M&A

5 November, 2009

UPDATE 2-Genmab US plant sale, job cuts to hit year results

* Says to sell U.S. plant, cut jobs, incur costs

* Cuts 2009 guidance to operating loss of 1.16 bln crowns

* Shares end down 9.3 percent, after hitting a 4-year low

(Adds detail, quotes; updates share price)

By John Acher

COPENHAGEN, Nov 5 (Reuters) - Danish biopharma company Genmab (GEN.CO) said it would post a deeper than expected full-year loss due to its plan to sell its U.S. manufacturing plant and cut about 300 jobs across its business.

Genmab said it expected a full-year 2009 operating loss of 1.16 billion Danish crowns ($231 million) instead of an earlier indicated loss of 650 million.

It lowered year revenue guidance to about 640 million crowns from a previous estimate of 750 million.

It was the second downgrade of 2009 guidance in less than three months. The planned sale of its Brooklyn Park, Minnesota plant marked a reversal of a less than two-year-old strategy to secure its own manufacturing capacity.

Genmab shares closed down 9.3 percent at 117 crowns, up from an earlier four-year low of 106 crowns.

Genmab said it did not intend to discontinue any current development programmes and would continue to focus on creating antibodies with the potential to treat cancer.

"We believe that cost pressures on our industry will be permanent," chief executive Lisa Drakeman said.

Genmab's workload has been reduced as partners take a bigger role, and its next clinical projects would be small, early-stage projects so the company needed to match its headcount to the expected workload, she said.

Genmab bought the Brooklyn Park antibody production plant in early 2008 from PDL BioPharma (PDLI.O) for $240 million cash at a time when it found manufacturing capacity scarce.

"Conditions have changed dramatically since that facility purchase was investigated," Drakeman said, adding the company could now access sufficient capacity at its contract manufacturer Lonza (LONN.VX).

Going forward Genmab will not need such a substantial plant to produce zalutumumab, an antibody in clinical development for treatment of head and neck cancer, she said.

The plant will operate on a maintenance-only mode with a small staff, until a sale is agreed, Genmab said.

Genmab said the fair value of the Brooklyn Park plant, less the cost of selling it, was about $145 million and it would recognise a non-cash impairment charge of about $83 million in the fourth quarter related to the sale.

Chief financial officer David Eatwell said Genmab had been advised by independent experts on the value of the plant but said of the expected sale price: "Of course it is an estimate".

It estimated cash costs of the 300 job cuts at 105 million crowns, of which 38 million will be taken in 2009 and 67 million in 2010. The reorganisation was expected to yield annual savings of about 300 million Danish crowns ($60 million).

Genmab said it expected its 2009 operating expenses to be about 1.3 billion crowns instead of the 1.4 billion foreseen before the reorganisation. (Reporting by Copenhagen newsroom; Editing by Simon Jessop and Dan Lalor) ($1 = 5.011 Danish crowna)

Source: http://www.reuters.com