Cambrex expects fine chemical consolidation to continue this year and is being “proactive” in its hunt for takeover targets.
After reducing net debt and adding to its cash reserves, which totalled $31.9m (€24.1m) at the end of 2011, Cambrex is positioned to make deals and expects to contribute to a busy year of takeovers.
“There’s certainly going to be consolidation in the pharma fine chemicals market”, Steven Klosk, CEO of Cambrex, told investors after releasing fourth quarter results. However, while there are plenty of takeover opportunities, Cambrex is looking for deals to give it specific capabilities.
Cambrex is hunting for assets that can strengthen its presence in generic finished products. In 2010 Cambrex invested in Zenara, an Indian finished product firm, and is looking for more deals to continue its expansion beyond APIs (active pharmaceutical ingredients).
“We’re really focused on continuing up the value chain in generics, much like we did with Zenara. And also looking at where can we get low-cost R&D (research and development) and manufacturing that will continue to drive our new product development pipeline”, Klosk said.
These two factors are central to what Cambrex is looking for in an acquisition. If a target has some “nice technology” and a product portfolio that can be added to Cambrex, the company is “certainly interested in those as well”, Klosk said.
Manufacturing overcapacity means lots of dormant facilities are on the market. Cambrex will pass on these “buy it and hope they come” facilities, Gregory Sargen, chief financial officer at Cambrex, said. Sargen hopes these plants are closed down rather than being bought by “desperate competitors”.
Fourth quarter dip
Klosk was speaking after Cambrex published disappointing fourth quarter results. After growing in the first nine months of the year, operating profit in the fourth quarter fell 30 per cent year-on-year.
Revenues grew year-on-year but the gains were offset by higher operating expenses and the cost of goods sold. Last year Cambrex faced price decreases as volumes in long-term contracts ramped up.
Shares in Cambrex closed down 15 per cent yesterday.