Edgar Filing: CAMBREX CORP

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

Commission file number 1-10638

CAMBREX CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 22-2476135
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

ONE MEADOWLANDS PLAZA, 07073
EAST RUTHERFORD, NEW JERSEY (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (201) 804-3000

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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COMMON STOCK, $.10 PAR VALUE NEW YORK STOCK EXCHANGE

SECURITIES REGISTERED PURSUANT TO SECTION 12 (G) OF THE ACT: (NONE)

Indicate by check mark whether the Registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act. Yes [ ]. No [X].

Indicate by check mark if the Registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [ ]. No [X].

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X]. No [ ].

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, non-accelerated filer, or a smaller reporting company.
See the definitions of "large accelerated filer," "accelerated filer" and
"smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [ ] Accelerated filer [X]

Non-accelerated filer [ ] Smaller reporting company [ ]
(Do not check if a smaller reporting company)

Indicate by check mark whether the Registrant is a shell company (as
defined in Rule 12b-2 of the Act). Yes [ ]. No [X].

The aggregate market value of the voting stock held by non-affiliates of
the registrant was approximately $378,159,543 as of June 30, 2007.

APPLICABLE ONLY TO CORPORATE REGISTRANTS

As of January 31, 2008, there were 29,015,068 shares outstanding of the
registrant's Common Stock, $.10 par value.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's definitive Proxy Statement for the 2008 Annual
Meeting are incorporated by reference into Part III of this Report.

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CAMBREX CORPORATION AND SUBSIDIARIES

INDEX TO ANNUAL REPORT ON
FORM 10-K FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION
FOR THE YEAR ENDED DECEMBER 31, 2007

ITEM PAGE
NO. NO.
---- ----

PART I
1 Business.......................................... 2
1A Risk Factors...................................... 7
1B Unresolved Staff Comments......................... 13
2 Properties........................................ 13
3 Legal Proceedings................................. 13
4 Submission of Matters to a Vote of Security
Holders........................................... 13

PART II
5 Market for the Registrant's Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity
Securities........................................ 14
6 Selected Financial Data........................... 16
7 Management's Discussion and Analysis of Financial
Condition and Results of Operations............... 18
7A Quantitative and Qualitative Disclosures about
Market Risk....................................... 34
8 Financial Statements and Supplementary Data....... 35
9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure............... 84
9A Controls and Procedures........................... 84
9B Other Information................................. 85

PART III
10 Directors, Executive Officers and Corporate
Governance........................................ 86
11 Executive Compensation............................ 87
12 Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters.... 87
13 Certain Relationships and Related Transactionsand
Director Independence............................. 87
14 Principal Accountant Fees and Services............ 87

PART IV
15 Exhibits and Financial Statement Schedules........ 88

PART I

ITEM 1 BUSINESS

GENERAL

Cambrex Corporation (the "Company" or "Cambrex"), a Delaware corporation,
began business in December 1981. Cambrex is a life sciences company dedicated to
growing its portfolio of commercial small molecule therapeutics and providing
products and services that accelerate and improve the discovery and
commercialization of new therapeutics. The Company primarily supplies its
products and services worldwide to pharmaceutical and generic drug companies.
Cambrex has three operating segments, which are manufacturing facilities, that
have been aggregated as one reportable segment. The Company's overall strategy
is to: grow its portfolio of custom development projects for products that may
be approved for sale to the public in order to ensure growth in its business of
manufacturing active pharmaceutical ingredients ("APIs") and advanced
intermediates under long term contracts; expand sales of projects based on its
proprietary technologies; and partner with generic drug companies to grow the
Companies extensive portfolio of generic APIs. The Company also seeks to
demonstrate excellence in regulatory compliance, environmental, health and
safety performance, and customer service. As part of the process of evaluating
strategic alternatives to enhance shareholder value, the sale of two businesses
within the former Human Health segment was completed in October 2006 and the
sale of the businesses that comprised the Bioproducts and Biopharma segments was
completed in February 2007, and accordingly, these businesses are being reported
as discontinued operations in all periods presented.

The Company uses a consistent business approach:

- Niche Market Focus: The Company participates in niche markets where
significant technical expertise provides competitive advantage and market
differentiation.

- Market Leadership: The Company secures leading market positions through
excellent customer service, proprietary technologies, specialized
capabilities and an outstanding regulatory record and leverages these
capabilities across the market segments in which it participates.

- New Products and Services: The Company continues to invest in research
and product development in order to introduce innovative products and
services to accelerate revenue growth, provide competitive advantage and
maintain its leading market positions.

- Operational Excellence: The Company maintains its commitment to
continually improve productivity and customer service levels and
maintains excellent quality and regulatory compliance systems.

- Acquisition and Licensing: The Company may drive growth in strategic
business segments through the prudent acquisition of products, product
lines, technologies and capabilities to enhance the Company's position in
its niche markets.

MARKET OVERVIEW AND GROWTH DRIVERS

The Company participates in markets that serve the healthcare industry.
Customers include companies and institutions that discover and commercialize
human therapeutics made using organic chemistry and generic drug companies.

The aging population, continued investment in healthcare research and drug
development and the necessity to develop life saving therapeutics to address
unmet needs drives business growth in life sciences companies serving the
healthcare market. Aging "baby boomers" in the United States, Europe and Japan
may provide an enormous healthcare opportunity. This group typically has more
education, a higher socio-economic level and higher demands for healthcare
services than previous generations.

Demand for Cambrex products and services is increased by its customers'
continuing access to financial resources to advance their research and
development projects for therapeutic candidates from the laboratory to the
clinic, and eventually, to the patient. Healthcare investment comes from a
variety of sources. Large pharmaceutical

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(dollars in thousands, except share data)

and biotechnology companies spend billions on drug discovery and development.
Research institutions may be funded by the government, business or private
sectors.

Once a drug is identified, companies need to develop a robust process for
the manufacture of clinical and commercial quantities. Product testing and
quality processes need to be integrated into the manufacturing process. This is
a critical step to getting a commercially viable drug to market. Cambrex excels
in the manufacture and testing of APIs and drug substances at laboratory,
clinical and commercial scale and specializes in optimizing manufacturing
processes.

Demand for outsourced services from pharmaceutical companies continues to
grow. Large pharmaceutical and biotechnology companies may outsource the
development and manufacturing of a drug substance to manage multiple internal
priorities, access new technologies or additional capacity, preserve needed
capital or ensure multiple sources of supply. Emerging pharmaceutical and many
generic drug companies outsource all process development and manufacturing.
Cambrex is particularly well positioned to assist drug companies with these much
needed services for traditional APIs.

New drugs are typically patented. When the patent expires, the drug may be
manufactured and marketed in its generic form. Growth in the generic drug market
is driven by the continuing stream of drug patents that will expire in the
future and favorable market forces that encourage the use of generic
pharmaceuticals as a more cost effective health care alternative to higher-
priced branded drugs. In the United States and many countries in Europe,
governments and prescription benefit management companies provide incentives for
generic substitution to reduce costs. Cambrex manufactures nearly 100 generic
APIs, typically in relatively small quantities for use in niche therapeutics.

The market for human therapeutics is regulated by the Food and Drug
Administration ("FDA") and other regulatory agencies through the development,
manufacturing and commercialization process. The FDA approves human therapeutics
and regulates manufacturing. Excellent regulatory and quality systems are
essential to serve the industry.

Asian competitors have increased their capabilities in drug substance
manufacturing and finished dosage form drugs in recent years. Although there has
been limited direct impact on the Company's niche products, the presence of
these competitors in the market has resulted in downward pricing pressure on
generic APIs and certain development services for products that have not been
approved by the regulatory authorities for sale to the public. Regulatory
compliance and product quality may determine the long term impact of these
competitors.

DEVELOPMENT OF THE BUSINESS

The discussion below provides insight to the general development of our
business, including the material acquisitions and disposition of assets over the
past five years.

In November 2003, the Company sold its Rutherford Chemicals business. The
sale represents the completion of the transformation from a specialty chemical
organization into a leading life sciences company. As a result of this
transaction, this business is being reported as discontinued operations in all
periods presented.

In October 2006, the Company sold two businesses within the former Human
Health segment for nominal consideration. As a result of this transaction, these
businesses are being reported as discontinued operations in all periods
presented.

In February 2007, the Company completed the sale of the businesses that
comprised the Bioproducts and Biopharma segments (excluding certain liabilities)
to Lonza for total cash consideration of $463,914, including working capital
adjustments. As a result of this transaction, these businesses are being
reported as discontinued operations in all periods presented.

In January 2008, the Company acquired ProSyntest AS, a privately held API
research and development company located in Tallinn, Estonia. ProSyntest,
renamed Cambrex Tallinn, has strengths in cost effective chemical

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(dollars in thousands, except share data)

route selection and sample generation, rapid scale up of products at kilo lab
scale, as well as chiral and organometallic chemistries.

PRODUCTS

The Company uses its technical expertise in a wide range of chemical
processes to meet the needs of its customers for high quality products and
services for specialized applications.

The Company's business is primarily comprised of the custom development and
manufacture of pharmaceutical ingredients derived from organic chemistry.
Products and services are supplied globally to innovative and generic drug
companies. Products include APIs and advanced pharmaceutical intermediates.
Services include custom development and current Good Manufacturing Practices
("cGMP") manufacturing services.

Products and services are sold to a diverse group of more than 500
customers, with two customers individually accounting for more than 10% of 2007
sales; one, a pharmaceutical company with which a long-term sales contract is in
effect, accounted for 11.2%. During 2007 the Company extended this contract to
2013 which resulted in lower profitability for sales under this arrangement. A
second customer, a distributor representing multiple customers, accounted for
12.5%. The Company's products are sold through a combination of direct sales and
independent agents. One API made up 14.5% of 2007 sales, the majority of which
is sold under the contract extended to 2013 discussed above.

This table summarizes gross sales by product groups:

2007 2006 CHANGE % CHANGE
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APIs and pharmaceutical intermediates... $220,386 $206,193 $14,193 6.9%
Other................................... 32,188 30,466 1,722 5.7%
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Total......................... $252,574 $236,659 $15,915 6.7%
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Sales of $252,574 increased $15,915 or 6.7% including a 4.7% favorable
impact due to exchange rates reflecting a weaker U.S. dollar.

Sales of APIs and pharmaceutical intermediates of $220,386 were $14,193 or
6.9% above the prior year due primarily to higher demand for a diuretic API,
nicotine polacrilex resin (used in smoking cessation products), amphetamines,
and a neurological API. The increase in 2007 sales was partially offset by lower
sales of three custom development products.

Other sales of $32,188 were $1,722 or 5.7% above the prior year due
primarily to higher volumes of a crop protection product and x-ray media,
partially offset by lower sales of feed additive products.

MARKETING AND DISTRIBUTION

The Company's products generally include higher value, low-to-medium volume
niche products requiring significant technical expertise to develop and
manufacture. Marketing generally requires significant cooperative effort among a
highly trained sales and marketing staff, a scientific staff that can assess the
technical fit and estimate manufacturing economics and business unit management
to determine the strategic and business fit. The process to take a client's
project from the clinical trial stage to a commercial, approved therapeutic may
take from two to ten years. The Company uses sales agents and independent
distributors in those areas where they are deemed to be more effective or
economical than direct sales efforts.

RAW MATERIALS

The Company uses a wide array of raw materials in the conduct of its
businesses.

For its products, the Company generally will have a primary and secondary
supplier for its critical raw materials. Prices for these raw materials are
generally stable except for the petroleum-based solvents where prices can vary
with market conditions.

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(dollars in thousands, except share data)

RESEARCH AND DEVELOPMENT

The Company's research and development program is designed to increase the
Company's competitiveness by improving its technology and developing processes
for the manufacture of new products to meet customer requirements. The goals are
to introduce innovative products, improve manufacturing processes to reduce
costs, improve quality and increase capacity, to identify market opportunities
that warrant significant technical expertise, and offer the prospects of a long-
term, profitable business relationship. Research and development activities are
performed at most of the Company's manufacturing facilities in both the United
States and Europe. Approximately 90 employees are partially involved in research
and development activities worldwide.

During the fourth quarter of 2007 the Company announced that it will
consolidate its United States research and development activities and small
scale API production with its facility in Charles City, Iowa. As a result of the
consolidation, the Company's Center of Technical Excellence in North Brunswick,
New Jersey ("New Jersey R&D facility") was substantially closed as of December
31, 2007.

The Company spent $12,157, $10,813 and $11,946 in 2007, 2006 and 2005,
respectively, on research and development efforts.

PATENTS AND TRADEMARKS

The Company has patent protection covering certain products, processes and
services. In addition, the Company also relies on know-how and trade secrets
(related to many of its manufacturing processes and techniques not generally
known to other companies) for developing and maintaining its market position.

Worldwide, the Company currently owns approximately 16 granted/in-force
patents which have various expiration dates, the latest of which is in 2025. In
addition, the Company currently has several pending patent applications and, as
decisions are made to patent new inventions, prepares new patent applications.

The Company has registered trademark rights in the United States and select
foreign countries for use in connection with the Company's products and
services. The Company also holds common law trademark rights for certain other
marks.

The Company requires employees to sign confidentiality and ownership of
inventions agreements where appropriate.

COMPETITION

The Company has at least 25 primary API and advanced intermediate
competitors throughout Western Europe and the U.S. and many more competitors
within various segments of the markets the Company serves, including a growing
number of competitors in Asia, Eastern Europe and other low-cost areas. While
there has been limited impact from the increased competition by low cost
providers on the specific products the Company produces to date, the Company
anticipates that it will face increased competition from these providers. It is
expected that regulatory compliance, product quality and logistics will
determine the long term impact of these competitors in the primary markets that
the Company serves. If the Company perceives significant competitive risk and a
need for technical or financial commitment, it generally negotiates long term
contracts or guarantees from its customers.

ENVIRONMENTAL AND SAFETY REGULATIONS AND PROCEEDINGS

General: Certain products manufactured by the Company involve the use,
storage and transportation of toxic and hazardous materials. The Company's
operations are subject to extensive laws and regulations relating to the
storage, handling, emission, transportation and discharge of materials into the
environment and the maintenance of safe working conditions. The Company
maintains environmental and industrial safety, health compliance programs and
training at its plants and believes that its manufacturing operations are in
compliance with all applicable safety, health and environmental laws.

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(dollars in thousands, except share data)

The Company conducts detailed environmental due diligence on all
acquisitions. The Company's acquisitions were made with consideration of any
known environmental conditions. Also, as with other companies engaged in the
Company's industry, risks of substantial costs and liabilities are inherent in
certain plant operations and certain products produced at the Company's plants.
Additionally, prevailing legislation tends to hold companies primarily
responsible for the proper disposal of their wastes even after transferal to
third party waste disposal facilities. Moreover, other future developments, such
as increasingly strict environmental, safety and health laws and regulations,
and enforcement policies there under, could result in substantial costs and
liabilities to the Company and could subject the Company's handling,
manufacture, use, reuse, or disposal of substances or pollutants at its plants
to more rigorous scrutiny than at present. Although the Company has no direct
operations and conducts its business through subsidiaries, certain legal
principles that provide the basis for the assertion against a parent company of
liability for the actions of its subsidiaries may support the direct assertion
against the Company of environmental liabilities of its subsidiaries.

Known environmental matters which may result in liabilities to the Company
and the related estimates and accruals are summarized in Note 17 to the Cambrex
Corporation and Subsidiaries Consolidated Financial Statements.

Present and Future Environmental Expenditures: The Company's policy is to
comply with all legal requirements of applicable environmental, health and
safety laws and regulations. The Company believes it is in compliance with such
requirements and has adequate professional staff and systems in place to remain
in compliance. In some cases, compliance can only be achieved by capital
expenditures and the Company made capital expenditures of $2,060 in 2007, $2,784
in 2006, and $2,012 in 2005 for environmental projects. As the environmental
proceedings in which the Company is involved progress from the remedial
investigation and feasibility study stage to implementation of remedial
measures, related expenditures may increase. The Company considers costs for
environmental compliance to be a normal cost of doing business and includes such
costs in pricing decisions.

EMPLOYEES

At December 31, 2007, the Company had 844 employees worldwide (616 of whom
were from international operations) compared with 858 employees at December 31,
2006 and 837 at December 31, 2005.

Non-U.S. production, administration, scientific and technical employees are
represented by various local and national unions. The Company believes its labor
relations are satisfactory.

SEASONALITY

The Company experiences some seasonality primarily due to planned plant
shutdowns by the Company and certain customers in the third quarter. Operating
results for any quarter, however, are not necessarily indicative of results for
any future period. In particular, as a result of various factors such as
acquisitions, plant shutdowns, and the timing of large contract revenue streams,
the Company believes that period-to-period comparisons of its operating results
should not be relied upon as an indication of future performance.

EXPORT AND INTERNATIONAL SALES

The Company exports numerous products to various areas, principally Western
Europe, Asia and Canada. Export sales from the Company's domestic operations in
2007, 2006 and 2005 amounted to $28,821, $28,825 and $24,524, respectively.
Sales from international operations were $171,145 in 2007, $154,197 in 2006, and
$144,577 in 2005. Refer to Note 15.

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(dollars in thousands, except share data)

ITEM 1A RISK FACTORS

FACTORS THAT MAY AFFECT FUTURE RESULTS

The following risk factors and other information included in this Annual
Report on Form 10-K should be carefully considered. If any of the following
risks occur, the Company's business, financial condition, operating results and
cash flows could be materially adversely affected. The risks and uncertainties
described below are not the only ones the Company faces. Additionally, risks and
uncertainties not presently known to the Company or that it currently deems
immaterial also may impair its business, financial condition, operating results
and cash flows in the future.

WE MAY PURSUE TRANSACTIONS THAT MAY CAUSE US TO EXPERIENCE SIGNIFICANT CHARGES
TO EARNINGS THAT MAY ADVERSELY AFFECT OUR STOCK PRICE AND FINANCIAL CONDITION.

We regularly review potential transactions related to technologies,
products, product rights and businesses complementary to our business. These
transactions could include mergers, acquisitions, divestitures, strategic
alliances or licensing agreements. In the future, we may choose to enter into
these transactions at any time. As a result of acquiring businesses or entering
into other significant transactions, we have previously experienced, and may
continue to experience, significant charges to earnings for merger and related
expenses that may include transaction costs, closure costs or costs related to
the write-off of acquired in-process research and development. These costs may
also include substantial fees for investment bankers, attorneys, accountants,
financial printing costs, severance and other closure costs associated with the
elimination of duplicate or discontinued products, employees, operations and
facilities.

IF WE MAKE ACQUISITIONS, WE MAY EXPERIENCE DIFFICULTY INTEGRATING THE
BUSINESSES.

We continually explore and conduct discussions with many third parties
regarding possible acquisitions. Our ability to continue to achieve our goals
may depend upon our ability to effectively integrate such businesses, to achieve
cost efficiencies and to manage these businesses as part of our company.
However, we may experience difficulty integrating the merged companies. As a
result of uncertainty following an acquisition and during the integration
process, we could experience disruption in our business or employee base. If we
are not able to successfully blend our products and technologies with the
acquired business to create the advantages the acquisition was intended to
create, it may effect our results of operations, our ability to develop and
introduce new products and the market price of our common stock. Furthermore,
there may be overlap between our products, services or customers, and the
combined company may create conflicts in relationships or other commitments
detrimental to the integrated businesses.

IF WE FAIL TO IMPROVE THE OPERATIONS OF FUTURE ACQUIRED BUSINESSES, WE MAY BE
UNABLE TO ACHIEVE OUR GROWTH STRATEGY.

Some of the businesses we may acquire could have significantly lower
operating margins than we do prior to the time we acquire them. In the past, we
have occasionally experienced temporary delays in improving the operating
margins of these acquired businesses. In the future, if we are unable to improve
the operating margins of acquired businesses or operate them profitably, we may
be unable to achieve our growth strategy.

COMPANIES MAY DISCONTINUE OR DECREASE THEIR USAGE OF OUR SERVICES.

We have observed increasing pressure on the part of our customers to reduce
spending, including the use of our services, as a result of negative economic
trends generally and in the pharmaceutical industry. These customers could
discontinue or decrease their usage of our services, including as a result of an
economic slowdown in the overall United States or foreign economies.

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(dollars in thousands, except share data)

COMPETITION OR A REDUCTION IN DEMAND FOR OUR PRODUCTS COULD REDUCE SALES.

The markets for our products are competitive and price sensitive. Other
suppliers have significant financial, operational, sales and marketing
resources, and experience in research and development. These and other companies
may have developed or could in the future develop new technologies that would
compete with our products or render our products obsolete. In addition, demand
for our products may weaken due to a reduction in research and development
budgets, loss of distributors or other factors.

The markets for certain of our products are also subject to specific
competitive risks and can be highly price competitive. Our competitors have
competed in the past by lowering prices on certain products. Our competitors may
lower prices on these or other products in the future and we may, in certain
cases, respond by lowering our prices. Conversely, failure to anticipate and
respond to price competition may hurt our market share.

We believe that customers in our markets display loyalty to their initial
supplier of a particular product. Therefore, it may be difficult to generate
sales to potential customers who have purchased products from competitors. To
the extent we are unable to be the first to develop and supply new products, our
competitive position may suffer.

OUR FAILURE TO OBTAIN NEW CONTRACTS OR RENEW EXISTING CONTRACTS MAY ADVERSELY
AFFECT OUR BUSINESS.

Many of our contracts are short-term in duration. As a result, we must
continually replace our contracts with new contracts to sustain our revenue. In
addition, many of our long-term contracts may be cancelled or delayed by clients
for any reason upon notice. The Company currently has a long-term sales contract
that accounts for more than 10% of sales that is scheduled to expire at the end
of 2013. There is no guarantee that this contract will be renewed.

OUR OPERATING RESULTS MAY UNEXPECTEDLY FLUCTUATE IN FUTURE PERIODS.

The Company's revenue and operating results have fluctuated, and could
continue to fluctuate, on a quarterly basis. The operating results for a
particular quarter may be lower than expected as a result of a number of
factors, including the timing of contracts; the delay or cancellation of a
contract; the mix of services provided; seasonal slowdowns in different parts of
the world; the timing of start-up expenses for new services and facilities; and
changes in government regulations. Because a high percentage of the Company's
costs are relatively fixed in the short term (such as the cost of maintaining
facilities and compensating employees), any one of these factors could have a
significant impact on the Company's quarterly results. In some quarters, the
Company's revenue and operating results may fall below the expectations of
securities analysts and investors due to any of the factors described above. In
such event, the trading price of the Company's common stock would likely
decline, even if the decline in revenue did not have any long-term adverse
implications for the Company's business.

FAILURE TO OBTAIN PRODUCTS AND COMPONENTS FROM THIRD-PARTY MANUFACTURERS COULD
AFFECT OUR ABILITY TO MANUFACTURE AND DELIVER OUR PRODUCTS.

We rely on third-party manufacturers to supply many of our raw materials,
product components, and in some cases, entire products. In addition, we have a
single source for supplies of some raw materials and components to our products.
Manufacturing problems may occur with these and other outside sources. If such
problems occur, we cannot ensure that we will be able to manufacture our
products profitably or on time.

ANY SIGNIFICANT CHANGE IN GOVERNMENT REGULATION OF THE DRUG DEVELOPMENT PROCESS
COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.

The manufacturing of pharmaceutical products are subject to extensive
regulation by governmental authorities, including the FDA and comparable
regulatory authorities in other countries. The Company's business depends in
part on strict government regulation of the drug development process.
Legislation may be introduced and enacted from time to time to modify
regulations administered by the FDA and governing the drug approval process. Any

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(dollars in thousands, except share data)

significant reduction in the scope of regulatory requirements or the
introduction of simplified drug approval procedures could have a material
adverse effect on the Company's business.

VIOLATIONS OF cGMP AND OTHER GOVERNMENT REGULATIONS COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR BUSINESS.

All facilities and manufacturing techniques used for manufacturing of
products for clinical use or for commercial sale in the United States must be
operated in conformity with cGMP regulations as required by the FDA. The
Company's facilities are subject to scheduled periodic regulatory and customer
inspections to ensure compliance with cGMP and other requirements applicable to
such products. A finding that the Company had materially violated these
requirements could result in regulatory sanctions, the loss of a customer
contract, the disqualification of data for client submissions to regulatory
authorities and a mandated closing of the Company's facilities. Any such
violations would have a material adverse effect on the Company's business.

LITIGATION MAY HARM OUR BUSINESS OR OTHERWISE NEGATIVELY IMPACT OUR MANAGEMENT
AND FINANCIAL RESOURCES.

Complex or extended litigation could cause the Company to incur large
expenditures and distract our management. For example, lawsuits by employees,
stockholders, counterparties to acquisition and divestiture contracts,
collaborators, distributors, customers, or end-users of our products or services
could be very costly and substantially disrupt our business. Disputes from time
to time with such companies or individuals are not uncommon, and we cannot be
assured that we will always be able to resolve such disputes out of court or on
terms favorable to the Company.

Refer to Note 17 for a discussion of the Company's environmental and legal
matters.

LOSS OF KEY PERSONNEL COULD HURT OUR BUSINESS.

The Company depends on a number of key executives. The loss of services of
any of the Company's key executives could have a material adverse effect on the
Company's business.

The Company also depends on its ability to attract and retain qualified
scientific and technical employees. There can be no assurance the Company will
be able to retain its existing scientific and technical employees, or to attract
and retain additional qualified employees. The Company's inability to attract
and retain qualified scientific and technical employees would have a material
adverse effect on the Company's business.

POTENTIAL PRODUCT LIABILITY CLAIMS, ERRORS AND OMISSIONS CLAIMS IN CONNECTION
WITH SERVICES WE PERFORM AND POTENTIAL LIABILITY UNDER INDEMNIFICATION
AGREEMENTS BETWEEN US AND OUR OFFICERS AND DIRECTORS COULD ADVERSELY AFFECT OUR
BUSINESS.

The Company manufactures products intended for use by the public. These
activities could expose the Company to risk of liability for personal injury or
death to persons using such products, although the Company does not presently
market or sell the products to end users. The Company seeks to reduce its
potential liability through measures such as contractual indemnification
provisions with clients (the scope of which may vary from client-to-client, and
the performances of which are not secured), exclusion of services requiring
diagnostic or other medical services, and insurance maintained by clients. The
Company could be materially and adversely affected if it were required to pay
damages or incur defense costs in connection with a claim that is outside the
scope of the indemnification agreements, if the indemnity, although applicable,
is not performed in accordance with its terms or if the Company's liability
exceeds the amount of applicable insurance or indemnity. In addition, the
Company could be held liable for errors and omissions in connection with the
services it performs. The Company currently maintains product liability and
errors and omissions insurance with respect to these risks. There can be no
assurance, however, that the Company's insurance coverage will be adequate or
that insurance coverage will continue to be available on terms acceptable to the
Company.

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(dollars in thousands, except share data)

The Company also indemnifies its officers and directors for certain events
or occurrences while the officer or director is, or was serving, at the
Company's request in such capacity. The maximum potential amount of future
payments the Company could be required to make under these indemnification
agreements is unlimited; however, the Company has a "Director and Officer"
insurance policy that covers a portion of any potential exposure. The Company
could be materially and adversely effected if it were required to pay damages or
incur legal costs in connection with a claim above its insurance limits.

ASSESSMENTS BY VARIOUS TAX AUTHORITIES MAY BE MATERIALLY DIFFERENT THAN WE HAVE
PROVIDED FOR AND WE MAY EXPERIENCE SIGNIFICANT VOLATILITY IN OUR ANNUAL AND
QUARTERLY EFFECTIVE TAX RATE.

As a matter of course, the Company is regularly audited by federal, state,
and foreign tax authorities. From time to time, these audits result in proposed
assessments. While the Company believes that it has adequately provided for any
such assessments, future settlements may be materially different than we have
provided.

In recent years, as described more fully in Note 8, the Company has
recorded a valuation allowance against all net domestic and certain foreign
deferred tax assets. Until such time as the Company's domestic and certain
foreign profitability is restored and considered by management to be sustainable
for the foreseeable future, the Company will not record the income tax benefit
or expense for domestic pre-tax losses and income respectively, and as such will
likely experience significant volatility in its effective tax rate.

WE HAVE A SIGNIFICANT AMOUNT OF DEBT.

The Company has a $200,000 revolving credit facility of which $101,600 was
outstanding at December 31, 2007. If we are unable to generate sufficient cash
flow or otherwise obtain funds necessary to make required payments on the credit
facility, we will be in default.

Even if we are able to meet our debt service obligations, the amount of
debt we have could adversely affect us in a number of ways, including:

- limiting our ability to obtain any necessary financing in the future for
working capital, capital expenditures, debt service requirements, or
other purposes;

- limiting our flexibility in planning for, or reacting to, changes in our
business;

- placing us at a disadvantage relative to our competitors who have lower
levels of debt;

- making us more vulnerable to a downturn in our business or the economy
generally; and

- requiring us to use a substantial portion of our cash to pay principal
and interest on our debt, instead of investing those funds in the
business.

INTERNATIONAL UNREST OR FOREIGN CURRENCY FLUCTUATIONS COULD ADVERSELY AFFECT OUR
RESULTS.

Our international revenues, which include revenues from our non-U.S.
subsidiaries and export sales from the U.S., represented 79% and 77% of our
product revenues in 2007 and 2006, respectively.

There are a number of risks arising from our international business,
including:

- foreign currencies we receive for sales outside the U.S. could be subject
to unfavorable exchange rates with the U.S. dollar and reduce the amount
of revenue that we recognize;

- the possibility that unfriendly nations or groups could boycott our
products;

- general economic and political conditions in the markets in which we
operate;

- potential increased costs associated with overlapping tax structures;

- more limited protection for intellectual property rights in some
countries;

- unexpected changes in regulatory requirements;

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(dollars in thousands, except share data)

- the difficulties of compliance with a wide variety of foreign laws and
regulations;

- longer accounts receivable cycles in certain foreign countries; and

- import and export licensing requirements.

A significant portion of our business is conducted in currencies other than
the U.S. dollar, which is our reporting currency. We recognize foreign currency
gains or losses arising from our operations in the period incurred. As a result,
currency fluctuations between the U.S. dollar and the currencies in which we do
business have caused and will continue to cause foreign currency transaction
gains and losses. We cannot predict the effects of exchange rate fluctuations
upon our future operating results because of the number of currencies involved,
the variability of currency exposures, and the potential volatility of currency
exchange rates. We engage in limited foreign exchange hedging transactions to
manage our foreign currency exposure, but our strategies are short-term in
nature and may not adequately protect our operating results from the full
effects of exchange rate fluctuations.

THE MARKET PRICE OF OUR STOCK COULD BE VOLATILE.

The market price of our common stock in the future may fluctuate
substantially due to a variety of factors, including:

- quarterly fluctuations in our operating income and earnings per share
results;

- technological innovations or new product introductions by us or our
competitors;

- economic conditions;

- disputes concerning patents or proprietary rights;

- changes in earnings estimates and market growth rate projections by
market research analysts;

- sales of common stock by existing holders;

- loss of key personnel; and

- securities class actions or other litigation.

The market price for our common stock may also be affected by our ability
to meet any guidance that we may, from time to time, publicly announce related
to our expected sales growth, profitability and other financial and operational
metrics, and our ability to meet analysts' expectations. In addition, the stock
market is subject to extreme price and volume fluctuations. This volatility has
had a significant effect on the market prices of securities issued by many
companies for reasons unrelated to the operating performance of these companies.

INCIDENTS RELATED TO HAZARDOUS MATERIALS COULD ADVERSELY AFFECT OUR BUSINESS.

Portions of our operations require the controlled use of hazardous
materials. Although we are diligent in designing and implementing safety
procedures to comply with the standards prescribed by federal, state, and local
regulations, the risk of accidental contamination of property or injury to
individuals from these materials cannot be completely eliminated. In the event
of such an incident, we could be liable for any damages that result, which could
adversely affect our business.

Additionally, any incident could partially or completely shut down our
research and manufacturing facilities and operations.

We generate waste that must be transported to approved storage, treatment
and disposal facilities. The transportation and disposal of such waste are
required to meet applicable state and federal statutes and regulations.
The storage, treatment and disposal of such waste potentially exposes us to
environmental liability if, in the future, such transportation and disposal are
deemed to have violated such statues or regulations or if the storage, treatment
and disposal facilities are inadequate and are proved to have damaged the
environment.

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(dollars in thousands, except share data)

The Company is also party to several environmental remediation
investigations and cleanups and, along with other companies, has been named a
"potential responsible party" for certain waste disposal sites. The Company has
also retained the liabilities with respect to certain pre-closing environmental
matters associated with the sale of the Rutherford Chemicals business. Refer to
Note 17 for a discussion of the Company's environmental matters.

THE POSSIBILITY WE WILL BE UNABLE TO PROTECT OUR TECHNOLOGIES COULD AFFECT OUR
ABILITY TO COMPETE.

Our success depends to a significant degree upon our ability to develop
proprietary products and technologies. However, we cannot be assured that
patents will be granted on any of our patent applications. We also cannot be
assured that the scope of any of our issued patents will be sufficiently broad
to offer meaningful protection. We only have patents issued in selected
countries. Therefore, third parties can make, use, and sell products covered by
our patents in any country in which we do not have patent protection. In
addition, our issued patents or patents we license could be successfully
challenged, invalidated or circumvented so that our patent rights would not
create an effective competitive barrier. We provide our customers the right to
use our products under label licenses that are for research purposes only. These
licenses could be contested, and we cannot be assured that we would either be
aware of an unauthorized use or be able to enforce the restrictions in a cost-
effective manner.

If a third party claimed an intellectual property right to technology we
use, we may need to discontinue an important product or product line, alter our
products and processes, defend our right to use such technology in court or pay
license fees. Although we may, under these circumstances, attempt to obtain a
license to such intellectual property, we may not be able to do so on favorable
terms, or at all. Additionally, if our products are found to infringe on a third
party's intellectual property, we may be required to pay damages for past
infringement, and lose the ability to sell certain products or receive licensing
revenues.

COMPLIANCE WITH CHANGING REGULATION OF CORPORATE GOVERNANCE AND PUBLIC
DISCLOSURE MAY RESULT IN ADDITIONAL EXPENSE.

Changing laws, regulations and standards relating to corporate governance
and public disclosure, are creating uncertainty for companies. These new or
changed laws and standards are subject to multiple interpretations, in many
cases due to their lack of specification. As a result, their application in
practice may evolve over time as new guidance is provided by regulatory and
governing bodies which could result in higher costs necessitated by revisions to
disclosures and governance practices. We are committed to maintaining high
standards of corporate governance and public disclosure. As a result of the
efforts to comply with the evolving laws and regulations increased general and
administrative expenses have been experienced and are likely to continue.

AVAILABLE INFORMATION

This annual report on Form 10-K, the Company's quarterly reports on Form
10-Q, the Company's current reports on Form 8-K, and amendments to those reports
filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934, are made available free of charge on the Company's Internet website
www.cambrex.com as soon as reasonably practicable after such material is
electronically filed with or furnished to the SEC. The most recent
certifications by the Company's Chief Executive Officer and Chief Financial
Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 are filed as
exhibits to this Annual report on Form 10-K. Last year the Company filed with
the New York Stock Exchange the Annual Chief Executive Officer Certification as
required by Section 303A.12.(a) of the New York Stock Exchange Listed Company
Manual.

Reports filed by the Company with the SEC may be read and copied at the
SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549.
Information on the operation of the Public Reference Room may be obtained by
calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site at
www.sec.gov that contains reports, proxy and information statements and other
information regarding issuers that file electronically with the SEC.

The following corporate governance documents are available free of charge
on the Company's website: the charters of our Audit, Regulatory Affairs,
Compensation and Governance Committees, our Corporate Governance

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(dollars in thousands, except share data)

Guidelines and our Code of Business Conduct and Ethics. These corporate
governance documents are also available in print to any stockholder requesting a
copy from our corporate secretary at our principal executive offices.
Information contained on our website is not part of this report. We will also
post on our website any amendments to or waivers of our Code of Business Conduct
and Ethics that relate to our Chief Executive Officer, Chief Financial Officer
and Principal Accounting Officer.

ITEM 1B UNRESOLVED STAFF COMMENTS

None.

ITEM 2 PROPERTIES.

Set forth below is information relating to the Company's manufacturing
facilities as of December 31, 2007:

OPERATING
LOCATION ACREAGE SUBSIDIARY PRODUCT LINES MANUFACTURED
-------- ------- ---------- --------------------------

Charles City, IA 57 acres Cambrex APIs, Pharmaceutical Intermediates,
Charles City, Imaging Chemicals, Animal Health
Inc. Products and Fine Custom Chemicals
Karlskoga, Sweden 42 acres Cambrex APIs, Pharmaceutical Intermediates,
Karlskoga AB Imaging Chemicals and Fine Custom
Chemicals
Paullo (Milan), Italy 13 acres Cambrex APIs
Profarmaco
Milano S.r.l.

The Company also leases 42,000 square feet in North Brunswick, New Jersey
for its Center of Technical Excellence, which has a lease term ending December
2010. In addition, the Company owns a six acre site and buildings in North
Haven, CT, and a three acre site in Carlstadt, New Jersey. The Company believes
its facilities to be in good condition, well-maintained and adequate for its
current needs.

During the fourth quarter of 2007 the Company announced that it will
consolidate its United States research and development activities and small
scale API production with its facility in Charles City, Iowa. As a result of the
consolidation, the Company's New Jersey R&D facility was substantially closed as
of December 31, 2007. Lease payments of approximately $1,400 per year will
continue through December 2010. The Company is currently exploring its options
to mitigate the lease expense.

Most of the Company's products and services are provided from multi-purpose
facilities. Each product has a unique requirement for equipment, and occupies
such equipment for varying amounts of time. It is generally possible, with
proper lead time and customer and regulatory approval (if required), to transfer
the manufacturing of a particular product to another facility should capacity
constraints dictate.

ITEM 3 LEGAL PROCEEDINGS

See "Environmental and Safety Regulations and Proceedings" under Item 1 and
Note 17 with respect to various proceedings involving the Company in connection
with environmental matters. The Company is party to a number of other
proceedings also discussed in Note 17.

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

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(dollars in thousands, except share data)

PART II

ITEM 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES

The Company's common stock, $.10 par value is listed on the New York Stock
Exchange ("NYSE") under the symbol CBM. The following table sets forth the
closing high and low sales price of the common stock as reported on the NYSE:

2007 HIGH LOW
---- ------ ------

First Quarter............................................. $25.04 $21.46
Second Quarter............................................ 25.89 11.67
Third Quarter............................................. 14.35 10.15
Fourth Quarter............................................ 11.69 7.44

2006 HIGH LOW
---- ------ ------

First Quarter............................................. $22.11 $18.52
Second Quarter............................................ 21.62 18.89
Third Quarter............................................. 22.76 19.78
Fourth Quarter............................................ 24.22 20.38

As of January 29, 2008, the Company estimates that there were approximately
4,878 beneficial holders of the outstanding common stock of the Company.

During May 2007, the Company paid a special dividend of $14.00 per share of
common stock. The quarterly dividend on common stock was $0.03 for the first
quarter of 2007 and discontinued thereafter. The quarterly dividend on common
stock was $0.03 for 2006.

2007 EQUITY COMPENSATION TABLE

The following table provides information as of December 31, 2007 with
respect to shares of common stock that may be issued under the Company's
existing equity compensation plans.

COLUMN (A) COLUMN (B) COLUMN (C)
-------------------- -------------------- --------------------
NUMBER OF SECURITIES
REMAINING FOR FUTURE
NUMBER OF SECURITIES ISSUANCE UNDER
TO BE ISSUED UPON WEIGHTED AVERAGE EQUITY COMPENSATION
EXERCISE OF EXERCISE PRICE OF PLANS (EXCLUDING
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, SECURITIES REFLECTED
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS IN COLUMN (A))
------------- -------------------- -------------------- --------------------

Equity compensation plans approved by
security holders.................... 1,232,520 $20.03 434,404
Equity compensation plans not approved
by security holders................. 239,237 $20.68 43,896
--------- -------
Total................................. 1,471,757 $20.15 478,300
========= =======

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(dollars in thousands, except share data)

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS

The following graph compares the Company's cumulative total stockholder
return for a five-year period, with a performance indicator of the overall stock
market, the S&P 500 Index and the S&P 1500 Pharmaceuticals Index which the
Company believes more closely reflects its current businesses. Prices are as of
December 31 of the year indicated.

COMPARISON OF CUMULATIVE FIVE YEAR TOTAL RETURN

(performance graph)

S&P 500 S&P 1500
CAMBREX CORPORATION INDEX PHARMACEUTICALS INDEX
------------------- ------- ---------------------

2002 100.00 100.00 100.00
2003 84.06 128.68 110.30
2004 90.64 142.69 102.47
2005 63.17 149.70 99.42
2006 76.91 173.34 114.91
2007 60.40 182.86 119.62

The Company's commercial activities are focused on manufacturing and
marketing to customers concentrated in the Life Sciences Industry (including
pharmaceutical chemicals and intermediates). Although the Company's products are
diverse, making it difficult to select a comparative peer group, the Company
believes that the S&P 1500 Pharmaceuticals Index is a good comparison group for
the commercial activities on which it currently focuses. The S&P 1500
Pharmaceuticals Index comprises 27 companies as of December 31, 2007.

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(dollars in thousands, except share data)

ITEM 6 SELECTED FINANCIAL DATA

The following selected consolidated financial data of the Company for each
of the years in the five year period ended December 31, 2007 are derived from
the audited financial statements for 2007, 2006 and 2005 and the books and
records of the Company for 2004 and 2003, respectively, each including all
adjustments necessary for discontinued operations presentation. The consolidated
financial statements of the Company as of December 31, 2007 and 2006 and for
each of the years in the three year period ended December 31, 2007 and the
reports of independent registered public accounting firms thereon are included
elsewhere in this annual report. In November 2003, the Company completed the
sale of the Rutherford Chemicals business. In October 2006, the Company sold two
businesses within the former Human Health segment and in February 2007 the
Company completed the sale of the businesses that comprised the Bioproducts and
Biopharma segments (excluding certain liabilities). See Note 18. As a result,
these businesses are being reported as discontinued operations for all periods
presented. The data presented below should be read in conjunction with the
financial statements of the Company and the notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere herein.

YEARS ENDED DECEMBER 31,
-----------------------------------------------------
2007(1) 2006(2) 2005(3) 2004(4) 2003(5)
-------- -------- --------- -------- --------

INCOME DATA:
Gross sales............................. $252,574 $236,659 $ 223,565 $216,528 $203,340
Net revenues............................ 252,505 235,073 224,213 217,065 206,846
Gross profit............................ 91,232 83,858 86,911 84,857 83,930
Selling, general and administrative
expenses.............................. 48,858 58,279 56,109 53,312 52,256
Research and development expenses....... 12,157 10,813 11,946 10,434 9,017
Restructuring expenses.................. 6,073 -- -- -- --
Strategic alternative costs............. 31,127 2,958 -- -- --
Legal settlement........................ -- -- -- -- 11,342
Operating (loss)/profit................. (6,983) 11,808 18,856 21,111 11,315
Interest (income)/expense, net.......... (485) 5,478 3,089 3,134 2,045
Other expense/(income), net............. 725 (17) 201 336 10
(Loss)/income before income taxes....... (7,223) 6,347 15,566 17,641 9,260
Provision for income taxes.............. 6,288 14,513 25,322 11,050 24,365
(Loss)/income from continuing
operations............................ (13,511) (8,166) (9,756) 6,591 (15,105)
Income/(loss) from discontinued
operations, net of tax................ 222,759 (21,706) (100,702) (33,461) (38,958)
Income/(loss) before cumulative effect
of a change in accounting principle... 209,248 (29,872) (110,458) (26,870) (54,063)
Cumulative effect of a change in
accounting principle.................. -- (228) -- -- --
Net income/(loss)....................... 209,248 (30,100) (110,458) (26,870) (54,063)
EARNINGS PER SHARE DATA:
Earnings/(loss) per common share
(basic):
(Loss)/income from continuing
operations......................... $ (0.47) $ (0.30) $ (0.37) $ 0.25 $ (0.59)
Income/(loss) from discontinued
operations, net of tax............. $ 7.77 $ (0.81) $ (3.81) $ (1.28) $ (1.51)
Cumulative effect of a change in
accounting principle............... $ -- $ (0.01) $ -- $ -- $ --
-------- -------- --------- -------- --------
Net income/(loss)..................... $ 7.30 $ (1.12) $ (4.18) $ (1.03) $ (2.10)

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(dollars in thousands, except share data)

YEARS ENDED DECEMBER 31,
-----------------------------------------------------
2007(1) 2006(2) 2005(3) 2004(4) 2003(5)
-------- -------- --------- -------- --------

Earnings/(loss) per common share
(diluted):
(Loss)/income from continuing
operations......................... $ (0.47) $ (0.30) $ (0.37) $ 0.25 $ (0.59)
Income/(loss) from discontinued
operations, net of tax............. $ 7.77 $ (0.81) $ (3.81) $ (1.27) $ (1.51)
Cumulative effect of a change in
accounting principle............... $ -- $ (0.01) $ -- $ -- $ --
-------- -------- --------- -------- --------
Net income/(loss)..................... $ 7.30 $ (1.12) $ (4.18) $ (1.02) $ (2.10)
Weighted average shares outstanding:
Basic................................. 28,683 26,816 26,456 26,094 25,775
Diluted............................... 28,683 26,816 26,456 26,462 25,775
DIVIDENDS PER COMMON SHARE.............. $ 14.03 $ 0.12 $ 0.12 $ 0.12 $ 0.12
BALANCE SHEET DATA: (AT END OF PERIOD)
Working capital......................... $ 69,663 $117,616 $ 139,207 $182,915 $138,458
Total assets............................ 373,462 606,376 612,472 791,985 778,503
Long-term obligations................... 101,600 158,600 182,060 219,999 205,201
Total stockholders' equity.............. 102,057 246,646 243,251 391,316 396,630

--------

(1) Loss from continuing operations include pre-tax charges of $31,127 within
operating expenses for the costs related to strategic alternatives,
$6,073 within operating expenses for restructuring costs and $841 within
interest expense for the write-off of unamortized debt costs. Income from
discontinued operations include the gain on sale of the businesses that
comprised the Bioproducts and Biopharma business segments of $235,489,
expense of $4,636 for the Rutherford litigation settlement and expense of
$1,000 for an adjustment to an environmental reserve at a Rutherford
Business site.

(2) Loss from continuing operations include pre-tax charges of $2,958 within
operating expenses for external advisor costs related to divestitures,
$5,272 within interest expense due to the pre-payment of a portion of the
Company's long-term debt and tax expense of $1,696 related to prior years
returns included in the provision for income taxes. Loss from
discontinued operations include the loss on the sale of two businesses
within the former Human Health segment of $23,244, expense of $200 for an
adjustment to an environmental reserve at a Rutherford Business site,
$2,092 for a goodwill impairment charge, $1,791 due to the acquisition of
Cutanogen and $1,475 for the write-down of an investment in equity
securities.

(3) Loss from continuing operations include pre-tax charges for executive
severance of $4,223 and an increase in an environmental reserve of $1,300
recorded in operating expenses, a tax benefit due to a favorable Swedish
court decision of $3,329 and an increase in valuation allowances against
domestic deferred tax assets totaling $16,926 within the provision for
income taxes. Loss from discontinued operations include pre-tax charges
for goodwill impairment of $76,385, long-lived asset impairment charge of
$30,792 and a tax benefit related to the long-lived asset impairment of
$1,673.

(4) Loss from discontinued operations includes a pre-tax charge of $48,720
for goodwill impairment. As a result of the adjustments for discontinued
operations, the calculation of diluted weighted average shares
outstanding includes common equivalent shares previously excluded as
anti-dilutive.

(5) Loss from continuing operations include a pre-tax charge of $11,342
recorded in operating expenses for the settlement of certain class action
lawsuits involving Mylan Laboratories and the establishment of valuation
allowances against net domestic deferred tax assets totaling $21,487
within the provision for income taxes.

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(dollars in thousands, except share data)

ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

EXECUTIVE OVERVIEW

The Company's business consists of three manufacturing facilities. These
facilities primarily manufacture APIs, ingredients derived from organic
chemistry and pharmaceutical intermediates.

As part of the process of evaluating strategic alternatives to enhance
shareholder value, the sale of two businesses within the former Human Health
segment was completed in October 2006 and the sale of the businesses that
comprised the Bioproducts and Biopharma segments was completed in February 2007,
and accordingly, these businesses are being reported as discontinued operations
in all periods presented.

The following significant events occurred during 2007 which affected
results from continuing operations:

- A charge of $31,127 recorded within operating expenses for strategic
alternatives costs.

- A charge of $6,073 recorded within operating expenses for restructuring
expenses.

- A charge of $841 recorded within interest expense for the write-off of
unamortized debt costs.

Sales in 2007 increased 6.7% to $252,574, including a 4.7% favorable impact
resulting from foreign currency, from $236,659 in 2006.

Increased sales of products based on proprietary technology, and higher
demand for generic APIs primarily contributed to the sales increase. The Company
continued its expansion of its custom development pipeline during 2007 and
successfully transitioned seven products from phase III clinical trials to
commercial production during the year. With one of the broadest portfolios of
products and services in the API market, the Company remains profitable and
represents a solid platform for future growth.

Gross margins in 2007 increased to 36.1% from 35.4% in 2006. On a
performance basis (excluding foreign currency impact), gross margins were 35.5%
in 2007. The marginal increase is due primarily to favorable product mix mostly
offset by lower pricing.

A pharmaceutical company, with which a long-term sales contract is in
effect, accounted for 11.2% of gross sales. The Company negotiated an extension
of this contract to 2013 which resulted in lower profitability for sales under
this arrangement in 2007.

The Company recorded tax expense of $6,288 in 2007 compared to $14,513 in
2006. Tax expense in 2007 includes $7,915 of benefit related to the recognition
of certain tax attributes as a result of the sale of the businesses that
comprised the Bioproducts and Biopharma segments. The tax provisions in 2007 and
2006 are primarily affected by the non-recognition of tax benefits in the U.S.
and certain foreign jurisdictions where losses are incurred and the Company
records valuation allowances against the benefits, the recording of tax expense
for profitable non-U.S. entities and agreed income tax audit adjustments in the
U.S. and non U.S. entities.

The Company reported a loss from continuing operations of $13,511, or $0.47
per diluted share in 2007, compared to $8,166, or $0.30 per diluted share, in
2006.

CRITICAL ACCOUNTING POLICIES

The Company's critical accounting policies are those that require the most
subjective or complex judgments, often as a result of the need to make estimates
about the effect of matters that are inherently uncertain. The Company bases its
estimates on historical experience and on other various assumptions that are
deemed reasonable by management under each applicable circumstance. Actual
results or amounts could differ from estimates and the differences could have a
material impact on the consolidated financial statements. A discussion of the
Company's critical accounting policies, the underlying judgments and
uncertainties affecting their application and the

--------
(dollars in thousands, except share data)

likelihood that materially different amounts would be reported under different
conditions or using different assumptions, is as follows:

Revenue Recognition

Revenues are generally recognized when title to products and risk of loss
are transferred to customers. Additional conditions for recognition of revenue
are that collection of sales proceeds is reasonably assured and the Company has
no further performance obligations.

The Company has certain contracts that contain multiple deliverables. These
deliverables often include process development services and commercial
production and are divided into separate units of accounting if certain criteria
are met, including whether the delivered element has stand-alone value to the
customer and whether there is objective and reliable evidence of the fair value
of the undelivered items. The consideration we receive is allocated among the
separate units based on their respective fair values, and the applicable revenue
recognition criteria are applied to each of the separate units.

For contracts that contain milestone-based payments, the Company recognizes
revenue using the proportional performance method based on the percentage of
costs incurred relative to the total costs estimated to be incurred to complete
the contract. Revenue recognition computed under this methodology is compared to
the amount of non-refundable cash payments received or contractually receivable
at the reporting date and the lesser of the two amounts is recognized as revenue
at each reporting date. The proportional performance methodology applied by the
Company for revenue recognition, utilizes an input based measure, specifically
labor costs, because the Company believes the use of an input measure is a
better surrogate of proportional performance than an output based measure, such
as milestones.

Amounts billed in advance are recorded as deferred revenue on the balance
sheet. Since payments received are typically non-refundable, the termination of
a contract by a customer prior to its completion could result in an immediate
recognition of deferred revenue relating to payments already received not
previously recognized as revenue.

Sales terms to certain customers include remittance of discounts if certain
conditions are met. Additionally, sales are generally made with a limited right
of return under certain conditions. The Company estimates these rebates and
estimated returns at the time of sale based on the terms of agreements with
customers and historical experience and recognizes revenue net of these
estimated costs which are classified as allowances and rebates.

The Company bills a portion of freight cost incurred on shipments to
customers. Freight costs are reflected in cost of goods sold. Amounts billed to
customers are recorded within net revenues.

Asset Valuations and Review for Potential Impairments

The review of long-lived assets, principally fixed assets and other
amortizable intangibles, requires the Company to estimate the undiscounted
future cash flows generated from these assets whenever events or changes in
circumstances indicate that the carrying value may not be fully recoverable. If
undiscounted cash flows are less than carrying value, the long-lived assets are
written down to fair value.

The review of the carrying value of goodwill and indefinite lived
intangibles is done annually or whenever events or changes in circumstances
indicate that the carrying value may not be fully recoverable utilizing a two-
step process. In the first step, the fair value of the reporting units is
determined using a discounted cash flow model and compared to the carrying
value. If such analysis indicates that impairment may exist, the Company then
estimates the fair value of the other assets and liabilities utilizing
appraisals and discounted cash flow analyses to calculate an impairment charge.

The determination of fair value is judgmental in nature and involves the
use of significant estimates and assumptions, including projected future cash
flows primarily based on operating plans, discount rates, determination of
appropriate market comparables and perpetual growth rates. These estimates and
assumptions could have a significant impact on whether or not an impairment
charge is recognized and the magnitude of any such charge.

--------
(dollars in thousands, except share data)

Environmental and Litigation Contingencies

The Company periodically assesses the potential liabilities related to any
lawsuits or claims brought against us. See Note 17 for a discussion of the
Company's current environmental and litigation matters, reserves recorded and
our position with respect to any related uncertainties. While it is typically
very difficult to determine the timing and ultimate outcome of these actions,
the Company uses its best judgment to determine if it is probable that the
Company will incur an expense related to a settlement for such matters and
whether a reasonable estimation of such probable loss, if any, can be made. If
probable and estimable, the Company accrues for the costs of clean-up,
settlements and legal fees. If the aggregate amount of the liability and the
timing of the payment is fixed or reasonably determinable, the Company discounts
the amount to reflect the time value of money. Given the inherent uncertainty
related to the eventual outcome of litigation and environmental matters, it is
possible that all or some of these matters may be resolved for amounts
materially different from any provisions that the Company may have made with
respect to their resolution.

Income Taxes

The Company applies an asset and liability approach to accounting for
income taxes. Deferred tax assets and liabilities are recognized for the
expected future tax consequences of temporary differences between the financial
statement and tax basis of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse. The
recoverability of deferred tax assets is dependent upon the Company's assessment
that it is more likely than not that sufficient future taxable income will be
generated in the relevant tax jurisdiction to utilize the deferred tax asset. In
the event the Company determines that future taxable income will not be
sufficient to utilize the deferred tax asset, a valuation allowance is recorded.
The Company's valuation allowances primarily relate to net operating loss
carryforwards, foreign tax credits, and alternative minimum tax credits in the
U.S., where profitability is uncertain and net operating loss carryforwards in
certain state and foreign jurisdictions with little or no history of generating
taxable income or where future profitability is uncertain.

Employee Benefit Plans

The Company provides a range of benefits to employees and retired
employees, including pensions, post-retirement, post employment and health care
benefits. The Company records annual amounts relating to these plans based on
calculations, which include various actuarial assumptions, including discount
rates, assumed rates of return, compensation increases, turnover rates, and
health care cost trend rates. The Company reviews its actuarial assumptions on
an annual basis and makes modifications to the assumptions based on current
rates and trends when it is deemed appropriate to do so. The effect of the
modifications is generally recorded and amortized over future periods. The
Company believes that the assumptions utilized for recording obligations under
its plans are reasonable.

The discount rate used to measure pension liabilities and costs is selected
by projecting cash flows associated with plan obligations which were matched to
a yield curve of high quality bonds. The Company then selected the single rate
that produces the same present value as if each cash flow were discounted by the
corresponding spot rate on the yield curve.

RESULTS OF OPERATIONS

2007 COMPARED TO 2006

Gross sales for 2007 increased 6.7% to $252,574 from $236,659 in 2006.
Gross sales were favorably impacted 4.7% due to the impact of foreign currency
reflecting weakness in the U.S. dollar primarily versus the Euro and Swedish
Krona.

--------
(dollars in thousands, except share data)

The following table shows gross sales to geographic area for the years
ended December 31, 2007 and 2006:

2007 2006
-------- --------

North America.......................................... $ 85,644 $ 85,944
Europe................................................. 150,692 136,545
Asia................................................... 9,125 8,041
Other.................................................. 7,113 6,129
-------- --------
Total.................................................. $252,574 $236,659
======== ========

Gross profit in 2007 was $91,232 compared to $83,858 in 2006. Gross margins
in 2007 increased to 36.1% from 35.4% in 2006. On a performance basis (excluding
foreign currency impact), gross margins were 35.5% in 2007. The marginal
increase is due primarily to favorable mix mostly offset by lower pricing.

Selling, general and administrative ("SG&A") expenses of $48,858 or 19.3%
of gross sales in 2007 decreased from $58,279 or 24.6% in 2006. Administrative
expenses decreased primarily due to lower personnel costs resulting from reduced
staffing at corporate headquarters (approximately $3,000) and lower audit
(approximately $2,200), insurance (approximately $1,900) and legal fees
(approximately $1,500) partially offset by an unfavorable impact from foreign
currency (approximately $1,500).

The Company announced plans to eliminate certain employee positions at the
corporate office upon completion of the sale of the businesses that comprised
the Bioproducts and Biopharma segments. This plan included certain one-time
benefits for employees terminated and is substantially completed as of December
31, 2007. Costs related to these plans are recorded as restructuring expenses in
the income statement. The Company recognized expense of $4,014 during 2007,
substantially all of which will be in cash. The Company anticipates annual cost
savings related to the elimination of all these positions to be approximately
$5,200.

The Company also announced that it will consolidate its United States
research and development activities and small scale API production with its
facility in Charles City, Iowa. As a result of the consolidation, the Company's
New Jersey R&D facility was substantially closed as of December 31, 2007. The
Company recognized restructuring expenses in 2007 of $2,059, of which
approximately $1,354 will be in cash. The charge of $2,059 consists of the
present value of the remaining lease payments under the Company's current
operating lease at the New Jersey R&D facility (reduced by estimated sublease
rentals) of $998, leasehold improvement write-offs of $705 and employee
retention and severance of $356. Costs related to this plan are recorded as
restructuring expenses on the income statement. The operating lease expires in
December 2010. In accordance with accounting guidance, the severance and
retention charges are being recognized ratably over the remaining service
period. An additional charge of $115 will occur in 2008 related to severance.
Lease payments are approximately $1,400 per year. As a result of closing this
facility, the Company estimates annual cost savings of approximately $2,100
related to personnel costs which will be offset by continued lease expense and
the loss of certain revenue generating projects.

Strategic alternative costs include costs that the Company has incurred
related to the decision to sell the businesses that comprised the Bioproducts
and Biopharma segments in February 2007 and costs associated with the exit of a
product line that manufactures a feed additive. These costs are not considered
part of the restructuring program or a part of discontinued operations under
current accounting guidance.

As a result of the sale of the businesses that comprise the Bioproducts and
Biopharma segments, certain benefits became payable under change of control
agreements between the Company and four of its current or former

--------
(dollars in thousands, except share data)

executives. These costs totaled $20,025 in 2007. Also included in strategic
alternative costs are retention bonuses of $6,780; this includes amounts paid to
certain current employees for continued employment, generally through September
30, 2007 and December 31, 2007, costs associated with the modification of
employee stock options due to the payment of the special dividend in connection
with the divestiture of $2,854 and external advisor costs of $456. The Company
may recognize additional expense in future quarters as the potential for changes
in estimates exists. Substantially all of these charges have been or will be
paid in cash. The exact timing of the payments is uncertain at this time but the
majority is expected to be in 2008.

During the fourth quarter of 2007 the Company committed to a plan to exit a
product line that produces a feed additive. The equipment used in producing this
product will be dismantled and disposed of upon completion of production.
Production will continue through the third quarter of 2008. In accordance with
FASB Interpretation No. 47, Accounting for Conditional Asset Retirement
Obligations ("FIN 47"), the Company now has the information needed to estimate a
range of potential settlement dates and the potential methods of settlement for
the dismantling and disposal of this equipment. Upon adopting FIN 47 in the
fourth quarter of 2005, the Company did not have the information needed to
estimate the fair market value of the asset retirement obligation and as such
did not record a liability. During the fourth quarter of 2007, the Company
recorded $1,012 for the asset retirement obligation. This charge is recorded as
strategic alternative costs in the income statement.

Total strategic alternative costs for 2007 were $31,127. Strategic
alternative costs for 2006 totaled $2,958 consisting of external advisor costs
related to divestitures.

Research and development expenses of $12,157 were 4.8% of gross sales in
2007, compared to $10,813 or 4.6% of gross sales in 2006. The increase in
expense primarily reflects higher personnel costs to invest in the growth and
development of proprietary technology platforms ($400), higher costs at the New
Jersey R&D facility due to lower billings of fixed costs to customers resulting
from fewer projects ($400) and depreciation expense associated with the new R&D
facility in Milano ($100). The impact of foreign currency also contributed to
higher expense ($500).

The Company incurred an operating loss in 2007 of $6,983 compared to
operating income of $11,808 in 2006 due to higher strategic alternative and
restructuring costs, partially offset by lower corporate spending and higher
gross margins. The 2007 results include strategic alternative and restructuring
costs of $31,127 and $6,073, respectively. The 2006 results include strategic
alternative costs of $2,958.

Net interest income was $485 in 2007 compared to net interest expense of
$5,478 in 2006 primarily reflecting higher interest income in 2007 compared to
2006 due to interest earned on the proceeds from the sale of the businesses that
comprised the Bioproducts and Biopharma segments. Lower average debt partially
offset by higher interest rates contributed to lower interest expense.
Additionally, 2007 includes the acceleration of unamortized origination fees
related to the repayment of a prior credit facility of $841. Included in 2006 is
approximately $5,272 related to the make whole payment of $4,809 and the related
acceleration of $463 of unamortized origination fees due to the prepayment of
the Senior Notes partially offset by the allocation of interest expense to
discontinued operations. The average interest rate was 6.9% and 5.8% in 2007 and
2006, respectively.

The Company recorded tax expense of $6,288 in 2007 compared to $14,513 in
2006. Tax expense in 2007 includes $7,915 of benefit related to the recognition
of certain tax attributes as a result of the sale of the businesses that
comprised the Bioproducts and Biopharma segments. The tax expense for 2007
includes a $7,816 valuation allowance to offset benefits generated from U.S. tax
losses and tax credits and losses in certain non-U.S. jurisdictions. These
valuation allowances result from the Company's recent history of domestic and
certain foreign losses and its short-term projections for losses from continuing
operations in the relative jurisdictions. Since 2003, the Company has maintained
a full valuation allowance on the tax benefits arising from domestic pre-tax
losses.

--------
(dollars in thousands, except share data)

recognized and, therefore, those losses would not be reduced by such income tax
benefits. The carryforward periods for foreign tax credits, research and
experimentation tax credits, net operating losses ("NOLs"), and the federal
alternative minimum tax credits are 10 years, 20 years, 20 years and an
indefinite period, respectively. As such, improvements in domestic pre-tax
income in the future may result in these tax benefits ultimately being realized.
However, there is no assurance that such improvements will be achieved.

In connection with the sale of the businesses that comprised the
Bioproducts and Biopharma businesses, the Company utilized domestic NOLs and
foreign tax credits for which a full valuation allowance was provided for at
December 31, 2006. The NOLs and foreign tax credits will be utilized to reduce
significantly all the domestic tax on this transaction. Additionally it is
anticipated that any U.S. income tax related to distributions from non-U.S.
Bioproducts entities repatriated in 2008 will be offset by foreign tax credits
and NOLs.

Loss from continuing operations in 2007 was $13,511, or $0.47 per diluted
share, versus $8,166, or $0.30 per diluted share in 2006.

2006 COMPARED TO 2005

Gross sales in 2006 of $236,659 increased $13,094 or 5.9% above 2005. Sales
were favorably impacted 0.5% due to the impact of foreign currency reflecting a
weaker U.S. dollar.

Gross profit in 2006 was $83,858 compared to $86,911 in 2005. Gross margin
in 2006 decreased to 35.4% from 38.9% in 2005.

The following table shows gross sales by geographic area for the years
ended December 31, 2006 and 2005:

2006 2005
-------- --------

North America.......................................... $ 85,944 $ 81,002
Europe................................................. 136,545 129,536
Asia................................................... 8,041 7,493
Other.................................................. 6,129 5,534
-------- --------
Total.................................................. $236,659 $223,565
======== ========

The increase in sales is due mainly to stronger demand for certain central
nervous system and cardiovascular APIs, nicotine polacrilex resin (used in
smoking cessation products) and higher sales of a diuretic API. These sales were
partially offset by lower sales of a gastrointestinal API, feed additives and a
pharmaceutical intermediate used for end-stage kidney treatment. Increasing
pricing pressures on APIs also negatively impacted sales.

Gross margins decreased to 35.4% in 2006 from 38.9% in 2005. The reduced
margins are due primarily to higher production costs, lower pricing on certain
APIs, and unfavorable impact of foreign currency partially offset by increased
sales volume and favorable product mix.

SG&A expenses of $58,279 or 24.6% of gross sales in 2006 increased from
$56,109 or 25.1% in 2005. Administrative expenses increased primarily due to
higher legal and audit fees, higher valuation of stock appreciation rights and
the expensing of stock options partially offset by lower personnel costs.

Research and development expenses of $10,813 were 4.6% of gross sales in
2006, compared to $11,946 or 5.3% of gross sales in 2005. The decrease primarily
reflects a reduction of Corporate personnel costs and lower labor costs.

Operating profit in 2006 was $11,808 compared to $18,856 in 2005. The
results reflect lower gross margins and higher operating expenses. The 2005
results include a charge for executive severance of $4,223 and a $1,300 charge
for an environmental remediation reserve at a non-operating facility.

Net interest expense of $5,478 in 2006 increased $2,389 from 2005. The
Company incurred costs of $5,272 associated with the prepayment of debt in 2006.
Excluding these charges, net interest expense would have decreased

--------
(dollars in thousands, except share data)

$2,883 primarily reflecting lower average debt partially offset by higher
interest rates. The average interest rate was 5.8% and 5.5% in 2006 and 2005,
respectively.

The Company recorded tax expense of $14,513 in 2006 compared to $25,322 in
2005. The tax expense for 2006 includes an $11,804 valuation allowance to offset
benefits generated from U.S. tax losses and tax credits and losses in certain
non-U.S. jurisdictions. These valuation allowances result from the Company's
recent history of domestic and certain foreign losses and its short-term
projections for losses from continuing operations in the relative jurisdictions.
Since 2003, the Company has maintained a full valuation allowance on the tax
benefits arising from domestic pre-tax losses.

The Company will continue to record a full valuation allowance, primarily
on its domestic net deferred tax assets and indefinite lived intangibles, until
an appropriate level of domestic profitability is sustained or tax strategies
can be developed that would enable the Company to conclude that it is more
likely than not that a portion of the domestic net deferred assets would be
realized. If the Company continues to report pre-tax losses in the United States
and certain foreign jurisdictions, income tax benefits associated with those
losses will not be recognized and, therefore, those losses would not be reduced
by such income tax benefits. The carryforward periods for foreign tax credits,
research and experimentation tax credits, NOLs, and the federal alternative
minimum tax credits are 10 years, 20 years, 20 years and an indefinite period,
respectively. As such, improvements in domestic pre-tax income in the future may
result in these tax benefits ultimately being realized. However, there is no
assurance that such improvements will be achieved.

Loss from continuing operations in 2006 was $8,166 or $0.30 per diluted
share, versus $9,756, or $0.37 per diluted share in 2005.

LIQUIDITY AND CAPITAL RESOURCES

During 2007 cash and cash equivalents on hand increased $4,742 to $38,488.
The weaker U.S. dollar favorably impacted the translated cash balances by
$2,876. During 2007, cash flows from operations used $793, compared to providing
$34,720 in the same period a year ago. The change in cash flows from operations
in 2007 versus 2006 is due primarily to the pay down of accounts payable in
addition to the pay down of several year end 2006 accruals.

Cash flows provided by investing activities in 2007 of $440,718 primarily
reflect proceeds from the sale of the businesses that comprised the Bioproducts
and Biopharma segments. Capital expenditures were $25,927 and $23,183 for 2007
and 2006, respectively. Capital expenditures for 2007 and 2006 primarily
consisted of a new API purification lab and finishing facility in Milan, Italy
and capital improvements to existing facilities. For 2008, capital expenditures
are expected to be approximately $32,000 to $34,000.

Cash flows used in financing activities in 2007 of $438,059 include a net
reduction of debt of $57,255 and dividends paid of $402,389 partially offset by
proceeds from stock options exercised of $21,898. In 2006 the Company had a net
reduction of debt of $25,486 and paid dividends of $3,210 which was partially
offset by proceeds from stock options exercised of $21,310.

In April 2007, the Company entered into a $200,000 five-year Syndicated
Senior Revolving Credit Facility which expires in April 2012.

The Company pays interest on this credit facility at LIBOR plus 1.25% -
2.00% based upon certain measurements of the Company's financial performance.
The credit facility also includes financial covenants regarding interest
coverage and leverage ratios. The Company was in compliance with all financial
covenants at December 31, 2007.

The 5-Year Agreement is collateralized by dividend and distribution rights
associated with a pledge of a portion of stock that the Company owns in a
foreign holding company. This foreign holding company owns a majority of the
Company's non-U.S. operating subsidiaries.

--------
(dollars in thousands, except share data)

in place with an aggregate notional value of $60,000, at an average fixed rate
of 4.48% before any spread based on the level of indebtedness per the terms of
the credit facility, and with maturity dates of October 2010. The Company's
strategy has been to cover a portion of outstanding bank debt with interest rate
protection. At December 31, 2007, the coverage was approximately 59% of our
variable interest rate debt.

As of December 31, 2007, there was $101,600 outstanding and $98,400 undrawn
under the 5-Year Agreement. The full amount of the undrawn balance is available
to be borrowed as of December 31, 2007.

The Company used the proceeds from the sale of the businesses that
comprised the Bioproducts and Biopharma segments, which closed during the first
quarter of 2007, to repay outstanding debt and in May 2007, paid a special
dividend of $14.00 per share, totaling $401,556. Approximately $94,000 was
borrowed from the Company's 5-Year Agreement to pay the dividend. The Company
also discontinued its quarterly dividend payment and will instead allocate these
cash outlays to support its growth initiatives.

During 2007, the Company also paid its quarterly dividend on common stock
of $0.03 for the first quarter. During 2006, the Company paid cash dividends of
$0.12 per share.

The 2007 and 2006 weighted average interest rate for long-term bank debt
was 6.9% and 5.8%, respectively.

CONTRACTUAL OBLIGATIONS

At December 31, 2007, our contractual obligations with initial or remaining
terms in excess of one year were as follows:

TOTAL 2008 2009 2010 2011 2012+
-------- ------- ------- ------- ------ --------

Long term debt.............. $101,600 $ -- $ -- $ -- $ -- $101,600
Interest on debt............ 23,891 5,791 5,791 5,657 4,989 1,663
Operating leases............ 7,992 2,198 2,107 2,078 689 920
Purchase obligations........ 25,675 9,866 4,386 4,681 3,945 2,797
Strategic alternatives/
restructuring............. 17,152 17,152 -- -- -- --
Vitamin B-3 settlement...... 1,577 1,577 -- -- -- --
Rutherford settlement....... 4,421 4,421 -- -- -- --
Mylan settlement............ 1,600 1,600 -- -- -- --
-------- ------- ------- ------- ------ --------
Contractual cash
obligations............... $183,908 $42,605 $12,284 $12,416 $9,623 $106,980
======== ======= ======= ======= ====== ========

In addition to the contractual obligations listed above, the Company
expects to contribute approximately $5,751 in cash to its two U.S. defined-
benefit pension plans in 2008. Also, not included in the above table is $5,116
of uncertain tax positions due to uncertainty surrounding the timing of the
obligation. See Note 8.

See Notes 9, 16 and 17 for additional information regarding our debt and
other commitments.

The Company's forecasted cash flow from future operations may be adversely
affected by various factors including, but not limited to, declines in customer
demand, increased competition, the deterioration in general economic and
business conditions, as well as other factors. See the Risk Factors section of
this document for further explanation of factors that may negatively impact the
Company's cash flows. Any change in the current status of these factors could
adversely impact the Company's ability to fund operating cash flow requirements.

MARKET RISKS

In the normal course of business, the Company uses a variety of techniques
and instruments, including derivatives, as part of its overall risk management
strategy to lower its exposure to market risks arising from adverse changes in
interest rates and foreign currency exchange rates.

--------
(dollars in thousands, except share data)

Currency Risk Management

The Company's primary market risk relates to exposure to foreign currency
exchange rate fluctuations on transactions entered into by international
operations which are primarily denominated in the U.S. dollar, Euro and Swedish
krona. The Company currently uses foreign currency exchange forward contracts to
mitigate the effect of short-term foreign exchange rate movements on the
Company's operating results. The notional amount of these contracts as of
December 31, 2007 was $22,078. Unrealized foreign exchange contract losses do
not subject the Company's actual results to risk as gains or losses on these
contracts are undertaken to offset gains or losses on the transactions that are
hedged.

With respect to the contracts outstanding at December 31, 2007, a 10%
fluctuation of the local currency over a one-year period would cause $2,214 pre-
tax earnings to be at risk. This is based on the notional amount of the
contracts, adjusted for unrealized gains and losses, of $22,144. These
calculations do not include the impact of exchange gains or losses on the
underlying positions that would offset the gains and losses of the derivative
instruments.

Interest Rate Management

The Company has employed a plan to mitigate interest rate risk by entering
into interest rate swap agreements to convert floating rates to fixed interest
rates. As of December 31, 2007, the Company had three interest rate swaps in
place with an aggregate notional value of $60,000, at an average fixed rate of
4.48% before any spread based on the level of indebtedness per the terms of the
credit facility, and with maturity dates of October 2010. The Company's strategy
has been to cover a portion of outstanding bank debt with interest rate
protection. At December 31, 2007, the coverage was approximately 59% of our
variable interest rate debt.

The swap stabilizes interest costs by converting floating or variable rates
to fixed rates through a contract with a financial institution. The Company
monitors the debt position and market trends to protect it from unforeseen
shifts in interest rates.

For example, at December 31, 2007 the company had variable debt of
$101,600, of which $60,000 is fixed by an interest rate swap. Holding all other
variables constant, if the LIBOR portion of the weighted average interest rates
in the variable rate debt increased by 100 basis points the effect on our
earnings and cash flows would have been higher interest expense of $416.

CONTINGENCIES

The Company is subject to various investigations, claims and legal
proceedings covering a wide range of matters that arise in the ordinary course
of its business activities. The Company continually assesses all known facts and
circumstances as they pertain to all legal and environmental matters and
evaluates the need for reserves and disclosures as deemed necessary based on
these facts and circumstances and as such facts and circumstances develop. These
matters, either individually or in the aggregate, could have a material adverse
effect on the Company's financial condition, operating results and cash flows in
a future reporting period.

Environmental

In connection with laws and regulations pertaining to the protection of the
environment, the Company and its subsidiaries are a party to several
environmental proceedings and remediation investigations and cleanups and, along
with other companies, has been named a potentially responsible party ("PRP") for
certain waste disposal sites ("Superfund sites"). Additionally, as discussed in
the "Sale of Rutherford Chemicals" section below, the Company has retained the
liability for certain environmental proceedings, associated with the Rutherford
Chemicals business.

Each of these matters is subject to various uncertainties, and it is
possible that some of these matters will be decided unfavorably against the
Company. The resolution of such matters often spans several years and frequently
involves regulatory oversight or adjudication. Additionally, many remediation
requirements are not fixed and are likely to be affected by future
technological, site, and regulatory developments. Consequently, the ultimate
extent of

--------
(dollars in thousands, except share data)

liabilities with respect to such matters, as well as the timing of cash
disbursements cannot be determined with certainty.

In matters where the Company has been able to reasonably estimate its
liability, the Company has accrued for the estimated costs associated with the
study and remediation of Superfund sites not owned by the Company and the
Company's current and former operating sites. These accruals were $6,905 and
$4,862 at December 31, 2007 and 2006, respectively. The increase in the accrual
includes net adjustments to reserves of $2,334 and the impact of currency of
$114 partially offset by payments of $405. Based upon currently available
information and analysis, the Company's current accrual represents management's
best estimate of the probable and estimable costs associated with environmental
proceedings including amounts for investigation fees where remediation costs may
not be estimable at the reporting date.

CasChem ISRA

As a result of the sale of the Bayonne, New Jersey facility (see "Sale of
Rutherford Chemicals" section below), the Company became obligated to
investigate site conditions and conduct required remediation under the New
Jersey Industrial Site Recovery Act ("ISRA"). The Company completed a
preliminary assessment of the site and submitted the preliminary assessment to
the New Jersey Department of Environmental Protection ("NJDEP"). The preliminary
assessment identified potential areas of concern based on historical operations
and sampling of such areas commenced. The Company has completed a second phase
of sampling and determined that a third phase of sampling is necessary to
determine the extent of contamination and any necessary remediation. The results
of the completed and proposed sampling, and any additional sampling deemed
necessary, will be used to develop an estimate of the Company's future liability
for remediation costs, if any. The Company submitted its plan for the third
phase of sampling to the NJDEP during the fourth quarter of 2005. The sampling
will commence upon approval of the sampling plan.

Cosan

The Company's Cosan subsidiary conducted manufacturing operations in
Clifton, New Jersey from 1968 until 1979. Prior to the acquisition of Cosan by
the Company, the operations were moved to another location and thereafter
Cambrex purchased the business. In 1997, Cosan entered into an Administrative
Consent Order with the NJDEP. Under the Administrative Consent Order, Cosan was
required to complete an investigation of the extent of the contamination related
to the Clifton site and conduct remediation as may be necessary. During the
third quarter of 2005, the Company completed the investigation related to the
Clifton site, which extends to adjacent properties. The results of the
investigation caused the Company to increase its related reserves by $1,300 in
2005 based on the proposed remedial action plan. The Company submitted the
results of the investigation and proposed remedial action plan to the NJDEP. In
late 2006, the NJDEP requested that an additional investigation be conducted at
the site. The Company estimated that the additional work will cost approximately
$240, and as such, increased the related reserve in the first quarter of 2007.
The Company submitted its plan for additional work to the NJDEP in April 2007.
In August 2007 the NJDEP approved the Company's work plan and the additional
investigation has commenced. As of December 31, 2007 the reserve was $1,432. The
results of the additional investigation may impact the remediation plan and
costs.

Additionally, the Company has reserved approximately $1,100 at December 31,
2007 for the Cosan Carlstadt, N.J. site.

Berry's Creek

--------
(dollars in thousands, except share data)

remedial investigation and feasibility study of the Berry's Creek Site. The PRPs
have engaged technical and allocation consultants to evaluate investigation and
remedial alternatives and develop a method to allocate related costs among the
PRPs. In December 2007 the PRPs reached a tentative agreement on the allocation
of the site investigation costs and the Company has increased its reserves by
$562 for its share. The investigation is expected to take several years and at
this time it is too early to predict the extent of any additional future
liabilities.

Nepera, Inc. -- Maybrook and Harriman Sites

In 1987, Nepera, Inc. ("Nepera") was named a PRP along with certain prior
owners of the Maybrook Site in Hamptonburgh, New York by the USEPA in connection
with the disposition, under appropriate permits, of wastewater at that site
prior to Cambrex's acquisition of Nepera in 1986. The Maybrook Site is on the
USEPA's National Priorities List for remedial work. A prior owner of the Nepera
facility has participated with Nepera in the performance of a remedial
investigation and feasibility study for the Maybrook Site. In September 2007,
the USEPA issued the Record of Decision ("ROD") which describes the remedial
plan for the Maybrook Site. The USEPA also issued the Company and the prior
owner a Notice of Potential Liability, requesting that the recipients sign a
Consent Decree to complete the ROD and pay the USEPA certain past oversight
costs, which the Company and the prior owner are currently negotiating with the
USEPA.

In 1987, Nepera was also named as a responsible party along with certain
prior owners of the Harriman, New York production facility by the New York State
Department of Environmental Conservation in connection with contamination at the
Harriman Site. A prior owner of the Nepera facility has participated with Nepera
in the performance of the remedial investigation and feasibility study for the
Harriman Site. In 1997, a final ROD was issued which describes the remediation
plan for the site. Nepera and the prior owner have been implementing the ROD
since 1997.

Until 1997, reserves were assessed and established based on the information
available. In November 1997, a settlement was reached between Nepera, Inc., the
former owner mentioned above, and the original owner of the Harriman operations,
pertaining to past and future costs of remediating the Maybrook and Harriman
Sites ("the Sites"). Under the terms of the settlement, the original site owner
paid approximately $13,000 to provide for past and future remediation costs at
the two sites in exchange for a release from the requirement to clean up the two
sites, and the settlement funds were placed in a trust for the benefit of
remediating the two sites on behalf of Nepera and the other former site owner.
Nepera and the prior owner were reimbursed their past costs from the trust.
Nepera had believed that the remaining funds available in the trust would be
sufficient to provide for the future remediation costs for the Sites.
Accordingly, the estimated range of liability for the Sites was set off against
the settlement funds.

Based on currently available information, Nepera believes that the current
trust balance will not cover the remaining work to be completed at Harriman and
under the final Maybrook ROD issued in September 2007. As such the Company has
increased its reserve by $1,000, which is recorded in discontinued operations,
for its expected share of the shortfall based on currently available
information. As of December 31, 2007 the reserve recorded on the books was
$1,200. The foregoing matters were retained by Nepera under the 2003 Purchase
Agreement as well as the settlement reached in the Rutherford matter (see "Sale
of Rutherford Chemicals" section below).

The Company is involved in other matters where the range of liability is
not reasonably estimable at this time and it is not determinable when
information will become available to provide a basis for adjusting or recording
an accrual, should an accrual ultimately be required.

LITIGATION AND OTHER MATTERS

Mylan Laboratories

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(dollars in thousands, except share data)

"District Court"). Suits were also commenced by several State Attorneys'
General. The suits alleged violations of the Federal Trade Commission Act
arising from exclusive license agreements between Profarmaco and Mylan covering
two APIs. The FTC and Attorneys' General suits were settled in February 2001,
with Mylan (on its own behalf and on behalf of Profarmaco and Cambrex) agreeing
to pay over $140,000 and with Mylan, Profarmaco and Cambrex agreeing to monitor
certain future conduct.

The same parties including the Company and Profarmaco have also been named
in purported class action complaints brought by private plaintiffs in various
state courts on behalf of purchasers of the APIs in generic form, making
allegations similar to those raised in the FTC's complaint and seeking various
forms of relief including treble damages.

In April 2003, Cambrex reached an agreement with Mylan under which Cambrex
would contribute $12,415 to the settlement of litigation brought by a class of
direct purchasers. In exchange, Cambrex and Profarmaco received from Mylan a
release and full indemnity against future costs or liabilities in related
litigation brought by purchasers, as well as potential future claims related to
this matter. Cambrex recorded an $11,342 charge (discounted to the present value
due to the five year pay-out) in the first quarter of 2003 as a result of this
settlement. In accordance with the agreement $10,815 has been paid through
December 31, 2007, with the remaining $1,600 to be paid in 2008.

In February 2008 the District Court, in an action brought by three health
care insurers, entered judgment after trial against Mylan, Gyma and Cambrex in
the amount of $8,355, payable jointly and severally, and also a punitive damage
award against each of Mylan, Gyma and Cambrex in the amount of $16,709. The
parties will appeal the awards. Cambrex expects any payment of the judgment
against it to be made by Mylan under the indemnity described above.

Vitamin B-3

In May 1998, the Company's subsidiary, Nepera, which formerly operated the
Harriman facility and manufactured and sold niacinamide ("Vitamin B-3"),
received a Federal Grand Jury subpoena for the production of documents relating
to the pricing and possible customer allocation with regard to that product. In
2000, Nepera reached an agreement with the government as to its alleged role in
Vitamin B-3 violations from 1992 to 1995. The Canadian government claimed
similar violations. All government suits in the U.S. and Canada have been
concluded.

Nepera has been named as a defendant, along with several other companies,
in a number of private civil actions brought on behalf of alleged purchasers of
Vitamin B-3. The actions seek injunctive relief and unspecified but substantial
damages. All cases have been settled within established reserve amounts.

Settlement documents are expected to be finalized and payments are expected
to be made during the next several months. The balance of the reserves recorded
within accrued liabilities related to this matter was $1,579 as of December 31,
2007.

Sale of Rutherford Chemicals

The Company completed the sale of its Rutherford Chemicals business in
November 2003. Under the agreement for the sale ("Purchase Agreement"), the
Company provided standard representations and warranties and included various
covenants concerning the business, operations, liabilities and financial
condition of the Rutherford Chemicals business ("Rutherford Business") and
provided certain indemnities. The Company also retained certain liabilities.
Under the Purchase Agreement, the Company also retained the responsibility for
certain matters including: (i) certain existing matters including violations and
off-site liabilities; (ii) completing the on-going remediation at the New York
facility under a Record of Decision ("ROD"); and (iii) completing the obligation
to investigate site conditions and conduct required remediation under the
provisions of the ISRA. The Company accrued for exposures which are deemed
probable and estimable related to the retained matters.

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(dollars in thousands, except share data)

In April 2006, the Company received a summons and complaint (the
"Complaint") from the Buyers, which was filed in the Supreme Court of the State
of New York, County of New York. In the Complaint, the Buyers sought
indemnification, declaratory and injunctive relief for alleged (i) breaches of
various representations, warranties and covenants, related to structures,
buildings and equipment at each of the purchased facilities and, in addition,
was responsible for a related third party claim; and (ii) was obligated to
conduct certain environmental remediation at four of the five Rutherford
Business facilities. The Company denied the allegations, filed counterclaims and
has been vigorously defending the matter.

In July 2007 the Company entered into a Settlement Agreement and Release
(the "Settlement Agreement") and a related Environmental Escrow Agreement (the
"Escrow Agreement") settling litigation which had been commenced by the Buyers
by the filing of the Complaint in April 2006.

Under the Settlement Agreement:

- In the third quarter of 2007 (i) the Company paid the Buyers the sum of
$636 in reimbursement for past remediation expenses at the Rutherford
Business facilities; and (ii) the Buyers paid the Company 400 GBP
(approximately $813) for reimbursement of certain tax refunds received
from United Kingdom taxing authorities.

- The Buyers also agreed to pay to an account (the "Escrow Account")
created under the Escrow Agreement the sum of $3,149 plus interest
subsequent to September 30, 2007, representing the amount owed on a
Subordinated Promissory Note issued as consideration under the Purchase
Agreement. The Buyers paid $1,000 of such amount in September 2007 and
$2,193 in November 2007.

- The Company also agreed to make payment to the Escrow Account within 30
days after the Buyers' Final Note Payment. The Company paid $4,421 in
January 2008 which was accrued at December 31, 2007.

The Escrow Account can be used only for costs arising from the remediation
of environmental contamination at the Rutherford Business facilities. The
Company has the right to object to any use of the funds in the Escrow Account
for non-remediation purposes, pursuant to an accelerated dispute resolution
process involving the parties' appointment of a Special Master.

Under the Settlement Agreement, the parties waive and extinguish all rights
under the Purchase Agreement to seek damages or any other remedy for any other
obligation contained in the Purchase Agreement as they relate to environmental
liabilities, including damages related to pre-closing ownership or operation of
the Rutherford Business facilities, compliance with environmental laws, and all
remediation at the Rutherford Business facilities, except for certain matters
which the Company specifically retained, namely (i) the off-site treatment,
storage and disposal of hazardous materials occurring before the November 10,
2003 closing of the Purchase Agreement, (ii) liability arising from the pre-
closing sales of products, (iii) the completion of on-going remediation at the
Nepera facility under a ROD, and (iv) completion of on-going remediation at the
Bayonne facility under ISRA. The Buyers, however, retain its contractual
obligation not to engage in any conduct that materially increases the Company's
costs of completing the remediation under the ROD at the Nepera facility and the
ISRA process at the Bayonne facility. The obligations specifically retained by
the Company are consistent with its remediation obligations under the Purchase
Agreement. The Company has previously accrued for exposures deemed probable and
reasonable related to any specifically retained matters.

Further, under the Settlement Agreement, the Buyers and the Company release
each other from all claims and counterclaims asserted in the litigation, with
the exception of the Company's possible claim that the Buyers' activities have
increased the Company's remediation costs at the Nepera facility, which claim
the Company will dismiss without prejudice to its right to reassert the claim in
the future. The Buyers and the Company also waive all rights and obligations
under the Purchase Agreement related to any claims for additional payments under
the Purchase Agreement, including the Company's claims for the return of tax
refunds, the payment of the Subordinated Note, and any payments under the earn-
out provision.

--------
(dollars in thousands, except share data)

for certain liabilities, including without limitation those arising from the
presence of hazardous materials at any of the Rutherford Business facilities,
except for the matters specifically retained by the Company.

The foregoing description is a summary and is qualified in its entirety by
the Settlement Agreement, which is filed as an Exhibit to the Quarterly Report
on Form 10-Q for the period ending June 30, 2007.

Related to the Settlement Agreement, the Company's 2007 results include a
charge of $4,041, net of tax, recorded in discontinued operations related to
this matter.

Class Action Matter

In October 2003, the Company was notified of a securities class action
lawsuit filed against Cambrex and five former Company officers. Five class
action suits were filed with the New Jersey Federal District Court (the
"Court"). In January 2004, the Court consolidated the cases, designated the lead
plaintiff and selected counsel to represent the class. An amended complaint was
filed in March 2004. The lawsuit has been brought as a class action in the names
of purchasers of the Company's common stock from October 21, 1998 through July
25, 2003. The complaint alleges that the Company failed to disclose in a timely
fashion the January 2003 accounting restatement and subsequent SEC
investigation, as well as the loss of a significant contract at the Baltimore
facility.

The Company filed a Motion to Dismiss in May 2004. Thereafter, the
plaintiff filed a reply brief and in October 2005, the Court denied the
Company's Motion to Dismiss. The Company continues to believe that the
complaints are without merit and will vigorously defend against them. As such,
the Company has recorded no reserves related to this matter. The Company has
reached its deductible under its insurance policy and further costs, expenses
and any settlement are expected to be paid by the Company's insurers.

The Company entered into a Memorandum of Understanding regarding the
settlement of all claims in this matter. The settlement includes a payment to
class members of an amount which is well within the policy limits of, and is
expected to be paid by, the Company's insurance. As a result, it is not expected
to impact the Company's operating results. Cambrex continues to deny liability
in the matter. The settlement is subject to final approval by the Court and
entry of an agreed upon Final Judgment. Class members will have the opportunity
to either object to the terms of the settlement or to opt out of the class.

Securities and Exchange Commission ("SEC")

Since 2003, the SEC has been conducting an investigation into the Company's
inter-company accounting procedures from the period 1997 through 2001. The
investigation began in the first half of 2003 after the Company voluntarily
disclosed certain matters related to inter-company accounts for the five-year
period ending December 31, 2001 that resulted in the restatement of the
Company's financial statements for those years. In late June 2007, this matter
was concluded with the issuance by the SEC of a Cease and Desist Order
("Order"). There are no fines or penalties associated with the Order. Under the
Order, the Company agreed to undertake certain remedial actions including, for a
two year period following the effective date of the Order, having the Company's
outside auditor conduct agreed upon procedures related to intercompany
transactions and compliance with the Order, with the results of such procedures
being reported to the SEC. The Company has implemented the remedial measures and
will continue the reporting and records retention obligations set forth in the
Order. This matter may be considered concluded.

Baltimore Litigation

In 2001, the Company acquired the biopharmaceutical manufacturing business
in Baltimore (the "Baltimore Business"). The sellers of the Baltimore Business
filed suit against the Company alleging that the Company made false
representations during the negotiations on which the sellers relied in deciding
to sell the business and that the Company breached its obligation to pay
additional consideration as provided in the purchase agreement which was
contingent on the performance of the Baltimore Business.

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(dollars in thousands, except share data)

In August 2007 the United States District Court, Southern District of New
York, granted the Company's pending Motion for Summary Judgment in the Baltimore
Litigation. The Company's Motion had been pending since late 2006. The Sellers
have filed a notice of appeal. Management continues to believe the matter to be
without merit and continues its defense of this matter. The Company is awaiting
the Court's briefing schedule and has filed its appellate brief in early 2008.

Other

The Company has commitments incident to the ordinary course of business
including corporate guarantees of certain subsidiary obligations to the
Company's lenders related to financial assurance obligations under certain
environmental laws for remediation, closure and third party liability
requirements of certain of its subsidiaries and a former operating location;
contract provisions for indemnification protecting its customers and suppliers
against third party liability for manufacture and sale of Company products that
fail to meet product warranties and contract provisions for indemnification
protecting licensees against intellectual property infringement related to
licensed Company technology or processes.

Additionally, as permitted under Delaware law, the Company indemnifies its
officers and directors for certain events or occurrences while the officer or
director is, or was, serving at the Company's request in such capacity. The term
of the indemnification period is for the officer's or director's lifetime. The
maximum potential amount of future payments the Company could be required to
make under these indemnification agreements is unlimited; however, the Company
has a Director and Officer insurance policy that covers a portion of any
potential exposure. The Company currently believes the estimated fair value of
its indemnification agreements is not significant based on currently available
information, and as such, the Company has no liabilities recorded for these
agreements as of December 31, 2007.

In addition to the matters identified above, Cambrex's subsidiaries are
party to a number of other proceedings that are not considered material at this
time.

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

Fair Value Measurements

In September 2006, the FASB issued FASB Statement No. 157 "Fair Value
Measurements" ("FAS 157"). This statement defines fair value, establishes a
framework for measuring fair value in GAAP, and expands disclosures about fair
value measurements. This statement will apply whenever another standard requires
(or permits) assets or liabilities to be measured at fair value. The standard
does not expand the use of fair value to any new circumstances. FAS 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. Relative to
FAS 157, the FASB issued FASB Staff Positions (FSP) 157-2, which defers the
effective date of SFAS 157 for all nonfinancial assets and nonfinancial
liabilities, except those that are recognized or disclosed at fair value in the
financial statements on a recurring basis, until fiscal years beginning after
November 15, 2008, and interim periods within those fiscal years. The Company is
currently evaluating the potential impact of this statement.

Accounting for Uncertainty in Income Taxes

The Company adopted Financial Accounting Standards Board ("FASB")
Interpretation No. 48, Accounting for Uncertainty in Income Taxes -- an
interpretation of FASB Statement No. 109 ("FIN 48") effective January 1, 2007.
This interpretation clarified the accounting for uncertainty in income tax
positions and required the Company to recognize in the consolidated financial
statements the impact of a tax position that is more likely than not to be
sustained upon examination based on the technical merits of the position. The
effect of adopting this interpretation was not material. Refer to Note 8 for
further discussion.

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(dollars in thousands, except share data)

Accounting for Planned Major Maintenance Activities

The Company adopted FASB Staff Position ("FSP") No. AUG AIR-1 "Accounting
for Planned Major Maintenance Activities" effective January 1, 2007. This FSP
amended certain provisions of APB Opinion No. 28 "Interim Financial Reporting".
This FSP prohibited the use of the accrue-in-advance method of accounting for
planned major maintenance activities in annual and interim reporting periods.
The adoption of this FSP had an immaterial impact on the Company's financial
position and results of operations.

Employers' Accounting for Defined Benefit Pension and Other Postretirement
Plans

In September 2006, the FASB issued FASB Statement No. 158 "Employers'
Accounting for Defined Benefit Pension and Other Postretirement Plans, an
amendment of FASB Statements No. 87, 88, 106 and 132(R)" ("FAS 158") which is
effective for fiscal years ending after December 15, 2006. FAS 158 requires an
employer to recognize the overfunded or underfunded status of a defined benefit
postretirement plan as an asset or liability in the balance sheet and to
recognize changes in that funded status in the year in which the changes occur
through comprehensive income. This statement does not impact the amounts
recognized in the income statement. Based on the Company's funded status of plan
obligations disclosed in Note 14, the impact of adopting FAS 158 was a reduction
to accumulated other comprehensive income of $7,464 ($7,088 net of tax) in 2006,
with no impact to the Company's consolidated statements of operations or cash
flows. There was not any affect on the Company's financing agreements as none of
the current debt covenants were impacted.

FAS 158 will also require an employer to measure the funded status of a
plan as of the date of the fiscal year end balance sheet. The Company's pension
plans and post retirement benefits plan currently have a September 30
measurement date. This measurement requirement is effective for fiscal years
ending after December 15, 2008. The effect of adopting this pronouncement will
not have a material impact on the Company's financial position or results of
operations.

Fair Value Option for Financial Assets and Financial Liabilities

In February 2007, the FASB issued FASB Statement No. 159 "The Fair Value
Option for Financial Assets and Financial Liabilities -- Including an amendment
of FASB Statement No. 115" ("FAS 159"). This Statement permits entities to
choose to measure many financial instruments and certain other items at fair
value. Unrealized gains and losses on items for which the fair value option has
been elected should be reported in earnings at each subsequent reporting date.
FAS 159 is effective at the beginning of the Company's first fiscal year that
begins after November 15, 2007. The Company is currently evaluating the
potential impact of this statement.

Amendment of FAS 141

On December 4, 2007, the FASB issued FASB Statement No. 141 (Revised 2007),
"Business Combinations" ("FAS 141R"). Under FAS 141R, an acquiring entity will
be required to recognize all the assets acquired and liabilities assumed in a
transaction at the acquisition date fair value with limited exceptions. FAS 141R
will change the accounting treatment for certain specific items, including:

- acquisition costs will be generally expensed as incurred;

- noncontrolling interests will be valued at fair value at the acquisition
date;

- acquired contingent liabilities will be recorded at fair value at the
acquisition date and subsequently measured at either the higher of such
amount or the amount determined under existing guidance for non-acquired
contingencies;

- in-process research and development will be recorded at fair value as an
indefinite-lived intangible asset at the acquisition date until the
completion or abandonment of the associated research and development
efforts;

- restructuring costs associated with a business combination will be
generally expensed subsequent to the acquisition date; and

--------
(dollars in thousands, except share data)

- changes in deferred tax asset valuation allowances and income tax
uncertainties after the acquisition date generally will affect income tax
expense.

FAS 141R also includes a substantial number of new disclosure requirements.
FAS 141R applies prospectively to business combinations (except for income taxes
which applies to prior as well as future acquisitions) for which the acquisition
date is on or after the beginning of the first annual reporting period beginning
on or after December 15, 2008. Earlier adoption is prohibited. Accordingly, the
Company will adopt this statement on January 1, 2009. The Company is currently
assessing the impact of this statement.

FORWARD-LOOKING STATEMENTS

This document may contain "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995 and Rule 3b-6 under The
Securities Exchange Act of 1934, as amended, including, without limitation,
statements regarding expected performance, especially expectations with respect
to sales, research and development expenditures, earnings per share, capital
expenditures, acquisitions, divestitures, collaborations, or other expansion
opportunities. These statements may be identified by the fact that they use
words such as "expects," "anticipates," "intends," "estimates," "believes" or
similar expressions in connection with any discussion of future financial and
operating performance. Any forward-looking statements are qualified in their
entirety by reference to the factors discussed throughout this Form 10-K. Any
forward-looking statements contained herein are based on current plans and
expectations and involve risks and uncertainties that could cause actual
outcomes and results to differ materially from current expectations including,
but not limited to, global economic trends, pharmaceutical outsourcing trends,
competitive pricing or product developments, government legislation and
regulations (particularly environmental issues), tax rate, interest rate,
technology, manufacturing and legal issues, including the outcome of outstanding
litigation disclosed in the Company's public filings, changes in foreign
exchange rates, uncollectable receivables, loss on disposition of assets,
cancellation or delays in renewal of contracts, lack of suitable raw materials
or packaging materials, the Company's ability to receive regulatory approvals
for its products, the accuracy of the Company's current estimates with respect
to its earnings and profits for tax purposes in 2007 and other factors described
under the caption "Risk Factors That May Affect Future Results" in this Form 10-
K. Any forward-looking statement speaks only as of the date on which it is made,
and the Company undertakes no obligation to publicly update any forward-looking
statement, whether as a result of new information, future events or otherwise.
New factors emerge from time to time and it is not possible for us to predict
which will arise. In addition, the Company cannot assess the impact of each
factor on the Company's business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements.

ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required in this section can be found in the "Market Risks"
section of Item 7 on page 27 of this Form 10-K.

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(dollars in thousands, except share data)

ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following consolidated financial statements and selected quarterly
financial data of the Company are filed under this item:

PAGE NUMBER
(IN THIS REPORT)
----------------

Reports of
Independent
Registered Public
Accounting Firms.. 36
Consolidated Balance
Sheets as of
December 31, 2007
and 2006.......... 39
Consolidated
Statements of
Operations for the
Years Ended
December 31, 2007,
2006 and 2005..... 40
Consolidated
Statements of
Stockholders'
Equity for the
Years Ended
December 31, 2007,
2006 and 2005..... 41
Consolidated
Statements of Cash
Flows for the
Years Ended
December 31, 2007,
2006 and 2005..... 42
Notes to
Consolidated
Financial
Statements........ 43
Selected Quarterly
Financial and
Supplementary
Data.............. 82

The consolidated financial statements and financial statement schedule are
filed pursuant to Item 15 of this report.

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(dollars in thousands, except share data)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
Cambrex Corporation

We have audited the accompanying consolidated balance sheet of Cambrex
Corporation as of December 31, 2007 and the related consolidated statements of
operations, stockholders' equity, and cash flows for the year then ended. In
connection with our audit of the financial statements, we have also audited the
financial statement schedules. These financial statements and schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedules based on our audit.

We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and schedules, assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements and schedules. We believe that our
audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Cambrex
Corporation at December 31, 2007, and the results of its operations and its cash
flows for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.

Also, in our opinion, the financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein for
the year ended December 31, 2007.

As described in Note 3, in 2007 the Company adopted Financial Accounting
Standards Board ("FASB") Interpretation No. 48, Accounting for Uncertainty in
Income Taxes -- an interpretation of FASB Statement No. 109 ("FIN 48").

We also have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), Cambrex Corporation's
internal control over financial reporting as of December 31, 2007, based on
criteria established in Internal Control -- Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our
report dated February 27, 2008 expressed an unqualified opinion thereon.

/s/ BDO Seidman, LLP

Woodbridge, NJ
February 27, 2008

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
Cambrex Corporation

We have audited Cambrex Corporation's internal control over financial
reporting as of December 31, 2007, based on criteria established in Internal
Control -- Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria). Cambrex
Corporation's management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying "Item
9A, Management's Report on Internal Control Over Financial Reporting". Our
responsibility is to express an opinion on the Company's internal control over
financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness
exists, and testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audit also included performing
such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

In our opinion, Cambrex Corporation maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2007,
based on the COSO criteria.

We also have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the accompanying
consolidated balance sheet of Cambrex Corporation as of December 31, 2007 and
the related consolidated statements of operations, stockholders' equity, and
cash flows for the year then ended and our report dated February 27, 2008
expressed an unqualified opinion thereon.

/s/ BDO Seidman, LLP

Woodbridge, NJ
February 27, 2008

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
Cambrex Corporation

In our opinion, the consolidated financial statements listed in the index
appearing under Item 15(a) (1) present fairly, in all material respects, the
financial position of Cambrex and its subsidiaries at December 31, 2006, and the
results of their operations and their cash flows for each of the two years in
the period ended December 31, 2006 in conformity with accounting principles
generally accepted in the United States of America. In addition, in our opinion,
the information with respect to 2006 and 2005 included in the financial
statement schedule listed in the accompanying index appearing under Item
15(a)(2) presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements. These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits. We conducted our audits of these statements in accordance with the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit of financial statements includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

As discussed in Notes 3 and 13 to the consolidated financial statements, in
2006 the Company changed the manner in which it accounts for pension and other
postretirement benefit plans and the manner in which it accounts for share-based
compensation.

/s/ PRICEWATERHOUSECOOPERS LLP

Florham Park, NJ
March 15, 2007, except for the effects of the
discontinued operations with respect to 2006 and
2005 described in Note 18, as to which the date
is February 27, 2008

CAMBREX CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

DECEMBER 31,
-------------------
2007 2006
-------- --------

ASSETS
Current assets:
Cash and cash equivalents.................................. $ 38,488 $ 33,746
Trade receivables, less allowances of $560 and $571 at
respective dates........................................ 45,003 38,552
Inventories, net........................................... 61,440 53,893
Assets of discontinued operations.......................... -- 79,527
Prepaid expenses and other current assets.................. 20,104 19,032
-------- --------
Total current assets............................... 165,035 224,750
Property, plant and equipment, net........................... 165,657 141,863
Goodwill..................................................... 35,552 32,573
Assets of discontinued operations............................ -- 202,292
Other non-current assets..................................... 7,218 4,898
-------- --------
Total assets....................................... $373,462 $606,376
======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................... $ 26,185 $ 28,592
Accrued expense and other current liabilities.............. 69,702 45,101
Liabilities of discontinued operations..................... -- 33,441
-------- --------
Total current liabilities.......................... 95,887 107,134
Long-term debt............................................... 101,600 158,600
Deferred tax liabilities..................................... 19,086 14,209
Liabilities of discontinued operations....................... -- 24,267
Accrued pension and postretirement benefits.................. 32,104 39,911
Other non-current liabilities................................ 22,728 15,609
-------- --------
Total liabilities.................................. 271,405 359,730
Commitments and contingencies (see Notes 16 and 17)
Stockholders' equity:
Common Stock, $.10 par value; authorized 100,000,000 issued
31,399,700 and 30,145,319 shares at respective dates.... 3,140 3,015
Additional paid-in capital................................. 98,793 241,360
Retained earnings.......................................... 4,031 28,860
Treasury stock, at cost, 2,385,066 and 2,446,097 shares at
respective dates........................................ (20,386) (20,832)
Accumulated other comprehensive income/(loss).............. 16,479 (5,757)
-------- --------
Total stockholders' equity......................... 102,057 246,646
-------- --------
Total liabilities and stockholders' equity......... $373,462 $606,376
======== ========

See accompanying notes to consolidated financial statements.

CAMBREX CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

YEARS ENDED DECEMBER 31,
-------------------------------
2007 2006 2005
-------- -------- ---------

Gross Sales.......................................... $252,574 $236,659 $ 223,565
Allowances and rebates............................. 1,368 1,026 641
-------- -------- ---------
Net sales............................................ 251,206 235,633 222,924
Other revenues..................................... 1,299 (560) 1,289
-------- -------- ---------
Net revenues......................................... 252,505 235,073 224,213
Cost of goods sold................................. 161,273 151,215 137,302
-------- -------- ---------
Gross profit......................................... 91,232 83,858 86,911
Selling, general and administrative expenses....... 48,858 58,279 56,109
Research and development expenses.................. 12,157 10,813 11,946
Restructuring expenses............................. 6,073 -- --
Strategic alternative costs........................ 31,127 2,958 --
-------- -------- ---------
Operating (loss)/profit.............................. (6,983) 11,808 18,856
Other (income)/expenses
Interest income.................................... (5,199) (514) (799)
Interest expense................................... 4,714 5,992 3,888
Other expenses/(income), net....................... 725 (17) 201
-------- -------- ---------
(Loss)/income before income taxes.................... (7,223) 6,347 15,566
Provision for income taxes........................... 6,288 14,513 25,322
-------- -------- ---------
Loss from continuing operations...................... $(13,511) $ (8,166) $ (9,756)
Income/(loss) from discontinued operations, including
gains/losses from dispositions, net of tax......... 222,759 (21,706) (100,702)
-------- -------- ---------
Income/(loss) before cumulative effect of a change in
accounting principle............................... 209,248 (29,872) (110,458)
Cumulative effect of a change in accounting
principle.......................................... -- (228) --
-------- -------- ---------
Net income/(loss).................................... $209,248 $(30,100) $(110,458)
======== ======== =========
Basic earnings/(loss) per share
Loss from continuing operations.................... $ (0.47) $ (0.30) $ (0.37)
Income/(loss) from discontinued operations,
including gains/losses from dispositions, net of
tax............................................. $ 7.77 $ (0.81) $ (3.81)
Cumulative effect of a change in accounting
principle....................................... $ -- $ (0.01) $ --
-------- -------- ---------
Net income/(loss).................................. $ 7.30 $ (1.12) $ (4.18)
Diluted earnings/(loss) per share
Loss from continuing operations.................... $ (0.47) $ (0.30) $ (0.37)
Income/(loss) from discontinued operations,
including gains/losses from dispositions, net of
tax............................................. $ 7.77 $ (0.81) $ (3.81)
Cumulative effect of a change in accounting
principle....................................... $ -- $ (0.01) $ --
-------- -------- ---------
Net income/(loss).................................. $ 7.30 $ (1.12) $ (4.18)
Weighted average shares outstanding:
Basic and Diluted.................................. 28,683 26,816 26,456

See accompanying notes to consolidated financial statements.

CAMBREX CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

COMMON STOCK
------------------------ ADDITIONAL
PAR VALUE PAID-IN RETAINED DEFERRED TREASURY
SHARES ISSUED ($.10) CAPITAL EARNINGS COMPENSATION STOCK
------------- --------- ---------- --------- ------------ --------

BALANCE AT DECEMBER 31, 2004...... 28,825,603 $2,883 $ 213,120 $ 175,804 $(1,982) $(21,991)
Comprehensive loss
Net loss..................... (110,458)
Other comprehensive loss
Foreign currency
translation adj.........
Unrealized losses on
hedging contracts, net
of tax of $883..........
Minimum pension liability
adjustment, net of tax
of $217.................
Unrealized losses on
available for sale
marketable securities,
net of tax of $0........
Other comprehensive loss........
Total comprehensive loss..........
Cash dividends at $0.12 per
share........................... (3,176)
Purchase of treasury stock........ (75)
Exercise of stock options......... 292,538 29 3,877
Vested restricted stock........... 2,239 (149) 1,298
---------- ------ --------- --------- ------- --------
BALANCE AT DECEMBER 31, 2005...... 29,118,141 $2,912 $ 219,236 $ 62,170 $(2,131) $(20,768)
Comprehensive loss
Net loss..................... (30,100)
Other comprehensive
income/(loss)
Foreign currency
translation adj.........
Unrealized losses on
hedging contracts, net
of tax of $177..........
Pensions, net of tax of
$(20)...................
Unrealized losses on
available for sale
marketable securities,
net of tax of $0........
Reclass adjustment for loss
on marketable securities
included in net
earnings, net of tax of
$0......................
Other comprehensive income...
Total comprehensive loss..........
Adjustment to initially apply FASB
Statement No. 158, net of tax of
$376............................
Disposition of
business -- pension.............
Cash dividends at $0.12 per
share........................... (3,210)
Purchase of treasury stock........ (113)
Exercise of stock options......... 1,069,876 103 20,977 230
Deferred compensation............. -- 222 159
Vested restricted stock........... (563) 2,131 (340)
Stock option expense.............. 448
Restricted stock expense.......... 1,040
---------- ------ --------- --------- ------- --------
BALANCE AT DECEMBER 31, 2006...... 30,188,017 $3,015 $ 241,360 $ 28,860 $ -- $(20,832)
Comprehensive income
Net income................... 209,248
Other comprehensive
income/(loss)
Foreign currency translation
adj........................
Unrealized losses on
hedging contracts, net
of tax of $107..........
Pensions, net of tax of
$346....................
Reclass adjustment for gain
on marketable securities
included in net
earnings, net of tax of
$0......................
Other comprehensive income...
Total comprehensive income........
Disposition of
business -- pension.............
Cash dividends and return of
capital at $14.03 per share..... (169,782) (234,077)
Purchase of treasury stock........ (59)
Exercise of stock options......... 1,175,101 121 21,777
Deferred compensation............. 8,771 1 207 62
Vested restricted stock........... 27,811 3 (446) 443
Stock option modification......... 2,535
Stock option expense.............. 711
Restricted stock expense.......... 2,431
---------- ------ --------- --------- ------- --------
BALANCE AT DECEMBER 31, 2007...... 31,399,700 $3,140 $ 98,793 $ 4,031 $ -- $(20,386)
========== ====== ========= ========= ======= ========

ACCUMULATED
OTHER TOTAL
COMPREHENSIVE COMPREHENSIVE STOCKHOLDERS'
GAIN/(LOSS) INCOME/(LOSS) EQUITY
------------- ------------- -------------

BALANCE AT DECEMBER 31, 2004...... $ 23,482 $ 391,316
Comprehensive loss
Net loss..................... (110,458) (110,458)
Other comprehensive loss
Foreign currency
translation adj......... (40,188)
Unrealized losses on
hedging contracts, net
of tax of $883.......... (984)
Minimum pension liability
adjustment, net of tax
of $217................. (117)
Unrealized losses on
available for sale
marketable securities,
net of tax of $0........ (361)
---------
Other comprehensive loss........ (41,650) (41,650) (41,650)
---------
Total comprehensive loss.......... $(152,108)
=========
Cash dividends at $0.12 per
share........................... (3,176)
Purchase of treasury stock........ (75)
Exercise of stock options......... 3,906
Vested restricted stock........... 3,388
-------- ---------
BALANCE AT DECEMBER 31, 2005...... $(18,168) $ 243,251
Comprehensive loss
Net loss..................... (30,100) (30,100)
Other comprehensive
income/(loss)
Foreign currency
translation adj......... 14,443
Unrealized losses on
hedging contracts, net
of tax of $177.......... 280
Pensions, net of tax of
$(20)................... 839
Unrealized losses on
available for sale
marketable securities,
net of tax of $0........ (10)
Reclass adjustment for loss
on marketable securities
included in net
earnings, net of tax of
$0...................... 1,475
---------
Other comprehensive income... 17,027 17,027 17,027
---------
Total comprehensive loss.......... $ (13,073)
=========
Adjustment to initially apply FASB
Statement No. 158, net of tax of
$376............................ (7,088) (7,088)
Disposition of
business -- pension............. 2,472 2,472
Cash dividends at $0.12 per
share........................... (3,210)
Purchase of treasury stock........ (113)
Exercise of stock options......... 21,310
Deferred compensation............. 381
Vested restricted stock........... 1,228
Stock option expense.............. 448
Restricted stock expense.......... 1,040
-------- ---------
BALANCE AT DECEMBER 31, 2006...... $ (5,757) $ 246,646
Comprehensive income
Net income................... 209,248 209,248
Other comprehensive
income/(loss)
Foreign currency translation
adj........................ 15,684
Unrealized losses on
hedging contracts, net
of tax of $107.......... (1,385)
Pensions, net of tax of
$346.................... 7,734
Reclass adjustment for gain
on marketable securities
included in net
earnings, net of tax of
$0...................... (1,117)
---------
Other comprehensive income... 20,916 20,916 20,916
---------
Total comprehensive income........ $ 230,164
=========
Disposition of
business -- pension............. 1,320 1,320
Cash dividends and return of
capital at $14.03 per share..... (403,859)
Purchase of treasury stock........ (59)
Exercise of stock options......... 21,898
Deferred compensation............. 270
Vested restricted stock........... --
Stock option modification......... 2,535
Stock option expense.............. 711
Restricted stock expense.......... 2,431
-------- ---------
BALANCE AT DECEMBER 31, 2007...... $ 16,479 $ 102,057
======== =========

See accompanying notes to consolidated financial statements.

CAMBREX CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

YEARS ENDED DECEMBER 31,
---------------------------------
2007 2006 2005
--------- --------- ---------

Cash flows from operating activities:
Net income/(loss)..................................... $ 209,248 $ (30,100) $(110,458)
Adjustments to reconcile net loss to cash flows:
Depreciation and amortization......................... 19,878 19,028 19,964
Stock based compensation included in net income....... 3,142 1,281 1,936
Write-off of debt origination fees.................... 841 463 --
Strategic alternative and restructuring charges....... 17,693 -- --
Stock option modification............................. 2,535 -- --
Deferred income tax provision......................... 4,209 1,486 14,815
Allowance for doubtful accounts....................... 55 53 20
Inventory reserve..................................... 2,709 2,548 3,157
Loss on sale of assets................................ 392 441 443
Changes in assets and liabilities:
Trade receivables..................................... (4,542) (2,399) (3,225)
Inventories........................................... (6,329) (10,117) (9,755)
Prepaid expenses and other current assets............. 1,131 (6,452) 8,052
Accounts payable and other current liabilities........ (17,919) 16,831 2,545
Other non-current assets and liabilities.............. 550 (2,433) (19,274)
Discontinued operations:
(Gain)/loss on sale of businesses..................... (235,489) 23,244 --
Changes in operating assets and liabilities........... (5,428) (5,398) 8,271
Other non-cash charges................................ 2,359 24,152 18,767
Rutherford settlement, net of tax..................... 4,172 -- --
Writedown of assets................................... -- 2,092 107,177
--------- --------- ---------
Net cash (used) in/provided by operating activities... (793) 34,720 42,435
--------- --------- ---------
Cash flows from investing activities:
Capital expenditures.................................. (25,927) (23,183) (19,259)
Other investing activities............................ 887 233 2,834
Discontinued operations:
Capital expenditures.................................. (530) (15,975) (21,048)
Proceeds from sale of business........................ 466,277 -- --
Acquired in-process research and development.......... -- (1,392) --
Acquisition of businesses (net of cash acquired)...... -- -- (814)
Divestiture of business, net of cash.................. -- (636) --
Other investing activities............................ 11 (301) (1,352)
--------- --------- ---------
Net cash provided by/(used) in investing activities... 440,718 (41,254) (39,639)
--------- --------- ---------
Cash flows from financing activities:
Dividends and return of capital....................... (402,389) (3,210) (3,176)
Long-term debt activity (including current portion):
Borrowings......................................... 151,500 225,069 212,027
Repayments......................................... (208,755) (250,555) (249,900)
Proceeds from stock options exercised................. 21,898 21,310 3,906
Other................................................. (59) (113) (55)
Discontinued operations:
Long-term debt activity (including current portion):
Borrowings......................................... -- 258 92
Repayments......................................... (254) (1,450) (1,429)
--------- --------- ---------
Net cash used in financing activities................. (438,059) (8,691) (38,535)
--------- --------- ---------
Effect of exchange rate changes on cash................. 2,876 3,629 (9,770)
--------- --------- ---------
Net increase/(decrease) in cash and cash equivalents.... 4,742 (11,596) (45,509)
Cash and cash equivalents at beginning of year.......... 33,746 45,342 90,851
--------- --------- ---------
Cash and cash equivalents at end of year................ $ 38,488 $ 33,746 $ 45,342
========= ========= =========
Supplemental disclosure:
Interest paid, net of capitalized interest............ $ 5,003 $ 13,613 $ 11,185
Income taxes paid..................................... $ 17,869 $ 16,690 $ 12,181

See accompanying notes to consolidated financial statements.

CAMBREX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

(1) THE COMPANY

Cambrex Corporation and Subsidiaries (the "Company" or "Cambrex") primarily
provides products and services worldwide to pharmaceutical companies and generic
drug companies. The Company is dedicated to providing essential products and
services to accelerate drug discovery, development and manufacturing processes
for human therapeutics. The Company's products consist of active pharmaceutical
ingredients ("APIs") and pharmaceutical intermediates produced under Food and
Drug Administration current Good Manufacturing Practices for use in the
production of prescription and over-the-counter drug products and other fine
custom chemicals derived from organic chemistry.

In October 2006 the Company sold two businesses within the former Human
Health segment for nominal consideration. As a result of this transaction, the
Company reported a non-cash charge of $23,244 in the fourth quarter of 2006, and
all periods presented reflect the results of these businesses as discontinued
operations.

In February 2007, the Company completed the sale of the businesses that
comprised the Bioproducts and Biopharma segments (excluding certain liabilities)
for total cash consideration of $463,914, including working capital adjustments.
As a result of this transaction, the Company reported a gain of $235,489 in
2007, and all periods presented reflect the results of these businesses as
discontinued operations. Refer to Note 18 for a complete discussion of
discontinued operations.

Interest expense is allocated to discontinued operations based upon net
assets consistent with EITF 87-24 "Allocations of Interest on Discontinued
Operations."

Upon the completion of the sale of the businesses that comprised the
Bioproducts and Biopharma segments, Cambrex's remaining business focuses on
providing products and services to accelerate the development and
commercialization of small molecule APIs, advanced intermediates and other
products for branded and generic pharmaceuticals. Cambrex has three operating
segments, which are manufacturing facilities, that have been aggregated as one
reportable segment.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant inter-company balances and
transactions have been eliminated in consolidation.

Cash Equivalents

Temporary cash investments with an original maturity of less than three
months are considered cash equivalents. The carrying amounts approximate fair
value.

Derivative Instruments

Derivative financial instruments are used by the Company primarily for
hedging purposes to mitigate a variety of working capital, investment and
borrowing risks. The use and mix of hedging instruments can vary depending on
business and economic conditions and management's risk assessments. The Company
uses a variety of strategies, including foreign currency forward contracts and
transaction hedging, to minimize or eliminate foreign currency exchange rate
risk associated with foreign currency transactions. Gains and losses on these
hedging transactions are generally recorded in earnings in the same period as
they are realized, which is usually the same period as the settlement of the
underlying transactions. The Company uses interest rate derivative instruments
only as hedges or as an integral part of borrowing. As such, the differential to
be paid or received in connection with these instruments is accrued and
recognized in income as an adjustment to interest expense.

CAMBREX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

The Company formally documents all relationships between hedging
instruments and hedged items, as well as its risk management objectives and
strategies for undertaking various hedging relationships. All cash flow hedges
are linked to transactions and the Company assesses effectiveness at inception
and on a quarterly basis. If it is determined that a derivative instrument is
not highly effective or the transaction is no longer deemed probable of
occurring, the Company discontinues hedge accounting and recognizes the
ineffective portion in current period earnings.

Inventories

Inventories are stated at the lower of cost, determined on a first-in,
first-out basis, or market. The determination of market value involves
assessment of numerous factors, including costs to dispose of inventory and
estimated selling prices. Reserves are recorded to reduce carrying value for
inventory determined to be damaged, obsolete or otherwise unsaleable.

Property, Plant and Equipment

Property, plant and equipment is stated at cost, net of accumulated
depreciation. Plant and equipment are depreciated on a straight-line basis over
the estimated useful lives for each applicable asset group as follows:

Buildings and improvements........... 20 to 30 years, or term of lease
if applicable
Machinery and equipment.............. 7 to 15 years
Furniture and fixtures............... 5 to 7 years
Computer hardware and software....... 3 to 7 years

Expenditures for additions, major renewals or betterments are capitalized
and expenditures for maintenance and repairs are charged to income as incurred.

When assets are retired or otherwise disposed of, the cost and related
accumulated depreciation are removed from the accounts, and any resulting gain
or loss is reflected in operating expenses. Interest is capitalized in
connection with the constructions and acquisition of assets that are capitalized
over longer periods of time for larger amounts. The capitalized interest is
recorded as part of the cost of the asset to which it relates and is amortized
over the asset's estimated useful life. Total interest capitalized in connection
with ongoing construction activities in 2007, 2006 and 2005 amounted to $1,123,
$443 and $260, respectively.

Impairment of Goodwill

The Company reviews the carrying value of goodwill to determine whether
impairment may exist on an annual basis or whenever it has reason to believe
goodwill may not be recoverable. The annual impairment test of goodwill is
performed during the fourth quarter of each fiscal year.

Goodwill impairment is determined using a two-step process. The first step
of the goodwill impairment test is used to identify potential impairment by
comparing the fair value of each reporting unit, determined using various
valuation techniques, with the primary technique being a discounted cash flow
analysis, to its carrying value. If the fair value of a reporting unit exceeds
its carrying amount, goodwill of the reporting unit is considered not impaired
and the second step of the impairment test is unnecessary. If the carrying
amount of a reporting unit exceeds its fair value, the second step of the
goodwill impairment test is performed to measure the amount of impairment loss,
if any. The second step of the goodwill impairment test compares the implied
fair value of the reporting unit's goodwill with the carrying amount of that
goodwill. If the carrying amount of the reporting unit's goodwill exceeds the
implied fair value of that goodwill, an impairment loss is recognized in an
amount equal to that excess.

CAMBREX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

The impairment test for other intangible assets not subject to amortization
consists of a comparison of the fair value of the intangible asset with its
carrying value. If the carrying value of the intangible asset exceeds its fair
value, an impairment loss is recognized in an amount equal to that excess.

Impairment of Long-Lived Assets

The Company assesses the impairment of its long-lived assets, including
amortizable intangible assets, and property, plant and equipment, whenever
economic events or changes in circumstances indicate that the carrying amounts
of the assets may not be recoverable. Long lived assets are considered to be
impaired when the sum of the undiscounted expected future operating cash flows
is less than the carrying amounts of the related assets. If impaired, the assets
are written down to fair market value.

Revenue Recognition

The Company bills a portion of freight cost incurred on shipments to
customers. Freight costs are reflected in cost of goods sold. Amounts billed to
customers are recorded within net revenues.

Income Taxes

The Company and its eligible subsidiaries file a consolidated U.S. income
tax return. Certain subsidiaries which are consolidated for financial reporting
are not eligible to be included in the consolidated U.S. income tax

CAMBREX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

return. Cambrex has not provided U.S. federal income and withholding taxes on
its undistributed earnings from non-U.S. operations as of December 31, 2007
because it intends to reinvest such earnings indefinitely outside of the United
States. If Cambrex were to distribute these earnings, it is anticipated that
foreign tax credits will be available under current law to significantly reduce
the resulting U.S. income tax liability. Determination of the amount of
unrecognized deferred tax related to these earnings is not practical. At
December 31, 2007, the cumulative amount of unremitted earnings of non-U.S.
subsidiaries was approximately $38,000.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Environmental Costs

In the ordinary course of business, the Company is subject to extensive and
changing federal, state, local and foreign environmental laws and regulations,
and has made provisions for the estimated financial impact of environmental
cleanup related costs. The Company's policy is to accrue environmental cleanup
related costs of a non-capital nature, including estimated litigation costs,
when those costs are believed to be probable and can be reasonably estimated.
The quantification of environmental exposures requires an assessment of many
factors, including changing laws and regulations, advancements in environmental
technologies, the quality of information available related to specific sites,
the assessment stage of each site investigation, preliminary findings and the
length of time involved in remediation or settlement. Such accruals are adjusted
as further information develops or circumstances change. For certain matters,
the Company expects to share costs with other parties. Costs of future
expenditures for environmental remediation obligations are not discounted to
their present value unless the aggregate amount of the liability and the timing
of cash payments are fixed or reasonably determinable. Recoveries of
environmental remediation costs from other parties are recorded as assets when
their receipt is deemed certain.

Foreign Currency

The functional currency of the Company's foreign subsidiaries is the
applicable local currency. The translation of the applicable foreign currencies
into U.S. dollars is performed for balance sheet accounts using current exchange
rates in effect at the balance sheet date and for revenue and expense accounts
and cash flows using average rates of exchange prevailing during the year.
Adjustments resulting from the translation of foreign currency financial
statements are accumulated in a separate component of stockholders' equity until
the entity is sold or substantially liquidated. Gains or losses relating to
transactions of a long-term investment nature are accumulated in stockholders'
equity. Gains or losses resulting from foreign currency transactions are
included in the results of operations as a component of other revenues in the
consolidated income statement. Foreign currency net transaction gains/(losses)
were $260, ($1,042) and $1,128 in 2007, 2006 and 2005, respectively.

Earnings Per Common Share

All diluted earnings per share are computed on the basis of the weighted
average shares of common stock outstanding plus common equivalent shares arising
from the effect of dilutive stock options, using the treasury stock method.

CAMBREX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

Earnings per share calculations are as follows:

FOR THE YEARS ENDED,
-------------------------------
2007 2006 2005
-------- -------- ---------

Net income/(loss):
Loss from continuing operations................ $(13,511) $ (8,166) $ (9,756)
Income/(loss) from discontinued operations, net
of tax....................................... 222,759 (21,706) (100,702)
Cumulative effect of a change in accounting
principle.................................... -- (228) --
-------- -------- ---------
Net income/(loss).............................. $209,248 $(30,100) $(110,458)
======== ======== =========
Weighted average shares outstanding:
Basic weighted average shares outstanding...... 28,683 26,816 26,456
Effect of dilutive stock options*.............. -- -- --
-------- -------- ---------
Diluted weighted average shares outstanding.... 28,683 26,816 26,456

Income/(loss) per share (basic):
Loss from continuing operations................ $ (0.47) $ (0.30) $ (0.37)
Income/(loss) from discontinued operations, net
of tax....................................... $ 7.77 $ (0.81) $ (3.81)
Cumulative effect of a change in accounting
principle.................................... $ -- $ (0.01) $ --
-------- -------- ---------
Net income/(loss).............................. $ 7.30 $ (1.12) $ (4.18)
======== ======== =========
Income/(loss) per share (diluted):
Loss from continuing operations................ $ (0.47) $ (0.30) $ (0.37)
Income/(loss) from discontinued operations, net
of tax....................................... $ 7.77 $ (0.81) $ (3.81)
Cumulative effect of a change in accounting
principle.................................... $ -- $ (0.01) $ --
-------- -------- ---------
Net income/(loss).............................. $ 7.30 $ (1.12) $ (4.18)
======== ======== =========

* For 2007, 2006 and 2005, the effect of stock options would be anti-dilutive
and is therefore excluded.

For the years ended December 31, 2007, 2006 and 2005, shares of 1,171,895,
2,157,470, and 3,317,847, respectively, were not included in the calculation of
diluted shares outstanding because the effect would be anti-dilutive.

Stock Based Compensation

In accordance with FAS 123(R) "Share-Based Payment," beginning January 1,
2006, the Company began recognizing compensation costs for stock option awards
to employees based on their grant-date fair value. The value of each stock
option is estimated on the date of grant using the Black-Scholes option-pricing
model.

Prior to 2006, the Company accounted for those plans under the recognition
and measurement principles of APB Opinion No. 25, "Accounting for Stock Issued
to Employees", and related interpretations. No stock-based employee compensation
cost related to the stock option plans was reflected in net income in 2005, as
all options granted under those plans had an exercise price equal to the market
value of the underlying common stock on the date of grant.

CAMBREX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

The following table illustrates the effect on net income and earnings per
share if the Company had applied the fair value recognition provisions of FAS
123 "Accounting for Stock-Based Compensation" as amended by FAS 148, "Accounting
for Stock-Based Compensation", to stock-based employee compensation.

YEAR ENDED
DECEMBER 31,
2005
------------

Net loss, as reported........................................ $(110,458)
Add: stock based compensation expense included in reported
net loss................................................... 1,936
Deduct: stock-based compensation expenses determined using
fair value method.......................................... 21,504
---------
Pro forma net loss........................................... $(130,026)
Loss per share:
Basic -- as reported....................................... $ (4.18)
Basic -- pro forma......................................... $ (4.91)
Diluted -- as reported..................................... $ (4.18)
Diluted -- pro forma....................................... $ (4.91)

During 2005 all unvested options were fully vested by the Compensation
Committee of the Board of Directors. Approximately 2,650,000 unvested options
were vested resulting in the acceleration of pro forma compensation expense of
$12,711 in 2005. The purpose of the accelerated vesting was to eliminate
compensation expense in the income statement that the Company would otherwise
have recorded with respect to these accelerated options subsequent to the
January 1, 2006 effective date of FAS 123(R). Due to this acceleration of stock
options, the pro forma disclosures are not likely to be representative of the
effects on reported net income for future periods.

The pro forma compensation expense for 2005 was calculated based on
recognizing ratably over the vesting period the fair value of each option
determined using the Black-Scholes option-pricing model.

Marketable Securities

The Company determines the appropriate classification of all marketable
securities as held-to-maturity, available-for-sale or trading at the time of
purchase, and re-evaluates such classification as of each balance sheet date. As
of December 31, 2006 and 2005, all of the Company's marketable securities were
classified as available-for-sale, and as a result, were reported at fair value.
All such securities were sold in 2007. Unrealized gains and losses are reflected
as a net amount under the caption of accumulated other comprehensive
income/(loss) in stockholders' equity. Realized gains and losses are recorded in
other expenses. For purposes of computing gains or losses, cost is identified on
a specific identification basis. As of December 31, 2006 the fair value of
marketable securities was $1,298 and the cost basis was $180. Unrealized gains
of $1,330 and unrealized losses of $213 were recorded in accumulated other
comprehensive income as of December 31, 2006.

Comprehensive Income/(Loss)

Included within accumulated other comprehensive income/(loss) for the
Company are foreign currency translation adjustments, changes in the fair value
related to derivative instruments classified as cash flow hedges, net of related
tax benefit, unrealized gain on available for sales securities and changes in
the pensions, net of tax. Total comprehensive income/(loss) for the years ended
2007 and 2006 is included in the Statements of Stockholders' Equity.

CAMBREX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

The components of accumulated other comprehensive income/(loss) in
stockholders' equity are as follows:

2007 2006
------- --------

Foreign currency translation............................ $23,040 $ 7,359
Unrealized (loss)/gain on hedging contracts, net of
tax................................................... (1,294) 88
Unrealized gain on available for sale securities........ -- 1,117
Pensions, net of tax.................................... (5,267) (14,321)
------- --------
Total................................................. $16,479 $ (5,757)
======= ========

(3) IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Fair Value Measurements

In September 2006, the FASB issued FASB Statement No. 157 "Fair Value
Measurements" ("FAS 157"). This statement defines fair value, establishes a
framework for measuring fair value in GAAP, and expands disclosures about fair
value measurements. This statement will apply whenever another standard requires
(or permits) assets or liabilities to be measured at fair value. The standard
does not expand the use of fair value to any new circumstances. FAS 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. Relative to
FAS 157, the FASB issued FASB Staff Positions ("FSP") 157-2, which defers the
effective date of SFAS 157 for all nonfinancial assets and nonfinancial
liabilities, except those that are recognized or disclosed at fair value in the
financial statements on a recurring basis, until fiscal years beginning after
November 15, 2008, and interim periods within those fiscal years. The Company is
currently evaluating the potential impact of this statement.

Accounting for Uncertainty in Income Taxes

The Company adopted FIN 48 effective January 1, 2007. This interpretation
clarified the accounting for uncertainty in income tax positions and required
the Company to recognize in the consolidated financial statements the impact of
a tax position that is more likely than not to be sustained upon examination
based on the technical merits of the position. The effect of adopting this
interpretation was not material. Refer to Note 8 for further discussion.

Accounting for Planned Major Maintenance Activities

Employers' Accounting for Defined Benefit Pension and Other Postretirement
Plans

CAMBREX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

(3) IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS -- (CONTINUED)

the Company's funded status of plan obligations disclosed in Note 14, the impact
of adopting FAS 158 was a reduction to accumulated other comprehensive income of
$7,464 ($7,088 net of tax) in 2006, with no impact to the Company's consolidated
statements of operations or cash flows. There was not any affect on the
Company's financing agreements as none of the current debt covenants were
impacted.

Fair Value Option for Financial Assets and Financial Liabilities

Amendment of FAS 141

- acquisition costs will be generally expensed as incurred;

- noncontrolling interests will be valued at fair value at the acquisition
date;

- restructuring costs associated with a business combination will be
generally expensed subsequent to the acquisition date; and

- changes in deferred tax asset valuation allowances and income tax
uncertainties after the acquisition date generally will affect income tax
expense.

CAMBREX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

(4) GOODWILL

The changes in the carrying amount of goodwill for the years ended December
31, 2007 and 2006 are as follows:

Balance as of January 1, 2006............................. $29,937
Translation effect........................................ 2,636
-------
Balance as of December 31, 2006........................... $32,573
-------
Translation effect........................................ 2,979
-------
Balance as of December 31, 2007........................... $35,552
=======

(5) NET INVENTORIES

Inventories are stated at the lower of cost, determined on a first-in,
first-out basis, or market.

Net inventories consist of the following:

DECEMBER 31,
-----------------
2007 2006
------- -------

Finished goods..................................... $25,646 $23,792
Work in process.................................... 21,301 15,540
Raw materials...................................... 11,058 11,696
Supplies........................................... 3,435 2,865
------- -------
Total............................................ $61,440 $53,893
======= =======

(6) PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

DECEMBER 31,
---------------------
2007 2006
--------- ---------

Land............................................ $ 3,451 $ 3,230
Buildings and improvements...................... 77,459 72,478
Machinery and equipment......................... 287,602 260,230
Furniture and fixtures.......................... 1,729 1,617
Construction in progress........................ 45,129 25,922
--------- ---------
Total...................................... 415,370 363,477
Accumulated depreciation........................ (249,713) (221,614)
--------- ---------
Net........................................... $ 165,657 $ 141,863
========= =========

Depreciation expense was $19,799, $18,989 and $19,925 for the years ended
December 31, 2007, 2006 and 2005, respectively. The Company made significant
Capital improvements to two facilities. Total Capital expenditures in 2007 was
$33,600 which includes $7,673 that was not paid as of December 31, 2007.

CAMBREX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

(7) ACCRUED EXPENSE AND OTHER CURRENT LIABILITIES

The components of accrued expenses and other current liabilities are as
follows:

DECEMBER 31,
-----------------
2007 2006
------- -------

Salaries and employee benefits payable............. $18,035 $16,694
Legal services..................................... 4,741 5,094
Deferred revenue................................... 5,190 4,288
Restructuring and strategic alternatives........... 18,414 --
Rutherford settlement.............................. 4,421 --
Deferred tax liabilities........................... 4,971 519
Taxes payable...................................... 3,444 6,694
Other.............................................. 10,486 11,812
------- -------
Total............................................ $69,702 $45,101
======= =======

(8) INCOME TAXES

(Loss)/Income before income taxes consist of the following:

DECEMBER 31,
------------------------------
2007 2006 2005
-------- -------- --------

Domestic.................................. $(48,634) $(32,954) $(16,916)
International............................. 41,411 39,301 32,482
-------- -------- --------
Total................................... $ (7,223) $ 6,347 $ 15,566
======== ======== ========

The provision for income taxes consist of the following
provisions/(benefits):

DECEMBER 31,
---------------------------
2007 2006 2005
------- ------- -------

Current:
Federal................................... $(8,317) $ 680 $ --
State..................................... 380 (614) 8
International............................. 10,016 12,961 10,499
------- ------- -------
$ 2,079 $13,027 $10,507
======= ======= =======
Deferred:
Federal................................... $ 172 $ 337 $17,238
State..................................... -- -- 111
International............................. 4,037 1,149 (2,534)
------- ------- -------
4,209 1,486 14,815
------- ------- -------
Total.................................. $ 6,288 $14,513 $25,322
======= ======= =======

CAMBREX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

(8) INCOME TAXES -- (CONTINUED)

The provision for income taxes differs from the statutory federal income
tax rate of 35% for 2007, 2006 and 2005 as follows:

DECEMBER 31,
---------------------------
2007 2006 2005
------- ------- -------

Income tax (benefit)/provision at U.S
federal statutory rate.................... $(2,528) $ 2,220 $ 5,447
State and local taxes, net of federal income
tax benefits.............................. 73 7 115
Effect of foreign income taxed at rates
other than the U.S. federal statutory
rate...................................... (27) (1,082) (3,318)
Permanent items (primarily compensation).... 9,225 -- --
Net change in valuation allowance........... 7,816 11,804 7,946
GAAP benefit in continuing operations....... (7,915) -- --
Indefinite-lived intangibles................ 172 337 16,926
Adjustments for prior years' taxes.......... (536) 1,393 (2,960)
Other....................................... 8 (166) 1,166
------- ------- -------
Total..................................... $ 6,288 $14,513 $25,322
======= ======= =======

The components of deferred tax assets and liabilities as of December 31,
2007 and 2006 relate to temporary differences and carryforwards as follows:

DECEMBER 31,
-----------------
2007 2006
------- -------

Current deferred tax assets:
Inventory........................................ $ 507 $ 985
Receivables...................................... 145 133
Legal and related reserves....................... 4,959 5,493
Disposition reserve.............................. 1,860 --
Other............................................ 3,755 3,771
------- -------
Current deferred tax assets...................... 11,226 10,382
Valuation allowances............................. (6,026) (9,569)
------- -------
Total current deferred tax assets............. $ 5,200 $ 813
======= =======
Current deferred tax liabilities:
Unremitted foreign earnings...................... $ 4,618 $ --
Other............................................ 353 519
------- -------
Total current deferred tax liabilities........ $ 4,971 $ 519
======= =======

CAMBREX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

(8) INCOME TAXES -- (CONTINUED)

DECEMBER 31,
-------------------
2007 2006
-------- --------

Non-current deferred tax assets:
Foreign tax credits carryforwards............... $ 44,270 $ 39,957
Environmental................................... 1,921 1,305
Contribution carryforwards...................... -- 21
Net operating loss carryforwards (domestic)..... -- 23,773
Net operating loss carryforwards (foreign)...... 1,858 3,258
Employee benefits............................... 7,412 7,678
Impairment of investment in securities.......... -- 2,360
Research & experimentation tax credits
carryforwards................................ 1,237 565
Alternative minimum tax credits carryforwards... 4,054 3,634
Fixed assets.................................... 1,088 3,546
Intangibles..................................... 16 274
Other........................................... 1,163 3,446
-------- --------
Non-current deferred tax assets................. 63,019 89,817
Valuation allowances*........................... (58,816) (81,834)
-------- --------
Total non-current deferred tax assets........ $ 4,203 $ 7,983

Non-current deferred tax liabilities:
Fixed assets.................................... $ 6,978 $ 5,073
Intangibles..................................... 6,348 6,626
Indefinite-lived intangibles.................... 1,531 1,360
Foreign tax allocation reserve.................. 8,061 8,152
Other........................................... 371 981
-------- --------
Total non-current deferred tax liabilities... $ 23,289 $ 22,192
======== ========
Total net non-current deferred tax
liabilities................................ $ 19,086 $ 14,209
======== ========

* In addition to the effect of the domestic and foreign valuation allowances
reflected in the current effective tax rate, the valuation allowance has
changed due to discontinued operations, agreed tax audit adjustments for
prior year deferred tax amounts and currency translation adjustments.

The Company establishes a valuation allowance against deferred tax assets
when it is more likely than not that the Company will be unable to realize those
deferred tax assets in the future. Based on the Company's current and past
performance, cumulative losses in recent years resulting from domestic
operations, the market environment in which the Company operates, and the
utilization of past tax attributes, the Company has established a valuation
allowance of $63,894 against a portion of its domestic deferred tax assets.
However, the Company has not recorded a valuation allowance against domestic tax
assets which are offset by domestic deferred tax liabilities that are expected
to reverse in the future. With respect to the Company's foreign deferred tax
assets, the Company has recorded a valuation allowance of $948 as of December
31, 2007.

The Company expects to maintain a full valuation allowance against its net
domestic deferred tax assets (primarily foreign tax credits), subject to the
consideration of all prudent and feasible tax planning strategies, until such
time as the Company attains an appropriate level of future domestic
profitability and the Company is able to

CAMBREX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

(8) INCOME TAXES -- (CONTINUED)

conclude that it is more likely than not that its domestic deferred tax assets
are realizable. The change in the domestic valuation allowance for the years
ended December 31, 2007 and 2006 was $26,506 and $8,236 respectively. The change
in the foreign valuation allowance for the years ended December 31, 2007 and
2006 was $55 and $214, respectively.

Under the tax laws of the various jurisdictions in which the Company
operates, net operating losses ("NOLs") may be carried forward or back, subject
to statutory limitations, to reduce taxable income in future or prior years. The
domestic NOLs have been fully utilized in 2007 as a result of the sale of the
businesses that comprised the Bioproducts and Biopharma segments and the foreign
NOLs total approximately $6,301. NOLs in foreign jurisdictions will carryforward
indefinitely.

As of December 31, 2007, $44,270 of foreign tax credits, $1,237 of research
& experimentation tax credits and $4,054 of alternative minimum tax credits were
available as credits against future U.S. income taxes. Under the U.S. Internal
Revenue Code, these will expire in 2014 through 2017, and 2020 through 2027,
respectively. The alternative minimum tax credit carryforwards have no
expiration date. All domestic credits are offset by a full valuation allowance.

The Company has not provided U.S. federal income and withholding taxes on
its undistributed earnings from non-U.S. operations as of December 31, 2007
because it intends to reinvest such earnings indefinitely outside of the United
States. Determination of the amount of unrecognized deferred tax related to
these earnings is not practical. The Company will, however, repatriate
approximately $16,000 of cash resulting from the sale of its Bioproducts non-
U.S. businesses. The Company has provided for the tax effect of this in its 2007
tax provision.

As described in Note 3, the Company adopted the provisions of FIN 48 as of
January 1, 2007. As of that date the Company had approximately $5,522 of
unrecognized tax benefits. During 2007, the Company increased its unrecognized
tax benefits by $128 for current year positions which is offset by a decrease in
unrecognized tax benefits of $486, mainly for prior year expiration of statute
of limitation periods. The total balance of unrecognized benefits at December
31, 2007 of $5,116, if recognized, would affect the effective tax rate. However,
of this total, $2,600 related to U.S. tax attributes may be subject to an
application of a valuation allowance which would offset the positive effect
associated with the recognition of such benefits.

In the next twelve months the Company may decrease its reserve for
unrecognized tax benefits for intercompany transactions by approximately $500
mainly due to the expiration of a statute of limitation period. Additionally, it
may decrease this reserve by approximately $937 due to a potential favorable
court decision regarding taxability of dividends and statute expiration and by
approximately $100 for resolution of certain state matters. With the exception
of the resolution of certain state matters these items would impact the income
tax provision.

The following table summarizes the activity related to the Company's
unrecognized tax benefits:

Balance at January 1, 2007...................................... $5,522
Gross increases related to current period tax positions......... 128
Gross decreases related to prior period tax positions........... (109)
Expiration for statute of limitations for the assessment of
taxes......................................................... (377)
Foreign currency translation.................................... (48)
------
Balance at December 31, 2007.................................... $5,116
======

Gross interest and penalties of $420 related to the above unrecognized tax
benefits are not reflected in the table above. Consistent with prior periods,
the Company recognizes interest and penalties within its income tax provision.

CAMBREX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

(8) INCOME TAXES -- (CONTINUED)

The Company has recently finalized the IRS examination for the periods
2001-2003. Although not currently under examination by the IRS, the Company is
subject to examination for the years 2004 through 2007. It is also subject to
exams in foreign jurisdictions for 2003 and 2005 forward for its significant
non-U.S. jurisdictions.

The Company is also subject to audit in various states for various years in
which it has filed income tax returns. Recently finalized state audits have not
resulted in material adjustments. Open years for the majority of states where
the Company files are for 2004 and forward.

(9) LONG-TERM DEBT

In February 2007, proceeds from the sale of the businesses that comprised
the Bioproducts and Biopharma segments, as discussed in Note 18, were used to
repay all outstanding debt under a prior credit facility. Due to this repayment,
$841 was recorded in interest expense in 2007 related to the acceleration of
unamortized origination fees.

In April 2007, the Company entered into a $200,000 five-year Syndicated
Senior Revolving Credit Facility which expires in April 2012.

As of December 31, 2007 there was $101,600 outstanding and $98,400 undrawn
under the 5-Year Agreement. The full amount of the undrawn balance is available
to be borrowed as of December 31, 2007.

The 2007 and 2006 weighted average interest rate for long-term bank debt
was 6.9% and 5.8%, respectively.

The balance of $101,600 outstanding as of December 31, 2007 matures in
2012.

(10) DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company uses derivative financial instruments to reduce exposures to
market risks resulting from fluctuations in interest rates and foreign exchange
rates. The Company is exposed to credit loss in the event of nonperformance by
the counter parties to the contracts. However, the Company does not anticipate
non-performance by the counterparties.

The Company's policy is to enter into forward exchange contracts or
currency options to hedge foreign currency transactions. This hedging strategy
mitigates the impact of short-term foreign exchange rate movements on the
Company's operating results primarily in Sweden and Italy. The Company's primary
market risk relates to exposures to foreign currency exchange rate fluctuations
on transactions entered into by these international operations that are
denominated primarily in U.S. dollars, Swedish krona, and Euros. As a matter of
policy, the Company does not hedge to protect the translated results of foreign
operations.

The Company's forward exchange contracts substantially offset gains and
losses on the transactions being hedged. The forward exchange contracts have
varying maturities with none exceeding twelve months. The Company makes net
settlements for forward exchange contracts at maturity, based upon negotiated
rates at inception of the contracts. The Company also enters into interest rate
swap agreements to reduce the impact of

CAMBREX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

(10) DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS -- (CONTINUED)

changes in interest rates on its floating rate debt. The swap agreements are
contracts to exchange floating rate for fixed interest payments periodically
over the life of the agreements without the exchange of the underlying notional
debt amounts.

All forward and swap contracts outstanding at December 31, 2007 have been
designated as cash flow hedges and, accordingly, changes in the fair value of
derivatives are recorded each period in accumulated other comprehensive income.
Changes in the fair value of the derivative instruments reported in accumulated
other comprehensive income will be reclassified into earnings in the period in
which earnings are impacted by the variability of the cash flows of the hedged
item. The ineffective portion of all hedges is recognized in current-period
earnings and is immaterial to the Company's financial results. The unrealized
net loss recorded in accumulated other comprehensive income at December 31, 2007
was $352 and $1,124 for forwards and swaps, respectively. These amounts will be
reclassified into earnings as the underlying forecasted transactions occur. The
net gain recognized in earnings related to foreign currency forward contracts
during the twelve months ended December 31, 2007 was $526.

Interest Rate Swap Agreements

The notional amounts provide an indication of the extent of the Company's
involvement in such agreements but do not represent its exposure to market risk.
The following table shows the notional amounts outstanding, maturity dates, and
the weighted average receive and pay rates of interest rate swap agreements as
of December 31, 2007.

WEIGHTED AVG.
RATE
NOTIONAL MATURITY ---------------
AMOUNTS DATE PAY RECEIVE
-------- -------- ----- -------

$20,000............................................. 2010 4.48% 4.85%
$20,000............................................. 2010 4.49% 4.85%
$20,000............................................. 2010 4.46% 4.85%

Interest expense under these agreements, and the respective debt
instruments that they hedge, are recorded at the net effective interest rate of
the hedged transactions. The fair value of these agreements was based on quoted
market prices and was in a loss position of $1,124 at December 31, 2007.

Foreign Exchange Instruments

The table below reflects the notional and fair value amounts of foreign
exchange contracts at December 31, 2007 and 2006:

2007 2006
---------------- ----------------
NOTIONAL FAIR NOTIONAL FAIR
AMOUNTS VALUE AMOUNTS VALUE
-------- ----- -------- -----

Forward exchange contracts.................... $22,078 $(74) $14,255 $292

The carrying amount reported in the consolidated balance sheets for cash
and cash equivalents, accounts receivable, and accounts payable approximates
fair value because of the immediate or short-term maturity of these financial
instruments. The carrying amount for short-term and long-term debt approximates
fair value because all of this underlying debt is at variable rates.

CAMBREX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

(11) STRATEGIC ALTERNATIVE AND RESTRUCTURING CHARGES

Strategic Alternative Costs

As a result of the sale of the Bioproducts and Biopharma segments, certain
benefits became payable under change of control agreements between the Company
and four of its current or former executives. These costs totaled $20,025 in
2007. Also included in strategic alternative costs are retention bonuses of
$6,780; this includes amounts paid to certain current employees for continued
employment, generally through September 30, 2007 and December 31, 2007, costs
associated with the modification of employee stock options due to the payment of
the special dividend in connection with the divestiture of $2,854 and external
advisor costs of $456. The Company may recognize additional expense in future
quarters as the potential for changes in estimates exists. Substantially all of
these charges have been or will be paid in cash. The exact timing of the
payments is uncertain at this time but the majority is expected to be in 2008.

Total strategic alternative costs for 2007 were $31,127. Strategic
alternative costs for 2006 totaled $2,958 consisting of external advisor costs
related to divestitures.

Corporate Office Restructuring

The Company announced plans to eliminate approximately 30 employee
positions at the corporate office upon completion of the sale of the businesses
that comprised the Bioproducts and Biopharma segments in February 2007. This
plan included certain one-time benefits for employees terminated and is
substantially completed as of December 31, 2007. For 2007, the Company
recognized expense of $4,014, consisting of $3,787 which will be paid in cash
and $227 for stock based compensation and other professional fees. The Company
expects the total charge for the program to be approximately $4,100,
substantially all of which will be paid in cash. The Company anticipates annual
cost savings related to the elimination of all these positions to be
approximately $5,200.

The following table reflects the activity related to the severance reserve
through December 31, 2007:

2007 ACTIVITY
JANUARY 1, ------------------ DECEMBER 31,
2007 CASH 2007
RESERVE BALANCE EXPENSE PAYMENTS RESERVE BALANCE
--------------- ------- -------- ---------------

Employee termination costs.......... $-- $3,787 $(2,975) $812
--- ------ ------- ----
$-- $3,787 $(2,975) $812
=== ====== ======= ====

CAMBREX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

(11) STRATEGIC ALTERNATIVE AND RESTRUCTURING CHARGES -- (CONTINUED)

Consolidation of Domestic Research and Development Activities

In November 2007, the Company announced that it will consolidate its United
States research and development activities and small scale API production with
its facility in Charles City, Iowa. As a result of the consolidation, the
Company's New Jersey R&D facility was substantially closed as of December 31,
2007. Due to the closure eighteen employee positions are planned to be
eliminated of which thirteen were eliminated as of December 31, 2007.

The Company recognized restructuring expenses in 2007 of $2,059, of which
approximately $1,354 will be in cash. The charge of $2,059 consists of the
present value of the remaining lease payments under the Company's current
operating lease at the New Jersey R&D facility (reduced by estimated sublease
rentals) of $998, leasehold improvement write-offs of $705 and employee
retention and severance of $356. Costs related to this plan are recorded as
restructuring expenses on the income statement. The operating lease expires in
December 2010. In accordance with accounting guidance, the severance and
retention charges are being recognized ratably over the remaining service
period. An additional charge of $115 will occur in 2008 related to severance.
Lease payments are approximately $1,400 per year. As a result of closing this
facility, cost savings going forward amounts to approximately $2,100 per year
related to personnel costs which will be offset by continued lease expense.

The following table reflects the activity related to the restructuring
reserve through December 31, 2007:

2007 ACTIVITY
JANUARY 1, ------------------ DECEMBER 31,
2007 CASH 2007
RESERVE BALANCE EXPENSE PAYMENTS RESERVE BALANCE
--------------- ------- -------- ---------------

Employee termination costs.......... $-- $ 356 $-- $ 356
Present value of lease payments..... -- 998 -- 998
--- ------ --- ------
$-- $1,354 $-- $1,354
=== ====== === ======

(12) STOCKHOLDERS' EQUITY

The Company has two classes of common shares which are Common Stock and
Nonvoting Common Stock. Authorized shares of Common Stock were 100,000,000 at
December 31, 2007 and 2006. Authorized shares of Nonvoting Common Stock were
730,746 at December 31, 2007 and 2006. Nonvoting Common Stock with a par value
of $.10 has equal rights with Common Stock, with the exception of voting power.
Nonvoting Common Stock is convertible, share for share, into Common Stock,
subject to any legal requirements applicable to holders restricting the extent
to which they may own voting stock. As of December 31, 2007 and 2006, no shares
of Nonvoting Common Stock were outstanding. The Company has authorized 5,000,000
shares of Series Preferred Stock, par value $.10, issuable in series and with
rights, powers and preferences as may be fixed by the Board of Directors. At
December 31, 2007 and 2006, there was no preferred stock outstanding.

On May 3, 2007, the Company paid a special dividend of $14.00 per share to
its shareholders resulting in a reduction in stockholders' equity of $403,026.
The effect on stockholders' equity was a reduction to retained earnings of
$233,244, representing total accumulated earnings as of the date of declaration,
with the remainder representing a return of capital of $169,782. As of December
31, 2007, cash disbursements were $401,556 and $1,470 was accrued related to
dividends on unvested restricted stock. The Company also announced that it will
no longer pay a quarterly dividend.

The Company held treasury stock of 2,385,066 and 2,446,097 shares at
December 31, 2007 and 2006, respectively, which are primarily used for issuance
to employee benefit plans.

CAMBREX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

(12) STOCKHOLDERS' EQUITY -- (CONTINUED)

At December 31, 2007 there were 478,300 authorized shares of Common Stock
reserved for issuance for stock option plans.

(13) STOCK BASED COMPENSATION

Beginning January 1, 2006, the Company began recognizing compensation costs
for stock option awards to employees based on their grant-date fair value. The
value of each stock option is estimated on the date of grant using the Black-
Scholes option-pricing model. The weighted-average fair value per share for the
stock options granted to employees for the years ended December 31, 2007, 2006
and 2005 were $5.44, $8.00 and $8.56, respectively.

The following assumptions were used in determining the fair value of stock
options for grants issued in 2007, 2006 and 2005:

2007 2006 2005
----------------- ----------------- -------------

Expected volatility............... 34.38% - 36.90% 36.49% - 38.28% 41.20%
Average dividend yield............ 0.00% 0.55% - 0.56% 0.57%
Expected term..................... 3.75 - 4.75 years 3.75 - 4.75 years 6 - 7 years
Risk-free interst rate............ 4.30% - 4.85% 4.42% - 4.96% 2.75% - 4.47%

The Company's stock options are not publicly traded; therefore, expected
volatilities are based on historical volatility of the Company's stock. The
risk-free interest rate is based on the yield of a zero-coupon U.S. Treasury
bond whose maturity period approximates the option's expected term. The expected
term was utilized based on the "simplified" method for determining the expected
term of stock options in Staff Accounting Bulletin No. 107, "Share-Based
Payment." Assumptions used in estimating the fair value of stock options granted
for the year ended December 31, 2007 and 2006 are consistent with the
assumptions used prior to the adoption of FAS 123(R) with the exception of the
expected life. As a result of using the "simplified" method, the expected life
was shortened by 1.25 years.

FAS 123(R) requires companies to estimate the expected forfeitures for all
unvested awards and record compensation costs only for those awards that are
expected to vest. As of December 31, 2007, the total compensation cost related
to unvested stock option awards granted to employees but not yet recognized was
$968. The cost will be amortized on a straight-line basis over the remaining
weighted-average vesting period of 3.2 years.

For 2007 and 2006, the Company recorded $379 and $383, respectively, in
selling, general and administrative expenses for stock options. In addition, the
Company recorded $282 and $50 in strategic alternative costs and restructuring
expenses, respectively, for stock options related to the change in control
agreements and the reduction in workforce in 2007.

In addition, for 2007 the Company recorded $2,535 in strategic alternative
costs for expenses associated with a stock option modification due to the
special dividend paid on May 3, 2007. The modification reduced the exercise
price of all stock options outstanding as of the dividend payment date by $14.00
per share, the amount of the special dividend. As of December 31, 2007, the
total compensation cost related to unvested stock option awards that were
modified but not yet recognized was $297. The cost will be amortized on a
straight-line basis over the remaining weighted-average vesting period of 2.6
years.

For the years ended December 31, 2007, 2006, and 2005, the Company recorded
$705, $898, and $881, respectively, in selling, general and administrative
expenses for restricted stock. In addition, the Company recorded $1,554 and $172
in strategic alternative costs and restructuring expenses, respectively, in 2007
for restricted stock and the Company recorded $2,214 in compensation expense in
2005 for restricted stock in accordance with the

CAMBREX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

(13) STOCK BASED COMPENSATION -- (CONTINUED)

former CEO's sign-on agreement. As of December 31, 2007 the total compensation
cost related to unvested restricted stock granted but not yet recognized was
$1,541. The cost will be amortized on a straight-line basis over the remaining
weighted-average vesting period of 1.8 years.

Cambrex senior executives participate in a long-term incentive plan which
rewards achievement of long-term strategic goals with restricted stock units.
Awards are made annually to key executives and vest in one-third increments on
the first, second and third anniversaries of the grant. On the third anniversary
of the grant, restrictions on sale or transfer are removed and shares are issued
to executives. In the event of termination of employment or retirement, the
participant is entitled to the vested portion of the restricted stock units and
forfeits the remaining amount; the three-year sale and transfer restriction
remains in place. For certain employees with employment contracts, all shares
vest upon certain events, including a change in control. In the event of death
or permanent disability, all shares vest and the deferred sales restriction
lapses. These awards are classified as equity awards as defined in FAS 123(R).
Historically, only senior executives participated in this plan. As of January 1,
2006, certain other employees are eligible to receive restricted stock as part
of a redesigned stock-based compensation plan. These awards cliff vest on the
third anniversary of the grant date.

At December 31, 2005, the Company had outstanding 150,000 fully-vested
cash-settled incentive SARs at a price of $19.30. These SARs were classified as
liability awards and, as such, were recorded at fair value until the rights were
exercised during the fourth quarter of 2006. As of December 31, 2007, the
Company did not have any SARs outstanding. For the year ended December 31, 2006
the Company recorded $269 in compensation expense. For the years ended December
31, 2005 the Company recorded the SAR's at intrinsic value, which resulted in a
$1,170 reversal of compensation expense in 2005. Under FAS 123(R), the Company
was required to measure the SARs at fair market value. Prior to adopting FAS
123(R), the SARs were measured at the intrinsic value. The Company also recorded
$228 in compensation expense as a cumulative effect of a change in accounting
principle in accordance with FAS 123(R) in 2006.

CAMBREX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

(13) STOCK BASED COMPENSATION -- (CONTINUED)

The following table is a summary of the Company's stock option activity
issued to employees and related information:

WEIGHTED AVERAGE
----------------------
NUMBER OF EXERCISE OPTIONS
SHARES PRICE EXERCISABLE
---------- -------- -----------

Outstanding at December 31, 2004............... 3,949,857 $27.07 1,787,967
----------
Granted...................................... 653,033 20.07
Exercised.................................... (292,538) 13.32
Forfeited or expired......................... (296,705) 31.45
----------
Outstanding at December 31, 2005............... 4,013,647 26.60 4,013,647
----------
Granted...................................... 249,367 21.39
Exercised.................................... (1,069,876) 19.91
Forfeited or expired......................... (438,245) 28.11
----------
Outstanding at December 31, 2006............... 2,754,893 28.48 2,517,941
----------
Granted...................................... 152,675 14.99
Exercised.................................... (1,202,752) 18.21
Forfeited or expired......................... (233,059) 22.52
----------
Outstanding at December 31, 2007............... 1,471,757 20.15
==========
Exercisable at December 31, 2007............... $21.37 1,293,108

On May 3, 2007, the Company paid a special dividend of $14.00 per share. As
a result, the market price of the stock declined by approximately $14.00 per
share from the prior day's close and therefore, all outstanding options were
modified to reduce the exercise price by $14.00 per share.

The aggregate intrinsic value for all stock options exercised for the years
ended December 31, 2007, 2006 and 2005 were $2,866, $2,684 and $1,701,
respectively. The aggregate intrinsic value for all stock options outstanding as
of December 31, 2007 was $270. The aggregate intrinsic value for all stock
options exercisable as of December 31, 2007 was $204.

CAMBREX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

(13) STOCK BASED COMPENSATION -- (CONTINUED)

A summary of the Company's nonvested stock options and restricted stock as
of December 31, 2007 and changes during the years ended December 31, 2007 and
2006, are presented below:

NONVESTED STOCK OPTIONS NONVESTED RESTRICTED STOCK
--------------------------- ---------------------------
WEIGHTED- WEIGHTED-
NUMBER OF AVERAGE GRANT- NUMBER OF AVERAGE GRANT-
SHARES DATE FAIR VALUE SHARES DATE FAIR VALUE
--------- --------------- --------- ---------------

Nonvested at January 1, 2006............ -- $ -- 69,756 $24.30
Granted................................. 249,367 $21.39 153,838 $21.52
Vested during period.................... -- $ -- (30,306) $24.64
Forfeited............................... (12,415) $21.39 (27,420) $22.11
-------- --------
Nonvested at December 31, 2006.......... 236,952 $21.39 165,868 $22.02
-------- --------
Granted................................. 152,675 $14.99 125,489 $17.09
Vested during period.................... (137,145) $16.57 (123,494) $21.55
Forfeited............................... (73,833) $19.79 (33,962) $20.91
-------- --------
Nonvested at December 31, 2007.......... 178,649 $11.34 133,901 $18.11
======== ========

(14) RETIREMENT PLANS AND OTHER POSTRETIREMENT BENEFITS

Domestic Pension Plans

The Company maintains two U.S. defined-benefit pension plans. Benefits for
the salaried and certain hourly employees are based on salary and years of
service, while those for employees covered by a collective bargaining agreement
are based on negotiated benefits and years of service. The Company's policy is
to fund pension costs currently to the full extent required by the Internal
Revenue Code. Pension plan assets consist primarily of balanced fund
investments.

The net periodic pension expense for 2007, 2006 and 2005 is based on a
twelve month period and on valuations of the plans as of January 1. However, the
reconciliation of funded status is determined as of the September 30 measurement
date.

The funded status of these plans, incorporating fourth quarter
contributions, as of September 30, 2007 and 2006 is as follows:

2007 2006
------- -------

CHANGE IN BENEFIT OBLIGATION
Benefit obligation at October 1....................... $61,517 $58,451
Service cost.......................................... 1,000 2,571
Interest cost......................................... 3,597 3,448
Actuarial gain........................................ (2,203) (562)
Benefits paid......................................... (2,433) (2,391)
Plan amendments....................................... 2,102 --
Curtailments.......................................... (6,129) --
------- -------
Benefit obligation at September 30.................... $57,451 $61,517
======= =======

CAMBREX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

(14) RETIREMENT PLANS AND OTHER POSTRETIREMENT BENEFITS -- (CONTINUED)

2007 2006
------- --------

CHANGE IN PLAN ASSETS
Fair value of plan assets at October 1................ $42,761 $ 38,437
Actual return on plan assets.......................... 4,966 3,381
Contributions......................................... 4,691 3,334
Benefits paid......................................... (2,433) (2,391)
------- --------
Fair value of plan assets at September 30............. $49,985 $ 42,761
------- --------
Funded status......................................... (7,466) (18,756)
Fourth quarter contributions.......................... -- 902
------- --------
Accrued benefit cost at December 31,.................. $(7,466) $(17,854)
======= ========

The amounts recognized in accumulated other comprehensive income/(loss) as
of December 31, 2007 and 2006 consist of the following:

2007 2006
------ -------

Actuarial loss........................................... $3,148 $12,922
Prior service cost....................................... 1,912 430
------ -------
$5,060 $13,352
====== =======

The components of net periodic pension cost are as follows:

2007 2006 2005
------- ------- -------

COMPONENTS OF NET PERIODIC PENSION COST
Service cost.................................... $ 1,000 $ 2,571 $ 2,751
Interest cost................................... 3,597 3,448 3,166
Expected return on plan assets.................. (3,733) (3,041) (2,939)
Amortization of prior service cost.............. 206 46 46
Recognized actuarial loss....................... 209 448 466
Curtailments.................................... 414 -- --
------- ------- -------
Net periodic benefit cost....................... $ 1,693 $ 3,472 $ 3,490
======= ======= =======

The sale of the businesses that comprised the Bioproducts and Biopharma
segments in February 2007 required the Company to recognize a curtailment charge
of $337 for the pension plans in 2007 which is recorded in discontinued
operations. In April 2007, the Board of Directors of the Company approved the
suspension of the domestic pension plans effective August 31, 2007. As a result,
the Company was required to recognize a curtailment charge of $77 for the
pension plan in 2007.

CAMBREX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

(14) RETIREMENT PLANS AND OTHER POSTRETIREMENT BENEFITS -- (CONTINUED)

The estimated amounts that will be amortized from accumulated other
comprehensive income into net periodic cost in 2008 are as follows:

PENSION
BENEFITS
--------

Actuarial loss.................................................. $ 96
Prior service cost.............................................. 436
----
Total......................................................... $532
====

Major assumptions used in determining the benefit obligation and net cost
for the Company's domestic pension plans are presented in the following table:

BENEFIT
OBLIGATION NET COST
------------- ---------------------
2007 2006 2007 2006 2005
----- ----- ----- ----- -----

Discount rate........................... 6.25% 6.00% 6.00% 5.75% 5.75%
Expected return on plan assets.......... N/A N/A 8.00% 8.00% 8.50%
Rate of compensation increase........... 5.00% 5.00% 5.00% 5.00% 5.00%

In making its assumption for the long-term rate of return on plan assets,
the Company has utilized historical rates earned on securities allocated
consistently with its investments. The discount rate was selected by projecting
cash flows associated with plan obligations, which were matched to a yield curve
of high quality corporate bonds. The Company then selected the single rate that
produced the same present value as if each cash flow were discounted by the
corresponding spot rate on the yield curve.

The aggregate Accumulated Benefit Obligation ("ABO") of $57,451 exceeds
plan assets by $7,466 as of September 30, 2007 for all domestic plans.

The Company expects to contribute approximately $5,751 in cash to its two
U.S. defined-benefit pension plans in 2008.

Estimated Future Benefit Payments

The following benefit payments, which reflect expected future service, as
appropriate, are expected to be paid:

PENSION BENEFITS
----------------

2008........................................................... $ 2,495
2009........................................................... $ 2,614
2010........................................................... $ 2,745
2011........................................................... $ 2,901
2012........................................................... $ 3,075
2013-2017...................................................... $18,560

The investment objective for plan assets is to achieve long-term growth of
capital with exposure to risk set at an appropriate level. The Company invests
in a diversified asset mix consisting of equities (domestic and international)
and taxable fixed income securities. Assets are managed to obtain the highest
total rate of return in keeping with a moderate level of risk.

CAMBREX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

(14) RETIREMENT PLANS AND OTHER POSTRETIREMENT BENEFITS -- (CONTINUED)

The allocation of pension plan assets is as follows:

PERCENTAGE OF
PLAN ASSETS
TARGET ---------------
ASSET CATEGORY: ALLOCATION 2007 2006
--------------- ---------- ------ ------

U.S. equities.................................................... 30%-70% 42.2% 45.8%
International equities........................................... 0%-20% 15.4% 11.7%
U.S. fixed income................................................ 20%-60% 34.5% 35.6%
Cash............................................................. N/A 7.9% 6.9%
------ ------
100.0% 100.0%
====== ======

The Company has a Supplemental Executive Retirement Plan ("SERP") for key
executives. This plan is non-qualified and unfunded.
The benefit obligation for this plan as of December 31, 2007 and 2006 is as
follows:

2007 2006
------- -------

CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year................ $ 5,225 $ 4,300
Service cost........................................... 53 193
Interest cost.......................................... 300 254
Actuarial loss......................................... 112 544
Benefits paid.......................................... (96) (66)
Curtailments........................................... (387) --
------- -------
Benefits obligation at end of year..................... 5,207 5,225
======= =======
Funded status.......................................... (5,207) (5,225)
======= =======

The amounts recognized in accumulated other comprehensive income/(loss) as
of December 31, 2007 and 2006 consist of the following:

2007 2006
---- ----

Actuarial loss..................................................... $680 $973
Prior service cost................................................. -- 16
---- ----
$680 $989
==== ====

The components of net periodic benefit cost are as follows:

2007 2006 2005
---- ---- ----

COMPONENTS OF NET PERIODIC BENEFIT COST
Service cost......................................... $ 53 $193 $224
Interest cost........................................ 300 254 243
Amortization of prior service cost................... 1 4 4
Recognized actuarial loss............................ 17 -- 4
Curtailments......................................... 15 -- --
---- ---- ----
Net periodic benefit cost............................ $386 $451 $475
==== ==== ====

CAMBREX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

(14) RETIREMENT PLANS AND OTHER POSTRETIREMENT BENEFITS -- (CONTINUED)

The sale of the businesses that comprised the Bioproducts and Biopharma
segments in February 2007 required the Company to recognize a curtailment charge
of $11 for the SERP plan in 2007 which is recorded in discontinued operations.
In April 2007, the Board of Directors of the Company approved the suspension of
the SERP plan effective August 31, 2007. As a result, the Company was required
to recognize a curtailment charge of $4 SERP in 2007.

The estimated amounts that will be amortized from accumulated other
comprehensive income into net periodic cost in 2008 is $5 related to actuarial
loss.

Major assumptions used in determining the benefit obligation and net cost
for the Company's SERP plan are presented in the following table:

BENEFIT
OBLIGATION NET COST
------------- ---------------------
2007 2006 2007 2006 2005
----- ----- ----- ----- -----

Discount rate........................... 6.00% 5.75% 6.00% 5.75% 5.75%
Rate of compensation increase........... 5.00% 5.00% 5.00% 5.00% 5.00%

Estimated Future Benefit Payments

The following benefit payments, which reflect expected future service,
as appropriate, are expected to be paid:

SERP BENEFITS
-------------

2008............................................................ $ 317
2009............................................................ $ 342
2010............................................................ $ 360
2011............................................................ $ 367
2012............................................................ $ 373
2013-2017....................................................... $1,855

International Pension Plans

A foreign subsidiary of the Company maintains a pension plan for their
employees that conforms to the common practice in their respective country.
Based on local laws and customs, this plan is not funded.

The funded status of this plan, as of December 31, 2007 and 2006 is as
follows:

2007 2006
-------- --------

CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year.............. $ 15,375 $ 12,414
Service cost......................................... 462 539
Interest cost........................................ 665 539
Actuarial loss....................................... 1,237 112
Benefits paid........................................ (364) (275)
Foreign exchange..................................... 1,188 2,046
-------- --------
Benefit obligation at end of year.................... $ 18,563 $ 15,375
======== ========
Funded status.......................................... $(18,563) $(15,375)
======== ========

CAMBREX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

(14) RETIREMENT PLANS AND OTHER POSTRETIREMENT BENEFITS -- (CONTINUED)

The amounts recognized in accumulated other comprehensive income/(loss) as
of December 31, 2007 and 2006 consist of the following:

2007 2006
------ ------

Actuarial loss............................................ $4,079 $2,852
Prior service credit...................................... (67) (75)
------ ------
$4,012 $2,777
====== ======

The components of the net periodic pension cost are as follows:

2007 2006 2005
------ ------ ------

COMPONENTS OF NET PERIODIC PENSION COST
Service cost...................................... $ 462 $ 539 $ 436
Interest cost..................................... 665 539 570
Amortization of unrecognized net obligation....... -- (35) (35)
Amortization of prior service cost................ (7) (6) (6)
Recognized actuarial loss......................... 75 73 49
------ ------ ------
Net periodic benefit cost......................... $1,195 $1,110 $1,014
====== ====== ======

The estimated amounts that will be amortized from accumulated other
comprehensive income into net periodic cost in 2008 are as follows:

PENSION
BENEFITS
--------

Actuarial loss.................................................. $(129)
Prior service cost.............................................. 7
-----
Total......................................................... $(122)
=====

Major assumptions used in determining the benefit obligation and net cost
for the Company's international pension plan are presented in the following
table:

BENEFIT
OBLIGATION NET COST
------------- ---------------------
2007 2006 2007 2006 2005
----- ----- ----- ----- -----

Discount rate........................... 4.25% 4.00% 4.25% 4.00% 5.00%
Rate of compensation increase........... 3.00% 2.70% 3.00% 2.70% 3.00%

The aggregate ABO is $17,553 for international plan. The international
pension plan does not have any assets.

The Company does not expect to contribute cash to its international pension
plan in 2008.

CAMBREX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

(14) RETIREMENT PLANS AND OTHER POSTRETIREMENT BENEFITS -- (CONTINUED)

Estimated Future Benefit Payments

The following benefit payments, which reflect expected future service, as
appropriate, are expected to be paid:

PENSION
BENEFITS
--------

2008............................................................ $ 473
2009............................................................ $ 521
2010............................................................ $ 579
2011............................................................ $ 615
2012............................................................ $ 531
2013-2017....................................................... $4,084

Savings Plan

Cambrex makes available to all domestic employees a savings plan as
permitted under Sections 401(k) and 401(a) of the Internal Revenue Code.
Employee contributions are matched in part by Cambrex. The cost of this plan
amounted to $608, $606 and $536 in 2007, 2006 and 2005, respectively.