December 4, 2014
By Riley McDermid, BioSpace.com Breaking News Editor
Swedish drugmaker Recipharm said Thursday that one of its customers, Meda, will transfer its domestic manufacturing of penicillin offshore to another supplier, resulting in the reduction of personnel, and possibly the closure, of its Strängnäs site.
The existing contract between the two will end Dec. 31, 2014, and neither company said why the relationship would be terminated.
The company’s Strängnäs unit currently employees 60 people but said a number of those will be terminated as a result of the Meda decision, though it did not specify how many. Recipharm did say that although Meda only accounts for about 2 percent of its total business, the plant in Strängnäs may be shuttered as a result of the lost business.
Thomas Eldered, CEO of Recipharm, said Thursday that the company had tried to find a solution that would work for both firms, but was ultimately unsuccessful. He said Recipharm would provide all employees affected with updated information no later than Feb. 17, 2015, when the company presents its full year report for 2014.
“I am disappointed that a long relationship will be terminated and in particular how it will affect a number of our Swedish employees, who have demonstrated their commitment and hard work to provide a high quality product and service to Meda,” he said in a statement. “We have worked hard to explore opportunities to improve the business for both companies. Unfortunately our offers have been rejected and they have now decided to transfer this range of products to other manufacturers abroad.”
The Meda business in Strängnäs year-to-date sales of more than $7 million, with a negative earnings before interest, taxes, depreciation, and amortization of around $133,000. That means offshoring the business will actually be good for Recipharm’s profit and earnings per share from 2016 onward.
“Whilst this is regrettable especially for the persons affected by this decision, the financial impact of this termination is expected to be positive from 2016 and the short term business impact will be minimal, if any,” said Eldered. “We will now continue to pursue our mission to develop and manufacture pharmaceuticals for demanding customers for global use. Our financial objectives remain unchanged.”
