The toll of Sanofi spinoff EuroAPI’s newly unveiled restructuring scheme is coming into focus as the manufacturer moves forward with its sweeping four-year efficiency plan.
While EuroAPI teased plans for head count reductions back in February, the company this week said it aims to cut roughly 550 employees across all functions by 2027.
Additionally, the drug ingredients firm announced it will sell off its manufacturing sites in Brindisi, Italy, and Haverhill in the U.K. before the end of that time frame, EuroAPI said in a Wednesday release.
News of the Brindisi site sale comes after the facility in March halted production of all active pharmaceutical ingredients thanks to quality control shortfalls spurred on by “the existence of malpractices at the local level,” EuroAPI said Wednesday.
When EuroAPI announced the production suspension earlier this year, the company noted the issue could weigh on its financial performance in 2024 and suspended its guidance for the 12-month period.
Now, EuroAPI has provided updated guidance for the year and announced plans to “gradually” resume API shipments and manufacturing from Brindisi during the third quarter.
EuroAPI debuted its FOCUS-27 efficiency plan in late February. The campaign is being headed up by the company’s new CEO, Ludwig de Mot, who originally joined EuroAPI in January as its chief transformation officer.
The plan calls for streamlining EuroAPI’s drug ingredients portfolio, becoming a more “focused” CDMO, developing a “rationalized” footprint and transforming in to a “leaner organization,” the company said earlier this year.
All told, the company plans to discontinue 13 APIs between 2026 and 2027 that account for about 80 million euros ($85 million) in annual sales. Additionally, the company figures its contract manufacturing and development arm should contribute more than one-third of net sales by the end of the restructuring timeline.
EuroAPI will ultimately operate out of just four production sites across France, Hungary and Germany. The company says it’s already been receiving interest in the Italian and British sites it plans to pawn off.
In conjunction with the restructuring, EuroAPI has now set the goal to reach 75 million euros to 80 million euros ($80 million to $85 million) in annual profits by the end of 2027. For the full year—accounting for the pause at the Brindisi site—EuroAPI expects net sales to decrease between 8% and 11% versus 2023.
At the same time, the company caveated that its performance in the second half of 2024 should exceed that of the first.
EuroAPI’s rationale for the expected revenue decline is threefold. First, the company has been hit by the downsizing of “two large CMO contracts.” Further, EuroAPI has experienced a “strong decrease in sales” to Sanofi. And, finally, the company wanted to account for the recent production pause in Italy.
To help line its coffers during the transformation, the company has locked down a 200 million euro ($214 million) investment from Sanofi, from which the drug ingredients firm spun out in late 2021. Sanofi has also pledged to reserve minimum available capacity on products manufactured by EuroAPI through a 54 million euro ($58 million) payment over the plan, EuroAPI said.
While EuroAPI is looking to tighten its belt, the company still plans to spend around 350 million euros to 400 million euros ($374 million to $427 million) in capital expenditures through the period of the restructuring scheme. Those investments will largely go toward boosting capacity for large molecules, vitamin B12, prostaglandins and opiates, the company said.
News of EuroAPI’s progress on FOCUS-27 comes after a difficult stretch for the company, which reported net sales growth of 4% to 1.01 billion euros (about $1.09 billion) for all of 2023.
Despite that revenue growth, EuroAPI’s losses have ballooned, with the company last year reporting a net loss of 189.7 million euros, which was more than a tenfold increase compared with 15 million euros in 2022.
EuroAPI’s board kicked off a strategic review last fall, around the same time the company slashed its projected revenue and earnings for 2023. At the time, then-CEO Karl Rotthier attributed the changes to pricing pressures from lower inflation, certain customers’ inventory reduction programs and the greater “biotech funding crisis.” He noted that more than 20 of the company’s projects had been delayed, reduced in scope or halted altogether.