Meda Terminates a Contract with Recipharm

Recipharm, a contract development and manufacturing organization headquartered in Jordboro, Sweden, reports that one of its customers, Meda, a specialty pharmaceutical company headquartered in Solna, Sweden, will terminate a contract with Recipharm relating to the supply of penicillin products at Recipharm’s site in Strängnäs, Sweden. The manufacturing contract will be terminated December 31, 2015, and Meda will transfer production offshore with other suppliers. The business accounts for approximately 2% of Recipharm's sales.

Recipharm employs 60 employees at its site in Strängnäs, and the company says that the termination of the contract will lead to personnel reductions and potentially even site closure. The manufacturing contract in Strängnäs remains in force until December 31, 2015, and Recipharm says there will be no change in the business until then. All options for the site for 2016 and beyond are undergoing review, and more information will be given no later than February 17, 2015, when company issues its full-year report

The Meda business in Strängnäs generated sales year-to-date as of September 2014 of SEK 52.9 million ($7.06 million) with negative EBITDA (earnings before interest, taxes, depreciation, and amortization) of SEK 1.0 million ($133,000) and negative EBIT (earnings before interest and taxes) of SEK 1.7 million ($227,000). Recipharm estimates that Meda's decision to terminate the contract in Strängnäs will increase Recipharm's profit from 2016.

Meda is one of Recipharm largest customers with manufacturing contracts at six Recipharm sites. Meda is a customer as a result of the sale of the mainly Swedish Recip product business (former part of Recipharm) to Meda in December 2007. Of the other five site contracts, Meda has served notice of termination for the Höganäs contract. If this contract is eventually terminated, it will affect group sales by approximately 1.6% in 2016 and a further 1.5% in 2017. All other contracts remain with the customary notice period of one to two years.

Source: Recipharm

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