Recipharm reports 2017 sales growth but expansion hit bottom line hard

Recipharm in Spain taken over from Roche
Recipharm took over this solid dose plant in Spain from Roche last year, part of an expansion that has taken a toll on its bottom line. (Roche)

Swedish CDMO Recipharm was able to grow sales significantly last year but recorded a loss for the year as its rapid expansion took a toll on its bottom line.

Recipharm today reported sales of SEK 5.3 billion ($653 million) for the years, an increase of 14%, but it recorded a SEK 160 million ($19.7 million) loss. It was affected by a SEK 240 million ($29.6 million) charge in the fourth quarter as it downsized its manufacturing network in an effort to cut costs and return to growth.

“We had a positive finish of the year, a year characterized by solid underlying demand but also delays in important projects and other issues,” CEO Thomas Eldered said in a statement. “All our major capex projects progressed without significant issues during the quarter. Our financial performance, excluding non-recurring items, stabilized through the quarter and the EBITDA-margin at 16.1 per cent was in line with our long-term overall financial target.”

RELATED: Sweden's Recipharm closing 2 plants, cutting 225 workers as growth takes financial toll on the CDMO

In November, the drugmaker announced it would close a tablet plant in the Stockholm area with about 180 workers, as well as a sachet and stick pack filling facility in Höganäs, Sweden, with about 45 workers. The company said it has seen sales at both plants decline in recent years.

The decision to whack the 225 jobs came weeks after Recipharm struck a deal to acquire a solid dose products plant in Leganés, Spain, near Madrid, taking on 200 Roche workers in that deal. It also negotiated a longterm manufacturing agreement to supply Roche with a number of solid dose products from the plant.

The Stockholm-based drugmaker last year decided it needed to trim its manufacturing footprint after several years of rapid expansion. The drugmaker in 2016 spent $205 million in a two-part deal with India's Kemwell, getting development operations in the U.S. and an API manufacturing plant in India.

Before that, it paid $102 million for a 74% stake in India’s Nitin Lifesciences, a move that added three manufacturing plants that specialize in small-volume production of sterile injectable products. Additionally, the company snapped up Mitim in Italy, which provides sterile liquids manufacturing services.

Eldered pointed out that results from its sterile liquids segment were affected by ongoing capacity expansion projects “as well as continued short supply of an important raw material,” but that the unit returned only a small hit to EBITDA as a result.