PharmEng is still running short of working capital, despite raising C$1m from one of its institutional investors via a convertible debenture agreement, and said it was in discussions with other investors with a view to raising additional funds before the end of the year.
That should keep the company going into 2009, it said, adding that it “continues to explore other financing arrangements, partnering and various strategic options to meet the long term needs of the organisation.”
On the positive side the company said it had slashed cash burn to C$1m in the quarter ended September 30, well down on the C$5.9m spent in the first half of the year, suggesting that the restructuring programme announced in the summer is starting to take effect. At the heart of the restructuring exercise have been cuts in staffing both at PharmEng’s manufacturing and consultancy operations.
The reduction in costs has been accompanied by a healthy 168 per cent increase in third quarter revenues to C$8.3m compared to the same period of 2007, with the bulk of the increase coming from PharmEng’s acquisition of a facility in Arnprior, Ontario formerly owned by Pfizer.
The steep increase in losses for the quarter came about as a result of a non-cash, C$4.2m impairment charge against PharmEng’s assets, largely as a result of the increased contract manufacturing capacity associated with the start up of the Sydney facility and takeover of the Arnprior site.
“The Sydney facility has taken longer than expected to come on line,” said PharmEng in a statement. “The additional time and cost associated with the construction and start up of the Sydney facility has created additional financing challenges for the organisation.”
Alan Kwong, CEO of PharmEng, said the firm is working hard “to reduce the start up losses at our Sydney facility and to conclude on a strategy to best maximise the capacities available in our two manufacturing assets.”
The contract manufacturing business is now PharmEng’s biggest division, bringing in C$5.8m in the quarter, while the consultancy business PTI contributed C$2.5m, a decline of 11 per cent over the prior year.