Sales at the packaging unit fell two per cent as the insourcing decision added to continued struggles to grow in North America. Catalent is competing against in-house capacity at biopharma firms and other third-party packagers but, after a period of turbulence, thinks volumes are now stabilising.
“The volumes that we’re recognising now are more longer-term volumes from committed customers. Our level of quoting and win rate on new business, in the last 90 days or so, has been on the upswing”, Matthew Walsh, chief financial officer of Catalent, said in the third quarter conference call.
Catalent hopes these positive trends mean it can stop further declines in packaging volumes in North America but Walsh acknowledged the difficulties. “The road ahead continues to be challenging”, Walsh said.
Some of the difficulty stems from the availability of in-house packaging capacity at big pharma firms. Until this is closed contract packagers will struggle to increase prices and face the risk that clients will bring work back in-house.
This happened to Catalent in the third quarter when a client decided to insource its packaging work. News of the insourcing decision comes three months after GlaxoSmithKline said it was bringing more work in-house to make its procurement more efficient, simplify its supply chains, and cut costs.
Other units performed better. Acquisition of the clinical trial supply business from Aptuit and strong demand for clinical services in Europe and North America drove a doubling of earnings at Catalent’s development business unit.
Oral technologies, which accounts for two-thirds of total sales, also grew revenues and earnings on an uptick in demand for softgel products and the Zydis delivery platform which Catalent owns.