Patheon back in the black, secures major Merck contract

Contract services company Patheon swung back into profit in the second quarter of the year, helped by a weak dollar, with gains for both its manufacturing and development services divisions.

The Canadian-headquartered company posted a $10.9 million net profit on group revenues, which rose 4.8% in the quarter to reach $175 million, helped by solid demand for its contract manufacturing division where sales advanced 5.1% to reach $142 million.

The development services unit also posted a gain, up 3.1% to a little over $33 million, although without the currency effect this would have shown a small decline. 

Patheon's chief executive Wes Wheeler said the signs are pointing to an upturn in the contract services sector, thanks to "an improving economy, increased funding activity and progress with plant consolidations".

Once again, Patheon's two manufacturing facilities in Puerto Rico proved to be a drag on profitability, operating at a loss throughout the first half of the year. The CMO has been trying to find a buyer for one of the units (at Caguas), having already closed another plant at Carolina, and concentrate all its activity in the remaining plant in Manati.

Sales from the Puerto Rican operations are growing well, however, and the company is on track to complete the re-organisation there by the end of next year, said Wheeler.

Meanwhile, Patheon also announced a wide-ranging new contract with Merck & Co for contract manufacturing services which will see the CMO deliver services and projects to the drugmaker from eight of its total network of 11 facilities around the world.

The deal ties in with Patheon's stated strategy of trying to secure high-level, strategic level contracts with big pharma players that cut across multiple projects, although financial details or details of the scope of the agreement have not been disclosed.

"The expanded agreement clearly positions Patheon as a preferred supplier to Merck," said Wheeler.

Phil Taylor