Patheon limps in with end of year results

By Anna Lewcock

- Last updated on GMT

Related tags: Income statement, United states dollar, Puerto rico

Patheon last week announced its fourth quarter and end of year
financial results after a tough year for the contract drug

The company announced a fourth quarter net loss of $22.4m (€17.1m), with a net loss for the year of $288.2m compared to last year's earnings of $21.6m. The difficulties for the company are largely down to their troubled Puerto Rico site, which they gained as part of the acquisition of contract manufacturer Mova Pharmaceutical in November 2004. "Fiscal 2006 was an exceptionally difficult year for our Puerto Rico operations and, consequently, for Patheon,"​ said the company's chief executive, Riccardo Trecroce. "Our overall earnings…were negatively impacted by a series of manufacturing issues and market driven declines affecting several high-volume products at our Puerto Rico operations."​ The company foresaw difficulties back in February 2006, after receiving a warning letter from the FDA in September 2005 regarding its production of Abbott's oral antibiotic, Omnicef (cefdinir). Coupled with other production problems at several of the company's sites, lower demand for over-the-counter manufacturing services, and deferred client orders, the company's predicament led to a year of disappointing financial results. Approximately 86 per cent of revenue was generated through commercial manufacturing at the company which totalled $613,141, slightly up on last year's sum of $607,266. The company reduced the size of its workforce by approximately 250 (around 4 per cent) during Q4, which led to the company recording $9.6m in severance expenses. This added to the 200 plus jobs that were also lost during the third quarter of fiscal 2006. Patheon expects revenues from current operations for fiscal 2007 to be comparable to 2006, but revenues for Q1 2007 slightly higher year-on-year. The company hopes to achieve cost savings in 2007 through contract negotiations which will result in savings from lower pricing and volume rebates on inventory items such as excipients and packaging components, and non-inventory consumables and services, including laboratory supplies and waste management services. In September Patheon announced that it had established a committee to evaluate a range of strategic and financial alternatives for the company, and last month confirmed that it was in discussions with several parties regarding various options. The firm emphasised that no transaction or other material development would necessarily arise from the process. In September Patheon also announced the resignation of chief financial officer and executive vice-president Douglas Ludwig, just six months after his appointment in March. His predecessor at the company was also in place for less than six months.

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