The company made an operating profit of $5.6m in the quarter on sales of $66m, with profitability lower than in the same period of 2007 as a result of “lower sales of generic active pharmaceutical ingredients (APIs) and an unfavourable product mix,” according to Steven Klosk, Cambrex’ recently appointed president and CEO.
In particular, the firm continued to feel the effects of the March recall of a product in the US for which Cambrex supplies the API, as well as limitations on its use in Europe, which should slice around $6m off its 2008 revenues.
The unnamed customer has filed a variation with regulators seeking to restore the product’s market presence, but if unsuccessful the impact on Cambrex’ annual revenues could be greater.
Profits were also held back by costs associated with the validation of Cambrex’ new finishing facility in Milan, Italy, which should be fully completed by the end of 2008
The lower sales of APIs was partially offset by higher custom manufacturing revenues, said Cambrex, but custom development revenues were flat compared to the prior year.
"The trends in our underlying markets remain favourable,” said Klosk. Sales of controlled substances, one of Cambrex’s key growth initiatives, were up about $5m on the prior year, he added.
Klosk was appointed in May to continue a cost-cutting drive at Cambrex initiated by former CEO James Mack. In the second quarter R&D spending was cut from $3m a year ago to $1.9m, primarily because of the consolidation of Cambrex’s New Jersey technical centre with its R&D operations in Iowa.
But the company is also bringing new capacity online. New laboratories at Iowa were commissioned during the second quarter to support growing demand for high potency compounds. And in addition to the Milan finishing facility, a new mid-scale API manufacturing plant at Cambrex’s Swedish operation will be operational in early 2009, said Klosk.