PharmEng cuts costs despite tripled turnover

By Phil Taylor

- Last updated on GMT

Related tags: Pfizer

Canada’s PharmEng International almost tripled its turnover in the second quarter, as its acquisition of a Pfizer manufacturing facility at the end of 2007 transformed sales at contract manufacturing facility Keata Pharma.

But the cost of the acquisition saw its net losses widen to C$1.5m in the quarter, more than double the loss reported a year ago, and the firm has now started a cost-reduction programme aimed at reducing operating expenses by a fifth.

Alan Kwong, PharmEng’s CEO, said he felt the company was still on track to meet its 2008 objectives, but acknowledged that there have been “delays in the timing of anticipated new business​.”

Unspecified staffing reductions will take place across the group, affecting both the contract manufacturing and consulting businesses, with a view to saving C$2.6m a year.

Kwong also said that the company is in breach of certain loan covenants, and while it has secured agreement from the lenders to postpone any action, it does need to find around C$3m to service the debt.

Revenue for the second quarter jumped 190 per cent to C$9.4m, with contract manufacturing turnover leaping to $7.3m from $0.6m, now accounting for 78 per cent of the company’s total sales.

The Pfizer facility, based at Arnprior, Ontario, is a key factor in the company's push to profitability this year as it brings around $75m in manufacturing contracts from its former owner between 2008 and 2010.

Prior to the takeover, the Arnprior facility manufactured Aricept (donepezil) for Alzheimer's disease, antihypertensive Norvasc (amlodipine), Celebrex (celecoxib) for arthritis, the smoking cessation drug Champix (varenicline), cholesterol treatment Lipitor (atorvastatin), Viagra (sildenafil) for erectile dysfunction and HIV drug Viracept (nelfinavir).

As a result of the acquisition, Keata's manufacturing capabilities have expanded to include pilot laboratories for formulation development, various capabilities of high shear mixing, container blending and equipment for modified release technology.

In the second quarter PharmEng completed the relocation of manufacturing from its manufacturing facility in Perth, Ontario, to the newly constructed plant in North Sydney, Nova Scotia.

The company said it “remains confident that 2008 manufacturing volumes will continue to generate significant revenue increases for Keata for the balance of 2008 leading to greatly improved financial performance​” for the year.

Meanwhile, in the second quarter PharmEng Technology, the company’s consulting division which focuses on project management, engineering initiatives, Good Manufacturing Practice (GMP) and validation, regulatory affairs, calibration and biosafety services, brought in a little over C$2m, or 22 per cent of group sales.

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