The provider of chemistry services to drug developers reported on Monday that 2005 revenue rose 8.5% year over year to $183.9 million while earnings were $0.50 a share, a nice recovery considering 2004's $0.37 loss. But the fourth-quarter numbers are a troubling sign of things to come. Revenue declined 15.2% to $39.1 million, and earnings came in at a $0.03 loss per share, versus a gain of $0.11 in the fourth quarter of 2004.
The main culprit in the Q4 decline wasn't the core contract business. Revenue in that area did slip 3% to $32.9 million, but that decline was due in part to timing -- General Electric's
The real pain in the quarter came from royalty revenue from the company's rights to Sanofi-Aventis'
On a positive note, Albany Molecular has made progress in ensuring that its contract business will stay competitive. After suffering from low-cost competition, the company is now taking advantage of cheaper labor. It has begun operations in India and Singapore, and last month it reached an agreement to buy a chemistry-services company in Hungary.
As for future results, Albany Molecular expects its 2006 contract services revenue to grow 10% to 17%. But even so, as Allegra royalties shrink, 2006 certainly looks like a transition year.
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Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.
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