Patheon swings to loss on terminated manufacturing contract
pharmafile | March 12, 2012 | News story | Manufacturing and Production | Patheon, fiscal, manufacturing, operating
Contract manufacturing and development organisation Patheon said it posted an operating loss in its fiscal first quarter results after losing a major supply contract.
Patheon reported an operating loss of $21 million on sales down 12% to $154 million, reversing a profit of $13.5 million a year ago, although chief executive James Mullen insisted that the ‘underlying business has improved’.
Also dragging down profits were $6 million in consulting fees related to a restructuring programme initiated by the outsourcing specialist last year, which includes the closure of a number of facilities and an exit from non-core businesses, notably semi-solid production and clinical packaging.
Meanwhile, Patheon’s operating costs rose thanks to higher selling, general and administration (SG&A) and corporate expenses, which collectively rose almost $9 million year-on-year.
Patheon’s contract manufacturing operations fared particularly badly, with sales dropping nearly 18% to $123 million in the quarter thanks to the terminated supply agreement, which stripped $33 million out of Patheon’s revenues.
The manufacturing woes were however partially offset by gains in Patheon’s contract development services unit, which posted a 15% increase to $31 million.
“The transformation activities are on track as we continue to improve efficiencies and productivity at the site level and in our general and administrative, pricing and procurement functions,” said Mullen.
Among the specific measures being implemented by Patheon as it strives to reinvigorate its business is the sale of its subsidiary in Swindon, UK, the closure of a facility in Puerto Rico and transferral of assets and operations between sites in Canada, Switzerland and the UK.
“In the second half of our fiscal year, consulting costs related to implementing our transformation programme should decline, and we anticipate recognising real cost savings from our initiatives”, added Mullen.
Phil Taylor
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