Recipharm has announced that it will initiate a process with the intention of discontinuing manufacturing operations at its facilities in Stockholm and Höganäs, Sweden.
Since 2015, Recipharm has been implementing efficiency activities in the Swedish part of the business segment known as Solids and Others. These initiatives have included a reduction in headcount and the rationalisation of low profitability contracts. As part of this ongoing initiative to improve profitability and competitiveness, the decision has been made to start a process with the intention of discontinuing activities both in Stockholm and Höganäs, according to the company press release.
Recipharm’s operations in the greater Stockholm area employ approximately 180 people and are specialised in the manufacturing of tablets. The company will explore the opportunity to close the facilities during the second half of 2019. Recipharm’s operations in Höganäs employ approximately 45 people and are specialised in sachet and stick pack filling, primarily for powders and granules. As part of the process, the company will evaluate different options for the facility. This will include divestment of the manufacturing site, with the intention to have discontinued its involvement in operations by the end of 2018 at the latest.
Negotiations with representatives of the employees will be initiated immediately with the expectation for a final decision regarding discontinued manufacturing operations in Stockholm and Höganäs to be made before year end 2017. As part of this activity, Recipharm will offer clients the opportunity to transfer manufacturing to other facilities in the group to minimise any potential impact on patients.
“The intended changes will enable us to serve our customers with best in class service and value. We will see immediate efficiency improvements from this change and in the long term, it will allow Recipharm to offer a more competitive manufacturing structure for oral solids,” said Thomas Eldered, CEO of Recipharm. “While this is a strategic choice made to optimize our manufacturing, it is a difficult decision as the closure affects approximately 225 of our Swedish employees, who have demonstrated commitment and hard work to provide high quality products and services. It is of course our intention to ensure fair and respectful treatment to all throughout this process.”
“Moving forward, the planned changes will enable us to focus our attention on the most competitive and efficient manufacturing facilities in our group. At a strategic level, we continue to pursue our mission to develop and manufacture pharmaceuticals for demanding customers for global use. As such, our financial objectives remain unchanged.”
The operations in Stockholm and Höganäs currently generate a negative annualised run rate EBITDA of approximately 25 SEK million. Discontinuing operations in Höganäs and Stockholm will lead to an EBITDA margin and profitability improvement in the strategic business segment Solids and Others. Estimated non-recurring costs associated with the decision to discontinue operations are expected to be charged to the Q4 2017 results.