Outsourcing firm Patheon's 4Q encouraging

By Wai Lang Chu

- Last updated on GMT

Related tags: Cent, North america

Drug production company Patheon has released its fourth-quarter
results, which has revealed that profit has jumped 180 per cent
despite a recent production halt at a Puerto Rican subsidiary. This
bodes well for the recent manufacturing and drug development (PDS)
service strategy in both North America and Europe.

The Toronto-based drug outsourcing company's results have reflected its anticipation in the surge in demand for outsourcing services, successfully building a global manufacturing network through its numerous site acquisitions.

Fourth-quarter profit jumped 180 per cent to $8.4 million (€7 million), while earnings for the quarter ended Oct. 31 amounting to 9.3 cents a diluted share compared with $3 million or 5.8 cents per share a year ago

Patheon​ currently owns and operates 14 manufacturing sites in North America and Europe, which the company has integrated into a network to manage projects to cater to respective local markets.

The company also reported a revenue increase of 48 per cent to $181.9 million.

Patheon had earlier warned that it would suffer a loss of 2 cents per share for the production halt in its Puerto Rican subsidiary.

Warnings from the US Food and Drug Administration (FDA) resulted in the updating of equipment and processes in the CEPH International operation.

Reported net earnings increased 102 per cent to $21.6 million or 24.8 cents a share, an increase from $10.7 million or 20.6 cents per share in 2004.

Contract manufacturing of pharmaceuticals in North America is big business with a figure currently estimated at a $6.25 billion (€5.3 billion) as regards market size. This is a figure forecasted to grow at a compound annual rate of 10.5 per cent from 2004 to 2011.

"Fiscal 2005 was challenging due to issues that affected our MOVA operations and our Whitby site,"​ commented Robert Tedford, chief executive officer of Patheon.

"The issues at MOVA included the shortage of client-supplied active pharmaceutical ingredient (API) for the large-volume Omnicef product, the suspension of manufacturing of that same product in response to a FDA Warning Letter and a decrease in volumes for a newly launched product,"​ he added.

Tedford commented that these challenges resulted in lower capacity utilisation and operating margins at MOVA in the second half of the year and a negative impact on earnings per share.

"With regards to North American (excluding MOVA) and European operations, we are reporting strong internal growth of 17 per cent in fiscal 2005 driven by our high-quality Rx manufacturing and drug development (PDS) services,"​ said Tedford.

"Our PDS business had another excellent year in 2005 with 31 per cent growth in number of projects and 5 NDA approvals, including one subsequent to year-end. At year-end, we had a total of 147 projects in our pipeline including 6 drug candidates at the NDA stage, of which 4 are in line for approval as soon as fiscal 2006."

Revenues from prescription (Rx) manufacturing, including MOVA, increased by 65 per cent or $195.8 million; PDS services increased by 38 per cent or $25.3 million; and over-the-counter (OTC) manufacturing increased by 7 per cent or $7.0 million.

Revenues from North American operations (including MOVA) rose by 67 per cent or $197.9 million, and European operations by 17 per cent or $30.2 million.

Patheon detailed its plans for next year, which will include expanding its cephalosporin capacity in Swindon, completing the transfer of two groups of products to its European operations.

The company also committed itself to its PDS operations in Puerto Rico and establishing an initial PDS presence in India.

"The combination of oral cephalosporin capabilities at our Carolina facility, the existing sterile cephalosporin capabilities at Swindon and the new lyophilisation plant dedicated to cephalosporin products that we are constructing in Swindon will allow us to provide a full range of dosage forms for this important category of antibiotics,"​ said Tedford.

The new facility at Swindon, scheduled for completion by the end of fiscal 2006, represents an investment of approximately 22 million euros.

Tedford said that in Europe, they would continue to integrate new Rx products into sites in Italy and France as part of the transfer of two groups of products from two clients who are restructuring their respective facilities in Europe.

"As part of this initiative, we will be establishing high-potency capabilities in Bourgoin by investing approximately 10 million euros at this site in 2006 and 2007,"​ said Tedford.

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