AMRI posts Q4 loss but expects contracting revs to grow in 2012

By Gareth Macdonald

- Last updated on GMT

Related tags Contract

AMRI posts Q4 loss but expects contracting revs to grow in 2012
AMRI posted a Q4 loss on lower sales but predicts that contracting revenues and margins will increase in 2012 thanks to cost cutting measures and new contracts

Contract revenue for the three months ended December 31, was $39.5m (EUR29.7), down 3 per cent on the comparable period last year, with the contributions from discovery services and small scale manufacturing declining 19 per cent to $9.5m and 26 per cent to $7.4m, respectively.

In contrast AMRI’s large scale contract manufacturing business - which produces a range of active pharmaceutical ingredients (API) and intermediates - brought in revenue of $22.6m, which is around 18 per cent higher than in the final three months of 2010.

CEO Thomas D’Ambra described 2011 as a year of ‘significant change for AMRI’ citing “disruptions and reorganizations going on within many of our large customers coupled with a difficult financing environment for small companies contributed to softer demand throughout the year than we had anticipated.

He added that: “Several areas of the company delivered good growth, but this was overshadowed by ongoing weakness in others. As a result of changes in the marketplace, AMRI has taken decisive actions to improve our operating structure, reduce non-core expenditures, and establish new opportunities for growth.”

These actions include the decision to halt all internal R&D​ and streamline its chemistry services operations in the US​. More recently AMRI began a review of operations at its underperforming facility in Hungary​.

Outlook

D’Ambra also predicted that new contracts AMRI has signed in 2011 –such as its discovery focused deals with the US National Institutes of Health (NIH) and Eli Lilly – will drive growth in 2012.

“We are actively pursuing additional opportunities with existing and new clients to enter or expand multi-year outsourcing and insourcing agreements, and we believe that many of our efforts over the past year have strengthened customer relationships and put AMRI in a position to return to growth.”

AMRI CFO Mark Frost – who is due to present at UBS 22nd Annual Global Healthcare Services Conference later this morning​ – was also cautiously optimistic about 2012.

In the first quarter, we expect contract revenue to range from $37m to $40m. For the full year 2012, we expect contract revenue to range from $176m to $186m, an increase of up to 10 per cent versus 2011.

We estimate contract gross margin for the year will range from 4-8% with improvement expected in each successive quarter​.”

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