Patheon cuts Op loss on PDS gains but manufacturing rev down

By Gareth Macdonald

- Last updated on GMT

Related tags: Puerto rico, Mergers and acquisitions, United states dollar

Patheon says lower Puerto Rico losses helped in fiscal Q3 and reports growing demand for product development services (PDS).

The Canadian contractor’s operating loss for the three months ended July 31 was $3.0m (€2.3m) down from the $5.2m deficit it posted for the year-earlier period, while revenue slipped 0.6 per cent to $163.3m.

Patheon attributed the moderate improvement to greater manufacturing efficiency at its facility in Manati, Puerto Rico which, while still operating at a loss as a result of energy costs, contributed “stronger revenues.”

The firm also said its third quarter deficit included a $6m charge associated with the impending closure and transfer of operations from its other Puerto Rico facility in Cargas, without which, it would have been in the black for the quarter.

Additionally, Patheon’s operating loss for the nine months to the end of July was down, falling just over 51 per cent to $2.4m thanks in part to a 3 per cent hike in revenue to $493.5m.

CEO Wes Wheeler was generally upbeat about the performance and prospects for the rest of the fiscal year, suggesting that demand for PDS services in the period was the strongest the contract manufacturing organisation (CMO) has seen in two years.

PDS revs up, manufacturing slows down

The PDS unit’s results further support the idea of recovering demand for this type of contracting, with revenue for Q3 climbing some 5 per cent to $33.1m.

In contrast, Patheon’s commercial manufacturing division fared less well in the three months to July 31 with revenue falling $2.7m to $130.2m, partly as a result of unfavourable exchange rates.

Despite this decline, Wheeler was cautiously optimistic that demand for contract manufacturing is also starting to recover.

We’re also experiencing historically high quote activity in our contract manufacturing business, but decision making timelines in the pharmaceutical industry continue to be very slow​.”

“Timing in outsourcing decision making” was cited, along with integration activity related to recent drug industry mergers and acquisitions (M&A) and foreign exchange rates, as an important factor in its performance in the rest of fiscal 2010.

Patheon suggested that, if all these factors are positive and costs relating to the committee set up to look at the now defunct JLL takeover offer are excluded, sales and income for the 12 month period will beat that seen in fiscal 2009.

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