Patheon slashes losses in Q3

07-Sep-2008 - Last updated on 08-Sep-2008 at 07:20 GMT

Canada’s Patheon put in another quarter of robust revenues growth in its third quarter, which coupled with cost-reduction measures helped the firm trim its net loss to $14.7m, down 75 per cent on a year ago.

Revenues swelled to $195m, with Patheon’s Pharmaceutical Development Services (PDS) unit leading the charge with sales up by a third to $38m. Contract manufacturing revenues also put in a good showing, rising 15 per cent to $157m thanks to strong growth in European business.

Overall, Patheon’s activities in Europe added $18m to the firms coffers, a rise of 23 per cent, albeit helped by favourable exchange rates.

The rise in profitability was particularly pleasing, according to Patheon’s CEO Wes Wheeler, who said the impact of the restructuring at the firm was to some extent masked by costs such as severance programmes.

The contract services company has been reinventing itself since Wheeler took the helm in December 2007, with a top-to-bottom revamp that has seen it relocate its corporate headquarters from Toronto to Research Triangle Park in North Carolina, US, as well as sell off, refocus and downsize facilities.

All told, those expenses came in at $6.7m in the quarter, including severance charges related to Patheon’s closure of its York Mills facility, with operations transferred to its unit in Whitby, as well as the downsizing of its site in Caguas, Puerto Rico. Savings from these activities will start to come in the fourth quarter, according to Wheeler.

Patheon is also planning to sell off a facility in Carolina, Puerto Rico, after one of the plant’s major products, Abbott Laboratories’ antibiotic Omnicef (cefdinir), lost patent protection, leading to a decline in volumes. The Carolina operation is currently being classified as a discontinued operation in Patheon’s accounts, along with the already-divested over-the-counter (OTC) pharmaceutical operations at Niagara-Burlington which were sold off in January to Pharmetics.

The York Mills property was sold off in April for just under $12m, and Patheon is currently leasing it during the decommissioning process.

The contract manufacturing business was marked by revenue increases at all Patheon’s North American facilities with the exception of Cincinatti, which the company said was held back by “customer related raw material supply constraints.”

Looking ahead, for the fourth quarter, the company said that revenues were expected to be lower than revenues for the third quarter, due to normal shutdowns in summer, particularly in Europe.