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Patheon Inc. , a provider of contract drug manufacturing services, reported it lost $11.2-million (U.S.) in the second quarter, reversing a $10.9-million profit a year earlier.

The Toronto company said Friday it lost 8.7 cents a share for the quarter ended April 30, compared with a profit of 8.4 cents a year earlier.

The company said weakness in the U.S. dollar resulted in an $8.8-million currency translation hit on its books.

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Revenues for the quarter fell 3.1 per cent to $170-million.

Patheon said the second-quarter results reflect an unusual level of contract cancellations and delays in the pharmaceutical development services, or PDS business, during the first half of 2011.

Patheon's commercial business was also negatively impacted by operating performance issues and production delays at several of the company's drug making plants.

"The commercial production forecast for the remainder of fiscal 2011 has strengthened and we have a strong book of business in Pharmaceutical Development Services," James Mullen, Patheon's chief executive, said in a release before stock markets opened Friday.

"We expect underlying operating performance in the second half to improve significantly from second quarter levels."

Looking ahead, Mr. Mullen said Patheon is working to improve its operational efficiency.

"We are actively addressing the commercial production challenges of the second quarter, which included higher than normal inventory writeoffs at several sites, as well as increased overtime at two sites related to a major new product launch, and significant increases in market demand for an existing product," Mr. Mullen said. "This has led to some orders shifting into the second half of the year.

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"Our PDS business experienced an unusual level of contract cancellations and delays during the first half related to customer regulatory approval and clinical trial outcome issues, as well as industry M&A activity. This created short term weakness in demand at some of our PDS sites, which had staffed for a higher level of activity. Contract cancellations are not typically a major PDS issue, and we have not seen further material issues over the last few months."

Patheon is a global provider of contract development and manufacturing services to the world's major drug companies. It has 10 drug making plants, eight development centres and one clinical trial packaging operation across North America and Europe.

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