Albany Molecular Research dips further into the red
quarter of 2006 recording an operating loss of $2.5m (€1.9m) - six
per cent worse than the same quarter the previous year - despite
encouraging revenue growth in its contract business.
A pre-tax loss of 1.5m was also recorded, although this was at least a 15 per cent improvement on the loss in the comparable 2005 quarter.
The contract manufacturer has been trying to find its feet after a drop off in royalties from one of its drugs Allegra, which has faced increasing generic competition.
As a result the firm has had to increase its reliance on its contract businesses although one of these segments - Large Scale Manufacturing - has been experiencing suboptimal profitability, adding to the company's woes.
For the quarter, contract revenue from the Large Scale Manufacturing business only increased 10 per cent from $17.1m in the last quarter of 2005 to $18.8m in 2006.
The company has been taking steps to turn this segment around and is in the process of a "restructuring initiative" in a bid to "improve profitability" although details of the restructure and exactly how this will revamp the business remain hazy.
In the meantime, the restructure is dragging down an already fragile bottom line - work at the large manufacturing facility in Rensselaer, New York cost the firm $1.6m for the quarter.
However, through this investment, the company said it expects to realise annual savings of approximately $5m beginning in 2007.
Outsourcing-Pharma.com was keen to find out if a bigger focus on its contract manufacturing business would offset entirely the loss in royalties generated by Allegra but the company was unavailable for comment.
Despite the losses the company is incurring, sales for the quarter were positive. Albany reported a 19 per cent increase in total revenue to $46.6m and contract revenue for the quarter was $40.3m, an increase of 23 per cent compared to $32.9m in 2005.
Total contract revenue includes revenue from the firm's Discovery Services, Development and Small Scale Manufacturing, and Large Scale Manufacturing business segments.
The Discovery Services segment saw a substantial 52 per cent jump in sales to $12.2m - driven primarily by revenue resulting from the acquisition of ComGenex (now AMRI Hungary) - while revenue from Development and Small Scale Manufacturing services was $9.3 million, an increase of 21 per cent compared to 2005.
End of year revenue for 2006 was, however, disappointing. The company recorded $179.8m in sales, a 2 per cent decrease compared to $183.9m in 2005.
This was also blamed on a reduction in Allegra royalties, as well as the discontinuation of one large scale manufacturing product supplied to GE Healthcare in 2005 worth $17m.
These decreases were, however, substantially offset by revenue in the company's Discovery Services business resulting from the acquisition of AMRI Hungary, which brought new business to the firm, as well as allowing it to sharply reduce its cost base.
In addition, an increasing demand in AMRI's contract services business had a positive impact. Looking forward, the company expects to maintain a strong growth in this segment.
"In the first quarter of 2007, we expect contract revenue to range from $37m to $41m, an increase of up to 13 per cent versus the first quarter of 2006," said Albany's CEO Mark Frost in a statement.
"We anticipate strong demand in both Discovery Services and Development and Small Scale Manufacturing to drive this increase."
