Lifecore Biomedical Q2 2026 Earnings Call Transcript

Lifecore Biomedical (NASDAQ: LFCR ) held its second-quarter earnings conference call on Wednesday. Below is the complete transcript from the call. This content is powered APIs. 1 million loss in the previous year.

5 to $25 million. Strategic growth is centered on maximizing existing business, advancing the development pipeline with 11 programs potentially commercializing by 2028, and adding high-quality new programs. Operational highlights include successful audits and inspections with no material issues and doubled fill-finish demand expected from 2027, with a significant focus on expanding into the Japanese market. 2 million cumulative SG&A and R&D expense reduction since 2024, and expects further improvements.

The company has added six new programs to its pipeline and plans to capitalize on industry trends like regionalized manufacturing and increased FDA enforcement to drive future growth. Full Transcript OPERATOR Good morning, and thank you for joining Lifecore Biomedical's earnings call for the second quarter and six months ended June 30, 2026. During the call, all participants will be in listen-only mode. Now I would like to turn the call over to Stephanie Diaz, Manager of Investor Relations for Lifecore Biomedical.

Stephanie Diaz, Investor Relations Good morning, and thank you for joining us today. Lifecore Biomedical will provide its earnings results for the second quarter and six months ended June 30, 2026, and a corporate update. As the company has recently changed its fiscal year-end to align with the calendar year, we will be comparing our results for the second quarter ended June 30, 2026 with a comparable prior-year quarter ended May 25, 2025. For the six-month period, we will be comparing our results from January 1 through June 30, 2026 with the prior-year period from November 24, 2024 through May 25, 2025.

Hosting the call today from Lifecore Biomedical are Paul Josephs, President and Chief Executive Officer, and Ryan Lake, Chief Financial Officer. Before we begin, I'd like to remind everyone that today's conference call will contain forward-looking statements. It is important to note that the forward-looking statements made during this call reflect management's judgment and analysis only as of today, August 5, 2026, and the company's actual results could differ materially from those projected in such forward-looking statements.

com, as well as our other filings with the Securities and Exchange Commission, including but not limited to the company's Form 10-Q for Q2 2026, which was filed with the SEC this morning and is also available on our website. In addition, our earnings press release includes a discussion of, and during this call we will reference, certain non-GAAP financial information. You can find relevant non-GAAP reconciliations in our presentation press release. With that, I'd like to turn the call over to Paul Josephs, President and Chief Executive Officer.

Paul Josephs, President and Chief Executive Officer Thank you, Stephanie. Good morning, everyone, and thank you for joining us today. During the second quarter, Lifecore Biomedical continued to execute with focus and discipline against the strategic objectives we implemented over the last 24 months. We are energized by the success and progress we are making in achieving the three pillars of our growth strategy.

As a reminder, these pillars are maximizing our existing commercial business, advancing our development pipeline towards commercialization, and adding high-quality new programs to our pipeline through business development. This is a thoughtful and deliberate strategy that is designed to drive durable growth over the medium to long term and create value for our shareholders as well as our employees, customers, and other key stakeholders. Building on our successful quarter and our visibility into the months ahead, we remain confident in our full-year expectations and reaffirm our 2026 guidance.

Ryan will provide additional details on our financial results following my overview of our Q2 achievements. I'll begin with an update on the progress we have made across all three pillars of our growth strategy. During the second quarter, we achieved important milestones in each of these areas. With respect to maximizing existing commercial business, we continue to work closely with our largest customer to support a significant increase in demand.

Contractually committed fill-finish demand is expected to double beginning in 2027, with committed demand increasing by more than 200% in 2028 as compared to 2026. We now have clear understanding of how this inflection point in demand with our partner will be effectuated, and we are in the process of ensuring that we are operationally ready to successfully execute this important milestone. As part of this growth in demand, we will be entering new markets in partnership with this customer. In particular, I'd like to highlight the Japanese market and the inspection conducted by the Pharmaceuticals and Medical Devices Agency, or PMDA.

This agency is known for its rigorous technical assessments and high-quality standards. This inspection was successful, and we are pleased with the results, marking a critical step in opening a future new market for our hyaluronic acid and aseptic fill-finish products for this customer. For the quarter, we hosted seven separate audits and inspections, representing one of the highest numbers performed in a single quarter for Lifecore Biomedical. Five of these were with existing and new customer audits, and two were regulatory agency inspections.

It is important to note that the time associated with these activities by teams across our organization made this a uniquely demanding period. At Lifecore Biomedical, we are very pleased to report that we successfully completed each of these inspections and audits with no material issues reported, all while meeting the development and manufacturing needs of our current customers. During the quarter, we also made progress with regard to the second arm of our growth strategy, advancing our development pipeline towards commercialization.

We believe that 11 existing development programs have the potential to commercialize by the end of 2028, and we continue to work to advance each of these programs daily. A highlight of the second quarter was Lifecore Biomedical's successful completion of several process performance qualification, or PPQ, batches for a customer approaching commercialization in 2027. While PPQ programs are particularly impactful as they are a pre-commercialization requirement, we caution that the execution of a PPQ campaign is the beginning of a one- to two-year journey towards a potential regulatory approval and subsequent recurring commercial revenue.

We have a diverse and exciting late-stage pipeline with the potential to significantly impact future revenues, capacity utilization, and improved margins. We continue to execute this important work and to support each of our development programs as they move closer towards commercialization. Recognizing the importance of the late-stage programs to our mid- and long-term growth objectives, we recently added a seasoned industry veteran with more than 15 years of experience with multiple CDMOs to lead our project management efforts.

She leads a team of highly talented experts who are responsible for driving our development programs towards commercialization in a professional and efficient manner. Complementing our project management efforts, our Manufacturing Science and Technology, or MS&T, team is charged with transitioning our development-stage programs towards commercialization as efficiently and as effectively as possible. This team includes experienced professionals in pharmaceutical development, and their combined focus on this important objective has improved our processes and productivity.

As our development programs continue to mature towards late stage, we believe this pipeline will be an important driver of our mid- and long-term success, and we intend to continue to invest in this team and the capabilities required to successfully execute this transition. We were extremely productive with the first two arms of our growth strategy. However, our greatest success during the period was the addition of high-quality new programs to our pipeline by our business development team, the third pillar of our growth strategy.

Since I joined Lifecore Biomedical in 2024, we have reorganized our commercial team with new leadership and proven business development professionals to complement our talented marketing team. We have successfully rebuilt this team with an aggressive, hunter-like approach to our sales and marketing efforts, and we are building strong momentum. During the second quarter, we added six new programs to our pipeline, two of which are expected to generate commercial revenue in the 2028—2029 timeframe. These agreements are with a combination of existing and new customers, ranging in scope from preclinical to the commercial transfer of two currently marketed products.

Three of these programs were signed during the month of June alone, reflecting the momentum of our business development team's efforts. Since the end of the quarter, we have closed another late-stage injectable program with a specialty biopharmaceutical company. This program is in addition to our nine year-to-date new business wins through June 30 and 13 new business wins over the last 12 months. Importantly, many of the leading indicators within our business development activity and pipeline continue to trend positively.

As an example, since mid last year, more than 60% of the opportunities for which we have competed have been late-stage programs or commercial site transfers. These late-stage programs and commercial site transfers are de-risked from clinical approval and come with demonstrated commercial demand, reducing the market risk associated with new drug products. Based on our current proposal activities, we are optimistic that we will continue to close additional late-stage and commercial site transfer programs during the remainder of 2026.

Adding to our confidence in our ability to close additional late-stage programs are two significant industry tailwinds: one, the increase in FDA enforcement actions that we have recently seen at other contract manufacturers; and two, the ongoing trend of regionalized drug manufacturing in the United States. These two discrete trends have led to an increase in the number of potential customers seeking high-quality, technically capable contract manufacturers like Lifecore Biomedical.

In summary, we believe that our revamped commercial strategy, combined with favorable market dynamics, will continue to add new and impactful opportunities to our pipeline in 2026 and beyond, contributing to our 12% revenue CAGR by the end of 2029 and providing the next wave of growth into the long term. In addition to the successes with our growth strategy objectives, we continue to make important improvements and create value across our organization. With respect to SG&A, our leadership team remains focused on identifying opportunities for enhanced efficiencies, productivity, and cost reductions.

We are currently progressing more than 40 projects, each intended to explore specific cost reductions or process and productivity improvements that we expect to positively impact margins and contribute to exceeding 25% adjusted EBITDA margin targets by 2029. It's important to note that we are not only focused on cost reductions, but also how we continue to improve the operations of our business. Enhanced systems and processes will be critical as we look forward towards the inflection point in demand with our largest customer and the potential addition of up to 11 product approvals through 2028. That concludes my update.

I will now turn the call over to Ryan Lake to provide an overview of our financial results for the second quarter and six months ended June 30, 2026. Ryan D. Lake, CPA — Chief Financial Officer Ryan, thank you, Paul, and good morning, everyone. In conjunction with my comments, I'd like to recommend that participants refer to Lifecore Biomedical Form 10-Q filing, which we filed with the SEC this morning.

As a reminder, we will be comparing our results for the second quarter ended June 30, 2026 with a comparable prior-year quarter ended May 25, 2025. For the six-month period, we will be comparing our results from January 1 through June 30, 2026 with the prior-year period from November 24, 2024 through May 25, 2025. Before providing our financial results, I wish to reaffirm our 2026 guidance for revenue and adjusted EBITDA. 5 to $25 million.

4 million for the comparable prior-year quarter ended May 25, 2025. The decrease in revenues was primarily a result of the factors that we described during our fourth quarter earnings announcement, as well as timing, mix, and volume of other customers, including lower development revenue and a contractual take-or-pay arrangement in the prior-year period, all of which were partially offset by increases in HA manufacturing revenue. We expect a step-up in CDMO revenues in the back half of the year, including higher aseptic and development revenues, and remain on track to deliver our stated revenue guidance by the end of 2026.

9 million compared to $14 million for the comparable prior-year quarter ended May 25, 2025. The decline in gross profit was primarily due to decreased revenues, unfavorable manufacturing costs, and the contractual take-or-pay arrangement in the prior period, partially offset by favorable HA sales volume. 2%, compared to $9 million for the comparable prior-year quarter ended May 25, 2025. The decrease in SG&A expenses was primarily due to lower recurring legal and accounting expenses and lower compensation, in addition to less non-recurring expenses primarily related to legacy legal matters.

06 of loss per diluted share for the comparable prior-year quarter ended May 25, 2025. 1 million in the comparable prior-year quarter ended May 25, 2025. I'll now review the results for the six months ended June 30, 2026. 6 million for the six-month comparable prior-year period ended May 25, 2025.

The decrease in revenues was similar to the explanations provided for the three-month period. 8 million for the six-month comparable prior-year period ended May 25, 2025. The decline in gross profit was primarily due to decreased revenues, product mix, unfavorable manufacturing costs, and the contractual take-or-pay arrangement in the prior period. 1 million for the six-month comparable prior-year period ended May 25, 2025.

The decrease in SG&A expenses was primarily due to lower recurring legal and accounting expenses and lower compensation, in addition to a reduction in non-recurring expenses primarily related to legacy legal matters. 48 of loss per diluted share for the six-month comparable prior-year period ended May 25, 2025. 8 million for the six-month comparable prior-year period ended May 25, 2025. I'd like to expand upon Paul's comments regarding our cost reduction activities.

2 million since we started these initiatives in late 2024. These include substantial reductions in accounting, consulting, and legal expenses, which drove the incremental improvements we recorded in EBITDA margins during 2025, and as reflected in our 2026 guidance, we expect continued reductions to support that trend in the future. Finally, I'd like to note that liquidity has improved significantly since late 2024. 6 million.