Patheon has reported increased revenue growth for Q3 2013 following the full completion of Banner and says more industry consolidation is likely.
For the third quarter 2013, Patheon saw revenue grow 30.4% on the same quarter last year, reporting figures of $265.7m (€201m), though operational income dropped by 72% to $4.3m from $15.5m. These figures were partially attributed to both sales from, and costs associated with Banner Pharmacaps, who Patheon acquired for $255m last October .
In a conference call to investors late last week CEO Jim Mullen said: “The Banner integration is complete and we are already seeing benefits both in our financial performance and the scope of products and services we offer.
“In addition, banner began to contribute EBITDA to this quarter and we remain on track to achieve over $1bn of revenue from the combined enterprises this year.”
Mullen also told stakeholders: “Our conversion in the integration of Banner illustrates our leadership team’s abilities to successfully integrate proprietary products that complement our legacy business and to quickly add new revenue.”
Furthermore he said he expected “to see further industry consolidation,” which he admitted was part of Patheon’s own strategy.
Within the last twelve months the oral dose solution market has seen a number of other mergers and acquisitions with Mitsubishi Chemical Holdings acquiring HPMC capsule maker Qualicaps , and Capsugel buying Encap Drug Delivery earlier this year.
Revenue from Patheon’s contract manufacturing business increased by 35.4% on the same quarter last year, according to the company.
“Across all of our sites we continue to focus on improving performance and our network rationalization plans are on track,” said Mullen. “We are seeing improvements on the key customer focus metrics of ‘right first time’ – a quality metric – and on-time delivery.”
Mullen also estimated from a number of surveys the global CMO (contract manufacturing orgnaisation) business is growing by 5-7%, with Patheon's own year-on-year growth sitting at the top end of this range.
Banner Boost & Backlog
However, Mullen was asked whether the legacy business had in fact reported a relatively flat quarter, with the 35.4% growth in its CMO revenue actually due to Banner sales.
“What you saw as pretty significant step ups in revenue quarter-on-quarter going through 2012, a lot of that was catch up on backlog activity, debottlenecking factories and pulling revenue through and products through,” he responded.
He continued: “As we started to work through that backlog we focused our attention more on the on-time delivery and the right first time, so what you see now is that we have really leveled the flow – not leveled it completely, but it’s a more linear progression of production and revenue.
“What you’re seeing is really current demand flowing through the factories as opposed to backlog and this year we were able to take most of the scheduled plant shutdowns which we postponed frankly last summer due to working through the backlogs.”