STAMFORD, Conn., Oct. 19 /PRNewswire/ -- ChiRex Inc. (Nasdaq: CHRX) announced today
third-quarter and nine-month results for the period ending September 30, 1999.
For the third quarter ended September 30, 1999, the Company reported a net profit before
non-recurring expenses, of $4.7 million, or $0.30 per diluted share, compared to a net profit of $1.2
million, or $0.10 per diluted share, in the comparable period in 1998. Results in the third quarter of
1999 were significantly better than results in the third quarter of 1998 due to the effect of higher
revenues and lower costs in the manufacturing division and significantly higher revenue in the
development division. For the nine months ended September 30, 1999, the Company reported a net
profit before non- recurring expenses of $11.5 million, or $0.78 per diluted share, compared to a net
profit of $0.8 million, or $0.07 per share, in the comparable period in 1998.
Total revenues in the third quarter increased 20% to $38.0 million from $31.7 million in the third
quarter of 1998. Manufacturing division revenues increased 9% (11% before the adverse effect of
foreign exchange) to $31.6 million from $29.1 million and development division revenues increased
146% to $6.4 million from $2.6 million in the comparable period in 1998. Gross profit increased to
$14.0 million in the third quarter of 1999, or 37% of total revenues, from $6.8 million, or 22% of total
revenues in 1998. Gross profit increased due to the continuing impact of the cost reduction program
initiated in 1998, continuing improvement in the operating performance of the manufacturing division,
strong and increasing revenue contribution from the development division, and better new product
pricing.
Sepracor Agreements
ChiRex announced today agreements with Sepracor Inc. to produce active ingredients for three
Sepracor products at full-scale in the Annan 3 production building in Annan, Scotland. Technology
transfer and scale-up has commenced on the first two products and the third product will commence
during the fourth quarter of 1999. ChiRex expects to produce validation quantities of all three products
during 2000, and expects to produce commercial quantities in 2001. The Sepracor agreements are
significant because they represent the first production volumes in management's previously-announced
strategy to utilize the Annan 3 production building. The Annan 3 production building was opened by
Glaxo in 1989 at a cost of approximately $50 million and was a strategic manufacturing location in the
Ranitidine (Zantac) supply chain. ChiRex acquired the Annan site and the underutilized Annan 3
capability from GlaxoWellcome in 1997.
Previously-announced Manpower Reduction
During the third quarter of 1999 the Company took a non-recurring charge as part of
previously-announced manpower reductions at its Dudley, England and Annan, Scotland facilities. As
a result, a total of 104 positions will be eliminated by year-end 1999. As part of the reduction, the
Company recorded an after-tax charge for severance and pension benefits during the quarter of $4.0
million, or $(0.25) per diluted share. The Company anticipates approximately $3.0 million in annual
savings from these manpower reductions.
Management Remarks
"We are extremely pleased that third quarter results are above expectations, but the greatest
accomplishments of the third quarter will have longer-term impact for shareholders," said Michael A.
Griffith, Chairman and Chief Executive Officer. "During the third quarter we completed our plan to
right-size the costs of our manufacturing division, announced the first Annan 3 production agreement,
added Dr. Andrew Myers of Harvard University to our Scientific Advisory Board, and saw Phase I of
our Boston facility fill to capacity. Our new business pipeline is very strong with several major
manufacturing projects under review and numerous development projects in all phases of clinical
development. Despite getting off to a slow start, the Malvern (Cauldron) acquisition has been put back
on track for the fourth quarter. More importantly, the Company has generated over $5 million of
customer orders through the integration of Cauldron into the ChiRex network, the majority through
'graduations' of small-scale activity from the pilot facility at Cauldron to the commercial scale facilities
in Dudley and Annan."
Mr. Griffith added: "During the third quarter of 1999, the Company announced the formation of two
operating divisions: the development division and the manufacturing division. This divisional
organization establishes clear lines of authority for delivery of ChiRex services and better aligns the
Company to serve the rapidly-growing market for contract process research and development services
and more positively enables use of ChiRex proprietary technology. The development division includes
the small-scale Boston, Dudley and Malvern development operations. The manufacturing division
includes the full-scale contract manufacturing operations at Annan and Dudley. Bruce P. Shutts has
been appointed President, Development Division and Ian D. Shott has been appointed President,
Manufacturing Division. In connection with this change, Dr. Roger B. Pettman has been promoted to
Vice President, Technology with responsibility for the Company's proprietary research programs
worldwide."
Mr. Griffith noted: "The development division today employs 101 with 68 billable chemists on the
bench. During the next six months we intend to expand our Malvern pilot plant, install a cGMP kilo lab
in Boston and open our new pilot plant in Annan. These investments will more than double our
small-scale FDA cGMP production. To complement this expansion we can increase the number of
process chemists on the bench to over 100 within the facilities we operate today. I should note that the
Annan pilot plant serves the dual role of adding needed small-scale capacity and enabling the
introduction of large-scale products at Annan during the year."
Company Description
ChiRex Inc. is an integrated pharmaceutical outsourcing company that provides an extensive range of
services to pharmaceutical and life science companies, primarily contract process research and
development and contract manufacturing of active pharmaceutical ingredients. The Company operates
through two operating divisions, the development division and the manufacturing division. The
Company's development division is engaged in every aspect of Drug substance development from
discovery support at submission of IND (Investigational New Drug) including development and
manufacture of material for clinical trials. The Company's manufacturing division produces bulk Active
Pharmaceutical Ingredients. Together, the two divisions span all of the steps needed to prepare the
Drug Substance subsection of a New Drug Application. The range of services provided by the
company include:
-- proprietary process research to create and produce previously unaffordable chiral materials
using the Company's patented process chemistry technologies, and production of unique
proprietary building blocks that aid in the drug discovery process,
-- customer-sponsored innovative process research to solve process chemistry challenges using
either traditional process chemistry techniques or proprietary techniques,
-- process research and development including discovery support, route design, route
development and synthesis of pre-clinical and clinical molecules,
-- scale-up of clinical quantities of active pharmaceutical ingredients including laboratory
synthesis, validated process demonstration, analytical methods development, hazard evaluation,
and pilot plant production of clinical trial active ingredients, and
-- production of commercial-scale active ingredients for launch and later for sale in all markets
globally.
ChiRex conducts its operations in four FDA cGMP facilities in Boston, Massachusetts; Malvern,
Pennsylvania; Dudley, England; and Annan, Scotland.
The Company's customers include Abbott Laboratories, AstraZeneca, Bristol Myers-Squibb,
Cephalon, Glaxo Wellcome, Eli Lilly and Company, Merck, Pfizer, Pharmacia & UpJohn, Johnson &
Johnson, Rohm and Haas, Sanofi, Sepracor and SmithKline Beecham. The Company's common stock
is publicly traded in the United States on the Nasdaq Stock Market's National Market ("NASDAQ")
under the symbol "CHRX". The Common Stock of Chirex Inc. is a component of the Russell 2000
Stock Index and Russell 3000 Stock Index.
Any statements contained in this release that relate to future plans, events, or performance, are
forward-looking statements that involve risks and uncertainties, including, but not limited to, product
development and market acceptance risks, product manufacturing risks, the impact of competitive
products and pricing, the results of current and future licensing and other collaborative relationships, the
results of financing efforts, developments regarding intellectual property rights and litigation, risks of
product non- approval or delays or post-approval reviews by the FDA or foreign regulatory
authorities, and other risks identified in ChiRex Inc.'s Securities and Exchange Commission filings.
Actual results, events or performance may differ materially. Readers are cautioned not to place undo
reliance on these forward-looking statements, which speak only as of the date hereof. ChiRex
undertakes no obligation to publicly release the results of any revisions to these forward-looking
statements that may be made to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events. |
