Albany Molecular Research's (AMRI) CEO William Marth on Q2 2014 Results - Earnings Call Transcript

Aug. 6.14 | About: Albany Molecular (AMRI)

Albany Molecular Research, Inc. (NASDAQ:AMRI)

Q2 2014 Earnings Conference Call

August 5, 2014 10:00 AM ET

Executives

Patty Eisenhaur – VP, IR and Corporate Communications

William Marth – President and CEO

Michael Nolan – SVP, CFO and Treasurer

Analysts

Ricky Goldwasser – Morgan Stanley

Greg Bolan – Sterne Agee

Operator

Good day, ladies and gentlemen, and welcome to the AMRI second quarter earnings conference call. As a reminder, this call is being recorded. At this time, I would like to turn the call over to your host, Patty Eisenhaur. Please go ahead.

Patty Eisenhaur

Thank you, Randy and good morning, everyone. Thank you for joining us today to review AMRI’s results for the second quarter 2014. This call is a follow up to the press release AMRI issued earlier this morning, a copy of which is on AMRI’s website. Today’s call is also being broadcast live via webcast which will also be available on AMRI’s website for 90 days.

With us on the call today is William Marth, AMRI’s President and Chief Executive Officer, and Michael Nolan, AMRI’s Chief Financial Officer, Senior Vice President and Treasurer.

Before we begin, I’d like to note that much of the discussion today might be termed forward-looking. Other than historical facts, our statements may contain projections, estimates and other forward-looking statements that involve a number of risks and uncertainties, including those discussed in AMRI’s annual report on Form 10-K for the year-ended December 31, 2013 as filed with the Securities and Exchange Commission on March 17, 2014 and the company’s other SEC filings.

While these statements represent management’s current judgment on the future direction of the company’s business, such risks and uncertainties could cause actual results to differ materially from any future performance suggested herein. The company undertakes no obligation to release publicly the results of any revisions to these forward-looking statements to reflect events or circumstances arising after the date here.

I’d also like to remind you that AMRI’s reported non-GAAP operating results are adjusted from US GAAP operating results for certain items that are described in the press release issued this morning. A reconciliation of our GAAP to non-GAAP results is included in the release.

I’ll now turn the call over to Bill.

William Marth

Thank you, (Patty). Welcome, everyone, and thank you for joining us today. It has been another busy quarter for AMRI and we continue to make excellent progress executing our strategy. Before I turn the call over to Mike to walk you through the detailed financials and our updated outlook, I would like to briefly review some operating highlights from the quarter.

Overall, our businesses performed well. Total revenue for the second quarter was $68 million, up 15% compared to the period a year ago. Importnatly, margins on our contract, research and manufacturing businesses continue to improve, expanding to 27% in the second quarter from 16% in the prior year period reflecting increased capacity utilization across our worldwide operations and the addition of higher margin Cedarburg business in the quarter. I am pleased to call out a few highlights for each of our businesses.

Within discovery services, we continue to see steady improvements in this business. Our UK operations had a strong quarter and we were pleased to report that our insourcing medicinal chemistry agreement with (Lilly) has recently been expanded to an additional (Lilly) discovery site in the UK. Expansion of this innovative insourcing program internationally confirms the value of our service offerings to clients like (Lilly) who are seeking flexible resources for their R&D needs.

Our public-private strategic partnership at Buffalo Niagara Medical Campus also achieved a milestone. Based upon demand by one of our global pharma partners, we took occupancy of a temporary space during the second quarter and will initiate revenue generating activities at the site in the third quarter.

As a reminder, the state of New York is establishing a discovery-focused translational science center at the Buffalo Niagara Medical Campus. The state is funding the construction and outfitting of the facility and AMRI, together with other partners, will provide life science discovery services, cutting edge platforms and expertise to academia and industry from early discovery to candidate selection and beyond.

Importantly, the Buffalo campus will afford us the opportunity to invest in the evolving approaches, platforms and technologies that our clients are seeking. Current ongoing activities for AMRI at the site include creation and development of novel proteins and reagents. This work will allow us to create foundations for a platform that can be scaled for the discovery and development of biologics.

Longer term, our goal will be to develop Buffalo into a fully integrated discovery center including chemistry, biology and pharmacology for both small molecules as well as biologics. There is a high interest level on behalf of our customers and we hope to leverage these partnerships to expand our business and activities in Buffalo further.

Overall, the DDS business continues to gain strength. Margins continue to grow based on a stronger business mix and our ongoing work to consolidate our facility resources to more effectively utilize our discovery and development resource pool.

During the second quarter, we completed the transfer of activities from our Syracuse facility to other sites within the AMRI network. We’ll begin to realize cost savings from the site closure in the third quarter.

Moving on to our large scale manufacturing and service segment, which includes our API and finished dose divisions, this segment continued to perform very well with revenue up 34% year over year and strong performances in both division. While API revenue this quarter reflects the addition of Cedarburg Pharmaceuticals, it also reflects strong organic growth from our other API facilities. Drug product revenue also continues to grow as we continue to see improving capacity utilization at our Burlington facility.

The most notable development in large scale manufacturing during the quarter was our announced acquisition of Oso Bio, a preeminent contract manufacturer of complex injectable drug product.

Oso Bio specializes in the manufacture of difficult compounds, including biologics, cytotoxic compound and DEA controlled substances. With its focus on commercial products, Oso Bio’s Albuquerque site has manufactured over 250 products in every major therapeutic category. Their expertise in late stage and commercial production is highly complementary to our early stage drug product manufacturing capabilities in Burlington. And the customers will now benefit from access to a single source to address their sterile fill and finish needs from phase one development, complete to commercial supply.

Let me give you a little background on the injectable contract manufacturing market and Oso Bio’s position. The US contract manufacturing market is moving beyond the $15 billion market and finished dose for manufacturing is growing annually at a double digit pace.

Within the injectable space, there are about 150 contract manufacturers but only half of them are dedicated CMOs qualified with western GMP compliance status. Of those 75 companies, about 75% of the capacity resides with just 17 companies. In a recent report on this market, PharmaSource characterized these companies as tier one based on their ability to handle biologics and provide a consistent supply of high value small molecules.

Most recently in the US, M&A activity and compliance issues have further decreased the companies in this tier one category to less than 10. Oso Bio is one of those. Coupled with recent manufacturing and compliance issues with CMOs in India, we believe this new business unit is well positioned in the CMO injectable market.

Like our discovery services, we anticipate continued adoption of outsourcing strategies for API and finished dose manufacturing. This is based on the industry’s interest in reducing time to market in an efficient cost-effective manner, the expanding virtual pharma model and growing pressures as well on big pharma to shift away from large capital intensive manufacturing activities, also the future trend of producing smaller scale personalized medicines is less suited to large in-house facilities.

With pipelines shifting towards more complex and specialized medicines, the combination of Oso Bio together with our API and development capabilities, AMRI now offers complete pipeline support from development through commercial scale for both API and finished dose. This makes AMRI one of only a small handful of contract manufacturers providing end to end services for both drug substance and drug product.

We are excited about the synergistic power of the combination our businesses brings and the opportunities that could result. Similar to the Cedarburg acquisition, we now have an expanded customer base and an expanded service offering that will create significant cross selling opportunities across all our business units.

Within this new (parental) drug business unit, Burlington and Albuquerque will immediately become a feeder project to the other. This is further complemented by the fact that both sides have recently successfully navigated their annual GMP inspections from the FDA. We closed the $110 million transaction in early July and integration activities are getting underway.

Oso Bio’s CEO Milton Boyer is now leading our newly formed (parental) business unit and our updated guidance reflects the addition, which Mike will provide further details on shortly.

We continue to see a strong book of business for API and drug product and development pipeline remains strong. Since the end of the first quarter, two our customers, API MDA development programs received FDA approvals. These programs will transition to commercial supply for those customers.

In addition, we signed two new agreements, one for the development of a complex cytotoxic API intended for our customer for the filing of a paragraph four (NASDAQ:ANDA) and the other is for development of a complex (parental) drug product which would also be filed as a paragraph four.

Similar development programs, we will be reimbursed for our development work. But what is different about the structure of these agreements is that we will receive a revenue stream from future sales of these products when they ultimately reach the market. Both of these programs are in early stage development, so recognition of that revenue stream on a commercial sales basis is a ways off.

That said, it is important to note that we will be looking to do more of this type of development agreement in the future, those that are based on complex API, or complex formulations, and transaction where we can share in the commercialization. So summarizing our API drug product development programs, compounds in phase one and phase two development, as of the end of the second quarter, were 65, up from 58 at the end of 2013. And the number of compounds in phase three that we are working on with clients was 23.

Even with the year end reflecting additions and pipeline transitions and at the end of the second quarter, we had 58 API and large scale commercialization programs underway with Cedarburg contributing 13 commercial API programs. Oso Bio will contribute 35 commercial products to the third quarter.

Now, let me turn the call over to Mike for more details on our financial performance and our forecast. Go ahead, Mike.

Michael Nolan

Thanks, Bill. I am now going to present financial results for the second quarter along with updated financial guidance for 2014. Our results reflect the addition of Cedarburg Pharmaceuticals as of April 4th and our guidance reflects the addition of Oso Bio as of July 2nd. Further details are included in our press release issued this morning on PR Newswire.

I’d like to underscore some highlights on the year-over-year basis for the second quarter. First, contract revenue was up 21% year over year at $62 million with the increase in contract revenue offsetting the anticipated decline in Allegra royalties resulting in overall revenue up 15% compared with second quarter 2013. Organically, contract revenue was up 10% year over year.

Second, we finished the quarter at $0.22 a share for our adjusted and diluted EPS which compares to second quarter 2013 at $0.12 despite a $0.03 drop from the impact of lower Allegra royalties.

Additionally, our contract margins in the second quarter were 27% excluding any royalties driven by increased capacity utilization across our global operations. Contract margins also benefited from the addition of Cedarburg’s specialty API business.

And finally, adjusted EBITDA for the quarter was $15.2 million at 22% of total revenue. We continue to be pleased with the improving trend in our contract business, including the seamless transition and strong start with the recently acquired Cedarburg business.

Turning to the financial details for second quarter 2014, all comparisons are on a year-over-year basis. To begin with, adjusted operating income in the second quarter was $11.4 million. This compares to $6 million in the second quarter of the prior year.

Excluding royalties and milestones, adjusted operating income increased $7.2 million on an incremental contract revenue of $10.7 million. Total revenue was $68.2 million, up 15% from second quarter 2013. Total contract revenue was up $61.5 million, an increase of 21%. On an organic basis, contract revenue was up 10% from second quarter 2013.

Contract margins for second quarter 2014 were 26.9% compared with second quarter 2013 at 16.4% reflecting the addition of Cedarburg Pharmaceuticals and a stronger mix. I will now provide a breakdown of contract revenue and contract margins and to discovery services development small scale manufacturing and large scale manufacturing.

Total contract revenue for our DDS segment was $19.5 million consistent with the second quarter 2013. Breaking that down, contract revenue from discovery services was $9.3 million in the second quarter, a decrease of 18% driven by lower US discovery services.

Contract revenue from development in small scale manufacturing in the second quarter was $10.2 million, an increase of 26% with continued strength in our US development pipeline.

Contract margins for our discovery services and development small scale manufacturing segment were 19% in the second quarter, an improvement of 6% from the prior year period driven by strong mix of business and the benefit of previous cost reduction initiatives.

Contract revenue for our large scale manufacturing segment was $42 million, an increase of 34% reflecting the addition of Cedarburg and strong growth in our UK and Burlington operations.

Adjusted contract margins for large scale manufacturing was 31% in the second quarter, up from 18% in the second quarter of 2013 reflecting higher capacity utilization worldwide and a stronger mix due to the Cedarburg acquisition.

Overall second quarter 2014 royalties were $6.7 million, down 41.8 million driven by $1.5 million in lower Allegra royalties. Selling, general and administrative costs, excluding one-time executive transition charges and business acquisition costs were $11.2 million in the second quarter of 2014, which are 18% of contract revenue compared with 20% in second quarter 2013.

Adjusted earnings per share in the second quarter of 2014 were $0.22 per diluted share compared to second quarter 2013 of $0.12 per diluted share. Adjusted earnings per share exclude restructuring charges and asset impairment charge related to the planned closure of our Syracuse facility as well as costs related to the Cedarburg and Oso Bio acquisitions.

Convertible debt interest and amortization charges, non-recurring income tax adjustments as a write-off of deferred financing are also excluded from our adjusted numbers.

Additionally, as a result of the continued improvement in the operating performance at our UK operations, we have updated the estimate on our ability to recover and accumulated net operating loss position.

As a result, we reversed evaluation reserve for our tax asset in the UK in the amount of $2.8 million in the second quarter. We excluded this favorable impact from our adjusted EPS for Q2 2014. Details on these adjustments can be found in our press release issued today.

Adjusted EBITDA for second quarter 2014 was $15.2 million or 22% of total revenue which compares with $10.4 million or 18% of total revenue in 2013. The increase in adjusted EBITDA margin reflects the strengthening in contract business offsetting the decline in Allegra royalties.

Second quarter operating cash flow was $12.4 million reflecting increased collections from first quarter receivables. CapEx was $3.5 million in the quarter and we ended the quarter with $137 million of cash on hand and subsequently used $109 million for the Oso Bio acquisition, leaving us with sufficient cash available to address our working capital needs.

I will now provide an update on our full-year guidance for 2014. Full-year contract revenues is expected to be between $275 million and $283 million, up 33% at the midpoint from 2013 and reflects the addition of Cedarburg and Oso Bio.

Full-year royalty revenues is expected to be around $25 million, which is down from 2013 royalty revenue of $36.6 million driven by reduced Allegra royalties. Activist royalties are expected to be roughly flat with 2013 levels at approximately $9 million or roughly $2 million to $2.5 million per quarter.

For Allegra, we anticipate full-year royalties of $15 million, of which we received $4 million in the second quarter. This leaves $5 million of Allegra royalties for the balance of the year split between Q3 and Q4 and consistent with the timing of the patent expiration.

Breaking down contract revenue for the year, we are projecting the following. DDS revenue will be between $79 million and $81 million, up 24% at the midpoint. Breaking down DDS revenue further, this consists of $42 million to $43 million of discovery services revenue and $37 million to $38 million of developed and small scale revenue.

Large scale manufacturing revenue between $196 million and $202 million including the addition of the Cedarburg and Oso Bio acquisitions, up 50% at the midpoint.

For contract gross margins, we are guiding to improve our contract margins from 18% in 2013 to a midpoint of 23.5% in 2014. Increased margins are the result of improved capacity utilization and ongoing cost management, a stronger mix including the Cedarburg and Oso Bio acquisitions and exclude any impact from purchase accounting.

We project adjusted SG&A cost for 2014 to approximate 17% of contract revenue, which is down slightly from 2013. Adjusted SG&A for 2014 excludes one-time executive transition and business acquisition costs and includes the impact of the Cedarburg and Oso Bio acquisitions excluding any impact from purchase accounting.

R&D investment is expected to increase slightly to around $1 million focused on improved process efficiencies in the plants as well as development activity for generics and includes the impact of the Cedarburg and Oso Bio acquisitions.

Adjusted earnings per share guidance for 2014 is between $0.87 and $0.92 representing an increase of 28% at the midpoint from 2013 and includes the addition of Cedarburg, Oso Bio and the ongoing growth of our contract business in 2014.

As we look at our revenue and earnings forecast for the remainder of the year and based on historical trends, we typically see greater revenue in earnings in the fourth quarter. As a result, we anticipate that revenue in the second half of this year will be split about 40/60 between the third and fourth quarters and that earnings will be split about 30/70 between the quarters.

I would also point out that out adjusted earnings per share guidance for 2014 excludes any impairment and restructuring charges, acquisition and integration costs, (post) retirement benefit plan settlement gains, purchase accounting amortization, non-recurring tax adjustments, executive transition costs and an estimated $0.20 impact from the interest and amortization charges associated with the bond offering.

Adjusted EBITDA for 2014 is forecasted to be between $59 million and $63 million or 20% of revenue including the impact of the Cedarburg and Oso Bio acquisitions. Operating cash flow is forecasted to be between $27 million and $30 million in 2014 before capital expenditures of approximately $18 million including the impact of acquisitions. Cash (coupon) interest on our $150 million bond will be $3.4 million in 2014.

Before I turn the call back over to Bill, I would like to emphasize how pleased we are with the operating performance of the business in a quarter where we were also focused on the activity surrounding the recent acquisitions.

The outlook for 2014 remains strong with continued top line growth and increased margin performance helping offset the expected decline in Allegra royalties. I will now turn the call over to Bill who will continue with his concluding remarks.

William Marth

Thanks, Mike. So to summarize, all areas of our business continue to make good progress. Within DDS we continue to rely on our operations to efficiently support our customers’ needs, yet preserving the skills and capabilities that our customers demand.

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The recent expansion of our insourcing program provides further validation that pharma continues to utilize outsourcing for their discovery work. Within API and finished dose manufacturing, we continue to see increased capacity utilization at all of our sites and to fill the pipeline with new and interesting programs that fit well within our core strength of developing and manufacturing complex API and drug product.

Oso Bio further strengthens the business with its higher margins and now extends our capabilities to include commercial scale fill and finish. We’ve updated our guidance for 2014 to include Oso Bio and now expect revenue growth to exceed 30% and adjusted earnings to grow 28% to 30% from prior year levels.

With that, I’ll now turn the call back over to the operator so we can take your questions. Randy?

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) We’ll now take our first question with Ricky Goldwasser with Morgan Stanley. Please go ahead.

Ricky Goldwasser – Morgan Stanley

Yeah, hi. Good morning. I was wondering if you can talk a little bit about what your deal pipeline looks like for the second half of ‘14 and if you can give us an update on just kind of that progress toward putting in place new credit facility or other financing alternatives.

Michael Nolan

Sure. Thanks, Ricky. Yeah, so in terms of our deal pipeline, as we progress through the year, we typically do see our unidentified revenue reduced and at this point we’re actually seeing less unidentified revenue for the balance of this year than we had seen, for instance, last year at this time looking to the balance of the year.

With regards to the financing situation, we do have a few alternatives that we are pursuing with regards to credit facility to allow us operating flexibility and with regards to any future M&A activity, we would also, of course, think to finance that through sensible, if you will, financing arrangements. And we’re working with a lot of the large banks, as you can imagine on both fronts with regards to our financing needs.

William Marth

Yeah, Ricky, I would just chime in. This is Bill Marth. I think with respect to the M&A pipeline, the deal flow remains really strong. The only thing that really changes for us is the fact that as we make each acquisition, we kind of sharpen our focus on what we may want to do, right.

So we think we have a very unique position in the (parental) markets today, right, being able to do everything from phase one development right to commercial supply that we can deliver and we deliver some very large products today within the Oso Bio network.

From here, if we can further concentrate in the (parental) market in the US, I think it would be very interesting before I did another dosage one. So I think there’s some more interest there. We’re very excited about the control substance space, what we’re doing today in (inaudible) and what Cedarburg has added, so again, if we can focus in there even more, it would be great. But the deal pipeline is still strong.

Ricky Goldwasser – Morgan Stanley

Okay. And then if you can just give us a little bit more color. I know you talked a lot about Oso Bio and its strategic contribution. When you think about the financial impact to guidance in the second half of the year, can you just help us with more detail around what’s the contribution also added to your EBITDA and EPS guidance?

Michael Nola

Sure. So consistent with our release when we acquire Oso Bio, we, at the time, indicated that overall for the year was upwards of $60 million of revenue as an example and we also gave between $9 million to $10 million of EBITDA. So our guidance actually is consistent with that.

So if you think of the back half of this year with the ramp up, it’s kind of between $28 million to $30 million of additional revenue from Oso Bio, EBITDA between $5 million and $6 million and roughly, from an EPS perspective, about $0.08 a share for EPS. All that excludes any purchase accounting or impacts from acquisition-related costs, Ricky.

Ricky Goldwasser – Morgan Stanley

Okay. Thank you.

Michael Nolan

You’re welcome.

Operator

And we’ll take our next question from Greg Bolan from Sterne Agee. Please go ahead.

Greg Bolan – Sterne Agee

Hey, thanks for taking the question. So I want to go back to a couple comments, Bill, you had made on the injectable business and you had kind of cited some M&A activity that has occurred as of late. And I just wanted to maybe talk a little bit about the trend that we’re seeing towards big pharma pulling the assets in-house.

Kind of looking at what Pfizer has done, (inaudible) Pharmaceutical, (Higma), over the past let’s say couple, you know, say three or four months, really more so (inaudible) Pharmaceuticals and Pfizer and what are the implications there because I guess as you think about the 75 players, I think you had called out that really are kind of considered tier one, how many of those players are now owned by big pharma and what do you think is kind of pushing big pharma to now kind of bring those capabilities now in-house?

William Marth. Yeah, Greg, thanks for the question. Actually, we… let me correct something you said there. Of the 75, there’s only 17 that are tier one. And of the 17 that are tier one, those are largely dedicated CMOs, people that… not the in-house portion.

Sun has done some recent acquisitions, one here in the US that I know of but really not a lot in the US. The idea that we’re focusing on is really (parental)s in the US market for the US market. And when you really think about the number of facilities owned by big pharma or even generic pharmas in the US that are operating at a full compliance level here in the US, it’s really relatively small, just a handful of us.

You look at the capabilities of people like (Catalynt), they’re outside of the US and you look at people like (Cook), very good manufacturer, they’re here in the US. So there’s really just a small handful of us here in the US.

Greg Bolan – Sterne Agee

But what do you think is driving these acquisitions by, for example, if you think about, for example, Pfizer and their (Ino) Pharm acquisition and bringing in that CMO asset? What’s driving that?

William Marth

Well, you’d have to ask Pfizer that. I think that realistically speaking, the market that we’re focused on is more complex and biologic for the US, manufactured in the US. And I don’t know. I don’t see necessarily Amgen, Genentech or the others acquiring CMOs at this point in time.

I know with the bidding in Oso Bio as a matter of fact, which was a great asset, there were to my knowledge no big pharmas involved whatsoever. There was one generic company that I know of but that was it.

Greg Bolan – Sterne Agee

Okay. That’s helpful. And then next question is just on the tax rate. Mike, I’m just kind of struggling with this. So what was your effective… what was your non-GAAP tax rate for the quarter? Was it around 26%?

Michael Nolan

Yes, if you looked at Q2 results, we ended up at… sorry, apology, we ended up at 33% effective non-GAAP tax rate, right?

Greg Bolan – Sterne Agee

Okay, got it. All right, just wanted to make sure I’m getting this right. As we think about going forward, what, if anything, do you think… where do you think the tax rate is going I guess as you think about kind of the continued push internationally whether it be contracts that you’re picking up abroad, you decided the insourcing deal with the UK facility under (Lilly), your efforts in India. I guess should we be expecting that tax rate to kind of, to drop slightly as we go into the next calendar year?

Michael Nolan

Yes, you should actually.

Greg Bolan – Sterne Agee

Okay.

Michael Nolan

It should be in the lower 30% range from a tax rate perspective. So as an example, Q1 we finished at 29%, right. Q2, 33%, so there is some shift in tax rate and a lot of its driven by where the earnings are as you can imagine, Greg, right. So for instance, UK continues to improve performance. We don’t pay taxes in the UK, so that drops right to the bottom line, so the overall effective tax rate. We pick up an asset like Cedarburg or Oso Bio, they’re in the US, they’re impacted also by state tax rate.

So as we look out, what I would say, Greg, is low 30% range our overall tax rate for the year.

Greg Bolan – Sterne Agee

Okay. That’s great. Thank you. And then Cedarburg, should we… I mean, when you guys acquired Cedarburg it was kind of a $13 million to $14 million additive type revenue asset for Albany. This year obviously had a very nice quarter it looks like, $5.5 million our contribution or thereabouts from Cedarburg for the quarter. Should we be thinking that that is more of a $16 million to $17 million contribution in terms of revenues this year?

Michael Nolan

Yeah, it’s going to be in line with the overall guidance we gave opposite the Cedarburg acquisition. What I can tell you, though, similar to Oso Bio, we do see synergies because we have these customers that we’ve now picked up, so we’re starting to have broader conversations like we will and have been with Oso Bio on growing the overall API business.

So the way George thinks about the API business is Cedarburg is part of the toolkit. It’s the overall API revenue he’s really focused on and what he can do to maximize that.

Greg Bolan – Sterne Agee

Okay. I know this is the smaller asset but I just want to make sure I’m getting the modeling right. So I think you guys had mentioned $1.5 million in synergies from Cedarburg over the 12 month period following the acquisition. Are those cost synergies that you guys are kind of realizing maybe a little bit towards the front end, I guess, as you kind of reduce maybe redundant headcount or what have you?

Michael Nolan

Yeah, they’re more back-end loaded, Greg.

Greg Bolan – Sterne Agee

Okay.

Michael Nolan

Very confident in those numbers, the Cedarburg and, in fact, the Oso Bio synergy estimates that we’re putting out there. And we’re taking prudent steps to accelerate as many of those synergies as we can but at the same time, the goal for us is to allow the business to continue to operate as successful as it has in the past and not get in the way of that.

So but I would say for forecast purposes it’s probably more back half and then, as well, 2015 full-year run rates pick up at that $1.5 million make sense on. And similar for Oso Bio for sure given it’s another quarter later since we’ve acquired it.

Greg Bolan – Sterne Agee

Okay, that’s great. And then just lastly, if you could repeat, I think you had responded to the question earlier about Oso contribution in the back half. Could you repeat that again, sorry Mike, on the revenue and the EBITDA side? I think it was $28 million revenue, $5 million to $6 million EBITDA?

Michael Nolan

Yeah, no problem. So when we went out with the announcement on Oso Bio, we indicated the full-year run rate revenue was about $58 million to $60 million, EBITDA $9 million to $10 million. So as we’ve taken on Oso Bio and looked at the plans for the balance of the year with Milton, we’re confident in $28 million to $30 million revenue range for impact on our results this year and an $0.08 EPS pickup that’s tied to the $5 million to $6 million EBITDA pickup in the second half from Oso Bio.

Greg Bolan – Sterne Agee

Okay, got it. All right. Okay, thanks guys. Appreciate it.

Michael Nolan

Welcome.

William Marth

Thank you.

Operator

(Operator Instructions) At this time, we have no questions in the queue.

Patty Eisenhaur

Great. Well, thanks, Randy. If you could give the replay information, that would be great and thank you, everyone, for joining us on today’s call. Take care.

Operator

This does conclude today’s conference. As a reminder, a recording of this call will be available today at 1:00 PM central time by dialing 888-203-1112. Thank you for your participation and have a great day.

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