Closings and Cuts
Bothell isn’t the first site shuttered this year by AMRI. On March 30, the company closed a Budapest, Hungary, facility that employed 100, months after disclosing in its 10-K annual report filing with the U.S. Securities and Exchange Commission (SEC) a decrease in demand for services based there. And twice last year, AMRI cut undisclosed numbers of jobs—a December 2011 round tied to elimination of internal R&D, and a March 2011 round aimed at reducing U.S. discovery chemistry services after demand shifted to lower-cost Asian operations.
For the Bothell closing, AMRI expects to take $11 million in charges, most to be recorded in the fourth quarter of this year and first quarter of 2013, according to an 8-K filing with the SEC: “The company expects that these cost reduction initiatives will result in annual savings of approximately $2.0 million which will begin to be recognized in the second quarter of 2013.”
During Q3, AMRI lost $2.1 million, compared with a $5.9 million net loss for the third quarter of last year. Most of that loss reflects a year-over-year drop in development/small-scale manufacturing contract revenue, which fell $1.8 million or 20% to $7.4 million, from $9.2 million in Q3 2011.
AMRI fared better with large-scale manufacturing revenue, which rose 14% year-over-year, to $29.3 million in Q3. Discovery services contract revenue stayed steady at $8.9 million. And royalty revenue jumped 45% or $3.3 million to $9.4 million, following launch of a generic drug for which AMRI makes the active pharmaceutical ingredient.
Those numbers prompted AMRI to raise its earnings-per-share guidance to investors, as it has after each quarter this year, and maintain its contract revenue guidance. “Both are creditable achievements, in our opinion, considering that AMRI’s customer base remains focused on controlling costs and curtailing spending on early-stage development spending,” Sterne Agee analysts Greg T. Bolan and Himanshu Rastogi, Ph.D., CFA wrote in a note to investors following the release of Q3 results.