The US active pharmaceutical ingredient (API) manufacturer outlined the plan to start work on Pharma 4 – currently an empty shell set up at its site in Charles City, Iowa – during its second quarter conference call earlier today.
CEO Steven Klosk told analysts Cambrex will start designing the facility and identifying the manufacturing equipment required before the end of the year and predicted the plant would be operational around 12 months after the process begins.
He also suggested the project would cost around $20m (€18m).
The plan comes a month after Cambrex’s newest facility at the site – Pharma 3 – became operational.
CFO Gregory Sargen said the firm’s Pharma 4 plan is driven by the expectation that capacity utilisation at the Pharma 3 facility will ramp up quickly.
He also said the idea is to “get ahead of the capacity utilisation curve,” explaining that the firm’s previous approach of building capacity in response to demand had meant it “lost some opportunities.”
Second quarter growth
Revenue for the second quarter ended June 20 was $119.1m (€107m), up 11% excluding currency impacts. EBITDA increased 6% to $36.7m.
Klosk attributed the gains to growth in all three of Cambrex’s categories – innovator drug ingredients ($76m, up 11%), generic APIs ($28m, up 7%) and controlled substances ($15m, 21% up) – adding that firm’s 26% profit margin was due to “strong capacity utilization.”
Cambrex added two late phase projects – one for a drug in Phase III and one for a commercial product - to its innovator business in Q2. Klosk predicted that, if the clinical product is approved, it will generate $5m-10m.
The commercial product is expected to generate more than $20m a year, starting in 2018.
On a more negative note, Klosk said that one of its customers terminated clinical development of a product that had been expected to generate more than $10m in annual revenue in the quarter.
Klosk also predcited that - including the $20m it will spend on Pharma 4 - Cambrex expects to invest $70m-$75m in capital projects this year, an increase on the $60m it spent in 2015.
He said "we are also making additional improvments and capacity expansions at our manufacturing sites in Sweden and Italy" but did not provide further details.
Cambrex increased its revenue and earnings guidance for the year.
The firm now expects to sales to increased 10% to 13% on 2015 and earnings to be between $144m and $149m, up between 12% and 16% year on year.
Klosk said the revision was “based on performance in the year to date, and high level visibility for orders during the second half of the year."
Full year growth will be driven by innovator APIs according to Klosk who said Cambrex's generic API revenues would be flat for the year.
"Expected orders for the second half of 2016 show softness in certain products so we now expect revenues from generic APIs to be approximately flat compare with prior guidance of low to mid single digit percentage growth."