Cambrex profits climb despite sales drop

The company's revenues of $61.7m were 5.1 per cent lower than in the first quarter 2007. Cambrex attributed the drop to lower sales of a gastrointestinal active pharmaceutical ingredient (API), lower custom development revenues and lower volumes of fine chemicals and feed additives, partially offset by higher demand for controlled substances. During the period, Cambrex announced that one of its customers is recalling a product for which it currently supplies the API. The firm did not provide any further details of the recall or the product and customer concerned, citing a confidentiality agreement. It did note, however, that - based on the information available to date - "the recall decision is not linked in any way to Cambrex's performance as the manufacturer of the API​". Despite the sales dip, Cambrex' cost cutting resolve is continuing to pay off, with the firm achieving a vastly improved profitability in the quarter compared to the same period last year. Operating profit rose to $7.5m from an operating loss of $18.4m for the first quarter of 2007 and pre-tax profit increased to $6.9m from a loss of $16.8m. These profit increases "were driven primarily by the decline in corporate expenses offset by lower profits from reduced sales volume," the firm said. Cambrex has been tightening its belt lately and this is reflected in the sales, general and administrative (SG&A) expenses which were reduced in the first quarter to $11.3m, compared to $15.3m in the same period last year. The firm said the reduction was primarily due to significantly lower expenses at the corporate headquarters which have shrunk from $9.7m to $4.7m over the course of 2007 due to restructuring activities. At the beginning of the year, James Mack, chairman, president, and CEO of the firm indicated that Cambrex has also "dramatically" reduced its corporate overhead to a $17m run rate heading into 2008. Commenting on this quarter's results, Mack acknowledged that sales volumes were down compared to 2007, "largely due to order patterns​", however insisted that on the operations side, the company is "progressing on key initiatives that bode well for the future​". "We've fully integrated our recently acquired Estonia-based R&D laboratories, allowing us to manage technical resources more efficiently in order to both compete more effectively on early-stage clinical projects and free up resources to work on larger scale projects​", said Mack. In addition, Mack said that the company's "key capital projects continue to progress on schedule​", with new laboratories in its Iowa facility expected to be ready for occupancy during the second quarter; a new finishing facility in Italy in the middle of its validation process; and a new mid-scale API manufacturing facility in Swedish planned to come on line in early 2009. Moreover, "Cambrex' drug delivery programs remain on track to add new products and expand into new geographic markets​," said Mack. "Our custom development pipeline remains strong with several Phase III projects that have good revenue potential when the products are approved, possibly in late 2008 or 2009​."