Rovi Issues Profit Warning Amid Declining CDMO Activity

Rovi, the Spanish specialized pharmaceutical company, has announced that its 2024 EBITDA is expected to be 10% to 15% below market consensus, due to reduced activity in its CDMO segment during the fourth quarter.

The company had previously considered selling its CDMO division, receiving offers exceeding USD 2.1 bn, but ultimately decided to retain it. Despite current challenges, Rovi maintains its 2025 forecasts and later this month, will discuss long-term strategies, offer more information on its 2024 performance.

The following article originally appeared in Fierce Pharma.

Spanish CDMO Laboratorios Farmacéuticos Rovi, known simply as Rovi, is part of a parade of biopharma contractors struggling to keep their manufacturing businesses growing in a post-COVID world.

Rovi warned (PDF) in a regulatory release this month that analyst consensus estimates for its annual profits in 2024 are likely 10% to 15% too high. The CDMO said its slimmed-down profit outlook is “due basically to lower expected activity in the contract manufacturing business (CDMO) during the fourth quarter of 2024.”

Rovi plans to publish detailed 2024 financial results on Feb. 25, at which time the company says it will offer more information on the 2024 profit situation and an analysis of its guidance for the current year.

Despite the rough conclusion to 2024, Rovi said its 2025 guidance, which anticipates a mid-single-digit sales decline, still stands.

In a follow-up call with the CDMO’s investor relations team, Rovi management provided little detail on the contract manufacturing downturn except to add that the company’s CDMO unit may have booked some one-off costs during the final three months of the year, analysts at ODDO BHF wrote in a recent note to clients.

That said, Rovi’s uninspiring guidance for 2025 likely already sent the message that earnings for 2024 could come in weak, the analysts pointed out. So, while the latest profit warning “worsens the [short-term] momentum” for the company, it does not alter Rovi’s capacity to “greatly increase its earnings” in the medium term should the CDMO poach new clients, the ODDO team said.

The ODDO analysts figure Rovi could realistically fill some of its unused CDMO capacity by cornering the market for injectables, where there is “high demand” despite “limited supply options.”

“[W]e believe that this feeble [short-term] earnings momentum will stop mattering once we get better visibility on improving capacity utilization,” the analysts said.

Rovi first rose to prominence during the COVID-19 pandemic when it agreed to chip in on production of Moderna’s mRNA-based vaccine Spikevax. In 2022, the partners inked a 10-year collaboration agreement under which Rovi currently supports Spikevax manufacturing across all stages of the supply chain plus production of Moderna’s next-generation COVID shots and mRNA vaccines against respiratory syncytial virus and flu.

This week, Rovi posted its financial performance over the first nine months of 2024, during which revenue decreased 5% versus the same period in 2023 to 564.6 million euros (about $587 million).

Digging deeper into the situation, Rovi noted in a corporate presentation that CDMO sales dropped 12% over the nine-month stretch to 253.2 million euros ($263 million). The company blamed the decline, in part, on lower revenues tied to the switch from a pandemic to an endemic COVID-19 vaccine market.

Rovi also attributed the sales decline to costs it incurred prepping its Spanish production facilities in Granada and Madrid to carry out work for Moderna.

On the bright side, Rovi noted that CDMO sales in 2024’s third quarter actually increased 16% over the same period in 2023, thanks to larger sales from existing customers beyond Moderna plus higher revenue from COVID shot production that the company attributed to “more concentrated seasonality” in the third quarter.

Rovi is hardly the only contract manufacturer struggling to recapture the sales highs seen during the pandemic. Nevertheless, the Spanish drugmaker’s CDMO business proved enticing enough to attract buyout offers last year.

Rovi confirmed that it received several buyout offers at the time, with Expansion naming the reported bidders as Antin Infrastructure Partners, Cinven, CVC Capital Partners, KKR and Permira.

After assessing its strategic options, Rovi in October decided to keep hold of the CDMO group "given the strength, momentum and prospects of this business," the company said in its recent investor presentation.

For more, please find the original story source here.