Intent on cutting costs and realigning operations as drug-marketing customers shift discovery to Asia, AMRI will close its Bothell, WA, Research Center early next year. The site’s natural product-based discovery services, and other biology-based activities, will shift to the contract research organization’s integrated drug discovery facility in Singapore, while analytical services will move to the company’s headquarters city of Albany, NY.
At least some of Bothell’s current 24 employees could be transferred to the new jobs being created through the shifts, Bruce J. Sargent, Ph.D., senior vp of drug discovery at AMRI, told GEN. Bothell is a fraction of AMRI’s workforce of just under 1,300 employees, including 632 in the Albany region.
“The co-location of AMRI’s Bothell biology services with the chemistry services offered at AMRI’s Singapore site is anticipated to drive customers’ drug-discovery programs forward more efficiently. Combining these capabilities in one location will help AMRI to continue to deliver the shorter timelines and better outcomes customers seek, including the continued delivery of improved compound design cycle times,” Dr. Sargent said.
“Transitioning Bothell’s structural analysis capabilities into AMRI’s Albany location will also provide a benefit to customers because it will better align these services with our Pharmaceutical Quality Services team in Albany,” he added.
AMRI says the relocations reflect a growing preference by customers to co-locate integrated drug-discovery activities, and carry them out in lower-cost areas.
“AMRI continues to look at its cost structure to ensure we maximize the value we bring to our customers and shareholders. Our focus near-term is to drive performance as we seek to meet our customer needs,” Dr. Sargent said.
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.