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Consolidated revenue in the first quarter 2008 was $270.7 million, up from$257.6 million in the first quarter 2007, a 5.1% increase. Currencytranslation contributed 6.3% of sales growth. Excluding currency,Pharmaceutical Systems segment sales grew at 0.7%, and Tech Group segmentsales declined by 5.9%. Both segments' sales were affected by expected salesdeclines, including the cessation of production and sales of the Exuberainhalable insulin device in Tech Group, and in Pharmaceutical Systems, reducedsales of components for packaging certain anemia (or "ESA") drugs, which arenow subject to more restrictive regulatory and reimbursement conditions, andof a diagnostic component, which the Company no longer produces.
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Consolidated gross profit margin was 30.8% in the quarter, or 0.4percentage points lower than in the prior-year quarter. The lower margin wasdue to the effects of the less profitable sales mix caused by the expectedsales declines, and to higher manufacturing costs. Reported quarterlyoperating profit of $38.1 million included a net benefit of $0.3 million froma contract settlement relating to the manufacture of devices for thediscontinued Exubera(R) product, net of restructuring costs. Excluding thoseitems, adjusted operating profit was $37.8 million, compared to $39.6 millionin the first quarter of 2007.
Executive Commentary
"While we did not equal last year's extraordinarily strong first quarter,I am very satisfied with our first quarter results, which were consistent withour expectations," said Donald E. Morel Jr. Ph.D., the Company's Chairman andChief Executive Officer. "The Tech Group operating results improved despitethe loss of the Exubera business. Organic sales growth in PharmaceuticalSystems muted the impact of the decline of our customers' ESA drug sales. Webelieve that sales of components for ESA drugs will return to a more normalpattern, if not at the same high levels, following the uptake of customerinventories, which is now underway. Excluding the effects of the predictedsales declines and currency, sales growth was over seven percent and in linewith our long-term expectations."
"There is no fundamental change in our plans or outlook for 2008," saidDr. Morel. "We continue to move forward with increased spending on researchand development and information systems, and are making important progress onthe capital and restructuring programs that we began last year. Consistentwith those plans, during 2008 we will introduce several key products,including silicone oil-free prefillable syringes and a passive safety needlesystem. These products are expected to add new sources of significant revenuegrowth beginning in two or three years. While continuing to invest for thefuture, we remain committed to achieving our 2008 financial objectives."
Pharmaceutical Systems Segment
Pharmaceutical Systems segment sales in the first quarter of 2008 were$207.5 million, up from $191.3 million in the first quarter of 2007, an 8.4%increase, with favorable foreign currency translation contributing 7.7percentage points. Excluding the effects of translation, sales grew by 0.7%.Approximately 60% of segment sales are reported in currencies other than theUS dollar and benefited from the relatively weak dollar, primarily in relationto the Euro. Lower sales of components used for packaging ESA drugs accountedfor $7.1 million of lower revenue, and sales of a diagnostic component thatthe Company ceased producing at the end of 2007 were $3.9 million lower.Together, these products accoun
