Earnings Reports (August 5th-9th)
Earnings Reports (August 5th-9th)
Taking a Look at Earnings for Rocket Lab (RKLB), Relay Therapeutics (RLAY), Coherus BioSciences (CHRS), & Avita Medical (RCEL).
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1. Rocket Lab (RKLB)
Rocket Lab (RKLB) has recently made significant strides in its growth and expansion, particularly in its launch capabilities, leading to a notable increase in its stock value. This week, RKLB's shares surged over 15%. The company's ambitious goals of enhancing revenue and expanding its backlog of launch systems are evident in its second-quarter earnings report, which also highlights advancements in the development of its larger Neutron rocket system.
Increase in Revenue & Backlog
RKLB is still unprofitable but is making significant progress toward reaching profitability. A key area of focus is their revenue and backlog, particularly the growth in their space systems segment, which is emerging as a hidden gem for the company.
In 2024, the Electron rocket's launch frequency has increased compared to 2023, resulting in a remarkable 71% YoY revenue growth in the second quarter, reaching $106M. The company has also secured 17 new launches this year. Additionally, the company's space systems segment, which includes satellite and solar panel development, enhances its vertical integration and operational efficiency. These combined efforts have led to a backlog exceeding $1B (excellent), providing a clear roadmap for future revenue growth.
With robust growth and an expanding backlog, this has pushed the stock up more than 10% this week, underscoring investor optimism.
Advancements in the Neutron Rocket & My Take
A key highlight of the quarter is the progress made on the Neutron rocket, a larger launch system under development. The Neutron rocket is poised to significantly boost RKLB's sales once operational. The company has completed the first engine test for the Neutron and is establishing carbon fiber manufacturing facilities. The goal is to have the Neutron ready for commercial use within a few years.
The entire thesis of this company relies heavily on the Neutron project, as I've emphasized multiple times before. Currently, the company is investing over $75 million in R&D each quarter, which affects profitability and cash flow. While the successful deployment of Neutron is expected to drive substantial revenue growth, the uncertainty around its launch timeline makes me hesitant to increase my position. The lack of a clear timeframe and uncertainty about their ability to successfully launch Neutron are major factors holding me back from consolidating further. Furthermore, Peter Beck has revised the timeline for Neutron several times, which undermines my confidence in the accuracy of their projections. For now, I’ll continue to hold on to my shares tightly until we have positive new on Neutron.
2. Relay Therapeutics (RLAY)
Relay Therapeutics (RLAY) announced their earnings this past week, though there wasn't much new information to discuss. As a pre-revenue company, we are eagerly awaiting a critical data readout expected in Q4 2024, which will be pivotal for the company’s future and investment thesis. While there is uncertainty, there are indications that a positive outcome is likely.
In the meantime, we can anticipate some volatility in the market. For those concerned about cash burn, Relay Therapeutics ended the quarter with $688 million in cash, which is expected to fund operations until the end of 2026. Personally, I plan to add to my position in this company whenever the opportunity arises.
For more in-depth research on what this company does, please reference my archive.
3. Avita Medical (RCEL)
AVITA Medical (RCEL) reported impressive growth in its Q4 2024 financial results, demonstrating strong performance across its business segments. Shares have increased nearly 20% on Friday upon positive results.
Second Quarter 2024 Detailed Financial Results:
Total Revenues: Increased by 29.3% to $15.2M from $11.8M in the same period last year, driven by deeper market penetration.
Gross Profit Margin: Improved to 86.2% from 81.2% last year, due to higher revenues and production volumes.
BARDA Income: Dropped to zero from $0.5M, as reimbursable clinical trials concluded. Last year's income came from the Biomedical Advanced Research and Development Authority under USG Contract No. HHSO100201500028C.
Operating Expenses: Totaled $28.7M, up from $21.2M last year, primarily due to a $6.3M increase in sales and marketing expenses related to the expansion of the commercial organization. G&A expenses rose by $1.4M, attributed to higher salaries and benefits, offset by reductions in deferred compensation and professional fees. A decrease of $0.2M in R&D costs was noted due to lower professional fees and development expenses.
Commercial Revenue: RCEL achieved a record commercial revenue of $15.1M, marking a 29% increase compared to the same period in 2023.
Gross Profit Margin: The company reported a gross profit margin of 86.2%, reflecting enhanced operational efficiency.
Product Developments and Approvals:
RECELL GO™: The FDA approved the premarket approval (PMA) supplement for RECELL GO on May 29, 2024, with the first case completed on May 31, 2024.
RECELL GO mini™: AVITA submitted a PMA supplement for the RECELL GO mini, designed for smaller wounds, on June 28, 2024. The product maintains its Breakthrough Device designation, ensuring a prioritized 180-day review period.
Regenity Agreement: AVITA entered an exclusive development and distribution agreement with Regenity Biosciences, granting AVITA commercialization rights to a unique collagen-based dermal matrix, pending 510(k) clearance.
Future Milestones:
Regenity 510(k) Clearance: Expected in Q4 2024, after which AVITA will begin marketing, selling, and distributing the dermal matrix.
Post-Market Studies: Plans to initiate multiple post-market clinical studies to explore synergies between the new dermal matrix and RECELL.
RECELL GO mini Approval: Anticipated FDA approval by December 27, 2024.
Vitiligo Study Publication: Plans to submit the post-market study (TONE) and a healthcare economics study for publication by year-end.
Financial Guidance:
Third Quarter 2024 Revenue: Expected to range between $19M and $20M, representing a 40% to 48% growth compared to the same period in 2023.
Full-Year 2024 Revenue: Now projected to be between $68M and $70M, reflecting a 37% to 41% increase over 2023.
Profitability Targets: AVITA aims to achieve cash flow break-even and GAAP profitability by the end of Q3 2025.
My Take
AVITA had an excellent quarter, especially considering its history of overpromising and underdelivering. Not long ago, the company a multi-bagger, with seemingly limitless potential. Unfortunately, due to poor decisions in the past, we are trying to climb our way back up. Now, with successful execution and optimistic guidance, along with numerous catalysts in its pipeline, I'm confident in holding my shares as the company aims to become a multi-bagger once again—or even exceed that achievement. I may consider adding to my position when I have an opportunity.
4. Coherus BioSciences (CHRS)
This past week Coherus BioSciences (CHRS) announced their Q2 2024 earnings, and it was a solid quarter.
Commercial Achievements:
Udenyca OnBody: Just over three months post-launch, Udenyca Onbody has captured an estimated 9% of the on-body injector market despite having an average selling price nearly double that of its only competitor, Neulasta Onpro.
Loqtorzi: Six months after its release, Loqtorzi has secured almost 10% of the nasopharyngeal carcinoma (NPC) patient population. It is now available in all 33 National Comprehensive Cancer Network (NCCN) centers, which treat an estimated 60% of NPC patients (this will be huge).
Financial Position: As of June 2024, CHRS held $159.2M in cash, surpassing my expectations by $75M.
The company has really demonstrated its commercial strength in Q2 of 2024. CHRS unveiled a simplified capital structure, with operating expenses 5% below Wall Street expectations, which helped offset a slower-than-anticipated improvement in gross margin.
Loqtorzi: Now available in all 33 NCCN centers in the United States, the treatment for NPC patients doubled from the first quarter. With the Centers for Medicare and Medicaid Services (CMS) granting a unique J Code at the start of Q3 2024, ordering and reimbursement for hospitals have improved, with no limitations on national reimbursement.
Udenyca Franchise: Despite being the highest-priced pegfilgrastim brand, Udenyca has gained market share across all three presentations. The prefilled syringe (PFS) formulation achieved its highest revenue in two years, while the autoinjector (AI) formulation grew revenue by 49% QoQ. Udenyca Onbody has become the company's second-bestselling product just three months into its launch.
Phase 3 Trial and Market Opportunity:
A phase 3 clinical trial for Loqtorzi is now underway in the United States, potentially doubling or even tripling the annual market opportunity to $500M by 2028. Also, which many don’t realize, CHRS does not have to fund this trial.
Key Metrics:
Q2 2024 Performance: Despite the absence of contributions from Cimerli and the final contributions from Yusimry, CHRS matched product revenue, delivered higher gross profit, and reduced operating expenses by 16% compared to the year-ago period when Cimerli contributed $26.7M in revenue.
Revenue Growth: Products launched within the past year generated $15.7M in Q2 2024 revenue, while Udenyca PFS sales grew by $7.2M. Total oncology revenue of $54.7M marked a 72% increase YoY, the highest since early 2022.
Financial Outlook:
Cash Position: CHRS ended Q2 2024 with a cash balance of $159.2M.
Operating Metrics: With a focus on oncology products, the next couple quarters will provide greater visibility into operating improvements. The company’s historical operating income mirrors total oncology revenue, suggesting that profitable operations are within reach.
My Take
This quarter was excellent, and while there's still a long way to go, the future looks much clearer, and their commercial execution has been impressive. The management team has made poor decisions in the past, but acknowledging and accepting these mistakes is crucial. However, we are now back on track, and past issues are in the rearview mirror. A look at the stock price’s five-year chart highlights this. The levels we are trading at today should not be overlooked, as this company is severely undervalued. With a clearer path to profitable operations and strong commercial execution, I’ve decided to increase my position. With the Loqtorzi and Udenyca franchises gaining momentum, I am confident this company will continue to excel.