Cambrex: delayed API plant opening set for Q2 opening

01-May-2016 - Last updated on 02-May-2016 at 12:13 GMT

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Related tags Pharma Capacity utilization Delay Tom delay Cambrex

An API facility Cambrex is setting up in Charles City, Iowa will be operational later than planned due to delayed equipment deliveries and installation challenges.

Plans for the plant – known as Pharma 3 - were announced last February when the US active pharmaceutical ingredient supplier said the additional capacity was needed to support growth of its contract manufacturing business.

Originally, Cambrex predicted it would be operational “early” in 2016. However, the plan now is to bring the facility online by July according to CEO Steven Klosk, who said the delay was the result of late equipment deliveries.

“Pharma 3 is a large and complex project. It is not unusual at all for there to be delays of some type, meaning equipment from a supplier is late. Equipment comes in and maybe it's damaged and you have to repair it.”

Capacity Utilization

The increase in demand for drug actives that prompted Cambrex to invest in Pharma 3 last year has continued into 2016 according to first quarter financials released last week.

Revenue for the three months to March increased 20% to $93.9m (€81.7m) due to higher demand for APIs. Margins also improved – from 37% to 41% - thanks in part to higher capacity utilization. Operating profit increased from $12.7 to $21.4m.

Cambrex reaffirmed its guidance for 2016 – 8% to 12% sales growth year-on-year and earnings of between $142m and $148m.

Klosk explained that Cambrex had already factored potential delays to the Pharma 3 project into its forecast. He also predicted that capacity utilization at the new plant will increase faster than originally planned when it does become operational.

Pharma 4

In addition to updating on the Pharma 3 delay, Cambrex used its first quarter presentation to outline its plans for another expansion.

According to Klosk, Cambrex has already constructed the shell of a fourth API facility – Pharma 4 – at the Charles City site which he said will allow the firm to generate “another $40 million to $60 million in revenue when fully utilized.”

This was echoed by CFO Greg Sargen who told investorsPharma 4 would not be made operational before 2017.

“We'll get Pharma 3 up and running and see how that acceleration of the capacity utilization goes, see how orders come in on the back half of the year, see how some of our late stage projects progress.

“And probably towards the end of this year or early 2017 we'll have a much better bead on timing of Pharma 4.”