Recipharm’s customer, Meda, is terminating its manufacturing and supply agreement for its penicillin products as of December 31, 2015, with plans to offshore production. This business accounts for approximately 2% of Recipharm’s current sales and will impact its 60 employees in Strängnäs, likely leading to a reduction in staff, and potentially closure of the site. Financially, the termination will have a positive impact on Recipharm’s profitability from 2016.
 
The Meda business in Strängnäs generated YTD sales as of September of SEK 52.9 million with a negative EBITDA of SEK -1.0 million and negative EBIT of SEK -1.7 million. It’s estimated that Meda’s decision to offshore their production will increase Recipharm’s profit and EPS from 2016.
 
The company is reviewing options for the site for 2016 and beyond. Meda is one of Recipharm’s largest customers with manufacturing contracts at six Recipharm sites. Meda will also terminate the Höganäs contract, which 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 1-2 years.
 
Thomas Eldered, chief executive officer of Recipharm, said, “I am disappointed that a long relationship will be terminated and in particular how it will affect a number of our Swedish employees, who have demonstrated their commitment and hard work to provide a high quality product and service to Meda. We have worked hard to explore opportunities to improve the business for both companies. Unfortunately our offers have been rejected and they have now decided to transfer this range of products to manufacturers abroad. Whilst this is regrettable, the financial impact of this termination is expected to be positive from 2016 and the short term business impact will be minimal, if any.”