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AMRI ends internal R&D, announces new external collaborations

AMRI revealed in its Q3 results that it will cease all activities related to its internal R&D programmes, other than on generics, and will immediately wind these down

US

AMRI revealed in its Q3 results that it will cease all activities related to its internal R&D programmes, other than on generics, and will immediately wind these down. Separately, three new external collaborations were announced, most notably one with Eli Lilly.

"Given the current economic and market environment, it is more important than ever to maximise our flexibility to adapt to whatever market conditions we may face in the most efficient and effective manner," said chairman, president and CEO Dr Thomas E. D'Ambra, who described the need to end internal R&D as "regrettable".

"In addition, we are in the process of a thorough review of our global organisation to determine additional opportunities to increase efficiencies. We are taking a measured approach and anticipate actions taken will create a leaner company with improved liquidity and a greater ability to achieve profitability," D'Ambra added.

D'Ambra - Important to maximise flexibility in current climate

Ending internal R&D will save $7 million in operating expenses in 2012 but CFO Mark Frost revealed that AMRI expects to incur a restructuring charge in Q4 "in order to right size our discovery operations to reflect this change in our approach." No details of any job cuts were revealed.

The company will continue to pursue active partnership and out-licensing opportunities for the existing pipeline. As a result, said D'Ambra, "We believe we will close the year with a much stronger platform for global growth in 2012 and beyond.  Now, more than ever, our customers are focused on pipeline development and commercialisation of biologics as part of their global business strategy."

The company's recent progress has been seriously hampered by problems at its aseptic fill-and-finish facility in Burlington, Massachusetts. The FDA issued a warning letter about the former Hyaluronics site in August 2010, following this up with a Form 483 in June 2011. Production ceased while these issues were addressed but this has taken longer than originally expected.

Recently, the FDA has agreed that the corrective actions proposed by AMRI in its written response to the letter and form "should adequately address the observations made by FDA investigators" and clinical and commercial production activities have resumed. However analysts, notably David Windley of Jeffries & Co., have warned that it will take some time to recapture customers and build the site back up to delivering "meaningful revenue".

During Q3, AMRI's revenue was said to be"essentially flat" at $50.2 million, while contract revenue was 2% up on Q3 2010. For the nine months to 30 September, revenues were 7.8% up from $149.4 million in the same period of 2010 to $161.1 million and contract revenue was 6.3% up at $130.2 million. Full year contract revenue guidance has been revised down to $171-$175 million, 8% up on 2010.

During the nine-month period, the Development/Small-Scale Manufacturing and Large-Scale Manufacturing businesses saw respective increases in contract revenue of 16.2% to $28.7 million and 20.1% to $73.0 million, while recurring royalties from Allegra were 3.7% up at $27.9 million. The company was also boosted by $3 million in milestone payments from Bristol-Myers Squibb.

However, the Discovery Services business saw its contract revenue fall by 23.0% to $28.5 million. The company sustained a net loss under US GAAP of $7.9 million, of which $5.9 million came in Q3. The adjusted net loss was $6.7 million. This still marked an improvement on Q1-3 2010, when the net loss was $13.8 million.

In early November, AMRI announced that it expects to hire over 40 synthetic chemists by Q3 2012 to support Lilly's drug discovery programmes, following on from a new six-year collaboration deal that could be renewed by mutual agreement. The chemists will work at Lilly's headquarters in Indianapolis, supporting the medicinal chemistry department.

This collaboration, AMRI said, "will further accelerate Lilly's drug discovery efforts by maximising real-time exchange of scientific information". Recruitment has already begun, with most expected to come from Indiana and neighbouring states.

This follows on from the sighing earlier in the year of a five-year contract, which includes funding of up to $43 million, from the National Institute of Neurological Disorders and Stroke (NINDS), which is part of the US National Institute of Health. Under this, AMRI will provide chemistry and other drug discovery technologies to support NINDS's Medicinal Chemistry for Neurotherapeutics programme.

The company described these agreements as underscoring "the significant progress we are making in establishing broader, strategic long-term customer relationships across all segments of our business.  We believe additional opportunities exist for multi-year partnership deals in discovery, development and large-scale services from the biopharmaceutical community," it added.

Separately, AMRI has just signed a three-year deal with Revolymer, a UK-based technology development company. It will become the primary manufacturer and supplier of Rev7, AGC and other polymers that are the main components of Revolymer's Rev7 degradable gum products, using Revolymer's patented technology to make them at its site in North Wales, the former Excelsyn. This extends an existing relationship between the two firms.

Finally, AMRI has also concluded a two-part agreement with Swedish firm Creative Antibiotics. This involves first the development of one of Creative Antibiotics' substance classes, the INP-1750/1855 class for the treatment of infections caused by the Pseudomonas aeruginosa bacterium, followed by the screening of two of its large substance libraries to find new substances effective against Gram-negative bacteria, in particular P. aeruginosa.

 

 

From Online Issue: December 2011