The plant – which AMRI bought from Hyaluron in June 2010 – has been a problem for the firm since August of the same year when it received a US Food and Drug Administration (FDA) warning letter detailing several ‘significant violations’ from current good manufacturing practices (GMP).
Since then AMRI has been working to correct the issues in a lengthy and costly process that had a significant impact on margins over the last 18-months. And while progress has been slow – it now appears AMRI is close to a complete resolution.
Speaking at UBS’ 22nd Annual Global Healthcare Service Conference yesterday, CFO Mark Frost told investors that: “We have done the final responses to the FDA which were signed off…so they have no concerns at our plant. It’s now a question of getting the final inspection that will happen in quarter two.
He added that it is “now a case of convincing customers [to return]” citing the new contracts that AMRI won in Q4 - detailed in its results presentation earlier this week - as evidence the firm has already started to make progress in this regard.
“If you listen to our call yesterday – we did have significant improvement albeit from a small number in the fourth quarter so we are reasonably encouraged that we are going to start turning that around and that has a very significant margin benefit for our business.”
Quite how much more work AMRI will need to do to win back business at Burlington has been a topic of much debate in recent months with observers suggesting that, despite an increase in RFP activity towards the end of 2011, customers have been slow to return and it will take time for the plant to generate ‘meaningful revenue.’
Frost also discussed AMRI’s customer relationship building efforts in terms of the evolution of the sales and marketing team it set up in 2005.
“Any of you that have followed the device space you saw the power of the surgeons change in the late 1990s. We’ve seen the same thing happen in the pharmaceutical space, in that, the power of the scientist has changed dramatically.
“So now in order to get a purchasing decision from large pharma you’ve got to convince the scientists, the procurement folks and the c-suite [management]. This means you need to have much more in-depth sales and marketing approach and it also means that it takes longer to get the decisions.
He cited AMRI’s deals with Eli Lilly and Merck – which took 15 and 14 months, respectively to put in place, as evidence of the efforts needed to win new customers.