ACETO Corporation (NASDAQ:ACET), focused on the global marketing, sale and distribution of Human Health products, Pharmaceutical Ingredients and Performance Chemicals, announced today financial results for the first quarter of fiscal 2017 ended September 30, 2016.

 First Quarter Fiscal 2017 versus First Quarter Fiscal 2016

Management Commentary

“Our first quarter results fell below last year due to lower revenue and gross profit in our Human Health segment partially offset by gains in Pharmaceutical Ingredients and Performance Chemicals,” said Sal Guccione, Chief Executive Officer of ACETO. “In our Human Health segment, Rising Pharmaceuticals experienced increased competition for certain products which began in the fourth quarter of fiscal 2016, while Pharmaceutical Ingredients benefited from favorable mix and Performance Chemicals saw a boost from increased agricultural protection product sales.”

Mr. Guccione added, “Also in the first quarter, Rising experienced product launch delays and backorders of some products which have continued into the second quarter. Nevertheless, we are maintaining our launch plans for fiscal 2017 and still plan to launch 12 to 15 new generic products during this fiscal year. Although we now expect to launch most of the new products and resolve the backorders in the second half of the year, the negative impact of these developments will weigh on our results for the first half of 2017.

“Regarding our fiscal 2017 full-year guidance, we have two crosscurrents at work: the near-term headwinds at Rising and the longer-term tailwind we expect to benefit from following the completion of the just announced acquisition of generic products and related assets of Citron Pharma. Absent the acquisition, our fiscal 2017 outlook has changed. We now expect ACETO’s fiscal year 2017 sales growth to be in the low-single digit percentage range and non-GAAP Adjusted EPS to be lower than last year by a mid-single digit percentage. On a GAAP basis, which will be negatively impacted by the aforementioned items as well as the transaction-related expenses, EPS is expected to be below last year by a low-double digit percentage. Including the contribution of Citron for the second half of fiscal 2017, we expect full-year sales growth to be in the 20% range, non-GAAP Adjusted EPS growth to be in the mid-single digit percentage range and GAAP EPS to be behind last year by approximately 20% reflecting deal-related costs and non-cash purchase accounting charges,” concluded Mr. Guccione.

First Quarter Financial Review

 Net sales for the first quarter of fiscal 2017 were $128.0 million, a decrease of 4.1% from $133.5 million reported in the first quarter of fiscal 2016. Total Company gross profit was $30.8 million, a decrease of 10.8%, compared to $34.6 million in the first quarter of fiscal 2016. Gross margin for the first quarter was 24.1% compared to 25.9% in the prior year period.

Human Health segment sales were $47.9 million, a decrease of 16.7%, compared to $57.5 million for the first quarter of fiscal 2016. The revenue decrease was primarily due to increased competition and price erosion on certain products at Rising. Nutritional product sales also decreased in the first quarter versus the prior year’s period, with the decline primarily occurring abroad. Gross profit for the Human Health segment was $14.2 million, a decrease of 30.1%, compared to $20.3 million for the first quarter of fiscal 2016. Gross margin for the first quarter was 29.7%, compared to 35.3% in the prior year period. The decrease in gross margin was primarily due to the sales decline at Rising, which was primarily driven by increased competition on certain products, as well as an unfavorable product mix and back orders on select products.

Pharmaceutical Ingredients segment sales were $40.6 million, an increase of 5.9%, compared to $38.4 million for the first quarter of fiscal 2016. The segment’s sales increase was driven by higher volumes of intermediates sold abroad. Gross profit in the quarter was $7.0 million, a 13.7% increase compared to $6.1 million for the first quarter of fiscal 2016. Gross margin for the first quarter was 17.1%, compared to 15.9% in the prior year period. The increase in gross profit and margin was driven by higher international sales of intermediates and a more favorable product mix in APIs.

Performance Chemicals segment sales were $39.5 million, an increase of 4.9%, compared to $37.7 million for the first quarter of fiscal 2016, due to higher sales of agricultural protection products. Gross profit was $9.7 million, an increase of 18.7%, compared to $8.2 million for the first quarter of fiscal 2016. Gross margin was 24.5% for the first quarter, compared to 21.7% in the prior year period. The increase in gross profit and margin was primarily due to increased sales volume and more favorable product mix within Agricultural Protection Products.

Total selling, general and administrative expenses were $21.0 million compared to $17.6 million in the same period last year, a 19.2% increase, with $1.8 million of the increase attributable to transaction costs associated with the announced acquisition of products from Citron Pharma and the remainder related to key management additions and annual compensation adjustments. Research and Development expenses in the first quarter totaled $1.0 million compared to $1.4 million in the prior year period. The majority of R&D expenses are milestone based and fluctuate quarterly.

Operating income totaled $8.8 million, a decrease of 43.5% from the first quarter of fiscal 2016. Net income was $4.4 million, or $0.15 per diluted share, compared to net income of $9.3 million, or $0.32 per diluted share, for the comparable quarter of fiscal 2016. Non-GAAP Adjusted Net Income was $8.3 million in the first quarter, compared to $11.0 million in the prior period, a 24.7% decrease. Non-GAAP Adjusted Earnings per Share were $0.28, compared to $0.37 in the year ago first quarter, a 24.3% decrease.

 Conference Call

Management will host a conference call to discuss the operating and financial results at 9:00 a.m. ET on Thursday, November 3, 2016. To participate in the conference call, please dial (800) 446-1671 or (847) 413-3362 approximately 10 minutes prior to the call. Please reference conference ID # 43519926.

The call is also being webcast with an accompanying presentation, which can be accessed through the investor relations section of the Company’s website, www.aceto.com. Please access the website 15 minutes prior to the start of the call to download and install any necessary audio software and download the presentation.

A telephone replay of the conference call will be available from 11:30 a.m. ET on November 3, 2016 until 11:59 p.m. ET on November 11, 2016 and may be accessed by calling (888) 843-7419 and referencing conference ID # 43519926. An archived replay of the conference call will also be available in the investor relations section of the Company’s website.

About ACETO

ACETO Corporation, incorporated in 1947, is focused on the global marketing, sale and distribution of Human Health products (finished dosage form generics and nutraceutical products), Pharmaceutical Ingredients (pharmaceutical intermediates and active pharmaceutical ingredients) and Performance Chemicals (specialty chemicals and agricultural protection products). With business operations in nine countries, ACETO distributes over 1,100 chemical compounds used principally as finished products or raw materials in the pharmaceutical, nutraceutical, agricultural, coatings and industrial chemical industries. ACETO’s global operations, including a staff of 25 in China and 12 in India, are distinctive in the industry and enable its worldwide sourcing and regulatory capabilities.