ChiRex Inc. announced today second-quarter and first-half results for the period ending June 30, 1999.
For the second quarter ended June 30, 1999, the Company reported a net profit before non-recurring expenses of $3.9 million, or $0.25 per diluted share, compared to a net profit of $0.8 million, or $0.06 per diluted share, in the comparable period in 1998. Results in the second quarter of 1999 were significantly better than results in the second quarter of 1998 due to the effect of operating leverage from higher revenues and further cost reduction at the Dudley and Annan manufacturing facilities. For the six months ended June 30, 1999, the Company reported a net profit before non-recurring expenses of $6.8 million, or $0.48 per diluted share, compared to a net loss of $0.3 million, or $(0.03) per share, in the comparable period in 1998.
Total revenues in the second quarter increased 28% to $36.6 million from $28.6 million in the second quarter of 1998. Revenues from manufacturing services increased 14% to $29.1 million from $25.5 million, while revenues from development services increased 142% to $7.5 million from $3.1 million in the comparable period in 1998. Gross profit increased to $12.8 million in the second quarter of 1999, or 35% of total revenues, from $7.1 million, or 25% of total revenues in 1998. Gross profit improved due to a greater mix of development revenues and better product pricing.
"Second quarter revenue, gross profit, cash flow and earnings are all better than expectation," said Michael A. Griffith, Chairman and CEO, in a press release. "During the second quarter we commenced production of the final product specified in the Glaxo supply agreement at Annan, we consummated the acquisition of Cauldron Process Chemistry in Malvern, Pennsylvania, and we booked the first projects into our newly-opened development business in Boston. Additionally, we continue to gain better control of our costs through the application of product management and the effect of our operational efficiency programs.
Mr Griffith added, "This week we announced the addition of Mr Bruce P. Shutts as vice president, development operations, who served most recently at Schering Plough Corporation as vice president of Chemical Development. Bruce will manage the worldwide process development operation of ChiRex, which today employs 106 people with 62 chemists on the bench in three locations: Boston, Massachusetts, Malvern, Pennsylvania and Dudley, England. During the next six months we will expand our Malvern pilot plant, install a cGMP kilo lab in Boston and add a pilot plant in Annan. These investments will more than double our small-scale FDA cGMP production capacity, and further enhance our services to the pharmaceutical industry. To complement this expansion, we can increase the number of chemists on-the-bench to over 100 within the facilities we operate today. Importantly, the Annan pilot plant will serve the dual role of adding needed capacity and enabling the introduction of large-scale products at Annan during the year."
During the second quarter of 1999 the Company took two non-recurring charges. First, the Company completed outsourcing agreements to take over the inventory warehouse operation at Dudley and the management information systems departments at Dudley and Annan. As a result, 30 positions will be eliminated. As part of the outsourcing, the Company recorded an after-tax charge for severance and pension benefits of $0.5 million or $(0.03) per diluted share. Second, the Company recorded an after-tax charge of $0.7 million, or $(0.05) per diluted share to write-off deferred financing costs required by the repayment of debt from the proceeds of the 2.875 million share common stock offering in late March.