The unit – in the Hungarian capital Budapest – has a staff of 100 employees and was established as a custom synthesis site but more recently has started providing discovery chemistry and support services to AMRI’s drug industry customers.
CEO Thomas D’Ambra told Outsourcing-pharma.com the review was prompted by the realisation that, increasingly, Pharma customers prefer contractors that do drug discovery under one roof.
“Multiple pharma companies are considering significant expansions to their discovery outsourcing activities. It has been clear in several conversations that there may be a real preference by some for co-localization of integrated discovery functions.”
Hungary losses
The other factor driving the review - D'Ambra continued - is the facility’s negative impact on earnings relative to other parts of AMRI's business.
“Manufacturing of APIs and intermediates for AMRI had a very good year in 2011 and 2012 looks promising as well. Unfortunately, the positive performance of sectors of AMRI’s business has been overshadowed by areas, like Hungary, that have been under pressure recently.
“The Hungary site has lost several million dollars over the past couple of years," he added.
What AMRI will do to address these issues is as yet unclear although, according to D’Ambra, transferring work to other facilities would have a number of benefits.
“One approach under consideration is to transition some of the customer relationships to other AMRI locations, such as in Singapore or Hyderabad, India. This would help to fill capacity at these sites and increase revenue, with little capital investment required.”
D’Ambra said it was premature to consider if – in the event AMRI does decide to close the plant – employees will be offered jobs at other facilities although he did say that: “The thought is reasonable, provided appropriate positions are available.”
Operational changes
The review follows a few months after AMRI said it will halt all internal R&D activities and just weeks after the firm announced plans to streamline its US chemistry team and laboratory footprint.
D’Ambra said: “The changes we have been implementing reflect market forces and supply and demand. Although it is regrettable to have to take some of these tough steps, we are responding to customer preferences and investing in resources and locations where market demand is growing” citing Singapore and India as examples.
He also suggested that AMRI’s review would continue in line with market trends, explaining that: “It is appropriate to always be assessing the business. Over the past couple of years, there have been tremendous changes in our customer’s organizations.”