Generic drag cant hold back Siegfried's API momentum

During the year, the Zofingen-headquartered firm divested both its biotechnology and wellness tea businesses in favour of expanding its actives pipeline through the acquisition of 20 development projects.

Siegfried's exit of the biopharmaceutical sector runs counter to the prevailing trend in recent years for contract manufacturers to build capacity in biologics.

In the early years of the decade the sentiment was that there was considerable undercapacity in bioprocessing, although recently this has corrected.

Significant investment in capacity by CMOs has made the operating environment more competitive.

Excluding the cash injection from the sale of the two divisions, earnings before interest, taxes and depreciation from continued operations grew a modest 3.8 per cent to CHF 69m, as an increased contribution from its API division, up a quarter to CHF 49.7m, was offset by a 40 per cent decline in EBITDA from its generics operations.

Siegfried commented that its actives division in p articular had been the subject of increased interest from major pharmaceutical research organizations worldwide.

The firm added that higher revenues from compounds on which patent protection had expired, coupled with its first-time sale of opiate compounds in the USA, had laid the foundations for further expansion of its API business.

It also said that its nicotine and methadone-based products had continued to fare well in the USA.

In contrast, the performance of Siegfried's generics division has been impacted upon by the difficult conditions in the German market and high depreciation from development projects.

However, the firm said that expansion of its Maltese production facility was likely to increase its contract manufacturing income, citing its recent deal with German generics company Haupt Pharma as an example of such future gains.

On a further positive note, Siegfried said that it is still actively developing generic medications for respiratory indications, such as asthma, using its PulmoJet dry-powder inhalation device.

The company also reported that its new laboratory facility in Zolfingen, work on which began last year, would both provide significant cost savings and further cement its position as in the pharmaceutical research field.

In conclusion, Siegfried said that its API business would continue expand and drive revenues, but conceded that the performance of its generic division was harder to predict owing to "significant changes in the market place".

Overall, the firm forecast growth in the single-digit range in 2008, with improved margins and better asset utilization resulting in increased operating profit.