. On Monday, the company cited operational and productivity issues for the reduction, ruling out the loss of a customer or order.
Catalent also said it had “identified significant issues with its forecasts over the past year” and potential non-cash adjustments related to its operations in Bloomington, Indiana. The company didn’t respond to requests for comment.
In February, Catalent had predicted annual net revenue between $4.63 billion and $4.88 billion. Adjusted Ebitda was expected to be between $1.22 billion to $1.3 billion.
“We are dissatisfied with our recent results and are taking the necessary steps to address the issues that negatively impacted our performance,” Chief Executive Officer Alessandro Maselli said in the Monday statement.
Other activity in the contract manufacturing space includes the $4.25 billion cash sale of a Baxter International Inc. unit to investor Warburg Pincus and private equity firm Advent International Monday.
(Updates from fifth paragraph with analyst comments)
