Animalcare suffers setback as supplier shuts production unit

York-based Animalcare uses Swedish company Recipharm to manufacture its 1ml ampoule version of Buprecare, a morphine based pain relief for dogs.

Animalcare said the closure will have a negative impact on 2011/12 results, although measures will be taken to limit the financial impact of the closure.

The group’s shares closed down four per cent last night, a fall of 7.5p to 168.5p, as the 2011-12 revenue shortfall overshadowed a five per cent rise in Animalcare’s sales for the year to June 30. Analyst Chris Glasper, at house broker Brewin Dolphin, said: “Clearly this is a blow for Animalcare and we understand has come completely out of the blue. With plans already in place to switch supplier, this should prove to be a temporary blip in what is otherwise a strong investment case.

“With net cash on the balance sheet following the disposal of the agricultural businesses, Animalcare remains strategically very well positioned.”

Mr Glasper is moving his 12-month price target from 181p to 175p to reflect the downgrade to short-term expectations.

Recipharm’s production unit had originally been scheduled to close in June 2012.

Animalcare said the only product that will be affected by the closure is the 1ml ampoule version of Buprecare. The group was in the process of establishing alternative manufacturing for Buprecare and will appoint an alternative supplier as soon as it can.

Animalcare’s chief executive Stephen Wildridge said: “Unfortunately, the premature closure means there now will be a period during which Animalcare will be unable to supply the 1ml ampoule presentation of Buprecare to the UK market.

“The supply position for the European markets is stronger and any disruption is expected to be minor.”

Buprecare 1ml ampoules were worth £650,000 of sales in the UK in the financial year to June 30.

Animalcare said the maximum damage to 2011/12 sales will be not more than £450,000 and will probably be less than this.

Following the announcement, Brewin Dolphin downgraded its full year earnings per share forecasts by eight per cent.

“This will hopefully prove to be an overly prudent move and we are satisfied that this is an isolated issue and that the investment case for Animalcare remains very much in tact,” said Mr Glasper.

Brewin Dolphin has cut its annual 2012 sales forecast from £12.9m to £12.1m and its pre-tax profit expectation f om £3.5m to £3.1m.

The broker said that underlying trading is reported to be in line with its expectations, despite challenging market conditions.

The group launched two new products in June, dog and cat sedative and reviver Sedastart and Sedastop.

Another two products should be launched before the end of 2011. One is a sedative and pain relief drug and the other is a cattle antibiotic. Referring to the cattle drug, Mr Wildridge said the group is not sure about the livestock market as it is very different to the companion animal market.

While the livestock market is run on economic models, the pet care market is far more emotive. People in the UK have proved themselves to be remarkably loyal to pets despite the downturn.

Many see their dogs and cats as members of the family and will spend whatever is necessary to keep them in good health.

Brewin Dolphin said Anivac, the vaccine for Viral Haemorrhagic Disease (VHD) in pet rabbits launched towards the end of last year, is trading very well.

VHD is a very serious disease and one of the biggest killers of rabbits in the UK and Europe.