Phibro Animal Health has been under pressure since the FDA said that it would crack down on the company’s antibiotic for pigs. Phibro’s regulatory woes took their toll on Q3 earnings, with sales that rang in lower than last year’s numbers.
The Teaneck, NJ-based company reported net sales of $183 million, a 1% drop year-over-year. Part of the problem is that some U.S. customers are shifting away from antibacterials “in anticipation of upcoming regulatory changes and in response to consumer preferences for the reduction or elimination of antibacterials in protein production,” CEO Jack Bendheim said in a statement.
The company’s stock was off more than 12% upon news of its disappointing Q3.
Last month, the FDA revealed that it would withdraw approval for Phibro’s antibiotic for pigs, Mecadox (carbadox). The agency has pushed back at the company’s med for years, saying that the drug may leave small amounts of carcinogenic residue in pork that could increase people’s risk of cancer.
Phibro has been quick to defend its drug, though. The FDA approved Mecadox based on a “rigorous safety review,” the company said last month. And Phibro has accommodated the FDA’s requests for additional safety data on the drug by launching new studies, it said.
The company still intends to “collaborate fully with the FDA to provide and evaluate the scientific data which we expect will address the (agency’s) concerns,” Phibro said in its latest earnings statement. It will submit data from its studies to the FDA by the July 11 deadline laid out by the agency.
“Safety is Phibro’s highest priority and we continue to have complete confidence in the safety of Mecadox. We expect the data we present to the FDA will support the continued safe use of the product,” the company said.
Still, Q3 wasn’t a complete downer for Phibro. The company reported some success for its vaccine business, partly thanks to its acquisition earlier this year of animal vaccine maker MVP Laboratories. The unit as a whole grew 8% to $900,000 during the quarter, which includes two months' results from MVP, Phibro said.
Despite the company’s stormy regulatory forecast and recent disappointments, Phibro is predicting brighter days in the months to come. The company has been working on improving its operating margins, and it expects to expand by 150 basis points to 15.3% by the end of 2016.
Phibro is also forecasting $477 million to $482 million in net sales for 2016, or a 3% to 4% increase. Vaccines and nutritional products will help drive this growth and will offset declines in the company’s mineral nutrition and performance products units, Phibro said.