Manufacturing moves pay off for AMRI

Albany, NY-based contract manufacturer AMRI ($AMRI) has been reworking its manufacturing assets like moves in a chess game, picking up valuable pieces here and there and then sacrificing a less important one as it remakes its board toward contract manufacturing and away from a reliance on royalties. Its most recent earnings suggest the attack strategy is paying off on the top line at least.

Its revenues were up 38% to $81.8 million, boosted by its drug product manufacturing, which was up 47% to $75.1 million. Costs were higher, though, and on Tuesday the small CMO reported a $2.2 million loss, or 20 cents a share, in the last quarter.

The company paid $41 million last year for Grafton, WI-based API maker Cedarburg, then followed that up with a $110 million deal for Oso Biopharmaceuticals Manufacturing to add that company's expertise in complex injectable drug products to its stable. In January the company agreed to pay $60 million to buy two facilities from drug development specialist Aptuit. It got Aptuit's facility in Glasgow, Scotland, which specializes in developing injectable drugs and provides clinical stage manufacturing, and an operation in West Lafayette, IN, to beef up its analytical testing services to include peptides, proteins and oligonucleotides.

AMRI CEO William Marth

CEO William Marth credited all of those acquisitions with contributing to its revenue growth in the last quarter. "We are very pleased with our results this quarter, highlighted by strong growth in our drug product business as a result of the acquisitions of OsoBio and our Glasgow UK facility, and solid year-over-year growth in our API business," Marth said in an earnings release. He explained during a conference call with analysts that AMRI's API business was up 27% and had higher margins, pointing to the buyout of Cedarburg as the key factor.

But not everything has been plant additions. AMRI confirmed last month that it would close a facility in Holywell, U.K. Shuttering the Wales plant will mean the loss of jobs for 62 workers. And not all of the acquisitions have been without their challenges. Shortly after it bought Oso last year, a storm knocked power out to its New Mexico manufacturing facility, resulting in the loss of some product and downtime and contributing to a loss for that quarter. Marth told analysts on Tuesday that the plant is now fully operational, ramping up and produced a record number of batches in March, many of which will be released in the second quarter.

But that has not dulled Marth's appetite to expand AMRI through M&A. And what would his priorities be? Marth told analysts he would like to get a custom synthesis site in Europe and an FDA-approved facility in India that would allow it to get further and faster in API markets. He said talks with the company's banks indicate AMRI has the wherewithal to finance more M&A.

- here's the earnings release
- read the Seeking Alpha transcript (reg. req.)
- get FierceCRO's take