- Swedish CDMO Recipharm AB will cut 225 jobs over the next two years as it winds down and eventually shutters operations at two manufacturing facilities in its home country.
- By the second half of 2019, Recipharm says it intends to close its Stockholm plant, which employs about 180 people for the production of tablets. A site in Höganäs will be closed even sooner — by the end of 2018 — affecting 45 staffers.
- The decision is aimed at cutting costs to improve the profitability of Recipharm's "Solids and Others" division. Recipharm has been discontinuing less profitable contracts and consolidating production to address underperforming operations in Sweden.
Recipharm's "Solids and Others" business unit is the Swedish company's largest by net sales, pulling in nearly 2.2 billion Swedish krona ($260 million) last year. But the division is about half as profitable as Recipharm's smaller (by sales) Sterile Liquids business.
To help boost margins, Recipharm has pushed through a "cost and improvement" program that has included layoffs as well as shutting down lower-profit parts of its Swedish business.
"In order to improve profitability we will increase focus on synergies and reduce our exposure to low-margin products," explained Recipharm CEO Thomas Eldered in an interim report published Nov. 9. "The intended discontinuing of the manufacturing facilities in Stockholm and Höganäs and transfer of production to other facilities within the group is an important step in this process."
Recipharm said its targeted facilities in Stockholm and Höganäs generated annual earnings before interest, taxes, depreciation and amortization (EBITDA) of negative 25 million Swedish krona ($3,000).
Winding down those operations will remove a drag on the company's segment earnings, although that will come at the cost of impacting over 200 employees.
The smaller Höganäs site could also potentially be sold, Recipharm indicated in its statement. In order to offset any supply disruption, the CDMO will offer its customers the opportunity to switch contracted manufacturing to other production sites.
In some good news for Recipharm, the company recently inked a supply agreement with Roche as part of a deal to buy the Swiss pharma giant's manufacturing facility in Leganes, Spain. Recipharm will provide solid dose products for the pharma, a contract that the CDMO says will boost net sales as soon as next year.