Synthetech says revs down in Q1; unveils plans to expand

By Gareth Macdonald

- Last updated on GMT

Related tags: Amino acid

Lower overseas demand from key customers hurt fine chemicals maker Synthetech in first quarter fiscal 2011, continuing the decline seen in the previous financial year

For the three months ended June 30 the firm, which makes amino acid derivatives, peptide fragments, resins and intermediates for the pharmaceuticals and cosmetics industries, posted an operating loss of $727,000 (€548,000) with revenue falling 56 per cent to just $2m.

Oregon, US-headquartered Synthetech attributed the decline to a $1.7m reduction in the amount of revenue generated by business from international customers which, it explained, fluctuates​ in line with the projects they undertake.

Nevertheless, the quarterly drop also continues the trend seen in fiscal 2010​, during which revenue fell 23 per cent to $15m on lower contributions from the firm’s supply, contract synthesis and medical devices services units.

When reporting its fiscal 2010 results earlier this year Synthetic said that part of the reason for the downward revenue trend was its dependence on a few key companies, explaining that: “Our top ten customers accounted for approximately 84 per cent of our revenue.

We believe that our fiscal 2011 revenue from major and mid-size pharmaceutical companies may be adversely impacted by current economic conditions and uncertainties related to the issues surrounding healthcare reform​.”

The latest set of quarterly financials appear to confirm Synthetech’s forecast and further vindicate efforts it has made “to address costs for raw materials, production wastes, and supplies​.”

2011 strategy

In related news, Synthetech recently started a strategic review that, according to a US Securities and Exchange Commission (SEC) filing​, will look at at any method of improving financial performance up to and including a sale of the company.

However, while this review is ongoing, comments by CEO Gregory Hahn in a letter to investors on June 10​, suggest Synthetech is more interested in growing beyond its core HCV franchise than it is in finding a potential buyer.

Dr Hahn said that: “While many CMO competitors are reducing personnel, Synthetech is increasing commercial development personnel to obtain more market opportunities​.”

He went on to explain that the firm is investing in a new active pharmaceutical ingredient (API) manufacturing suite, extra bulk solvent storage capacity as well as process-specific equipment.

Synthetech’s other key investment in fiscal 2011, continued Hahn, will be in its San Diego Research Center (SDRC) which is designed to provide capacity for production of compound’s for preclinical development.

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