Second-quarter revenues rose 17 per cent to $58m, with gains for AMRI’s discovery services and development/small-scale manufacturing businesses propping up a 17 per cent decline in revenues at the firm’s large-scale manufacturing unit to $19.6m caused by reduced sales of GE Healthcare products and a dramatic fall-off in shipments of Vyvanse (lisdexamfetamine), an attention-deficit hyperactivity disorder drug sold by Shire.
Contract discovery services revenue rose a whopping 54 per cent to just under $15m, helped by strong gains in the US and Singapore, and a good performance by the firm’s natural products unit, said AMRI’s chief financial officer Mark Frost in a conference call.
Meanwhile, development and small-scale manufacturing services added 43 per cent to reach a little over $15m, with the forward momentum driven by specialty pharma and biopharma customers. AMRI’s recently-opened facility in Hyderabad, India, also made its first contribution in the quarter.
The filing of approval to take an AMRI drug licensed by BMS into Phase I testing in Canada added a $4m milestone, a significant factor in the company’s 90 per cent hike in operating income to $3m. But even despite this one-off bonus AMRI achieved a key target by returning its contract business to an “earnings positive” state, said Frost.
AMRI also said it expects to complete construction of a non-GMP pilot plant at its recently-acquired manufacturing facility in Aurangabad, India, formerly operated by FineKem Laboratories, in the coming weeks.
European restructuring completed
AMRI also said that it had completed its restructuring of its European discovery services business, centred on Hungary, which kicked off in May. The revamp cost $2m in charges and involved the loss of 22 jobs, but will “position [the business] for long-term financial growth as well as future expansion.”
The unit will also be shifting its focus from compound library provision into medicinal chemistry, with the possibility of expansion into small-scale manufacturing down the line.
AMRI recently appointed a new managing director for the European business, Dr Philip Small, and also announced plans to move into new facilities. D’Ambra stressed the unit was taking a little longer to get integrated than other overseas operations, such as Singapore and Hyderabad, because there was a need to convert operations from an existing business, rather than build the AMRI culture from scratch.
D’Ambra also believes there has been some discounting in among AMRI’s competitors in Europe, which are struggling to cope with increased price competition from emerging markets such as Asia.
For the full-year, AMRI expects contract revenues to come in at $186-$190m, with $56m of that total coming from the discovery services business, up a third on the prior year.
“We expect increase demand for medicinal chemistry services both in the US and Asia, as well as strong natural products and screening revenue from contracts which we signed in 2007,” Frost told the conference call.
Development/small scale manufacturing should contribute $53-$55m, up around 20 per cent, with large-scale manufacturing roughly flat at $76-$77m.
However, CEO Thomas D’Ambra sounded a note of caution in closing remarks, pointing to the increasing difficulty of small and start-up companies to raise investment capital, particularly in the US, as the credit crunch continues to bite.
He said that AMRI’s investment in markets outside the US is creating a “global platform” that should help it ride the downturn.
“AMRI is doing well in challenging times,” he said.
In-house projects to swell R&D costs
R&D spending will increase as AMRI continues its diversification strategy, which has seen it evolve from being simply a provider of contract services to a developer of its own pipeline of therapeutic products destined for out-licensing.
One of AMRI’s cancer drugs, the tubulin inhibitor ALB109564(a), started Phase I testing last month.