Martek Biosciences Corp., which makes nutritional oils for baby formula, significantly cut revenue projections yesterday evening after discovering that its largest customers had overstocked its product in response to previous supply shortages.
Trading of the Columbia biotech's shares on the Nasdaq Stock Market was briefly halted. In after-hours trading the shares plunged $23.82, or 40 percent, to $36.26. The shares had closed at $60.08, down 5 cents.
In a news release, Martek cut its fiscal 2005 revenue estimate to between $220 million and $240 million. Earlier this year, the firm had forecast revenue of up to $310 million.
Martek, which employs 600 people, including 115 in the Washington region, also said it will delay its international expansion plans.
Company officials declined to discuss the announcement.
Martek produces the nutritional oils from microalgae, then sells the oils to U.S. infant formula manufacturers. Numerous studies have shown the oils have cardiovascular, mental and other health benefits for newborns.
But the company has had trouble keeping up with demand, in large part because of problems at a subcontractor's manufacturing plants. A plant in Italy suffered a major power failure in 2003. A New Jersey plant caught fire last year.
In its news release, Martek said its large customers have been building up inventory during the past several quarters to protect themselves against supply shortages. Martek said it only recently learned the extent of the inventory buildup.
The company does not believe the projected decrease in sales is an indication of reduced demand from consumers.
Earlier this year, Martek signed an agreement with Kellogg Co. to provide the consumer foods company with nutritional oils to use in food. Kellogg can begin selling food with Martek's oils next year.