Rexam faces patent expiry of drug delivery product in 2012

Will continue to develop strong pipeline to fuel future growth

One of the main devices that Rexam Healthcare manufactures for drug delivery is in the process of coming off patent and this is expected to have an impact on results in 2012.

But Rexam’s chief executive Graham Chipchase played this down by saying that this is ‘part of the normal cycle within the pharmaceutical industry, which is why we continue to develop a strong product pipeline to fuel future growth.’

Rexam Healthcare is the global leader in rigid plastic packaging and devices for healthcare applications. It designs, develops and manufactures containers and healthcare closures, drug delivery devices, metering pumps and valves and medical components.

Rexam’s Healthcare volumes (sales excluding pass through of resin cost) were flat in 2011 and there was weak demand in North America.

In Pharmaceutical Packaging, strong growth in insulin pens was offset by weakness in inhalers following a quiet flu season.

Looking ahead, the firm expects that there will be more opportunities to develop or co-develop solutions with pharmaceutical companies as they focus increasingly on their core business.

‘We have a range of new products including insulin pens and the next generation of sophisticated drug delivery devices to replace those coming off patent,’ said Chipchase.

Advancia, for example, is a new generation of nasal spray pumps specially designed to enhance protection of preservative free drugs, which is expected to help consolidate Rexam’s position as a leader in this field.

Rexam’s plastic packaging business, which includes Healthcare and Personal Care, accounted for 19% of Rexam’s underlying operating profit from continuing operations in 2011 (2010: 23%).

Total plastic packaging sales rose to £948m in 2011, up from £942m in 2010. Underlying operating profit fell to £102m from £119m.

Rexam has decided to sell the Personal Care business, which includes the High Barrier food container operation.

Chipchase said the firm believes that while Personal Care is ‘an attractive, well run business’, given that Rexam can generate better returns elsewhere in the Group, it is likely to be of greater value to another owner.

The sale of this business will also improve the range of projects in which Rexam can invest in both Beverage Cans and Healthcare.

‘Healthcare will remain a key component of the Group,’ Chipchase added. ‘It is a business with good growth prospects, well established customer relationships and long term contracts, as well as high barriers to entry and a strong return profile.’

In 2011, Rexam’s sales in emerging markets grew 8% and there is further potential here for both the Beverage Cans and Healthcare businesses.

For example, Rexam Healthcare is in the process of doubling the capacity of its plant in Bangalore to meet continued growth in the region. At the same time it is finalising a contract to manufacture generic drug delivery devices for a customer in India, which will, in time, require it to build a plant in Western India.

Going forward, Rexam remains cautious about the global economy and Chipchase said it faces ‘certain cost challenges in 2012’. But overall, Rexam expects 2012 to be another year of progress as it continues to focus on cash, costs and return on capital employed.

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