11-Mar-2011

Patheon reports 13.5% rise in Q1 revenues

Patheon, the Canadian provider of contract development and manufacturing services saw its Q1 2011 revenues rise by 13.5% to C$175.7m compared with the same period last year. Excluding currency fluctuations, the increase was approximately 10.3%.

Operating income for the period was $14.3m or 8.1% percent of revenues, up from an operating loss of $6.6m in the same period last year. First quarter adjusted EBITDA was $29.5m, up from $9.3m.

‘The improvement in first quarter results reflects benefits from early expiry of a customer contract in the UK this quarter, as was previously disclosed,’ said James C. Mullen, Patheon's ceo. ‘We also saw continued improvement in most of the North American commercial business, while results in the European commercial and our development services business were not as robust.

‘Our quality track record remains strong and the development of broader strategic relationships with several customers continues. We are also encouraged that the market dynamics for outsourced manufacturing and development services continues to be encouraging, but is moving at a slower pace than we would like.’

Mullen added: ‘The fundamental reasons for the industry to outsource the development and manufacturing of pharmaceutical products remain the same. Pharmaceutical companies are under heavy pressure to optimise their resources in the face of cost pressures. We are well positioned to meet the future outsourcing demand with our focus on supply security, financial stability, ability to manufacture multiple dosage forms, geographic breadth and competitive pricing. I am confident that as the trend evolves we are well positioned to capture our share of the business.’

Revenues from commercial manufacturing operations for the three months ended January 31, 2011 increased by 16.1%, or $20.6m, to $148.7m from $128.1m in the same period of 2010. Had local currencies remained constant to the rates of the prior year, commercial manufacturing revenues would have been approximately 12.5% higher than 2010.

North American commercial revenues increased by $5.1m, or 9%. Had the Canadian dollar remained constant to the prior year rates, North American revenues would have been 9.4% higher than 2010. The increase was primarily due to higher revenues across all sites.

European commercial revenues increased by $15.5m or 21.6%. Had European currencies remained constant European revenues would have been approximately 15.2% higher than the same period of 2010.

The increase is primarily due to the amendment of a manufacturing and supplies agreement with a significant customer in the UK. The amendment reflects the customer's decision not to proceed with a development-stage lyophilized cephalosporin sterile product following receipt of a complete response letter from the FDA. As part of the amendment, the customer is paying Patheon a reservation fee of €21.6m. In addition, as a result of the shortened contract life, Patheon is accelerating related deferred revenue recognition and will be relieved of its obligation to repay certain customer-funded capital related to the original manufacturing and supply agreement.

Pharmaceutical Development Services (PDS) revenues for the three months increased by 1.1% to $27.0m from $26.7m in the same period of 2010. Had the local currency rates remained constant to the prior year, PDS revenues would have been flat with the same period of 2010.

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