NEXGEL Subsidiary, CG Converting and Packaging, Begins 12,000 Square Foot Expansion of Texas Facility to Support the Expected Growth in Product Demand in 2024
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Insights
The expansion of NEXGEL's CG Converting and Packaging facility represents a strategic move to bolster the company's operational capabilities in anticipation of increased product demand. This development is indicative of NEXGEL's proactive approach to scaling its infrastructure to meet the expected surge in orders stemming from its partnerships with industry players like AbbVie and STADA. The investment in new automation equipment, although financed, is a forward-looking decision that could potentially enhance production efficiency and reduce long-term operational costs.
From a market perspective, such facility expansions are often received positively by investors as they signal growth and a commitment to meeting future demand. However, the financial impact of the adjusted lease terms and the cost of new equipment financing will need to be weighed against the benefits of increased capacity. As the expansion is set to complete in the second quarter of 2024, the short-term implications may include capital outlay and increased expenses, while the long-term benefits could manifest as higher revenue streams and improved margins from economies of scale.
Analyzing the financial implications of NEXGEL's facility expansion requires a close examination of the capital expenditure and its financing. The fact that the expansion is landlord-funded suggests a favorable lease negotiation, which may mitigate direct capital investment risk for NEXGEL. However, the lease adjustments to reflect the increased square footage could result in higher long-term fixed costs. The decision to finance new automation equipment will likely introduce debt obligations that need to be serviced, impacting cash flow.
Investors should monitor the company's subsequent financial statements for changes in depreciation expenses, interest payments and potential changes in operating lease liabilities. It will be crucial to assess whether the increased capacity translates into sufficient sales growth to cover these additional costs. If managed effectively, this expansion could improve the company's competitive position in the healthcare and consumer applications market, ultimately enhancing shareholder value.
The logistical advantages of expanding the CG Converting and Packaging facility are significant. By increasing the facility's square footage, NEXGEL is likely to achieve more efficient fulfilment and shipping services, which is crucial for maintaining customer satisfaction and reducing lead times. The introduction of new automation equipment is expected to streamline operations, enhancing NEXGEL's ability to handle larger volumes of material.
Supply chain resilience is a critical factor for businesses in the healthcare sector, where timely delivery can be as important as product quality. The enhanced capacity and efficiency may also provide NEXGEL with the flexibility to adapt to fluctuating market demands and reduce vulnerability to supply chain disruptions. This strategic expansion could serve as a differentiator in the market, potentially leading to stronger partnerships and customer retention.
LANGHORNE, Pa., Jan. 09, 2024 (GLOBE NEWSWIRE) -- NEXGEL, Inc. (“NEXGEL” or the “Company”) (NASDAQ: NXGL), a leading provider of medical and over-the-counter (OTC) products including ultra-gentle, high-water-content hydrogels for healthcare and consumer applications, today announced a 12,000 square foot expansion of its CG Converting and Packaging facility in Granbury, Texas. The expansion will support the expected growth in product demand from its new strategic partnerships as well as continued growth of NEXGEL’s own branded products.
The expansion is expected to be completed during the second quarter of 2024. The expansion is funded by the landlord and lease terms will be adjusted to reflect the increase in square footage. The Company is purchasing new automation equipment, which will be financed, to support the expected growth in product demand.
Adam Levy, CEO of NEXGEL, commented, “Ahead of the increase in demand we expect from important partnerships like AbbVie and STADA in the summer of 2024, we are pleased to find a mutually beneficial agreement with our landlord at our Texas facility. This expansion will allow us to handle the expected increased volumes of material, provide more efficient fulfilment and shipping services, and increase our overall capacity and efficiency. We have already broken ground and expect to complete the project and be operational well ahead of when we expect these orders to scale.”
About NEXGEL, Inc.
NEXGEL is a leading provider of healthcare, beauty, and over-the-counter (OTC) products including ultra-gentle, high-water-content hydrogels. Based in Langhorne, Pa., the Company has developed and manufactured electron-beam, cross-linked hydrogels for over two decades. NEXGEL brands include Silverseal, Hexagels, Turfguard, Kenkoderm, and Dermablock. Additionally, NEXGEL has strategic contract manufacturing relationships with leading consumer healthcare companies.
Forward-Looking Statement
This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (which Sections were adopted as part of the Private Securities Litigation Reform Act of 1995). Statements preceded by, followed by or that otherwise include the words “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “project,” “prospects,” “outlook,” and similar words or expressions, or future or conditional verbs, such as “will,” “should,” “would,” “may,” and “could,” are generally forward-looking in nature and not historical facts. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the Company's actual results, performance, or achievements to be materially different from any anticipated results, performance, or achievements for many reasons. The Company disclaims any intention to, and undertakes no obligation to, revise any forward-looking statements, whether as a result of new information, a future event, or otherwise. For additional risks and uncertainties that could impact the Company's forward-looking statements, please see the Company's Annual Report on Form 10-K for the year ended December 31, 2022, including but not limited to the discussion under “Risk Factors” therein, which the Company filed with the SEC and which may be viewed at http://www.sec.gov/.
Investor Contact:
Valter Pinto, Managing Director
KCSA Strategic Communications
212.896.1254
valter@kcsa.com
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