CAMBREX CORP - 10-K Annual Report

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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, 2003

OR

[ ] 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:

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

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 an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [X] No

The aggregate market value of the voting stock held by non-affiliates of
the registrant was approximately $579,540,125 as of June 30, 2003.

APPLICABLE ONLY TO CORPORATE REGISTRANTS

As of February 29, 2004, there were 26,093,242 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 2004 Annual
Meeting are incorporated by reference into Part III of this report.
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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
providing essential products and services to accelerate drug discovery,
development and manufacturing processes for human therapeutics. The Company
primarily supplies its products and services worldwide to pharmaceutical and
Biopharmaceutical companies, generic drug companies, biotech companies and
research organizations. In the fourth quarter, 2003 the Company began reporting
results in three segments: Human Health, (formerly Human Health and All Other
segments), Bioproducts and Biopharma (previously combined as BioSciences
segment). Each of these segments includes various product categories. The
Company's overall strategy is to focus on niche markets that have global
opportunities, build on strong customer relationships to enhance its new
products pipeline, and support state-of-the-art technology, while being an
industry leader in regulatory compliance, environmental, health and safety
performance, and service.

The Company uses a consistent business approach in each of its segments:

1. Niche market focus: The Company participates in niche markets
requiring significant technical expertise.

2. Market leadership: The Company secures leading market positions
through its proprietary technologies and specialized capabilities.

3. Margin expansion: The Company reviews product and service
profitability on a continuing basis to eliminate those not meeting
operating profit goals and replaces them with products and services
that can generate higher financial returns.

The Company has a number of key strategic initiatives:

1. Introduce new innovative products to drive organic growth through
continued investment in research and new product development.

2. Drive growth in strategic business segments through the prudent
acquisition of product lines, technologies, and capabilities to
enhance the Company's position in its niche markets.

3. Maintain its commitment to continuous improvement and cost reduction
to improve productivity, efficiencies and service levels.

4. Leverage its broad capabilities and reputation across the life
sciences market segments in which they participate.

5. Introduce or acquire new products and services that bring the Company
closer to the patient and increase revenues from testing services.

Effective January 1, 2002, the operating units that primarily produce
specialty and fine chemicals and animal health and agriculture products were
combined under a new business unit, Rutherford Chemicals, Inc. Rutherford
Chemicals, Inc. included CasChem, Inc., Bayonne, New Jersey; Heico Chemicals,
Inc., Delaware Water Gap, Pennsylvania; Nepera, Inc., Harriman, New York;
Zeeland Chemicals, Inc., Zeeland, Michigan; and Seal Sands Chemicals Ltd.,
Middlesbrough, United Kingdom. In the fourth quarter 2002, the Company announced
that it had engaged a financial advisor to assist the Company in investigating
strategic alternatives for the Rutherford Chemicals segment. In the third
quarter 2003, the Company announced that an agreement to sell Rutherford
Chemicals Business had been signed and on November 10, 2003, the transaction was
completed, subject to working capital and other adjustments (see Note #14 to the
consolidated financial statements). As a result, the business is being reported
as a discontinued operation for all periods presented.

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On October 30, 2001, Cambrex completed the acquisition of the Marathon
Biopharmaceuticals ("Marathon") business, located in Hopkinton, Massachusetts,
for approximately $26,000 in cash through a share purchase of CoPharma Inc.
Marathon is a full-service cGMP manufacturer of Biopharmaceutical ingredients
and purified bulk biologics for pre-clinical evaluation, clinical trials and
commercial scale quantities. This acquisition strengthens Cambrex's existing
capabilities for producing pre-clinical, clinical and commercial quantities of
bulk biologics. Assets acquired and liabilities assumed have been recorded at
their estimated fair values. Goodwill was recorded at approximately $11,035 and
other identifiable intangibles were recorded at $2,153. Subsequent to the
acquisition, the acquired subsidiary's formal name was changed to Cambrex Bio
Science Hopkinton, Inc.

On June 1, 2001, Cambrex completed its acquisition of the Bio Science
Contract Production Corporation ("Bio Science") Biopharmaceutical manufacturing
business in Baltimore, Maryland. The business involves the cGMP manufacture of
purified bulk biologics and pharmaceutical ingredients. The total purchase price
was approximately $120,000 in cash, which was funded by an existing line of
credit facility. Additional purchase price payments of up to $25,000 may be made
depending on future business performance over the four years following the date
of purchase. No additional performance-based payments have been made to date.
Assets acquired and liabilities assumed have been recorded at their estimated
fair values. Goodwill was recorded at approximately $117,800, including
incremental deal costs. In addition, identifiable intangible assets of $3,382
were recorded. Subsequent to the acquisition, the acquired subsidiary's formal
name was changed to Cambrex Bio Science Baltimore, Inc.

In 2002, the Company changed the names of their life sciences subsidiaries
to leverage its capabilities and reputation across the corporation. The new
subsidiary names are listed below:

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PRODUCTS

The Company uses its technical expertise in a wide range of chemical and
biological processes to meet the needs of its customers for high quality
products and services for specialized applications. The following table sets
forth for the periods indicated information concerning gross sales from the
Company's three segments:

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(1) Sales from Cambrex Bio Science Baltimore, Inc. acquired in June 2001, and
Cambrex Bio Science Hopkinton, Inc. acquired in October 2001, are included
from dates of acquisition.

Human Health: The Human Health segment is primarily comprised of
pharmaceutical ingredients derived from organic chemistry. Products and services
are supplied globally to innovative and generic drug companies. Products include
active pharmaceutical ingredients and advanced pharmaceutical intermediates.
Services include development and manufacturing services.

The Human Health Segment is classified into five principal product groups:
(1) Active Pharmaceutical Ingredients ("APIs"), (2) Pharmaceutical
Intermediates, (3) Imaging Chemicals, (4) Fine Custom Chemicals and (5) Other.
These products are sold to a diverse group of more than 1,100 customers, with
two customers individually accounting for more than 10% of 2003 sales in this
segment; one a distributor representing multiple customers, accounting for
13.5%, and a second, a manufacturer of final dosage form pharmaceuticals,
accounting for 11.5%. Many of these products are also sold through agents. Also,
one active pharmaceutical ingredient makes up 13.8% of 2003 sales in this
segment.

This table summarizes the gross sales for this product segment:

Human Health sales of $242,165 increased $10,823 or 4.7% including the
favorable effects of foreign currency. Human Health sales were favorably
impacted 9.1% due to exchange rates reflecting the weaker U.S. dollar.

APIs sales of $183,632 were $10,679 or 6.2% above the prior year due
primarily to higher sales of central nervous system and hypertension APIs due to
higher demand, signing of a long-term sales agreement for an API to treat
Alzheimer's disease and the favorable currency impact partly offset by lower
shipments of a respiratory API due to reduced demand in the U.S., and lower
shipments of cardiovascular APIs due primarily to the loss of a U.S. customer
and lower prices in Europe.

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Pharmaceutical Intermediates sales of $24,349 were $155 or 0.6% above 2002
primarily due to higher sales of an antihistamine product due to increased
demand and favorable currency effect partly offset by lower custom development
demand.

Imaging chemicals sales were lower than 2002 by $2,113 or 18.1% due to
reduced pricing and market share in 2003.

Fine Custom Chemicals sales were higher than 2002 by $2,754 or 13.0% due to
increased sales of crop protection and feed additive products due to higher
demand and successful implementation of higher capacity production lines.

Other product category changes from prior year were not significant.

Bioproducts: This segment consists of cell culture products (including
living cell cultures, cell culture media, cell culture media supplements, cell
based assays and cell therapy services), endotoxin detection products and
services, electrophoresis and chromatography products. The Company manufactures
more than 1,800 products which are sold to more than 14,000 customers worldwide
with no one customer accounting for over 10% of 2003 sales in this segment.

This table summarizes the gross sales for this product segment:

Gross sales of $119,298 were $11,428 or 10.6% above 2002. Bioproducts sales
were favorably impacted 5.2% due to exchange rates reflecting a weaker U.S.
dollar.

Cells and media sales of $62,161 were $11,497 or 22.7% higher than prior
year due to increased demand for cell therapy services, higher sales of normal
human cells and media products due to increased demand, pricing and new product
launches in Europe and the favorable effect of currency exchange.

Endotoxin detection sales of $30,474 were $3,277 or 12.0% higher than prior
year due to the favorable effect of currency exchange and stronger demand in
Europe.

Electrophoresis, chromatography and other sales of $26,663 were $3,346 or
11.1% lower than prior year primarily due to the sale of the In Vitro diagnostic
cell business in the first quarter 2002 partially offset by an increase in
assays due to higher demand.

Biopharma: The Biopharma segment consists of the Company's contract
Biopharmaceutical process development and manufacturing business. Biopharma
sales of $44,128 were $11,090 or 20.1% below 2002 reflecting the reduced volumes
and suite utilization driven by the previously announced loss of a customer
whose product failed to receive FDA approval, changes in terms of an existing
contract and completion of other 2002 contracts that were only partially
replaced in 2003. There are four customers that individually account for more
than 10% of 2003 sales in this segment. They represent 27.4%, 17.2%, 16.2%, and
12.1% of 2003 sales in this segment.

MARKETING AND DISTRIBUTION

The Company's Human Health and Biopharma segments generally include high
value, low-to-medium volume niche products requiring significant technical
expertise for their development and manufacture. Marketing generally requires
significant cooperative effort among a small highly trained sales and marketing
staff, a technical staff that can assess the technical fit and estimate
manufacturing economics, and the business

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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 seven years. Agents in those areas where direct
sales efforts are not economical may handle sales of established product.

For the Bioproducts segment, the Company markets and sells its products in
the United States and Europe principally through its own direct sales force. The
remaining international markets are served principally through an extensive
network of independent distributors. The Company has also implemented an
e-commerce website to market and sell these products in the U.S. and Europe.

RAW MATERIALS

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

For its Human Health products, the Company generally will have a primary
and secondary supplier for its critical raw materials. Long-term contracts are
in effect for most of the critical raw materials used. Prices for these raw
materials are generally stable except for the petroleum based solvents where
prices can vary with market conditions.

For its Bioproducts products, the Company buys materials from many
suppliers and is generally not dependent on any one supplier or group of
suppliers. Although there is a well-established market for raw fetal bovine
serum, its price and supply are cyclical and fluctuate. The Company also is
dependent on one company for the raw materials used to make electrophorosis
media products incorporating Agarose. A long-term contract is in effect for this
supply.

The other key raw materials used by all segments of the Company are
advanced organic intermediates and generally have been in adequate supply from
multiple suppliers.

RESEARCH AND DEVELOPMENT

The Company's research and development program is designed to increase the
Company's competitiveness through 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, and to identify market
opportunities that warrant a 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 125 employees are
involved directly in research and development activities worldwide.

The Cambrex Center of Technical Excellence, a new research and development
organization is located in The Technology Center of New Jersey in North
Brunswick, helps place the Company in a unique position to be a full-service
resource for pharmaceutical and biotechnology companies throughout the drug
development cycle.

The Company spent approximately $17,123, $15,794 and $17,379 in 2003, 2002
and 2001, respectively, on research and development efforts.

PATENTS AND TRADEMARKS

The Company has patent protection in some of its product areas. However,
the Company relies primarily on know-how in many of its manufacturing processes
and techniques not generally known to other life sciences companies for
developing and maintaining its market position.

The Company currently owns approximately 120 United States patents which
have various expiration dates beginning in 2004 through 2019 and which cover
selected items in each of the Company's major product areas. The Company also
owns the foreign equivalent of many of its United States patents. In addition,
the Company has applied for patents for various concepts and is in the process
of preparing patent applications for
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other concepts. The Company owns patent and other proprietary rights to the
endotoxin detection products which are material to the product lines.

The Company has trademarks registered in the United States and a number of
other countries for use in connection with the Company's products and business.
The Company believes that many of its trademarks are generally recognized in its
industry. Such trademarks include Poietics(TM) , Clonetics(R), SeaPlaque(R),
NuSieve(R), Reliant(R), Latitude(R), PAGEr(R), MetaPhor(R), Accugene(R) and
BioWhittaker(TM).

The Company requires employees to sign confidentiality and non-compete
agreements where appropriate.

COMPETITION

Because of the nature of the Company's products in its Human Health segment
and its strategic approach, it is not possible to identify a group of direct
competitors. Where competition exists, it is typically specific to a certain
product, or is focused early in the process, when an initial market position is
being established. If the Company perceives significant competitive risk and a
need for large technical or financial commitment, it generally negotiates
long-term contracts or capital guarantees from its targeted customer before
proceeding.

In the Bioproducts segment, no one company is known to compete with the
Company in all of its product groups, but in each group competition is offered
by a number of companies, including, in some cases, firms substantially larger
and with greater financial resources than the Company. The markets in which the
Company competes are generally concentrated and are highly competitive, with
competition centering on product specifications and performance, quality, depth
of product line, price, technical support, timely product development and speed
of delivery.

The Biopharma segment consists of approximately six primary competitors
that supply contract Biopharmaceutical development and manufacturing services to
biotech companies. Generally, the competition focuses on larger quantities and
scale of manufacturing capacity. Cambrex differentiates their services through a
focus on smaller scale process development and manufacturing services, an
industry-leading regulatory compliance record, depth of experience producing
approved drugs, a commitment to quality, and world-class early process
development services.

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 international and domestic federal, state
and local laws and regulations relating to the storage, handling, emission,
transportation and discharge of materials into the environment and the
maintenance of safe conditions in the work place. The Company maintains
environmental and industrial safety and health compliance programs at its
plants, and believes that its manufacturing operations are in general compliance
with all applicable safety, health and environmental laws.

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
chemical business, 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 chemical companies primarily
responsible for the proper disposal of their chemical 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 thereunder, 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

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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 #24 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 general 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 approximately
$4,032 in 2003, $3,752 in 2002, and $2,897 in 2001 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 will most likely increase. The Company
considers costs for environmental compliance to be a normal cost of doing
business, and includes such costs in pricing decisions.

RISK 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. 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 operations. If any of the following
risks occur, the Company's business, financial condition, operating results and
cash flows could be materially adversely affected.

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 or product rights and businesses complementary to our business. These
transactions could include mergers, acquisitions, 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 and
financial printing costs and severance and other closure costs associated with
the elimination of duplicate or discontinued products, employees, operations and
facilities. Although we do not expect these charges to have a material adverse
effect upon our overall financial condition, these charges could have a material
adverse effect on our results of operations for particular quarterly or annual
periods and they could possibly have an adverse impact upon the market price of
our common stock.

WE MAY MAKE ACQUISITIONS OF BUSINESSES. INHERENT IN THIS PRACTICE IS A RISK THAT
WE MAY EXPERIENCE DIFFICULTY INTEGRATING THE BUSINESSES OR COMPANIES THAT WE
HAVE ACQUIRED INTO OUR OPERATIONS, WHICH WOULD BE DISRUPTIVE TO OUR MANAGEMENT
AND OPERATIONS.

The merger of two companies involves the integration of two businesses that
have previously operated independently. Difficulties encountered in integrating
two businesses could have a material adverse effect on the operating results or
financial condition of the combined company's business. As a result of
uncertainty following a merger and during the integration process, we could
experience disruption in our business or employee base. There is also a risk
that key employees of a merged company may seek employment elsewhere, including
with competitors, or that valued employees may be lost upon the elimination of
duplicate functions. If we and our merger partner are not able to successfully
blend our products and technologies to create the advantages the merger was
intended to create, it may affect our results of operations, our ability to
develop and

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introduce new products and the market price of our common stock. Furthermore,
there may be overlap between our products, services or customers, and a merged
company may create conflicts in relationships or other commitments detrimental
to the integrated businesses.

PHARMACEUTICAL, BIOPHARMACEUTICAL AND BIOTECHNOLOGY COMPANIES MAY DISCONTINUE OR
DECREASE THEIR USAGE OF OUR SERVICES.

We depend on pharmaceutical, biopharmaceutical and biotechnology companies
that use our services for a large portion of our revenues. Although there has
been a trend among these companies to outsource drug production functions, this
trend may not continue. We have experienced 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. If
these companies discontinue or decrease their usage of our services, including
as a result of a slowdown in the overall United States or foreign economies, our
revenues and earnings could be lower than we expect and our revenues may
decrease or not grow at historical rates.

COMPETITION IN THE LIFE SCIENCES RESEARCH MARKET, AND/OR A REDUCTION IN DEMAND
FOR OUR PRODUCTS, COULD REDUCE SALES.

The markets for our products are competitive and price sensitive. Other
life science 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 compete with our products or even render our products obsolete. If a
competitor develops superior technology or cost-effective alternatives to our
products or services, our business, operating results, and financial condition
could be seriously harmed. In addition, demand for our products may weaken due
to reduction in research and development budgets, loss of distributors or other
factors, which would have an adverse effect on our financial condition.

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. This would reduce revenues and profits.
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.

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FAILURE TO OBTAIN NEW OR RENEWED CONTRACTS OR CANCELLATION OF EXISTING CONTRACTS
MAY ADVERSELY AFFECT OUR BUSINESS AND FINANCIAL RESULTS.

Many of the Company's contracts are short-term in duration. As a result,
the Company must continually replace its contracts with new contracts to sustain
its revenue. The Company's inability to generate new contracts on a timely basis
would have a material adverse effect on its business, financial condition, and
results of operations.

In addition, many of the Company's long-term contracts may be cancelled or
delayed by clients for any reason upon notice. Contracts may be terminated for a
variety of reasons, including termination of product development, failure of
products to satisfy safety requirements, unexpected or undesired results from
use of the product or the client's decision to forego a particular study. The
failure to obtain new contracts or the cancellation or delay of existing
contracts could have a material adverse effect on the Company's business and
results of operations.

OUR BIOPHARMA BUSINESS SEGMENT MAY EXPERIENCE SIGNIFICANT VOLATILITY IN
PROFITABILITY AND HAS A LARGE AMOUNT OF GOODWILL RECORDED THAT WILL BE SUBJECT
TO IMPAIRMENT IF FORECASTED PROFIT LEVELS ARE NOT OBTAINED.

The Company's Biopharma business unit provides process development and
manufacturing services on a contract basis to biopharmaceutical companies. This
business has a very high fixed cost structure and its customers are often
dependent on the availability of funding and pursuing drugs that are in earlier
stages of clinical trials, and thus have high failure rates. Losses of one or
more customers can result in significant swings in profitability from quarter to
quarter and year to year. The Company has recorded a substantial amount of
goodwill related to this business, which may be subject to an impairment charge
if the business unit does not perform at or near projected levels in the future.

REVENUE IS DIFFICULT TO PREDICT.

The Company's revenue is difficult to predict because it is primarily
generated on a contract-by-contract or purchase order basis. Many of the
contracts are short-term, and may be canceled at any time. Consequently, the
Company does not have a significant backlog, nor is backlog a meaningful
indicator of future revenue. As a result, much of the Company's revenue is not
recurring from period to period, which contributes to the variability of results
from period to period.

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 (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.

OUR MARKET SHARE DEPENDS ON NEW PRODUCT INTRODUCTIONS AND ACCEPTANCE.

Rapid technological change and frequent new product introductions are
typical for the market for certain of our products and services. Our future
success will depend in part on continuous, timely development and introduction
of new products that address evolving market requirements and are attractive to
customers. We
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believe successful new product introductions provide a significant competitive
advantage because customers make an investment of time in selecting and learning
to use a new product, and are reluctant to switch thereafter. We spend
significant resources on internal research and development, as well as on
technology development elsewhere to support our effort to develop and introduce
new products. To the extent that we fail to introduce new and innovative
products, we could fail to obtain an adequate return on these investments and
could lose market share to our competitors, which may be difficult to regain. An
inability, for technological or other reasons, to develop successfully and
introduce new products could reduce our growth rate or otherwise damage our
business.

In the past we have experienced, and may experience in the future, delays
in the development and introduction of products. We cannot be assured that we
will keep pace with the rapid change in life sciences research, or that our new
products will adequately meet the requirements of the marketplace or achieve
market acceptance. Some of the factors affecting market acceptance of our
products include:

- availability, quality and price as compared to competitive products;

- the functionality of new and existing products;

- the timing of introduction of our products as compared to competitive
products;

- scientists' and customers' opinions of the product's utility and our
ability to incorporate their feedback into future products;

- general trends in life sciences research.

The expenses or losses associated with unsuccessful product development
activities or lack of market acceptance of our new products could adversely
affect our business, financial condition and results of operations.

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 case, 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 assure you that we will be able to manufacture our
products profitably or on time.

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ANY SIGNIFICANT REDUCTION IN GOVERNMENT REGULATION OF THE DRUG DEVELOPMENT
PROCESS, OR VIOLATIONS BY THE COMPANY OF CGMP AND OTHER GOVERNMENT REGULATIONS,
COULD HAVE A MATERIAL ADVERSE EFFECT ON THE COMPANY'S BUSINESS AND RESULTS OF
OPERATIONS.

The design, development, testing, manufacturing and marketing of
biotechnology and pharmaceutical products are subject to regulation by
governmental authorities, including the United States Food and Drug
Administration ("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 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 and results of
operations.

All facilities and manufacturing techniques used for manufacturing of
products for clinical use or for commercial sale in the Unites States must be
operated in conformity with current Good Manufacturing Practices ("cGMP")
regulations. The Company's facilities are subject to scheduled periodic
regulatory and customer inspections to ensure compliance with cGMP and other
requirements. 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/or a mandated closing of the Company's facilities. Any such
material violations would have a material adverse effect on the Company's
business and results of operations.

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

Substantial, complex or extended litigation could cause us to incur large
expenditures and distract our management. For example, lawsuits by employees,
stockholders, 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 assure you that we will always be able to resolve such
disputes out of court or on terms favorable to us.

The Company is involved in a number of lawsuits including a class action
lawsuit filed against Cambrex and five former and current Company officers
alleging the failure to disclose in a timely fashion the restatement of results
for the 1997 through 2001 time frame as discussed in the SEC investigation
section below, as well as the loss of a significant contract at our Baltimore
facility. If this matter, or any of the Company's other lawsuits, is resolved in
an unfavorable manner, they could have a material adverse effect on the
operating results and cash flows in future periods.

THE SEC INVESTIGATION INTO THE COMPANY'S INTER-COMPANY ACCOUNTING MATTER COULD
HURT OUR BUSINESS.

The Securities and Exchange Commission ("SEC") is currently conducting an
investigation into the Company's inter-company accounting issue. The
investigation began during 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. The Company is fully cooperating
with the SEC and does not expect further revisions to its historical financial
statements relating to these issues. This investigation could lead to an adverse
outcome and adversely affect our business, financial condition, results of
operations and cash flows.

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 is a significant
shortage of, and intense competition for, 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
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11

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 and results of operations.

POTENTIAL PRODUCT LIABILITY CLAIMS, ERRORS AND OMISSIONS CLAIMS IN CONNECTION
WITH SERVICES THE COMPANY PERFORMS AND POTENTIAL LIABILITY UNDER INDEMNIFICATION
AGREEMENTS BETWEEN THE COMPANY AND ITS OFFICERS AND DIRECTORS COULD ADVERSELY
AFFECT OUR EARNINGS AND FINANCIAL CONDITION.

The Company manufactures products intended for use by the public. In
addition, the Company's services include the manufacture of pharmaceutical and
biologic products to be tested in human clinical trials and for consumption by
humans. 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 commercially 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 that the Company's insurance coverage
will be adequate or that insurance coverage will continue to be available on
terms acceptable to the Company.

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 affected 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.

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 for and negatively affect our earnings.

During 2003, the combination of a loss due to the sale of Rutherford
Chemicals business, the Mylan settlement, and a geographic shift of forecasted
income resulted in the recording of a valuation allowance against all net
domestic deferred tax assets, except those for which the company has viable tax
planning strategies. Going forward, until such time as the Company's domestic
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 may
experience significant volatility in its effective tax rate. Should the Company
continue to experience domestic losses, certain tax planning strategies may also
be negatively affected which could result in future increases to our domestic
deferred tax asset valuation allowance.

WE HAVE A SIGNIFICANT AMOUNT OF DEBT THAT COULD ADVERSELY AFFECT OUR FINANCIAL
CONDITION.

The Company has a revolving credit facility of approximately $269 million
of which $105 million was outstanding at December 31, 2003 and privately placed
debt of $100 million, which is a significant amount of debt and debt service
obligations. If we are unable to generate sufficient cash flow or otherwise
obtain funds

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12

necessary to make required payments on the notes, including from cash and cash
equivalents on hand, we will be in default under the terms of the loan
agreements, or indentures.

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 by:

- 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 competitive 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;

- requiring us to use a substantial portion of our cash to pay principal
and interest on our debt, instead of contributing those funds to other
purposes such as working capital and capital expenditures.

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 61% of our product
revenues in 2003 and 59% of our product revenues in 2002. We expect that
international revenues will continue to account for a significant percentage of
our revenues for the foreseeable future.

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;

- 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 rage 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 may not adequately
protect our operating results from the full effects of exchange rate
fluctuations.

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THE MARKET PRICE OF OUR STOCK COULD BE VOLATILE.

The market price of our common stock has been subject to volatility and, in
the future, the market price of our common stock 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 analysts' expectations. Any failure to meet such expectations, even
slightly, could have an adverse effect on the market price of our common stock.
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 is
deemed to have violated such statues and/or regulations or if the storage,
treatment and disposal facilities are inadequate and are proved to have damaged
the environment.

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. After
reviewing information currently available, management believes any amount paid
in excess of accrued liabilities will not have a material effect on its
financial position or results of operations. However, these matters, if resolved
in a manner different from the estimates, could have a material adverse effect
on financial condition, operating results and cash flows when resolved in future
reporting periods.

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THE POSSIBILITY THE COMPANY 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 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.

EMPLOYEES

At December 31, 2003 the Company had 1,861 employees worldwide (870 of whom
were from international operations) compared with 1,879 employees at December
31, 2002 and 1,728 at December 31, 2001.

Cambrex Karlskoga AB, Cambrex Profarmaco Landen NV, Cambrex Cork Limited,
and Cambrex Profarmaco Milano S.r.l. 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 Latin America. Export sales from the Company's domestic
operations in 2003, 2002 and 2001 amounted to $22,100, $23,684 and $20,934,
respectively. Sales from international operations were $223,666 in 2003,
$207,082 in 2002, and $199,666 in 2001. Refer to Note #22 to the Cambrex
Corporation and Subsidiaries Consolidated Financial Statements.

AVAILABLE INFORMATION

This annual report on Form 10-K, as well as the Company's reports on Form
10-Q, and current reports on Form 8-K, 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 Securities
and Exchange Commission ("SEC").

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15

Reports filed by the Company with the SEC may be read and copied at the
SEC's Public Reference Room at 450 Fifth Street, NW, 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, Compensation and Governance
Committees, our Corporate Governance 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.

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16

ITEM 2 PROPERTIES.

Set forth below is information relating to the Company's manufacturing
facilities:

The Company owns all the above facilities and properties, with the
exception of the leased facilities in Nottingham, England, Copenhagen, Denmark,
Baltimore, Maryland and Hopkinton, Massachusetts. The Company also leases 42,000
square feet in North Brunswick, New Jersey for its Center of Technical
Excellence, which has a 10 year term ending March 27, 2010. In addition, the
Company owns a four acre site and buildings in North Haven, CT and thirty-one
acres of undeveloped land adjacent to the North Haven facility, eighty-one acres
in Walkersville, Maryland 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.

Most of the Company's products are manufactured in multi-purpose
facilities. Each product has a unique requirement for equipment, and occupies
such equipment for varying amounts of time. This, combined with the variations
in demand for individual products, makes it difficult to estimate actual overall
capacity subject

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17

to regulatory approval. It is generally possible, with proper lead time and
customer approval, to transfer the manufacturing of a particular product to
another facility should capacity constraints dictate.

The Company plans to continue to expand capacity to meet growing needs by
process improvements and construction of new facilities where needed.

ITEM 3 LEGAL PROCEEDINGS.

See "Environmental and Safety Regulations and Proceedings" under Item 1 and
Note #24 to the Cambrex Corporation and Subsidiaries Consolidated Financial
Statements 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 #24. Management is of the opinion that while
the ultimate liability resulting from those proceedings, as well as
environmental matters, may have a material effect upon the results of operations
in any given year, they will not have a material adverse effect upon the
Company's liquidity nor its financial position.

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None

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18

EXECUTIVE OFFICERS OF THE REGISTRANT

The following table lists the executive officers of the Company:

The Company's executive officers are elected by the Board of Directors and
serve at the Board's discretion.

Mr. Mack was elected Chairman of the Board of Directors on October 28,
1999. Effective January 31, 2003, Mr. Mack was re-appointed President. He also
retains his position as Chief Executive Officer. Mr. Mack has been Chief
Executive Officer since Mr. Baldwin's retirement on April 1, 1995. Mr. Mack was
appointed President and Chief Operating Officer and a director of the Company in
February 1990. For six years prior thereto he was Vice President in charge of
the worldwide Performance Chemicals businesses of Olin Corporation, a
manufacturer of chemical products, metal products, and ammunition and
defense-related products. Mr. Mack was Executive Vice President of Oakite
Products, Inc. from 1982 to 1984. Prior to joining Oakite, he held various
positions with The Sherwin-Williams Company, most recently as President and
General Manager of the Chemicals Division from 1977 to 1981. Mr. Mack is a past
Chairman of the Board of Governors of the Synthetic Organic Chemical
Manufacturing Association and is a member of the Board of Trustees of the
Michigan Tech Alumni Fund.

Mr. Beshar joined the Company on December 5, 2002 as Senior Vice President
and Chief Financial Officer. In January 2004, he was appointed to the position
of Executive Vice President and Chief Financial Officer. Prior to joining
Cambrex, Mr. Beshar was Senior Vice President and Chief Financial Officer for
Dendrite International. Prior to Dendrite, he was Executive Vice President,
Finance and Chief Financial Officer for Expanets, Inc. from November 1998
through January 2002. Mr. Beshar has served as Chief Financial Officer for other
businesses in his career and has been the President and Chief Executive Officer
of a company privately owned by Merrill Lynch Capital Partners. Mr. Beshar is a
member of the Board of Directors of PNY Technologies, Inc.

Dr. Carroll was appointed Vice President and Chief Technology Officer,
Pharmaceutical Technology in January 2002. He joined the Company in September
1997 as Vice President, Technology. Mr. Carroll had been with Bristol-Myers
Squibb for 14 years, most recently as Vice President, Chemical Development for

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(dollars in thousands, except share data)
19

Bristol-Myers Squibb Technical Operations. Prior to working for Bristol-Myers
Squibb, Dr. Carroll was with Pfizer, Inc. in Groton, CT.

Mr. Congiusti was appointed Vice President, Information Technology in
November 1998. Mr. Congiusti joined the Company in September 1994 as Director,
Information Services. Prior to joining the Company, from 1984 to 1994, he held
various senior information systems management positions at International
Specialty Products and American Cyanamid Company.

Mr. Eansor joined Cambrex in 2000 as Vice President and General Manager,
BioTherapeutics Business Unit. In 2002 he was appointed to the position of
President, Bioproducts Business Unit. Prior to joining Cambrex, Mr. Eansor was
with R.P. Scherer North America from 1981 until 2000 serving in various roles
including Vice President of Pharmaceutical Operations, Vice President of
Operations and General Manager.

Mr. Guccione was appointed Executive Vice President, Corporate Strategy and
Development in December 2002. He also served as Senior Vice President and Chief
Financial Officer from May 2001 through December 2002. Previously, he held the
position of Senior Vice President, Corporate Development since January 2001. Mr.
Guccione joined the Company in December 1995 as Vice President, Corporate
Development. Prior to joining the Company, from 1993 to 1995, he held the
position of Vice President and General Manager of the International Specialty
Products (ISP) Personal Care Division. He also served as Director of Corporate
Development for ISP, and had other various positions in Corporate Development at
ISP from 1987-1993.

Mr. Klosk was appointed Executive Vice President, Administration in October
1996 and was promoted to the position of Executive Vice President,
Administration and Chief Operating Officer, Cambrex Pharma and Biopharmaceutical
Business Unit in October 2003. Mr. Klosk joined the Company in October 1992 as
Vice President, Administration. From February 1988 until he joined Cambrex, he
was Vice President, Administration and Corporate Secretary for The Genlyte
Group, Inc., a lighting fixture manufacturer. From 1985 to January 1988, he was
Vice President, Administration for Lightolier, Inc., a subsidiary of The Genlyte
Group, Inc.

Dr. Marshak was appointed to the position of Vice President and Chief
Technology Officer, Biotechnology in January 2002. He joined the Company in
August 2000 as Vice President, Research and Development, BioSciences Group.
Prior to joining Cambrex, Dr. Marshak held various Research and Development
positions with Osiris Therapeutics, Inc. from 1999 to 2000, most recently as
Executive Scientific Advisor. From 1986 to 1994 he was a Senior Staff
Investigator with Cold Spring Harbor Laboratory.

Mr. Mossman joined Cambrex in July 2003 as the President of the Cambrex
Pharma Business Unit. In October 2003, Mr. Mossman's responsibilities were
expanded and he was appointed to his current position, President and CEO,
Cambrex Pharma and Biopharma Business Units. Prior to joining Cambrex, Mr.
Mossman was with Dixie Chemical Company, Inc. from 1983 through 2003 and serving
in the role of President since 1990. From 1979 through 1980, Mr. Mossman was
General Manager, Thiokol Specialty Chemicals Division, from 1972 through 1979,
he was President and Cofounder of Southwest Specialty Chemical Company, Inc.,
and from 1964 through 1972, he held various engineering and marketing management
positions with Salsbury Laboratories.

Dr. Russolo, President of the Cambrex Profarmaco Business Unit, joined
Cambrex in 1994 with the acquisition of Profarmaco Nobel S.r.l. in Milan Italy,
where he served as Managing Director since 1982. Dr. Russolo joined Profarmaco
Nobel S.r.l. in 1971. Upon the acquisition of Profarmaco Nobel S.r.l., Dr.
Russolo continued serving in the role of Managing Director until 2000, when he
was appointed to his current position.

Mr. Thauer was appointed Senior Vice President, Law & Environment in
January 2001. Mr. Thauer was previously appointed Vice President, Law &
Environment in December 1992, and General Counsel and Corporate Secretary in
August 1989. From 1987 until he joined Cambrex, he was Counsel to the business
and finance group of the firm of Crummy, Del Deo, Dolan, Griffinger and
Vecchione. From 1971 to 1987, Mr. Thauer had held various positions with Avon
Products, Inc., including U.S. Legal Department Head and Corporate Assistant
Secretary.
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20

PART II

ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

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:

As of February 29, 2004, the Company estimates that there were
approximately 4,600 beneficial holders of the outstanding Common Stock of the
Company.

The quarterly dividend on common stock was $0.03 for 2003 and 2002.

2003 Equity Compensation Table

The following table provides information as of December 31, 2003 with
respect to shares of common stock that may be issued under the Company's
existing equity compensation plans.

2000 EMPLOYEE PERFORMANCE STOCK OPTION PLAN

The 2000 Employee Performance Stock Option Plan provides for the grant of
stock options (both incentive stock options and "non-qualified" stock options)
primarily to key employees of the Company and its subsidiaries who are not
executive officers. The plan is generally administered by the Compensation
Committee of the Board, which has full authority, subject to the terms of the
plan, to determine the provision of awards, including the amount and type of the
awards and vesting schedules, as well as to interpret the plan.

Individual award agreements set forth the applicable vesting schedule for
such awards, which are based on the Company's publicly traded share price but
which may also be based on the passage of time or otherwise. In general,
following a "change in control" (as defined in the plan), each stock option will
be canceled in exchange for a cash settlement equal to the excess of the "change
in control price," which means

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21

the highest price per share paid or offered in any bona fide transaction related
to a change in control (as determined by the Compensation Committee), over the
exercise price of the stock option.

Stock options are granted with an exercise price of not less than one
hundred percent of the fair market value of the underlying Cambrex common stock
on the date of grant. Stock options are not exercisable more than ten years from
the date of grant.

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, 2003 are derived from
the audited financial statements. The consolidated financial statements of the
Company as of December 31, 2003 and December 31, 2002 and for each of the years
in the three year period ended December 31, 2003 and the report of independent
auditors thereon are included elsewhere in this annual report. In the third
quarter 2003, the Company announced that an agreement to sell the Rutherford
Chemicals business had been signed and on November 10, 2003 the transaction was
completed, subject to working capital and other adjustments (see Note #14 to the
consolidated financial statements). As a result, the business is being reported
as a discontinued operation 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.

Cambrex Corporation restated its results for the second quarter 2002. This
restatement resulted from a reassessment of the carrying value of an equity
investment in a privately held emerging biotechnology company. The Company
concluded that $4.3 million of the investment should have been impaired as of
the second quarter 2002 and the remaining $0.7 million should have been
initially classified as an intangible asset related to a licensing agreement
entered into concurrent with the equity investment. The impairment charge of
$4.3 million was recorded in Other expense and a related $1.5 million tax
benefit was recorded in Provision for income taxes and as a deferred tax asset.
Net Income and Total Stockholders' Equity decreased by $2.8 million. This
restatement did not have an effect on the Company's cash flows.

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22

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(1) Includes the results of Cambrex Bio Science Baltimore, Inc. from the date of
acquisition effective June 2001, the results of Cambrex Bio Science
Hopkinton, Inc. from the date of acquisition effective October 2001.

(2) Includes the results of Cambrex Profarmaco Landen NV from the date of
acquisition effective March 2000, the results of Cambrex Bio Science
Wokingham Limited from the date of acquisition effective July 24, 2000.

(3) Includes the results of Cambrex Cork Limited from the date of acquisition
effective March 1999 and the results of Cambrex Bio Science Rockland, Inc.
and Cambrex Bio Science Copenhagen ApS from the date of acquisition
effective July 1999.

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23

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

EXECUTIVE OVERVIEW

During 2003, the Company completed its transformation to a pure life
sciences company with the sale of the Rutherford Chemicals business unit during
the fourth quarter. Consequently, the Company began reporting three segments in
2003 -- Human Health, Bioproducts, and Biopharma. The Human Health segment is
primarily comprised of pharmaceutical ingredients derived from organic
chemistry. The Bioproducts segment consists of cell culture products and
services, endotoxin detection products and services, and electrophoresis and
chromatography products. The Biopharma segment consists of the Company's
biopharmaceutical process development and manufacturing business.

Members of senior management team regularly review key financial metrics
and the status of operating initiatives within our business. These metrics
include sales growth and gross margin performance by major product category,
operating income margins, cash flows from operations, working capital levels,
and return on capital employed at both a business unit and consolidated level in
addition to earnings per share at a consolidated level. We review this
information on a monthly basis through extensive business unit reviews which
include, among other operating issues, detailed discussions related to
significant sales opportunities, proposed and ongoing investments in new
businesses or property plant and equipment, cost reduction efforts, and the
status of new product development.

In 2003, the Company continued to see strong growth across many product
categories within its Bioproducts segment, and management sees even more
significant future growth potential in cell therapy services. The Bioproducts
segment is primarily driven by biotechnology research spending levels, the
overall demand for endotoxin detection products and services and the Company's
ability to continually provide product upgrades and innovative new products and
services. The loss of a large customer in 2003 whose product did not receive FDA
approval negatively affected our Biopharma segment and the Company continues to
take aggressive steps to replace this business. The Company believes its
Biopharma business will experience more volatility than its other businesses due
to the unpredictable nature of the biotechnology drug discovery and the
availability of funding, but believes the overall growth trend predicted for the
contract biopharmaceutical manufacturing market will result in significant
long-term growth for businesses providing these services. In the Human Health
segment, the company saw net sales growth driven by the impact of a weaker U.S.
dollar, with increases in sales of several active pharmaceutical ingredients
offset by reductions in others, and pricing pressure within certain product
categories. This segment is driven primarily by patent expirations of branded
drugs, population demographics, pressures to contain health care costs, and the
level of outsourcing by branded pharmaceutical companies.

During 2003, the Company settled its Mylan lawsuit and took a pre-tax
charge for approximately $11,342 as discussed more fully below and in Note #24
of the Notes To Consolidated Financial Statements, and recorded valuation
allowances against net domestic deferred tax assets totaling $21,487 within the
Provision for income taxes for continuing operations, explained more fully below
and in Note #10 in the Notes to Consolidated Financial Statements. The Company's
tax rate may experience volatility until such time that domestic operations
achieve sustainable profitability.

CRITICAL ACCOUNTING POLICIES

Our critical accounting policies are those which we believe 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
our critical accounting policies, the underlying judgments and uncertainties

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24

affecting their application and the likelihood that materially different amounts
would be reported under different conditions or using different assumptions, is
as follows:

Revenue Recognition

Revenues are 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.

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. The Company continually monitors the adequacy of procedures
used to estimate these reductions by comparison of estimated reductions to
actual reductions.

Service Revenue

The Company's contract manufacturing business records revenue as services
are performed. In 2003 the Company entered into a contract that contains
milestone based payments. Revenue is recorded based on the cost of efforts
(since the contract's commencement) up to the reporting date, divided by the
total expected contractual costs (from the contract's commencement to the end of
the development arrangement), multiplied by the total expected contractual
payments under the arrangement. However, revenue would be limited to the amount
of nonrefundable cash payments received and the subsequent milestone payments
that have become due and payable at the reporting date.

Asset Valuations and Review For Potential Impairments

Under FAS144, our review of our long-lived assets, principally fixed
assets, and other amortizable intangibles requires us to initially estimate the
undiscounted future cash flow of these assets, whenever events or changes in
circumstances indicate that the carrying amount of these assets may not be fully
recoverable. Our review of goodwill and indefinite lived intangibles are done
annually in accordance with SFAS 142 utilizing a discounted cash flow analysis
that represents fair value. If such analysis indicates that a possible
impairment may exist, as described in Note #5 to the accompanying financial
statements, we are required to then estimate the fair value of the asset,
determined by third party and internal appraisals and valuations, as deemed
appropriate, or estimated discounted future cash flows, which includes making
estimates of the timing of the future cash flows, discount rates and reflecting
varying degrees of perceived risk. The determination of fair value includes
numerous uncertainties, such as the impact of competition on future sales and
margin, operating, selling and administrative costs, interest and discount
rates, technological changes, consumer demand and governmental regulations. We
believe that we have made reasonable estimates and judgments in determining
whether our long-lived assets and goodwill have been impaired, however, if there
is a material change in the assumptions used in our determination of fair values
or if there is a material change in economic conditions or circumstances
influencing fair value, we could be required to recognize certain impairment
charges in the future.

Environmental and Litigation Contingencies

We periodically assess the potential liabilities related to any lawsuits or
claims brought against us. See Note #24 in the accompanying financial statements
for a discussion of our 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, we use our best judgment to determine if it is probable that we 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. Given the
inherent uncertainty

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25

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 we may have made with respect to
their resolution.

Allowance For Doubtful Accounts and Inventory Obsolescence Reserves

The Company maintains allowances for doubtful accounts for estimated losses
resulting from the inability of its customers to make required payments. If the
financial condition of customers were to deteriorate, this may result in an
impairment of their ability to make payments to the Company, and additional
allowances may be required.

The Company establishes reserves for its inventories to recognize estimated
obsolescence and unusable items on a continual basis. Market conditions
surrounding products are also considered periodically to determine if there are
any net realizable valuation matters that would require a write down of any
related inventories. If market or technological conditions change, it may result
in additional inventory reserves and write downs deemed necessary by management.

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 bases 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., and net operating loss carryforwards in certain state and foreign
jurisdictions with little or no history of generating taxable income.

Research and Development ("R&D") Including In-Process R&D ("IPR&D")

Many of the Company's products are subject to regulation by governmental
authorities, principally the Food and Drug Administration ("FDA") in the United
States and equivalent authorities in international markets. Research and
development expenses are charged to the consolidated statement of operations
when incurred, as the Company considers that regulatory and other uncertainties
inherent in the development of new products preclude it from capitalizing
development costs.

With respect to completed acquisitions, acquired products or projects that
have achieved technical feasibility, signified by FDA or comparable regulatory
body approval, are capitalized as intangible assets because it is probable that
the costs will give rise to future economic benefits. Estimates of the values of
these intangible assets are subject to the estimation process described in
"Asset Valuations and Review for Potential Impairments" above.

Acquired products or projects that have not achieved technical feasibility,
(i.e., regulatory approval) and no alternative future use are charged to the
statement of operations on the date of acquisition. In connection with its
acquisitions, the Company generally utilizes independent appraisers in the
determination of IPR&D charges. The amount of this charge is determined based on
a variety of factors including the estimated future cash flows of the product or
project, the likelihood of future benefit from the product or project, and the
level of risk associated with future research and development activities related
to the product or project.

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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 based on input from actuaries.

RESULTS OF OPERATIONS

As discussed in Note #14 of the accompanying financial statements, on
November 10, 2003, the sale of Rutherford Chemicals was completed and
accordingly, the business comprising the Rutherford Chemicals segment is being
reported as a discontinued operation in all periods presented.

The following table sets forth, for the periods indicated, certain items
from the selected consolidated financial information as a percentage of gross
sales:

The following tables show the gross sales of the Company's three segments,
in dollars and as a percentage of the Company's total gross sales for the years
ended December 31, 2003, 2002 and 2001, as well as the gross profit by product
segment for 2003 and 2002.

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2003-2002 GROSS SALES & GROSS PROFIT BY PRODUCT SEGMENT

2003 COMPARED TO 2002

Cambrex Corporation restated its results for the second quarter 2002. This
restatement resulted from a reassessment of the carrying value of an equity
investment in a privately held emerging biotechnology company. The Company
concluded that $4.3 million of the investment should have been impaired as of
the second quarter 2002 and the remaining $0.7 million should have been
initially classified as an intangible asset related to a licensing agreement
entered into concurrent with the equity investment. The impairment charge of
$4.3 million was recorded in Other expense and a related $1.5 million tax
benefit was recorded in Provision for income taxes and as a deferred tax asset.
Net income and Total stockholders' equity decreased by $2.8 million. This
restatement did not have an effect on the Company's cash flows.

Gross sales for 2003 increased 2.8% to $405,591 from $394,430 in 2002.
Sales in the Human Health and Bioproducts segments increased compared to 2002
more than offsetting the decrease in the Biopharma segments. Gross sales were
favorably impacted 7.0% due to the exchange rates reflecting the weakness in the
U.S. dollar primarily versus the Euro and Swedish Krona.

The Human Health Segment gross sales in 2003 of $242,165 were $10,823 or
4.7% above 2002. Human Health sales were favorably impacted 9.1% due to exchange
rates reflecting a weaker U.S. dollar. Excluding the currency impact, the
decrease results from the reduced pricing and market share of certain imaging
products, lower shipments of a respiratory API due to reduced demand in the
U.S., lower shipments of cardiovascular APIs due primarily to the loss of a U.S.
customer and lower prices in Europe. Partly offsetting these decreases were
higher sales of central nervous system APIs and a hypertension API due to
increased demand, signing of a long-term sales agreement for an API to treat
Alzheimer's disease and increased sales of crop protection and feed additive
products due to high demand and successful implementation of higher capacity
production lines.

The Bioproducts Segment gross sales in 2003 of $119,298 were $11,428 or
10.6% above 2002. Bioproducts sales were favorably impacted 5.2% due to exchange
rates reflecting a weaker U.S. dollar. The increased sales before the impact of
foreign currency are primarily due to higher cell therapy services due to
increased demand and higher sales of normal human cells and media products due
to increased demand, higher pricing and new product launches in Europe. These
increases were partly offset by the impact of the sale of the In Vitro
diagnostic cell business during the first quarter of 2002.

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28

The Biopharma Segment gross sales in 2003 of $44,128 were $11,090 or 20.1%
below 2002. The sales decrease primarily reflects the reduced volumes and suite
utilization in our Biopharmaceutical manufacturing business driven by the loss
of a Biopharmaceiutical customer whose product failed to receive FDA approval,
changes in terms of an existing contract and completion of other 2002 contracts
that were only partially replaced. Foreign currency had no impact on Biopharma
sales.

Export sales from the Company's domestic operations were $22,100 in 2003
compared to $23,684 in 2002. International sales from European operations
totaled $223,666 in 2003 compared to $207,082 in 2002. The $405,591 of sales in
2003 consisted of $206,079, $173,035, $16,401 and $10,076 of sales to North
America, Europe, Asia and rest of world, respectively.

Gross profit in 2003 was $162,406 compared to $177,718 in 2002. Gross
margin in 2003 decreased to 40.0% from 45.1% in 2002, reflecting lower margins
in all segments. The Biopharma segment gross margins were down significantly
compared to the prior year due to lower suite utilization and lower pricing on
an existing contract. The Human Health segment margins decreased due to pricing
pressures on API's and other fine custom chemicals including a volume-based
rebate adjustment and the unfavorable impact of foreign currency partly offset
by favorable product mix. The Bioproducts gross margins decreased primarily due
to additional bad debt reserves in 2003 and certain 2002 favorable inventory
adjustments which did not repeat in 2003, partly offset by favorable production
volumes, pricing, cost reduction activities and the favorable impact of foreign
currency.

Selling, general and administrative expenses of $95,117 or 23.4% as a
percentage of gross sales in 2003 increased from $85,762 or 21.7% in 2002. Sales
and marketing expenses increased primarily due to the impact of foreign currency
exchange and an investment in the Company's sales force. Higher administrative
costs reflect the impact of currency translation due to the weaker U.S. dollar,
higher pension expenses, the costs incurred for the ongoing SEC investigation
into the restatement of results disclosed in the fourth quarter 2002, the
vesting of stock appreciation rights in the fourth quarter 2003 and regulatory
compliance costs associated with the Sarbanes-Oxley Act.

Research and development expenses of $17,123 were 4.2% of gross sales in
2003, compared to $15,794 or 4.1% of gross sales in 2002. The increase primarily
reflects investments in new product technologies for endotoxin detection and
molecular biology and the impact of foreign currency exchange.

The 2003 results include a pre-tax provision of $11,342 (discounted to the
present value of the five year pay-out) related to an agreement reached with
Mylan Laboratories under which Cambrex will contribute $12,415 to the settlement
of consolidated litigation brought by a class of direct purchasers. Of this
amount, $4,415 has been paid to date with the balance due in equal installments
over a five-year period. In exchange, Cambrex received from Mylan a release and
full indemnity against future costs or liabilities in related litigation brought
by the purchasers, as well as potential future claims related to this matter.
The 2002 results include a pre-tax charge of $4,238 for asset impairment and
other charges related to the closure of a small manufacturing facility and other
severance charges.

The operating profit in 2003 was $38,824 compared to $71,924 in 2002. The
results reflect lower gross margins in all segments, the $11,342 pre-tax charge
for the Mylan settlement discussed above and higher operating expenses.

Net interest expense of $11,840 in 2003 increased $576 from 2002 reflecting
higher average interest rates due primarily to the higher fixed interest rate on
certain senior notes issued in 2003, partly offset by the lower average debt due
primarily to cash flows from operations and the proceeds from the sale of the
Rutherford Chemicals business. The average interest rate was 4.8% for the year
2003 versus 4.3% in 2002.

The provision for income taxes in 2003 resulted in an effective rate of
99.1% as compared with 24.3% in the same period of 2002. The combination of a
loss due to the sale of Rutherford Chemicals, the Mylan settlement, and a
geographic shift of forecasted income resulted in $21,487 of domestic deferred
tax assets being deemed unlikely to be realized, and as such, a valuation
allowance for this amount was recorded against
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29

these assets in the 2003 continuing operations tax provision. The deferred tax
assets deemed unlikely to be realized for financial reporting purposes include
foreign tax credit carry-forwards, carrying a five year life from inception, the
tax benefit related to domestic net operating losses from continuing operations
and research and experimentation tax credits that can be carried forward 20
years, and a credit related to a federal alternative minimum tax that can be
carried forward indefinitely. The long carry-forward period for domestic net
operating losses and the alternative minimum credit and expected improvements in
domestic continuing operations may result in these tax benefits ultimately being
realized, however, there is no assurance that such improvements can be achieved.

The income from continuing operations in 2003 was $245, or $0.01 per
diluted share versus $39,955, or $1.51 per diluted share in 2002. The 2003
income from continuing operations includes a charge of approximately $21,487 for
the deferred tax valuation allowance and a $11,342 pretax charge for the Mylan
settlement both discussed above. The 2002 results include $4,238 consisting of
an asset impairment and other charges related to the closure of a small
manufacturing facility and other severance charges and a $7,344 pre-tax charge
for two investment impairments recorded in Other expense.

In the third quarter 2003, the Company announced that an agreement to sell
the Rutherford Chemicals business had been signed and on November 10, 2003 the
transaction was completed. As a result, this business is being reported as a
discontinued operation for all periods presented. The terms of sale resulted in
a write-down of assets to fair value of approximately $53,098 which is based on
the selling price, including fees associated with the transaction, subject to
working capital and other adjustments. The Company is currently in negotiations
with the buyer regarding the working capital adjustment which is not expected to
be finalized until first quarter 2004. In 2003, loss on discontinued operations,
net of tax was $(54,308) compared to $(6,546) in 2002. The 2003 results include
the write-down of assets discussed above. The loss in 2002 includes pre-tax
charges of $10,000 for Vitamin B-3 litigation and $10,849 for asset impairment
and other charges, pretax benefits of $2,620 due to a favorable insurance
settlement and $3,760 for a favorable arbitration settlement. In addition to the
special items discussed above, the 2003 loss from discontinued operations
increased due to unfavorable product mix and higher energy and raw material
prices.

The net (loss) income in 2003 was $(54,063), or $(2.07) per diluted share
versus $33,409, or $1.26 per diluted share in the same period a year ago.

The Company's independent auditors informed the Company that there were
material weaknesses in the Company's internal controls relating to the adequacy
of documentation and level of personnel within the Company's corporate tax
department during the fourth quarter of 2003. The Company has and is taking
several actions to remediate these weaknesses. Please refer to Item 9A for a
more detailed description of this matter.

2002 COMPARED TO 2001

Effective January 1, 2002, the Company adopted Statement of Financial
Accounting Standards No. 142, Goodwill and Intangible Assets. The effect of this
adoption was to cease amortization of goodwill and certain indefinite-lived
intangible assets. On an as adjusted basis to reflect FASB No. 142, 2001 net
income would have been $33,354 versus the $25,312 reported in 2001.

Gross sales in 2002 increased 10.6% to $394,430 from $356,555 in 2001.
Sales in Biopharma and Bioproducts increased 145.8% and 5.2%, respectively
compared to 2001 while the Human Health sales were relatively flat. Gross sales
were favorably impacted 2.2% due to the exchange rates reflecting a weaker U.S.
dollar primarily versus the Euro and Swedish Krona.

The Human Health Segment gross sales of $231,342 were $240 or 0.1% below
2001. Human Health sales were favorably impacted 2.9% due to exchange rates
reflecting a weaker U.S. dollar. Sales decreased due primarily to lower sales of
cardiovascular APIs due to customer inventory reductions and competitive
pressures, lower sales of an antihistamine product due to fall off in customer
demand and the effect of a

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30

smaller shipment of an anti-infective product for use in clinical trials. Also,
feed additive sales were lower due to customer inventory management, and the
impact of a customer bringing in-house the manufacture of a performance
enhancing polymer product, as well as customer inventory build-ups of another
performance enhancing polymer product. Partly offsetting these decreases were
increased sales of a new amphetamine product used to treat attention deficit
disorder, higher sales of gastrointestinal APIs to meet increased demand,
continued growth of a pharmaceutical intermediate used in therapeutic treatment
of end-state kidney disease, higher market share in imaging products worldwide,
and higher sales of central nervous system API's due to increased worldwide
demand.

The Bioproducts Segment gross sales of $107,870 were $5,358 or 5.2% above
2001. Bioproducts sales were favorably impacted 2.0% due to exchange rates
reflecting a weaker U.S. dollar. The increased sales were primarily due to
higher sales of endotoxin protection products reflecting the impact of a more
focused sales force and introduction of FDA compliant software in mid 2002,
higher Media and Serum sales (primarily liquid form) due to market share gains
in Europe and strong shipments of Normal Human Cells reflecting improved product
supply and quality. These increases were partly offset by the impact of the sale
of the In Vitro diagnostic cell business during the first quarter of 2002.

The Biopharma Segment gross sales of $55,218 were $32,757 or 145.8% above
2001. The increase in sales is due primarily to the acquisitions of the two
contract Biopharmaceutical process development and manufacturing businesses that
make up this segment that were completed during the second half of 2001. Foreign
currency had no impact on Biopharma sales.

Export sales from the Company's domestic operations were $23,684 in 2002
compared to $20,934 in 2001. International sales from European operations
totaled $207,082 in 2002 compared to $199,666 in 2001. The $394,430 of sales in
2002 consisted of $216,591, $150,180, $17,745 and $9,914 of sales to North
America, Europe, Asia and rest of world, respectively.

Gross profit in 2002 was $177,718 compared to $157,972 in 2001. Gross
margin in 2002 increased to 45.1% from 44.3% in 2001. The Bioproducts segment
margins increased due to favorable product mix and higher volumes. This increase
was partially offset by lower margins in the Biopharma segment due to under
absorption of fixed costs. Overall, Human Health segment margins were down
slightly due to lower volumes partially offset by favorable product mix, which
was aided by the Company's hedging strategy and overall higher production at
most European plants.

Selling, general and administrative expenses as a percentage of gross sales
were 21.7% in 2002 versus 22.5% for 2001 (20.2% on an as adjusted basis
considering the adoption of SFAS No. 142.) Excluding the impact of FAS No. 142,
higher administrative costs were due primarily to the impact of the second half
2001 Biopharmaceutical manufacturing acquisitions, a reduction of environmental
accruals in the second quarter 2001, and higher insurance premiums and employee
benefit expenses in 2002.

Research and development expenses of $15,794 were 4.1% of gross sales in
2002, compared to $17,379 or 4.9% of gross sales in 2001, reflecting staff
reductions and lower overall spending.

The 2002 results include a pre-tax charge of $4,238 for asset impairment
and other charges related to the closure of a small manufacturing facility and
other severance expenses. The 2001 results include a pre-tax charge of $2,022
related to the closure of another small manufacturing facility.

The operating profit in 2002 was $71,924, compared to $58,472 in 2001. The
results reflect the increased sales in the Bioproduct and Biopharma segments and
the reduced amortization expense as a result of the adoption of SFAS No. 142,
partially offset by higher administration costs.

Net interest expense of $11,264 in 2002 increased $662 from 2001 reflecting
the higher average debt balance due to financing the 2001 acquisitions, partly
offset by a lower average interest rate. The average interest rate was 4.3% in
2002 versus 5.2% in 2001.

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31

The provision for income taxes in 2002 resulted in an effective rate of
24.3% versus 27.4% in 2001. The decrease reflects the tax effect of the special
charges, a change in geographic mix of income and the impact of the continuing
R&D tax credit programs.

The Company's income from continuing operations in 2002 was $39,955 or
$1.51 per diluted share compared with $34,988 or $1.32 per diluted share in
2001. In addition to the pre-tax charges discussed above, the 2002 results
included a $7,344 pre-tax charge for investment impairments recorded in Other
expense.

Due to the sale of the Rutherford Chemicals business during 2003, the
Rutherford Chemicals business is being reported as a discontinued operation for
all periods presented. Loss on discontinued operations, net of tax was ($6,546)
in 2002 as compared to ($9,676) in 2001. The loss in 2002 includes pre-tax
charges of $10,000 for Vitamin B-3 litigation, $10,849 for asset impairment and
other charges, pre-tax benefits of $2,620 due to a favorable insurance
settlement and $3,760 for a favorable arbitration settlement. The loss in 2001
includes pre-tax charge of $19,053 for restructuring and asset write-downs and
$4,400 pre-tax charge for Vitamin B-3 litigation. Excluding the above items,
loss on discontinued operations, net of tax, increased in 2002 primarily due to
lower sales volume reflecting lower demand and timing of production campaigns
for crop protection products, lower demand for certain performance enhancing
chemicals, and continued weakness in the telecommunications and industrial
coatings industries.

The Company's net income in 2002 was $33,409 or $1.26 per diluted share
compared to $25,312 or $0.96 per diluted share in 2001.

LIQUIDITY AND CAPITAL RESOURCES

Net cash flow from operations was $73,286 for the year ended December 31,
2003, down from $104,340 in 2002. The decrease in cash flow is due primarily to
lower net income, net cash payments of $5,198 for settlement and legal costs
associated with Vitamin B-3 litigation, $4,415 cash payment associated with the
Mylan settlement, and insurance proceeds received in 2002 related to Rutherford
Chemicals. Cash flows from investing activities in 2003 included proceeds from
the sale of Rutherford Chemicals, net of expenses, of $50,215 and capital
expenditures of $37,857. Cash flows from financing activities in 2003 of $60,588
included net repayments of debt of $56,253, payment of dividends of $3,100 and
the purchase of treasury stock of $2,420, partially offset by $1,130 in proceeds
from the exercise of stock options.

Capital expenditures were $37,857, $40,443 and $30,161 in 2003, 2002 and
2001, respectively. In 2003, part of the funds were used for suite expansion at
our Baltimore and Hopkinton sites, endotoxin detection and cell therapy
manufacturing capabilities at our Walkersville site; R&D lab upgrades at our
Milano site and new small scale production equipment for generic pharmaceuticals
at our Charles City site.

In November 2001, the Company entered into a $430,000 Syndicated Revolving
Credit Agreement led by JPMorganChase as the Administrative Agent. The agreement
consisted of a 364-day renewable senior revolving credit facility for $161,000
(the "364-Day Facility"), and a 5-year senior revolving credit facility of
$268,750 (the "5-Year Agreement").

In 2003, the Company elected not to renew the 364-Day Facility and this
facility expired in November 2003. Concurrently, the 5-Year Agreement was
amended with the addition of an "accordion feature" which, if utilized, will
allow for the increase of the total commitments of up to $75,000.

The 5-Year Agreement allows the Company to choose among various interest
rate options and to specify the portion of the borrowing to be covered by
specific interest rates. Under the 5-Year Agreement the interest rate options
available to the Company are the following:

1) U.S. Prime Rate,

2) LIBOR plus an applicable margin that ranges from .575% to 1.20%, or

3) Money Market rate plus an applicable margin that ranges from .575% to
1.20%.

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32

The applicable margin discussed above is based upon the ratio of
consolidated funded indebtedness to consolidated modified EBITDA. The Company
also pays a facility fee between .15% to .30% on the entire credit facility.

The bank loan 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 certain of the
Company's non-U.S. operating subsidiaries.

As of December 31, 2003, there was $105,200 outstanding and $163,550
undrawn under the 5-year Agreement. Of the undrawn amount, $61,000 is available
to be borrowed as of December 31, 2003 due to limits established in the Credit
Agreement.

The Agreement is subject to financial covenants requiring the Company to
maintain certain levels of net worth, interest coverage ratio, leverage ratios
and limitations on indebtedness. The Company complied with all covenants during
2003.

In June 2003, the Company borrowed $75,000 in a private offering consisting
of 7-year guaranteed senior Notes due in June 2010 with interest payments due
semi-annually at an annual rate of 5.31%. During October 2003, the Company
borrowed an additional $25,000 in a private offering consisting of 10-year
guaranteed senior Notes due in October 2013 with interest payments due
semi-annually at an annual rate of 7.05%. These Notes rank equal with the
Company's other senior indebtedness and are collateralized by the same assets as
the bank loan described above. The funds were used primarily to pay down
existing bank debt and to provide Cambrex with longer term fixed rate debt.

The 2003 and 2002 average interest rates were 4.8% and 4.3%, respectively.

At December 31, 2003 our contractual obligations with initial or remaining
terms in excess of one year were as follows:

See Notes #12 and #23 in the accompanying financial statements for
additional information regarding our debt and other commitments.

Management believes that existing sources of capital, together with cash
flows from operations, will be sufficient to meet foreseeable cash flow
requirements. A key to our access to liquidity is the maintenance of our strong
long-term credit ratings and ability to meet debt covenants to maintain certain
levels of net worth, an interest coverage ratio and leverage ratios. The Company
met all bank covenants during 2003 and does not anticipate any covenant
compliance issues in the coming year. Management also believes that the Company
will maintain its strong long-term credit ratings. Any events that change the
status of our ability to meet debt covenants or maintain our credit ratings
could adversely impact our ability to fund operations.

Our 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 Risk Factors section of this document
for further explanation of factors that may negatively impact our cash flows).
Any change in the current status of these factors could adversely impact the
Company's ability to fund operating cash flow requirements.

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33

FINANCIAL INSTRUMENTS

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.

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, Swedish
Krona and British Pound Sterling currencies. 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 at December 31, 2003 was $28,036. The Company estimates the
forward contracts to be approximately 66% of the non-local currency exposure
during the period. Unrealized foreign exchange contract losses do not subject
the Company's actual results to risk as gains or losses on these contracts
generally offset gains or losses on the transactions that are hedged.

Given a scenario that the operating companies' non-local currency
collections match their forecasts, and all exchange rates move 10% against their
local currencies, no more than $2,100 of pre-tax profits for a twelve-month
period would be at risk. This is based on unhedged risk of $21,008. This
residual risk allows for an over-forecasting margin of error and prevents over
hedging of actual operating risk. As of December 31, 2003, the non-local
forecasted currency exposures were $86,766. Offsetting this exposure is
forecasted U.S. Dollar inter-company payments from the combined European sites
of $24,217. Of the remaining $62,549 forecasted exposure, $41,541 was partially
hedged with major banks and through offsetting inter-company hedge contracts,
thereby reducing the non-hedged risk to $21,008.

Interest Rate Management

Each of the interest rate options in the Revolving Credit Agreement
includes floating rates. This arrangement has the advantage of making lower
interest rates available in a declining rate market. However, it also exposes
the Company to any upward swings in interest rates. For example, based on the
Company's current net debt outstanding, an unexpected annual interest rate
increase of 100 basis points (1%) could increase interest expense and thus
decrease the Company's after-tax profitability by approximately $497.

To limit the risk of interest rates rising above a tolerable level, the
Company would pay a premium now in order to obtain a fixed interest rate at a
predetermined cost in the future. That 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 any unforeseen shifts in interest rates.

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, 2003, the Company had eleven interest rate swaps in
place with an aggregate notional value of $95,000, at an average fixed rate of
4.41%, and with varying maturity dates through the year 2006. The Company's
strategy has been to cover a portion of outstanding bank debt with interest rate
protection. At December 31, 2003, the coverage was approximately 90% of our
variable interest rate debt.

ENVIRONMENTAL

In connection with laws and regulations pertaining to the protection of the
environment, the Company is a party to several environmental remediation
investigations and cleanups and, along with other companies, has been named a
"potentially responsible party" for certain waste disposal sites ("Superfund
sites"). 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 Company had accruals, included in other non-current liabilities of
$4,900 and $4,542 at December 31, 2003 and December 31, 2002, respectively, for
costs associated with the

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study and remediation of Superfund sites and the Company's current and former
operating sites for matters that are probable and reasonably estimable. The
increase in the accrual is due to currency fluctuation of $458, partially offset
by $100 in payments. Included in the liabilities mentioned above are
environmental liabilities discussed in the "Sale of Rutherford Chemicals"
section below. Based on currently available information and analysis, the
Company's accrual represents management's best estimate of what it believes are
the probable environmental cleanup related costs of a non-capital nature. After
reviewing information currently available, management believes any amounts paid
in excess of the accrued liabilities will not have a material effect on its
financial position or results of operations. However, these matters, if resolved
in a manner different from the estimates could have a material adverse effect on
financial condition, operating results and cash flows when resolved in a future
reporting period.

LITIGATION

Mylan Laboratories

In late, 1998 the Company and its subsidiary Profarmaco S.r.l. (currently
known as Cambrex Profarmaco Milano S.r.l., "Profarmaco") were named as
defendants (along with Mylan Laboratories, Inc. ("Mylan") and Gyma Laboratories
of America, Inc., Profarmaco's distributor in the United States) in a proceeding
instituted by the Federal Trade Commission ("FTC") in the United States District
Court for the District of Columbia (the "District Court"). The allegations arise
from exclusive license agreements between Profarmaco and Mylan covering the drug
master files for lorazepam and clorazepate, two active pharmaceutical
ingredients ("APIs"). The FTC alleged violations of the Federal Trade Commission
Act; including unlawful restraint of trade and conspiracy to monopolize markets
for the APIs. A lawsuit making similar allegations against the same parties
seeking injunctive relief and treble damages, was filed by the Attorneys General
of 31 states in the District Court on behalf of those states and persons in
those states who were purchasers of the generic pharmaceuticals.

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.

On February 9, 2001, a federal court in Washington, DC entered an Order and
Stipulated Permanent Injunction as part of a settlement of the FTC and Attorneys
General's suits. Under these settlement documents Mylan agreed to pay over
$140,000 on its own behalf and on behalf of most of the other defendant
companies including Cambrex and Profarmaco. In the Order and Injunction, the
settling defendants also agreed to monitor certain future conduct. Mylan had
been fully covering the costs for the defense and indemnity of Cambrex and
Profarmaco under certain obligations set forth in the license agreements.
Cambrex agreed to cover separate legal defense costs incurred for Cambrex and
Profarmaco on a going forward basis beginning August 1, 2000. The private
litigation continues.

On April 7, 2003, Cambrex reached an agreement with Mylan under which
Cambrex would contribute $12,415 to the settlement of consolidated 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. Approximately $4,415 was paid in April
2003 in accordance with the agreement, with the remaining $8,000 to be paid over
the next five years. 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. As of December 31, 2003, the outstanding balance for
this liability was $7,186.

Vitamin B-3

On May 14, 1998, the Company's Nepera subsidiary, a manufacturer and seller
of niacinamide (Vitamin B-3), received a Federal Grand Jury subpoena for the
production of documents relating to the
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35

pricing and possible customer allocation with regard to that product. The
Company understands that the subpoena was issued as part of the Federal
Government's ongoing anti-trust investigation into various business practices in
the vitamin industry generally. In the fourth quarter of 1999, the Company
reached a settlement with the Government concerning Nepera's alleged role in
Vitamin B-3 violations from 1992 to 1995. On October 13, 2000, the Government
settlement was finalized with Nepera entering into a voluntary plea agreement
with the Department of Justice. Under this agreement, Nepera entered a plea of
guilty to one count of price fixing and market allocation of Vitamin B-3 from
1992 to 1995 in violation of section one of the Sherman Act and agreed to pay a
fine of $4,000. Under the plea agreement, Nepera was placed on probation for one
year, which has ended. The fine was paid in February 2001. 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.

An accrual of $6,000 was recorded in the fourth quarter 1999 to cover the
anticipated government settlements, related litigation, and legal expenses.
Based on discussions with various plaintiffs counsel, as well as current
estimates of expenditures for legal fees, an additional accrual of $4,400 was
established in the fourth quarter of 2001. The Company believed that the current
reserves would be sufficient to cover resolution of the remaining related
litigation matters. However, during 2002, based on information developed during
the year, the Company determined that the remaining litigation matters would be
more costly than previously anticipated. Therefore, during 2002, the Company
increased reserves by $10,000. The balance of this accrual as of December 31,
2003 was approximately $3,836. This accrual has been recorded in accrued
liabilities.

Litigation in the United States under the U.S. antitrust laws was commenced
some years ago by a group of European purchasers. On motion by the Vitamin B-3
defendants, the District Court dismissed the litigation, under the long-standing
rule that foreign purchasers cannot sue in U.S. courts under U.S. antitrust
statutes. Recently, the Federal Circuit Court reversed the District Court's
decision. The Vitamin B-3 defendants, supported by the U.S. Department of
Justice, appealed to the United States Supreme Court and the hearing is
currently scheduled for April 2004. The Company strongly believes that the claim
should be dismissed, however, the Circuit Court's decision is so unusual that we
cannot predict the disposition of this matter.

Mallinckrodt

During February 1999, the Company's Charles City facility ("CCC") sold
several batches of 5-NIPA, an x-ray contrast media raw material, to
Mallinckrodt, Inc. In April 1999, Mallinckrodt verbally notified CCC that some
of the 5-NIPA batches appeared to be out of specification. CCC requested that
Mallinckrodt cease production and return the product for refund or replacement.
CCC's quality control tests indicated that the material met the agreed
specification, but CCC was ready to issue a credit to Mallinckrodt upon return
of the questionable material. Nevertheless, it appears that Mallinckrodt
continued to use the material.

In August 1999, Mallinckrodt issued CCC a schedule that summarized the
total costs allegedly incurred by Mallinckrodt related to the questionable
5-NIPA in the amount of approximately $4,800. On July 13, 2000, Mallinckrodt
sent CCC a letter claiming that CCC breached its supply agreement by delivering
contaminated 5-NIPA to Mallinckrodt and claiming damages for its costs. We
responded that, among other things, CCC delivered in-specification material and
did not breach the supply agreement. On October 2, 2000, Mallinckrodt filed suit
in United States District Court in St. Louis, Missouri alleging, among other
things, that CCC breached the supply agreement and claiming significant damages.
On December 27, 2000, we filed our answer, denying Mallinckrodt's claims.

Mediation was held in June 2003 but was unsuccessful. A second mediation
occurred on November 12, 2003; we did not reach agreement, but continued
discussing settlement as we prepared for trial, which had been scheduled for
early January 2004. On December 16, 2003, we reached a settlement with
Mallinckrodt for $3,200 which has subsequently been paid. The Company has a
$1,000 deductible under its insurance policy. The Company exhausted a majority
of the deductible through the costs of defense which had been previously
reserved. The Company has subsequently been reimbursed approximately $3,000 by
its insurance carrier.

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36

Sale of Rutherford Chemicals

The Company entered into an agreement for the sale of its Rutherford
Chemicals business and completed this transaction on November 10, 2003, subject
to working capital adjustments. Under the agreement, the Company provided
standard representations and warranties concerning the business, operations,
liabilities and financial condition of the Rutherford Chemicals Business. Most
of such representations and warranties will survive for a period of thirty days
after the Buyer's preparation of its audited financial statements for year-end
2004. Therefore, claims for breaches of such representations would have to be
brought during that time frame. Certain specified representations and
warranties, such as those relating to employee benefit matters, will survive for
longer periods. Under the agreement, the Company has indemnified the Buyer for
breaches of representations and warranties, such indemnification is subject to a
deductible and a cap at a percentage of the purchase price.

The Company has retained the liabilities associated with existing general
litigation matters, including Vitamin B-3 as stated above. With respect to
certain pre-closing environmental matters, the Company retains the
responsibility for (i) certain existing matters; including violations and
off-site liabilities and (ii) completing the on-going remediation at the New
York facility. Further, as a result of the sale of the Bayonne, New Jersey
facility, the obligation to investigate site conditions and conduct required
remediation under the provisions of the New Jersey Industrial Site Recovery Act
was triggered; and the Company has retained the responsibility for completion of
any such investigation and remediation. With respect to all other pre-closing
environmental liabilities, whether known or unknown, the Buyer is responsible
for the management of potential future matters; however, the Buyer and the
Company may share the costs of associated remediation with respect to such
potential future matters, subject to certain limitations defined in the
agreement to the sale.

Class Action Matter

In mid-October, 2003, the Company was notified of a securities class action
lawsuit filed against Cambrex and five former and current Company officers. To
date, five class action suits have been filed with the New Jersey Federal
District Court and we have been served with process in several of the cases. The
original and later lawsuits were brought as class actions in the names of
purchasers of the Company's common stock from October 21, 1998 through July 25,
2003. The complaints allege that the Company failed to disclose in timely
fashion the January 2003 accounting restatement and subsequent SEC
investigation, as well as the loss of a significant contract at the Baltimore
facility.

Under the rules applicable to class action litigation, the various
plaintiffs appeared in Federal Court on January 12, 2004, and the Court
designated the lead plaintiff and selected counsel to represent the class. The
plaintiff has sixty (60) days to amend the complaint. The Company will have a
further forty-five (45) days to file a motion to dismiss. We consider the
complaints to be substantially without merit and will vigorously defend against
them.

Securities and Exchange Commission

The Securities and Exchange Commission ("SEC") is currently conducting an
investigation into the Company's inter-company accounting issue. 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. To Cambrex's knowledge, the
investigation is limited to this inter-company accounting matter, and the
Company does not expect further revisions to its historical financial statements
relating to these issues. The Company is fully cooperating with the SEC.

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37

Other

The Company enters into standard indemnification agreements in the ordinary
course of business including 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 specifications and contract
provisions for indemnification protecting licensees against intellectual
property infringement related to licensed Company technology or processes. Due
to the lack of historical obligations related to these items and the existence
of associated insurance coverage, the Company has no liabilities recorded for
these items as of December 31, 2003.

As permitted under Delaware law, the Company has agreements whereby we
indemnify our officers and directors for certain events or occurrences while the
officer or director is, or was serving, at our 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 we could be required to make
under these indemnification agreements is unlimited; however, we have a Director
and Officer insurance policy that covers a portion of any potential exposure.

The Company believes the estimated fair value of the above indemnification
agreements is minimal, and as such, the Company has no liabilities recorded for
these agreements as of December 31, 2003.

While it is not possible to predict with certainty the outcome of the above
litigation and other matters and various other lawsuits, it is the opinion of
management that the ultimate resolution of these proceedings should not have a
material adverse effect on the Company's results of operations, cash flows and
financial position. These matters, if resolved in an unfavorable manner, could
have a material effect on the operating results and cash flows when resolved in
a future reporting period.

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

Accounting for Asset Retirement Obligations

In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard No. 143, "Accounting for Asset
Retirement Obligations" ("SFAS 143"). The standard requires that legal
obligations associated with the retirement of tangible long-lived assets be
recorded at fair value when incurred and was adopted by the Company on January
1, 2003. Adoption of SFAS 143 did not have any effect on the Company's
consolidated financial position or results of operations as it has determined
its long-lived assets have indeterminate future lives.

Rescission of FAS No. 4, 44 and 64, Amendment of FAS 13, and Technical
Corrections as of April 2002

In May 2002, the FASB issued Statement of Financial Accounting Standards
No. 145, "Rescission of SFAS No. 4, 44 and 64, Amendment of SFAS 13, and
Technical Corrections as of April 2002" ("SFAS 145"). The statement rescinds
SFAS 4 (as amended by SFAS 64), which required extraordinary item treatment for
gains and losses on extinguishments of debt, and SFAS 44, which does not affect
the Company. Additionally, the statement amends certain provisions of SFAS 13
and other existing authoritative pronouncements to make various technical
corrections, clarify meanings, or describe their applicability under changed
conditions. The provisions of SFAS 145 related to extinguishments of debt are
effective for the Company beginning January 1, 2003, and all other provisions
are effective for transactions occurring or financial statements issued on or
after May 5, 2002. Adoption of SFAS 145 did not have any effect on the Company's
consolidated financial position or results of operations.

Accounting for Costs Associated with Exit or Disposal Activities

In June 2002, the FASB issued Statement of Financial Accounting Standard
No. 146, "Accounting for Costs Associated with Exit or Disposal Activities"
("SFAS 146"). This Statement addresses financial accounting and reporting for
costs associated with exit or disposal activities and nullifies Emerging Issues
Task
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38

Force (EITF) Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)." This Statement eliminates the definition
and requirements for recognition of exit costs in Issue 94-3, and requires that
a liability for a cost associated with an exit or disposal activity be
recognized when the liability is incurred. SFAS 146 also establishes that fair
value is the objective for initial measurement of the liability. SFAS 146 is
effective for exit or disposal activities that are initiated after December 31,
2002, with early application encouraged. Any charges associated with future
restructuring programs will be recorded in accordance with SFAS 146. This will
spread the recognition of the restructuring expenses over a number of accounting
periods as compared to EITF 94-3.

Accounting for Stock-Based Compensation -- Transition and Disclosure

In December 2002, the FASB issued Statement of Financial Accounting
Standard No. 148, "Accounting for Stock-Based Compensation -- Transition and
Disclosure" ("SFAS 148"). This Statement provides alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employees compensation from the intrinsic method. SFAS 148 also
amends the disclosure provisions of SFAS 123 and APB Opinion No. 28, "Interim
Financial Reporting," to require disclosure in the summary of significant
accounting policies of the effects of an entity's accounting policy with respect
to stock-based employee compensation on reported net income and earnings per
share in annual and interim financial statements. While SFAS 148 does not amend
SFAS 123 to require companies to account for employee stock options using the
fair value method, the disclosure provisions of SFAS 148 are applicable to all
companies with stock-based employee compensation, regardless of whether they
account for that compensation using the fair value method of SFAS 123 or the
intrinsic value method of APB 25. SFAS 148's amendment of the transition and
annual disclosure requirements of SFAS 123 are effective for fiscal years ending
after December 15, 2002. The Company has adopted the disclosure provisions of
SFAS 148 as of December 31, 2002, and will continue to use the intrinsic value
method of APB 25.

Amendment of Statement 133 on Derivative Instruments and Hedging Activities

On April 30, 2003 the FASB issued SFAS 149 "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities" which amends SFAS 133. This
Statement clarifies under what circumstances a contract with an initial net
investment meets the characteristics of a derivative, it also clarifies when a
derivative contains a financing component and amends the definition of an
underling to conform it to language used in FASB Interpretation No. 45. This
statement is effective for contracts entered into or modified after June 30,
2003, except for those provisions of this Statement that relate to SFAS 133
implementation issues that have been effective for fiscal quarters that began
prior to June 15, 2003. Adoption of SFAS 149 did not have any effect on the
Company's consolidated financial position or results of operations.

Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity

In May 2003, the FASB issued Statement of Financial Accounting Standard No.
150, "Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity" ("SFAS 150"). SFAS 150 specifies that instruments within
its scope embody obligations of the issuer and that, therefore, the issuer must
classify them as liabilities. This statement requires that mandatory redeemable
financial instruments, obligations to repurchase the issuer's equity shares by
transferring assets, and certain obligations to issue a variable number of
shares be classified as liabilities. SFAS 150 is effective at the beginning of
the first interim period beginning after June 15, 2003. Adoption of this
Statement did not have any effect on the Company's results.

Guarantor's Accounting and Disclosure Requirements for Guarantees

In November 2002, FASB Interpretation No. 45, "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" ("FIN 45") was issued. FIN 45
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39

elaborates on the disclosures to be made by a guarantor in its interim and
annual financial statements about its obligations under certain guarantees that
it has issued. It also clarifies that a guarantor is required to recognize, at
the inception of a guarantee, a liability for the fair value of the obligation
undertaken in issuing the guarantee. The initial recognition and initial
measurement provisions of this Interpretation are applicable on a prospective
basis to guarantees issued or modified after December 31, 2002. The required
disclosures are effective for financial statements of interim or annual periods
ending after December 15, 2002. The adoption of FIN 45 did not have any effect
on the Company's consolidated financial position or results of operations.

Consolidation of Variable Interest Entities

In January 2003, FIN No. 46, "Consolidation of Variable Interest Entities"
("FIN 46") was issued. The interpretation provides guidance on consolidating
variable interest entities and applies immediately to variable interests created
after January 31, 2003. The guidelines of the interpretation will become
applicable for the Company in its fourth quarter 2003 financial statements for
variable interest entities created before February 1, 2003. The interpretation
requires variable interest entities to be consolidated if the equity investment
at risk is not sufficient to permit an entity to finance its activities without
support from other parties or the equity investors lack certain specified
characteristics. The Company has reviewed FIN 46 and determined its impact did
not have an effect on the Company's financial position or results of operations.

In December 2003, the FASB issued FIN 46R which requires the application of
either FIN 46 or FIN 46R by public entities created prior to February 1, 2003 at
the end of the first interim or annual reporting period ending after December
15, 2003. All entities created after January 31, 2003 by public entities were
already required to be analyzed under FIN 46, and they must continue to do so,
unless FIN 46R is adopted early. FIN 46R will be applicable to all non-SPEs
created prior to February 1, 2003 by Public Entities that are not small business
issuers at the end of the first interim or annual reporting period ending after
March 15, 2004.

Employer's Disclosure about Pensions and Other Postretirement Benefits

In December 2003, the FASB published a revision to SFAS No. 132 "Employers'
Disclosure about Pensions and Other Postretirement Benefits an amendment of FASB
Statements No. 87, 88, and 106." SFAS No. 132R requires additional disclosures
to those in the original SFAS No. 132 about the assets, obligations, cash flows,
and net periodic benefit cost of defined benefit pension plans and other defined
benefit postretirement plans. The provisions of SFAS No. 132 remain in effect
until the provisions of SFAS No. 132R are adopted. SFAS No. 132R is effective
for financial statements with fiscal years ending after December 15, 2003. The
Company is in compliance with SFAS No. 132R.

On January 12, 2004, the FASB issues Staff Position (FSP) 106-1 which
permits a sponsor of a postretirement health care plan that provides a
prescription drug benefit to make a one-time election to defer accounting for
the effects of the Medicare Prescription Drug, Improvement and Modernization Act
of 2003 (the Act). The Company has elected to defer the accounting effects of
this act. As a result, any measures of the plan APBO or net periodic
postretirement benefit cost in the financial statements or accompanying notes do
not reflect the effects of the Act on the plan and specific authoritative
guidance on the accounting for the federal subsidy is pending and that guidance,
when issued, could require the Company to change previously reported
information.

Accounting for Revenue Arrangements with Multiple Deliverables

In January 2003, the Emerging Issues Task Force ("EITF") released EITF
00-21: "Accounting for Revenue Arrangements with Multiple Deliverables" ("EITF
00-21"). EITF 00-21 clarifies the timing and recognition of revenue from certain
transactions that include the delivery and performance of multiple products or
services. EITF 00-21 is effective for revenue arrangements entered into during
fiscal periods beginning after June 15, 2003. The Company is in compliance with
this EITF.

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40

In December 2003, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 104 (SAB 104), Revenue Recognition. SAB 104 supersedes
SAB 101, Revenue Recognition in Financial Statements to include the guidance
from Emerging Issues Task Force EITF 00-21 "Accounting for Revenue Arrangements
with Multiple Deliverables." The adoption of SAB 104 did not have a material
effect on the Company's consolidated results of operations or financial
position.

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, 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. The
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 factors that could affect the Company's forward-looking
statements relating to the resolution of the material weaknesses in internal
controls discussed in Item 9A of this Annual Report including, among other
things: the Company's ability to fully resolve the weaknesses during the three
to six month period from the date of filing of this Annual Report; the Company's
ability to identify and retain qualified and experienced personnel on both a
short and long term basis in its tax department; the Company's ability to design
and maintain policies and procedures which enable the Company to avoid any
reoccurrence of the matters which gave rise to the material weaknesses; the
Company's ability to implement policies and procedures including documentation
that meets the internal control over financial reporting requirements of the
rules adopted by the Commission pursuant to Section 404 of the Sarbanes-Oxley
Act of 2002, the risks and other factors described under the caption "Risk
Factors That May Affect Future Results" in this Form 10-K, global economic
trends, pharmaceutical outsourcing trends, competitive pricing or product
developments, government legislation and/or regulations (particularly
environmental issues), tax rate, technology, manufacturing and legal issues,
unfavorable results shipments, changes in foreign exchange rates, performance of
minority investments, un-collectable receivables, loss on disposition of assets,
cancellation or delays in renewal of contracts, and lack of suitable raw
materials or packaging materials. 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, we
cannot assess the impact of each factor on our 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.

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41

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:

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

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42

REPORT OF INDEPENDENT AUDITORS

To the Stockholders and Board of Directors
of Cambrex Corporation

In our opinion, the consolidated financial statements listed in the
accompanying index on page 42 present fairly, in all material respects, the
financial position of Cambrex Corporation and Subsidiaries at December 31, 2003
and 2002, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2003 in conformity with
accounting principles generally accepted in the United States of America. In
addition, in our opinion, the financial statement schedule listed in the
accompanying index 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 auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit 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 Note 5 to the consolidated financial statements, the
Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill
and Other Intangible Assets," effective January 1, 2002.

As discussed in Note 2, the 2002 consolidated financial statements have
been restated.

/s/: PRICEWATERHOUSECOOPERS LLP

Florham Park, New Jersey
February 27, 2004

43

CAMBREX CORPORATION AND SUBSIDIARIES

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

See accompanying notes to consolidated financial statements.
44

CAMBREX CORPORATION AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS
(IN THOUSANDS, EXCEPT PER-SHARE DATA)

See accompanying notes to consolidated financial statements.
45

CAMBREX CORPORATION AND SUBSIDIARIES

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

See accompanying notes to consolidated financial statements.
46

CAMBREX CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

See accompanying notes to consolidated financial statements.
47

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 the life sciences industry. As
discussed in Note #14, on November 10, 2003, the sale of Rutherford Chemicals
was completed and accordingly, the business comprising the Rutherford Chemicals
segment is being reported as a discontinued operation in all periods presented.
The Company operates in three segments, Human Health, Bioproducts and Biopharma.

(2) RESTATEMENT OF FINANCIAL RESULTS

Cambrex Corporation restated its results for the second quarter 2002. This
restatement resulted from a reassessment of the carrying value of an equity
investment in a privately held emerging biotechnology company. The Company
concluded that $4.3 million of the investment should have been impaired as of
the second quarter 2002 and the remaining $0.7 million should have been
initially classified as an intangible asset related to a licensing agreement
entered into concurrent with the equity investment. The impairment charge of
$4.3 million was recorded in Other expense and a related $1.5 million tax
benefit was recorded in Provision for income taxes and as a deferred tax asset.
Net income and total stockholders' equity decreased by $2.8 million. This
restatement did not have an effect on the Company's cash flows.

A summary of the effects of the restatement on the accompanying
Consolidated Income Statements and Consolidated Balance Sheet follows:

Consolidated Income Statement

48

CAMBREX CORPORATION AND SUBSIDIARIES

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

(2) RESTATEMENT OF FINANCIAL RESULTS -- (CONTINUED)

Consolidated Balance Sheet

- ---------------

* Reflects discontinued operation and other reclassifications

(3) 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 and virtually no risk of loss in value are considered cash equivalents.

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 substantially all of its 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
borrowings. 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.

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.

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.

49

CAMBREX CORPORATION AND SUBSIDIARIES

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

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

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............................ 15 to 20 years
Machinery and equipment............................... 5 to 10 years
Furniture and fixtures................................ 3 to 5 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 construction and acquisition of assets. 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 2003, 2002 and 2001 amounted
to $53, $1,041 and $1,482, respectively.

Goodwill and Intangible Assets

Intangible assets are recorded at cost and amortized on a straight-line
basis as follows:

Patents................................. Amortized over the remaining
life of individual patents
(average 5 years)
Goodwill................................ No amortization is being
recorded in accordance
with SFAS No. 142
Product technology...................... 5 to 17 years
Non-compete agreements.................. 5 years
Trademarks and other.................... up to 40 years

The Company continually evaluates the reasonableness of its amortization of
intangibles. If it becomes probable that expected future undiscounted cash flows
associated with intangible assets are less than their carrying value, the assets
are written down to their fair value. On January 1, 2002 the Company adopted
Statement of Financial Accounting Standards ("SFAS") 142, "Goodwill and Other
Intangible Assets." SFAS 142 applies to all goodwill and intangibles determined
to have indefinite lives. Goodwill and indefinite lived intangibles will not be
amortized but will be tested for impairment at least annually. Intangible assets
other than goodwill will be amortized over their useful lives and reviewed for
impairment in accordance with SFAS 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets."

Impairment of Long-Lived Assets

The Company assesses the impairment of its long-lived assets under SFAS
144, including 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.

Revenue Recognition

Revenues are recognized when products are shipped and title and risk of
loss has passed to the customer. Royalties are recognized as earned in
accordance with royalty agreements. Revenue is recorded net of returns

50

CAMBREX CORPORATION AND SUBSIDIARIES

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

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

and discounts and allowances offered to customers. The Company estimates returns
and discounts at the time of sale based on the terms of the agreements and
historical experience. The Company continually evaluates the adequacy of these
methods used to estimate returns and discounts. Service based revenue is
recognized as work is performed or completed, and payment is assured, in
accordance with individual customer contracts.

Service Revenue

The Company's contract manufacturing business records revenue as services
are performed. In 2003 the Company entered into a contract that contains
milestone based payments. Revenue would be based on the cost of efforts (since
the contract's commencement) up to the reporting date, divided by the total
expected contractual costs (from the contract's commencement to the end of the
development arrangement), multiplied by the total expected contractual payments
under the arrangement. However, revenue would be limited to the amount of
nonrefundable cash payments received and the subsequent milestone payments that
have become due and payable at the reporting date.

Income Taxes

Deferred income taxes reflect the differences between assets and
liabilities recognized for financial reporting purposes and amounts recognized
for tax purposes. Deferred taxes are based on tax laws currently enacted.

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 return. U.S.
income taxes are provided on a repatriation of a portion of accumulated foreign
earnings and consider applicable foreign tax credits. The repatriation of
dividends occurred due to an expected tax law change, and there is no plan to
repatriate dividends in the future. Cambrex has adopted a policy to indefinitely
reinvest the unremitted earnings of certain non-U.S. subsidiaries, and as such,
separate provisions for income taxes have been determined for these entities and
U.S. taxes have not been provided on their unremitted earnings. At December 31,
2003, the cumulative amount of unremitted earnings of non-U.S. subsidiaries was
$47,056.

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

51

CAMBREX CORPORATION AND SUBSIDIARIES

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

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

their present value. 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 gain (losses)
were $2,600, $1,083 and ($1,876) in 2003, 2002 and 2001, 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.

Earnings per share calculations are as follows:

For the year ended December 31, 2003, 2002 and 2001, approximately
2,096,000, 1,223,000, and 416,000 shares respectively, were not included in the
diluted EPS calculation because the option price was greater than the market
price.

52

CAMBREX CORPORATION AND SUBSIDIARIES

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

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

Freight Billing and Costs

The Company bills a portion of freight cost incurred on shipments to
customers. Freight costs are reflected in Cost of goods sold and amounts billed
to customers are recorded within Net revenues. These amounts are not material to
the Company's operating results.

Stock Based Compensation

At December 31, 2003, the Company has seven stock-based employee
compensation plans currently in effect, which are described more fully in Note
#16. The Company accounts 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 is reflected in net income, 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. The following table illustrates the effect on
net income and earnings per share if the Company had applied the fair value
recognition provisions of FASB Statement No. 123, Accounting for Stock-Based
Compensation, to stock-based employee compensation.

The pro forma compensation expense of $4,981, $1,714, and $6,994 for 2003,
2002 and 2001, respectively, was calculated based on the fair value, net of tax,
of each option primarily using the Black-Scholes option-pricing model for
non-performance options and a path dependent model for performance options, with
the following assumptions for 2003, 2002 and 2001, respectively: (i) average
dividend yield of 0.57%, 0.30% and 0.30% (ii) expected volatility of 40.81%,
33.77% and 30.28%, (iii) risk-free interest rate ranging from 2.75% to 3.95%,
3.84% to 4.84%, and 3.86% to 5.13%, and (iv) expected life of 4-7 years.

In May 2003, the Chief Executive Officer was granted 150,000 incentive
stock appreciation rights. These rights vest if Cambrex stock trades at an
average price of $25 or higher for 20 consecutive days prior to his retirement.
Upon vesting, the employee is entitled to a cash settlement representing the
difference in value between the closing price of Cambrex stock on the day of the
grant, which was $19.30, and the closing price of Cambrex stock on the day the
rights are exercised. These rights terminate one year after the employee's
retirement. In the fourth quarter of 2003, these rights vested and the Company
recorded compensation expense of approximately $900. These rights will be marked
to market until the rights are exercised or expire with the amount being
recorded as compensation expense or benefit in the applicable period.

Comprehensive income

SFAS 130, "Reporting Comprehensive Income," requires foreign currency
translation adjustments and certain other items, which were reported separately
in stockholders' equity, to be included in other comprehensive income (loss).
Included within accumulated other comprehensive (loss) income for the Company
are foreign currency translation adjustments, changes in the fair value related
to derivative
53

CAMBREX CORPORATION AND SUBSIDIARIES

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

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

instruments classified as cash flow hedges, net of related tax benefit, and
changes in the minimum pension liability, net of related tax benefit. Total
comprehensive income (loss) for the years ended 2003, 2002 and 2001 is included
in the Statement of Stockholders' Equity.

The components of Accumulated Other Comprehensive Income (Loss) in
Stockholders' Equity are as follows:

Software and Development Costs

In 2003, 2002 and 2001, the Company capitalized purchased software from a
third party vendor and software development costs incurred under the provisions
of SOP 98-1, "Accounting for the Cost of Computer Software Developed or Obtained
for Internal Use." Capitalized costs include only (1) external direct costs of
materials and services incurred in developing or obtaining internal use
software, (2) payroll and payroll-related costs for employees who are directly
associated with and who devote substantial time to the internal-use software
project, and (3) interest costs incurred, while developing internal-use
software. Amortization begins when assets are ready for their intended purpose
and were placed in service.

Research and development costs, business process re-engineering costs,
training and computer software maintenance costs are expensed as incurred.
Software development costs are being amortized using the straight-line method
over the expected life of the product.

Segment Information

SFAS 131, "Disclosure about Segments of an Enterprise and Related
Information" requires segment information to be prepared using the "management"
approach. The management approach is based on the method that management
organizes the segments within the Company for making operating decisions and
assessing performance. SFAS 131 also requires disclosures about products and
services, geographic areas, and major customers.

Reclassification

Certain reclassifications have been made to prior year disclosures to
conform with current year presentation.

(4) ACQUISITIONS

On October 30, 2001, Cambrex Corporation completed the acquisition of
Marathon Biopharmaceuticals ("Marathon"), located in Hopkinton, Massachusetts,
for approximately $26,000 in cash through a share purchase of CoPharma Inc.
Marathon is a full-service cGMP manufacturer of Biopharmaceutical ingredients
and purified bulk biologics for pre-clinical evaluation, clinical trials and
commercial scale quantities. This acquisition strengthens Cambrex's existing
capabilities for producing pre-clinical, clinical and commercial quantities of
bulk biologics. Assets acquired and liabilities assumed have been recorded at
their fair estimated fair values. Goodwill was recorded at approximately $11,035
and other identifiable intangibles were $2,153. Assets acquired include $9,900
of fixed assets, $700 in inventories, $5,700 deferred tax assets and
approximately $3,400 in accounts payable and accrued liabilities. The goodwill
associated with this transaction is not

54

CAMBREX CORPORATION AND SUBSIDIARIES

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

(4) ACQUISITIONS -- (CONTINUED)

deductible for tax purposes. Subsequent to the acquisition, the company's formal
name was changed to Cambrex Bio Science Hopkinton, Inc.

On June 1, 2001, Cambrex Corporation completed its acquisition of the Bio
Science Contract Production Corporation ("Bio Science") Biopharmaceutical
manufacturing business in Baltimore, Maryland. The business involves the cGMP
manufacture of purified bulk biologics and pharmaceutical ingredients. The total
purchase price was approximately $120,000 in cash, which was funded by an
existing line of credit facility. Additional purchase price payments of up to
$25,000 may be made depending on future business performance over the next four
years. Assets acquired and liabilities assumed have been recorded at their
estimated fair values. Goodwill was recorded at approximately $117,800,
including incremental deal costs. In addition, identifiable intangible assets of
$3,382 have been recorded. Subsequent to the acquisition, the Company's formal
name was changed to Cambrex Bio Science Baltimore, Inc.

The above acquisitions have been accounted for under the purchase method of
accounting and accordingly the results of operations of the acquisitions are
included in the accompanying consolidated financial statements from the date of
acquisition. Assets acquired and liabilities assessed have been recorded at
their fair values.

(5) GOODWILL AND INTANGIBLE ASSETS

The Company adopted SFAS 142, "Goodwill and Other Intangible Assets" in the
first quarter of fiscal 2002. The effect of this adoption was to cease
amortization of goodwill and certain other indefinite-lived intangible assets.
The Company has established reporting units based on its current segment
structure for purposes of testing goodwill for impairment. Goodwill has been
assigned to the reporting units to which the value of the goodwill relates. The
Company will evaluate goodwill and other intangible assets at least on an annual
basis and whenever events and changes in circumstances suggest that the carrying
amount may not be recoverable based on the estimated future cash flows.

In the fourth quarter of 2003, the Company performed the required annual
test for impairment. The assessment was made in conjunction with the budgeting
process and the long range planning by each reporting unit. The assessment
utilized a forecasted discounted cash flow method.

The changes in the carrying amount of goodwill for the years ended December
31, 2003 and 2002, are as follows:

55

CAMBREX CORPORATION AND SUBSIDIARIES

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

(5) GOODWILL AND INTANGIBLE ASSETS -- (CONTINUED)

Other intangible assets that are not subject to amortization beginning
January 1, 2003, consist of the following:

Intangible Assets:

Other intangible assets, which will continue to be amortized, consist of
the following:

*This category includes certain fully amortized patents, proprietary process and
non-compete agreements.

Amortization expense amounted to $1,626, $1,554 and $12,961 for the years
ended December 31, 2003, 2002 and 2001, respectively.

The expected future amortization expense related to current intangible
assets currently recorded in the future is as follows:

For the year ended December 31, 2004........................ $1,656
For the year ended December 31, 2005........................ $1,631
For the year ended December 31, 2006........................ $1,621
For the year ended December 31, 2007........................ $1,603
For the year ended December 31, 2008........................ $1,495

56

CAMBREX CORPORATION AND SUBSIDIARIES

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

(5) GOODWILL AND INTANGIBLE ASSETS -- (CONTINUED)

As adjusted net income and diluted earnings per share for the year ended
December 31, 2003, reflecting the adoption of SFAS No. 142, were as follows:

(6) IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Accounting for Asset Retirement Obligations

In June 2001, The Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard No. 143, "Accounting for Asset
Retirement Obligations" ("SFAS 143"). The standard requires that legal
obligations associated with the retirement of tangible long-lived assets be
recorded at fair value when incurred and was adopted by the Company on January
1, 2003. Adoption of SFAS 143 did not have any effect on the Company's
consolidated financial position or results of operations as it has determined
its long-lived assets have indeterminate future lives.

Rescission of FAS No. 4, 44 and 64, Amendment of FAS 13, and Technical
Corrections as of April 2002:

In May 2002, the FASB issued Statement of Financial Accounting Standards
No. 145, "Rescission of SFAS No. 4, 44 and 64, Amendment of SFAS 13, and
Technical Corrections as of April 2002" ("SFAS 145"). The statement rescinds
SFAS 4 (as amended by SFAS 64), which required extraordinary item treatment for
gains and losses on extinguishments of debt, and SFAS 44, which does not affect
the Company. Additionally, the statement amends certain provisions of SFAS 13
and other existing authoritative pronouncements to make various technical
corrections, clarify meanings, or describe their applicability under changed
conditions. The provisions of SFAS 145 related to extinguishments of debt are
effective for the Company beginning January 1, 2003, and all other provisions
are effective for transactions occurring or financial statements issued on or
after May 5, 2002. Adoption of SFAS 145 did not have any effect on the Company's
consolidated financial position or results of operations.

Accounting for Costs Associated with Exit or Disposal Activities

In June 2002, the FASB issued Statement of Financial Accounting Standard
No. 146, "Accounting for Costs Associated with Exit or Disposal Activities"
("SFAS 146"). This Statement addresses financial accounting and reporting for
costs associated with exit or disposal activities and nullifies Emerging Issues
Task Force (EITF) Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)." This Statement eliminates the definition
and requirements for recognition of exit costs in Issue 94-3, and requires that
a liability for a cost associated with an exit or disposal activity be
recognized when the liability is incurred. SFAS 146 also establishes that fair
value is the objective for initial measurement of the liability. SFAS 146 is
effective for exit or disposal activities that are initiated after December 31,
2002, with early application encouraged. Any

57

CAMBREX CORPORATION AND SUBSIDIARIES

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

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

charges associated with future restructuring programs will be recorded in
accordance with SFAS 146. This will spread the recognition of the restructuring
expenses over a number of accounting periods as compared to EITF 94-3.

Accounting for Stock-Based Compensation -- Transition and Disclosure

In December 2002, the FASB issued Statement of Financial Accounting
Standard No. 148, "Accounting for Stock-Based Compensation -- Transition and
Disclosure" ("SFAS 148"). This Statement provides alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employees compensation from the intrinsic method. SFAS 148 also
amends the disclosure provisions of SFAS 123 and APB Opinion No. 28, "Interim
Financial Reporting," to require disclosure in the summary of significant
accounting policies of the effects of an entity's accounting policy with respect
to stock-based employee compensation on reported net income and earnings per
share in annual and interim financial statements. While SFAS 148 does not amend
SFAS 123 to require companies to account for employee stock options using the
fair value method, the disclosure provisions of SFAS 148 are applicable to all
companies with stock-based employee compensation, regardless of whether they
account for that compensation using the fair value method of SFAS 123 or the
intrinsic value method of APB 25. SFAS 148's amendment of the transition and
annual disclosure requirements of SFAS 123 are effective for fiscal years ending
after December 15, 2002. The Company has adopted the disclosures provision of
SFAS 148 as of December 31, 2002, and will continue to use the intrinsic value
method of APB 25.

Amendment of Statement 133 on Derivative Instruments and Hedging Activities

On April 30, 2003 the Financial Accounting Standards Board issued SFAS 149
"Amendment of Statement 133 on Derivative Instruments and Hedging Activities"
which amends SFAS 133. This Statement clarifies under what circumstances a
contract with an initial net investment meets the characteristics of a
derivative, it also clarifies when a derivative contains a financing component
and amends the definition of an underling to conform it to language used in FASB
Interpretation No. 45. This statement is effective for contracts entered into or
modified after June 30, 2003, except for those provisions of this Statement that
relate to SFAS 133 implementation issues that have been effective for fiscal
quarters that began prior to June 15, 2003. Adoption of SFAS 149 did not have
any effect on the Company's consolidated financial position or results of
operations.

Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity

In May 2003, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity"
("SFAS 150"). SFAS 150 specifies that instruments within its scope embody
obligations of the issuer and that, therefore, the issuer must classify them as
liabilities. This statement requires that mandatory redeemable financial
instruments, obligations to repurchase the issuer's equity shares by
transferring assets, and certain obligations to issue a variable number of
shares be classified as liabilities. SFAS 150 is effective at the beginning of
the first interim period beginning after June 15, 2003. Adoption of this
Statement did not have any effect on the Company's results.

Guarantor's Accounting and Disclosure Requirements for Guarantees

In November 2002, FASB Interpretation No. 45 ("FIN 45"), "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" was issued. FIN 45 elaborates on the
disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under certain guarantees that it has issued. It
also clarifies that a guarantor is required to recognize, at the inception of a
guarantee, a liability for the fair value of the obligation undertaken in
issuing the
58

CAMBREX CORPORATION AND SUBSIDIARIES

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

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

guarantee. The initial recognition and initial measurement provisions of this
Interpretation are applicable on a prospective basis to guarantees issued or
modified after December 31, 2002. The required disclosures are effective for
financial statements of interim or annual periods ending after December 15,
2002. The adoption of FIN 45 did not have any effect on the Company's
consolidated financial position or results of operations.

Consolidation of Variable Interest Entities

In January 2003, FIN No. 46, "Consolidation of Variable Interest Entities"
("FIN 46") was issued. The interpretation provides guidance on consolidating
variable interest entities and applies immediately to variable interests created
after January 31, 2003. The guidelines of the interpretation will become
applicable for the Company in its fourth quarter 2003 financial statements for
variable interest entities created before February 1, 2003. The interpretation
requires variable interest entities to be consolidated if the equity investment
at risk is not sufficient to permit an entity to finance its activities without
support from other parties or the equity investors lack certain specified
characteristics. The Company has reviewed FIN 46 and determined its impact did
not have an effect on the Company's consolidated financial position or results
of operations.

In December 2003, the FASB issued FIN 46R which requires the application of
either FIN 46 or FIN 46R by public entities created prior to February 1, 2003 at
the end of the first interim or annual reporting period ending after December
15, 2003. All entities created after January 31, 2003 by public entities were
already required to be analyzed under FIN 46, and they must continue to do so,
unless FIN 46R is adopted early. FIN 46R will be applicable to all non-SPEs
created prior to February 1, 2003 by Public Entities that are not small business
issuers at the end of the first interim or annual reporting period ending after
March 15, 2004.

Accounting for Revenue Arrangements with Multiple Deliverables

In January 2003, the Emerging Issues Task Force ("EITF") released EITF
00-21: "Accounting for Revenue Arrangements with Multiple Deliverables." EITF
00-21 clarifies the timing and recognition of revenue from certain transactions
that include the delivery and performance of multiple products or services. EITF
00-21 is effective for revenue arrangements entered into during fiscal periods
beginning after June 15, 2003. The Company is in compliance with this EITF.

In December 2003, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 104 ("SAB 104"), Revenue Recognition. SAB 104 supersedes
SAB 101, Revenue Recognition in Financial Statements to include the guidance
from Emerging Issues Task Force EITF 00-21 "Accounting for Revenue Arrangements
with Multiple Deliverables." The adoption of SAB 104 did not have a material
effect on the Company's consolidated results of operations or financial
position.

Employer's Disclosure about Pension and Other Postretirement Benefits

In December 2003, the FASB published a revision to SFAS No. 132 "Employers'
Disclosure about Pensions and Other Postretirement Benefits an amendment of FASB
Statements No. 87, 88, and 106." SFAS No. 132R requires additional disclosures
to those in the original SFAS No. 132 about the assets, obligations, cash flows,
and net periodic benefit cost of defined benefit pension plans and other defined
benefit postretirement plans. The provisions of SFAS No. 132 remain in effect
until the provisions of SFAS No. 132R are adopted. SFAS No. 132R is effective
for financial statements with fiscal years ending after December 15, 2003. The
Company is in compliance with SFAS 132R.

On January 12, 2004, the FASB issues Staff Position (FSP) 106-1 which
permits a sponsor of a postretirement health care plan that provides a
prescription drug benefit to make a one-time election to defer accounting for
the effects of the Medicare Prescription Drug, Improvement and Modernization Act
of 2003
59

CAMBREX CORPORATION AND SUBSIDIARIES

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

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

(the Act). The Company has elected to defer the accounting effects of this act.
As a result, any measures of the plan APBO or net periodic postretirement
benefit cost in the financial statements or accompanying notes do not reflect
the effects of the Act on the plan and specific authoritative guidance on the
accounting for the federal subsidy is pending and that guidance, when issued,
could require the Company to change previously reported information.

(7) NET INVENTORIES

Net inventories consist of the following:

(8) PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following:

Depreciation expense was $34,208, $29,284 and $24,457 for the years ended
December 31, 2003, 2002 and 2001, respectively.

(9) ACCRUED LIABILITIES

The components of accrued liabilities are as follows:

60

CAMBREX CORPORATION AND SUBSIDIARIES

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

(10) INCOME TAXES

Income (loss) from continuing operations before taxes consisted of the
following:

The provision for income taxes consists of the following expenses
(benefits):

The provision for income taxes differs from the statutory Federal income
tax rate of 35% for 2003, 2002 and 2001 as follows:

61

CAMBREX CORPORATION AND SUBSIDIARIES

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

(10) INCOME TAXES -- (CONTINUED)

The components of deferred tax assets and liabilities as of December 31,
2003 and 2002 relate to temporary differences and carryforwards as follows:

SFAS 109, Accounting for Income Taxes, requires the Company to establish 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 all available evidence -- including the Company's current and
past performance, cumulative losses in recent years resulting from domestic
operations, as well as from the disposition of the Rutherford Chemicals
business, the market environment in which the Company operates, and the
utilization of past tax attributes -- the Company has established a valuation
allowance of $51,536 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. In addition, the Company has not recorded a valuation
allowance against domestic deferred tax assets that the Company could utilize
upon the implementation of certain tax planning strategies.
62

CAMBREX CORPORATION AND SUBSIDIARIES

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

(10) INCOME TAXES -- (CONTINUED)

The Company expects to maintain a full valuation allowance against its net
domestic deferred tax assets, 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
conclude that it is more likely than not that its domestic deferred tax assets
are realizable. The change in valuation allowance for the years ended December
31, 2003 and 2002 was $50,948 and ($2,455), respectively.

Under the tax laws of the various jurisdictions in which the Company
operates, net operating losses (NOLs) may be carried forward, subject to
statutory limitations, to reduce taxable income in future years. The tax effect
of such NOL carryforwards aggregated approximately $37,487 and $3,309 at
December 31, 2003 and 2002. These NOLs will expire during the period from 2018
through 2024.

As of December 31, 2003, approximately $15,491 of foreign tax credits were
available as credits against future U.S. income taxes. Under the U.S. Internal
Revenue Code, these foreign tax credits will expire in 2005 through 2007 and are
offset by a full valuation allowance (see above).

During 2003, the Company derived U.S. income tax benefits from continuing
operations of approximately $412 from an exclusion provided under U.S. income
tax laws with respect to certain extraterritorial income (ETI) attributable to
foreign trading gross receipts. The World Trade Organization (WTO) ruled that
the ETI exclusion represents a prohibited export subsidy under the WTO Agreement
on Subsidies and Countervailing Measures. Based upon this ruling, a WTO
arbitration panel has determined that the European Union (EU) may impose up to
$4 billion per year in trade sanctions against the U.S., although the EU has yet
to impose such sanctions. President George W. Bush has stated that the U.S. will
change its tax laws in order to comply with the WTO ruling. Various legislative
proposals providing for the repeal of the ETI exclusion have introduced
broad-based international tax reforms, but the Bush Administration and Congress
have not yet agreed upon a solution to this issue. Since the impact of this
matter upon the Company depends upon the actions of the EU and the specific
provisions of any tax legislation ultimately enacted by Congress, it is not
possible to predict the impact on future financial results. However, if the ETI
exclusion is repealed and legislation that would replace the ETI exclusion
benefit is not enacted, future results could be negatively impacted.

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. The Company prevailed in a Swedish tax court case relating to an
inter-company financing structure and is currently awaiting the outcome of an
appeal by the Swedish tax authorities. The Company believes that its positions
comply with applicable law and intends to continue to vigorously defend its
positions. The Company believes that it has adequately provided for any probable
outcome related to these matters, and it does not anticipate any material
earnings impact from their resolution.

During 2003, the Company made a substitute tax election that allowed an
Italian subsidiary to step-up the tax basis of certain operating assets and to
record a net tax benefit of $2,000 in its 2003 U.S. GAAP financial statements.
For U.S. GAAP purposes, the Company expects to record similar tax benefits
relating to the substitute tax election in 2004 and 2005 and moderate additional
tax benefits for a period of years thereafter.

(11) SHORT-TERM DEBT

The Company has lines of credit in Italy with local banks (the "Facility").
The Facility is short-term and provides three types of financing with the
following limits: Overdraft Protection of $8,000, Export Financing of $8,000 and
Advances on Uncleared Deposits of $300. The Overdraft Protection and Export
Financing facilities bear interest at varying rates when utilized, however,
Advances on Uncleared Deposits bear no

63

CAMBREX CORPORATION AND SUBSIDIARIES

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

(11) SHORT-TERM DEBT -- (CONTINUED)

interest. There are no amounts outstanding as of December 31, 2003 and 2002. The
2003 and 2002 average interest rates were 1.7% and 2.2%, respectively.

Short-term debt at December 31, 2003 and 2002 consists of the following:

(12) LONG-TERM DEBT

Long-term debt consists of the following:

(a) In November 2001, the Company entered into a $430,000 Syndicated Revolving
Credit Agreement led by JPMorganChase as the Administrative Agent. The agreement
consisted of a 364-day renewable senior revolving credit facility for $161,000
(the "364-Day Facility"), and a 5-year senior revolving credit facility of
$268,750 (the "5-Year Agreement").

In 2003, the Company elected not to renew the 364-Day Facility and this
facility expired in November 2003. Concurrently, the 5-Year Agreement was
amended with the addition of an "accordion feature" which, if utilized, will
allow for the increase of the total commitments of up to $75,000.

The 5-Year Agreement allows the Company to choose among various interest
rate options and to specify the portion of the borrowing to be covered by
specific interest rates. Under the 5-Year Agreement the interest rate options
available to the Company are the following:

1) U.S. Prime Rate,

2) LIBOR plus an applicable margin that ranges from .575% to 1.20%, or

3) Money Market rate plus an applicable margin that ranges from .575% to
1.20%.

The applicable margin discussed above is based upon the ratio of
consolidated funded indebtedness to consolidated modified EBITDA of Cambrex
Corporation. The Company also pays a commitment fee between .15% to .30% on the
entire credit facility.

The bank loan 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 certain of the
Company's non-U.S. operating subsidiaries.

As of December 31, 2003, there was $105,200 outstanding and $163,550
undrawn under the 5-year Agreement. Of the undrawn amount, $61,000 is available
to be borrowed as of December 31, 2003 due to limits established in the Credit
Agreement.

64

CAMBREX CORPORATION AND SUBSIDIARIES

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

(12) LONG-TERM DEBT -- (CONTINUED)

The Agreement is subject to financial covenants requiring the Company to
maintain certain levels of net worth, interest coverage ratio, leverage ratios
and limitations on indebtedness. The Company complied with all covenants during
2003.

(b) The Company assumed three capital leases as part of the acquisition of
Bio Science Contract Production Corp. in June 2001 of $12,100. The leases are
for buildings, improvements and phone systems. There is $8,545 outstanding at
December 31, 2003. All capital leases are collateralized by their underlying
assets.

In June 2003, the Company borrowed $75,000 in a private offering consisting
of 7-year guaranteed senior Notes due in June 2010 with interest payments due
semi-annually at an annual rate of 5.31%. During October 2003, the Company
borrowed an additional $25,000 in a private offering consisting of 10-year
guaranteed senior Notes due in October 2013 with interest payments due
semi-annually at an annual rate of 7.05%. These Notes rank equal with the
Company's other senior indebtedness and are collateralized by the same assets as
the bank loan described above. The funds were used primarily to pay down
existing bank debt and provide Cambrex with longer term fixed rate debt.

The 2003 and 2002 average interest rates were 4.8% and 4.3%, respectively.

Aggregate maturities of long-term debt are as follows:

2004........................................................ $ 1,376
2005........................................................ 1,402
2006........................................................ 106,617
2007........................................................ 1,438
2008........................................................ 1,462
Thereafter.................................................. 101,450
--------
Total............................................. $213,745
========

(13) 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 does not enter into financial instruments for trading or
speculative purposes. The Company is exposed to credit loss in the event of
nonperformance by the other parties to the interest rate swap and forward
exchange contracts. However, the Company does not anticipate non-performance by
the counterparties.

The Company adopted (SFAS 133) Statement of Financial Accounting Standard
No. 133 "Accounting for Derivative Instruments and Hedging Activities," and its
corresponding amendments under SFAS No. 138, (referred to hereafter as "SFAS
133"), which establishes accounting and reporting standards for derivative
financial instruments. The Company's policy is to enter into forward exchange
contracts and/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, Belgium, Great
Britain 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, British Pound Sterling 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

65

CAMBREX CORPORATION AND SUBSIDIARIES

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

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

enters into interest rate swap agreements to reduce the impact of 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, 2003 have been
designated as cash flow hedges and, accordingly, changes in the fair value of
derivatives are recorded each period in Other Comprehensive Income. Changes in
the fair value of the derivative instruments reported in Other Comprehensive
Income will be reclassified as 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. Adoption of this statement
resulted in an after tax reduction of other comprehensive income of $86. The
unrealized net loss recorded in accumulated comprehensive income at December 31,
2003 was $484. This amount 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,
2003 was $3,020. The net loss on interest rate swap contracts recognized in
interest expense was $3,619 for the twelve months ended December 31, 2003.

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, 2003.

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 $4,146 at December 31, 2003.

Foreign Exchange Instruments

The table below reflects the notional and fair value amounts of foreign
exchange contracts at December 31, 2003 and 2002.

66

CAMBREX CORPORATION AND SUBSIDIARIES

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

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

The carrying amount reported in the consolidated balance sheets for cash
and cash equivalents, accounts receivable, accounts payable and short-term debt
approximates fair value because of the immediate or short-term maturity of these
financial instruments. The carrying amount reported for long-term debt
approximates fair value since approximately 49% of the underlying debt has
variable rate terms and reprices quarterly. Of this amount, the Company has
interest rate swaps covering the majority of the outstanding debt. An additional
47% of the debt has fixed interest rates, however, these notes have been placed
within the last six months and as such, approximates fair value as of December
31, 2003.

(14) DISCONTINUED OPERATIONS -- SALE OF RUTHERFORD CHEMICALS

Effective January 1, 2002, the operating units that primarily produce
specialty and fine chemicals and animal health and agriculture products were
combined under a new business unit, Rutherford Chemicals, Inc. Rutherford
Chemicals, Inc. includes CasChem, Inc., Bayonne, New Jersey; Heico Chemicals,
Inc., Delaware Water Gap, Pennsylvania; Nepera, Inc., Harriman, New York;
Zeeland Chemicals, Inc., Zeeland, Michigan; and Seal Sands Chemicals, Limited,
Middlesbrough, United Kingdom. In the fourth quarter 2002, the Company announced
that it had engaged a financial advisor to assist the Company in investigating
strategic alternatives for the Rutherford Chemicals segment. The financial
advisor contacted certain parties regarding the Rutherford Chemicals business.
On July 31, 2003 the Company's Board of Directors approved a proposed sale of
the Rutherford business and on August 7, 2003, the Company announced that an
agreement to sell the company had been signed. On October 17, 2003 the Company
announced an agreement which amended the terms of the original agreement and on
November 10, 2003 the sale was completed. The revised agreement specifies
proceeds for the sale of $55,000 in cash at closing, a $2,000 subordinated 12%
interest bearing note payable in full in 5 1/2 years from the closing date, and
an $8,000 performance-based cash earn-out as certain future operating profit
targets are achieved in each of the next 3 years. These terms result in a
write-down of assets to estimated fair value of approximately $53,098 which is
based on the selling price, including fees associated with the transaction,
subject to working capital and other adjustments. The Company is currently in
discussions with the buyer regarding the final calculation of the working
capital adjustment which is expected to be completed in the first half of 2004.
The buyer has recently communicated their calculation of the working capital
adjustment, which if correct, would result in an unfavorable adjustment to the
loss from discontinued operations. The Company believes it has recorded this
obligation properly, however, any changes resulting in negotiations with the
buyer will be reflected in loss from discontinued operations in future periods.
The Company has not included any of the performance based cash earn-out in the
computation of the $53,098 loss and income for discontinued operations will be
recorded in future periods if the Company receives any payments under the
earn-out arrangement. This loss has not been tax effected as more fully
explained in Note #10.

Also, the Company retains the liabilities of the Rutherford Chemicals
business associated with existing general litigation matters, including Vitamin
B-3 reserves, pre-closing environmental liabilities and post retirement benefits
and pension liabilities. See Note #24 for further discussion.

As a result of the signing of the agreement on August 7, 2003, and the
completion of the transaction on November 10, 2003, the business comprising the
Rutherford Chemicals segment is being reported as a discontinued operation in
all periods presented.

67

CAMBREX CORPORATION AND SUBSIDIARIES

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

(14) DISCONTINUED OPERATIONS -- SALE OF RUTHERFORD CHEMICALS -- (CONTINUED)

The following table shows revenues and loss from the discontinued
operations:

The following table shows the carrying amount of the assets and liabilities
of the segment that was sold as of December 31, 2002:

The Company performed an asset impairment assessment of the long-lived
assets in the Rutherford Chemical segments as of June 30, 2003 under a held for
use model. The Company used a probability-weighted undiscounted cash flow model
to test for recoverability. This probability assessment was made as of June 30,
2003 and considered all facts and circumstances available at that date, which
included the possibility of a sale. The assessment as of June 30, 2003 did not
result in any impairment loss.

(15) STOCKHOLDERS' EQUITY

The Company has two classes of common shares designated Common Stock and
Nonvoting Common Stock. Authorized shares of Common Stock were 100,000,000 at
December 31, 2003 and 2002. Authorized shares of Nonvoting Common Stock were
730,746 at December 31, 2003 and 2002.

At December 31, 2003 there were 201,762 of authorized shares of Common
Stock reserved for issuance for stock option plans.

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, 2003 and 2002, no shares of Nonvoting Common
Stock were outstanding.

68

CAMBREX CORPORATION AND SUBSIDIARIES

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

(15) STOCKHOLDERS' EQUITY -- (CONTINUED)

The Company held treasury stock of 2,614,910 and 2,487,247 shares at
December 31, 2003 and 2002, respectively, and are used for issuance to the
Cambrex Savings Plan. In May 2000, the Board of Directors authorized the Company
to purchase an additional 1,000,000 shares of Company Stock in the open market
from time to time at a price determined by the Share Repurchase Committee. The
Company has purchased 419,300 shares under this authorization as of December 31,
2003.

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, 2003 and 2002, there was no
preferred stock outstanding.

(16) STOCK OPTIONS

The Company has seven stock-based compensation plans currently in effect.
The 1992 Stock Option Plan ("1992 Plan"), the 1994 Stock Option Plan ("1994
Plan"), the 1996 Performance Stock Option Plan ("1996 Plan"), the 1998
Performance Stock Option Plan ("1998 Plan"), the 2001 Performance Stock Option
Plan ("2001 Plan") and the 2003 Performance Stock Option Plan ("2003 Plan")
provide for the granting of non-qualified and incentive stock options (ISO)
intended to qualify as additional incentives to management and other key
employees. The 1996 Plan, the 1998 Plan, the 2001 Plan and the 2003 Plan also
provide for the granting of non-qualified stock options to non-employee
directors.

The 2000 Employee Performance Stock Option Plan ("2000 Plan") provides for
the granting of non-qualified and incentive stock options intended to qualify as
additional incentives to non-executive employees.

Certain options granted under the 1996, 1998, 2000, 2001 and 2003 plans may
become exercisable six years after the date of grant, subject to acceleration if
the publicly traded price of the Company's Common Stock equals or exceeds levels
determined by the Committee within certain time periods or in the event of a
change in control. Options may also become exercisable based on the passage of
time, such that the option becomes fully exercisable in a series of cumulating
portions over a four-year period. Options shall have a term of no more than ten
years from the date of grants. In addition, stock option awards may be
transferred to a member of the Participant's immediate family or to a trust or
similar vehicle for the benefit of such transferee.

The Company applies the provisions of APB Opinion No. 25 and related
Interpretations in accounting for its stock-based compensation plans. Statement
of Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation" (SFAS 123) establishes financial accounting and reporting
standards for stock-based employee compensation plans. The Company has adopted
the disclosure only provisions available under SFAS 123. Accordingly, no
compensation cost has been recognized for stock option plans under SFAS 123.

69

CAMBREX CORPORATION AND SUBSIDIARIES

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

(16) STOCK OPTIONS -- (CONTINUED)

122,750 options were exercised during 2003. Shares of Common Stock subject
to outstanding options under the stock option plans were as follows:

Information regarding the Company's stock option plans is summarized below:

(17) RETIREMENT PLANS

Domestic Pension Plans

The Company maintains two U.S. defined-benefit pension plans which cover
substantially all eligible employees: (1) the Nepera Hourly Pension Plan (the
"Nepera Plan") which covers the union employees at
70

CAMBREX CORPORATION AND SUBSIDIARIES

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

(17) RETIREMENT PLANS -- (CONTINUED)

the Harriman, New York plant, and (2) the Cambrex Pension Plan (the "Cambrex
Plan") which covers all other eligible employees.

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.
Effective January 1, 2003, newly hired employees (except those covered by
collective bargaining) will not participate in these plans. The Company
currently is reviewing alternative means of providing retirement benefits for
all employees.

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 both 2003 and 2002 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, 2003 and 2002 is as follows:

71

CAMBREX CORPORATION AND SUBSIDIARIES

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

(17) RETIREMENT PLANS -- (CONTINUED)

Major assumptions used in determining the benefit obligation for the
Company's domestic pension plans are presented in the following table as
weighted averages:

The components of net periodic pension cost are as follows:

Major assumptions used in determining the net cost for the Company's
domestic pension plans are presented in the following table as weighted
averages:

The aggregate ABO (Accumulated Benefit Obligation) of $43,549 exceeds plan
assets by $14,598 in 2003 for all qualified domestic plans.

72

CAMBREX CORPORATION AND SUBSIDIARIES

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

(17) RETIREMENT PLANS -- (CONTINUED)

The Company expects to contribute approximately $4,859 in cash to its two
U.S. defined-benefit pension plans in 2004.

The investment objective is to achieve long-term growth of capital, with
exposure to risk set at an appropriate level. The objective shall be
accomplished through the utilization of a diversified asset mix consisting of
equities (domestic and international) and taxable fixed income securities. The
account is to be managed on a fully discretionary basis to obtain the highest
total rate of return in keeping with a moderate level of risk.

The allocation of pension plan assets is as follows:

The Company has a Supplemental Executive Retirement Plan (SERP) for key
executives. This plan is non-qualified and unfunded. It consists of two plans,
the Corporate SERP plan and the BioWhittaker SERP Plan.

The benefit obligation for these plans as of September 30, 2003 and 2002 is
as follows:

Major assumptions used in determining the benefit obligation for the
Company's SERP Plans are presented in the following table as weighted averages:

73

CAMBREX CORPORATION AND SUBSIDIARIES

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

(17) RETIREMENT PLANS -- (CONTINUED)

The components of net periodic benefit cost are as follows:

Major assumptions used in determining the net cost for the Company's SERP
plans are presented in the following table as weighted averages:

International Pension Plans

Certain foreign subsidiaries of the Company maintain pension plans for
their employees that conform to the common practice in their respective
countries. Based on local laws and customs, some of those plans are not funded.
For those plans that are funded, the amount in the trust supporting the plan is
actuarially determined, and where applicable, in compliance with local statutes.
The funded status of these plans, incorporating fourth quarter contributions, as
of December 31, 2003 and 2002 is as follows:

74

CAMBREX CORPORATION AND SUBSIDIARIES

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

(17) RETIREMENT PLANS -- (CONTINUED)

Major assumptions used in determining the benefit obligation for the
Company's international pension plans are presented in the following table as
weighted averages:

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

Major assumptions used in determining the net cost for the Company's
international pension plans are presented in the following tables as weighted
averages:

The aggregate ABO of $14,257 for international plans exceeds plan assets by
$10,519 in 2003.

75

CAMBREX CORPORATION AND SUBSIDIARIES

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

(17) RETIREMENT PLANS -- (CONTINUED)

The Company expects to contribute approximately $562 in cash to its
international pension plans.

Savings Plan

Cambrex makes available to all 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 $2,113, $1,941
and $1,094 in 2003, 2002 and 2001, respectively.

Other

The Company has a non-qualified Compensation Plan for Key Executives ("the
Deferred Plan"). Under the Deferred Plan, officers and key employees may elect
to defer all or any portion of their pre-tax annual bonus and/or annual base
salary. Included within other liabilities at December 31, 2003 and 2002 there is
$1,611 and $1,407, respectively, representing the Company's obligation under the
plan. To assist in the funding of this obligation, the Company invests in
certain mutual funds and as such, included within other assets at December 31,
2003 and 2002 is $1,611 and $1,407, respectively, representing the fair value of
these funds. During 1995, the Board amended the Deferred Plan to permit officers
and key employees to elect to defer receipt of Company stock which would
otherwise have been issued upon the exercise of Company options. Total shares
held in trust as of December 31, 2003 and 2002 are 248,504 and 253,378,
respectively, and are included as a reduction of equity at cost. The value of
the shares held in trust and the corresponding liability of $6,277 at December
31, 2003 have been recorded in equity. The Deferred Plan is not funded by the
Company, but the Company has established a Deferred Compensation Trust Fund
which holds the shares issued. In addition, shares are held in trust for
restricted stock grants for certain Officers. The number of shares held at
December 31, 2003 and 2002 was 73,783 and 85,508, respectively. The fair value
of these shares was $1,864 and $2,640 at 2003 and 2002, respectively.

(18) OTHER POSTRETIREMENT BENEFITS

Cambrex provides postretirement health and life insurance benefits
("postretirement benefits") to all eligible retired employees. Employees who
retire at or after age 55 with ten years of service are eligible to participate
in the postretirement benefit plans. The Company's responsibility for such
premiums for each plan participant is based upon years of service subject to an
annual maximum of one thousand dollars. Such plans are self-insured and are not
funded.

Effective January 1, 2003, the Company made significant changes to these
benefits affecting current and future retirees, both in reducing the level of
benefits and reducing the subsidy the Company provides. Certain subsidiaries and
all employees hired after December 31, 2002 (excluding those covered by
collective bargaining) are not eligible for these benefits.

The Company elected to amortize the transition obligation of $1,853 over
twenty years. Due to plan amendments and the curtailment gain on Rutherford,
this transition obligation was fully written off. The net effect upon 2003, 2002
and 2001 pretax operating results, including the amortization of the transition
obligation in 2002 and 2001, resulted in a (benefit) cost of $(688), $1,100, and
$308, respectively.

76

CAMBREX CORPORATION AND SUBSIDIARIES

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

(18) OTHER POSTRETIREMENT BENEFITS -- (CONTINUED)

The periodic postretirement benefit cost includes the following components:

Major assumptions used in determining the benefit obligation and net cost
for the Company's postretirement benefits are presented in the following table
as weighted averages:

The assumed health care cost trend rate used to determine the accumulated
postretirement benefit obligation is 11% in 2003 decreasing 1% per year to an
ultimate rate of 5% (6.5% in 2002). A one-percentage-point increase in the
assumed health care cost trend rate would increase the accumulated
postretirement benefit obligation by $110 and would increase the sum of interest
and service cost by $11. A one-percentage-

77

CAMBREX CORPORATION AND SUBSIDIARIES

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

(18) OTHER POSTRETIREMENT BENEFITS -- (CONTINUED)

point decrease would lower the accumulated postretirement benefit obligation by
$128 and would raise the sum of interest and service cost by $13.

(19) RESTRUCTURING, IMPAIRMENTS AND OTHER CHARGES

2001 Actions

On November 30, 2001, the Company announced a plan to realign its
businesses which included the creation of Rutherford Chemicals, Inc., in
recognition of the Company's strategic emphasis on the growing opportunities in
the Life Sciences Industry. In addition, on November 30, 2001 the Company
announced its commitment to a restructuring and cost savings program that
included impaired assets, severance, and other costs related to the realignment
of the businesses. The restructuring and cost savings program was largely
executed in the fourth quarter of 2001, with the remaining actions to be
completed by the end of 2002.

In the fourth quarter 2001, Cambrex recorded special pre-tax charges of
$23,075, the majority of which were non-cash items. As a result of the Company's
business restructuring which created Rutherford Chemicals, Inc., together with
an impairment charge within those businesses, the Company incurred $18,649
(continuing operations consisted of $2,022 and discontinued operations consisted
of $16,627) of charges to operating expense, composed of asset write-downs of
$17,243 (continuing, $1,600, discontinued, $15,643) and severance costs of
$1,406 (continuing, $422, discontinued $984). The Company also incurred $4,426
of inventory write-downs charged to cost of sales, consisting of $2,426
associated with discontinued products manufactured at Rutherford Chemical
facilities and a separate $2,000 Bioproducts inventory charge.

The asset write-downs consisted primarily of fixed asset write-offs and
impairments. A $10,000 impairment charge was recorded on certain assets at one
of Rutherford's chemical sites, based on the estimated fair value of the assets
determined by discounting the expected future cash flows. A $1,600 impairment
was also recorded related to an unused chemical facility to recognize its
estimated current fair value. In addition, a $5,643 charge was recorded to
write-off fixed assets related to discontinued product lines at another of
Rutherford's chemical sites.

Severance charges, which apply largely to the Company's various chemical
sites, relate to involuntary terminations of approximately 62 employees. All
affected employees received notification in the fourth quarter 2001. As of
December 31, 2002 all 62 employees have been terminated.

2002 Actions

In 2002, Cambrex completed its plan to realign its businesses. In 2002, the
Company recorded special pre-tax charges of $15,087. These charges included:
Continuing operations fixed asset impairments of $1,599, closure costs for a
small manufacturing facility of $1,700 and severance costs of $939. Discontinued
operations consists of fixed asset impairments of $6,079, a goodwill impairment
of $3,962, inventory write-downs of $586 (included in cost of sales),
dismantling costs of $100 and severance of $122.

The fixed asset impairments related to certain assets at a Rutherford
Chemicals domestic site, and a domestic site included as parts of continuing
operations, and were based on an assessment completed in the third quarter that
indicated the return on investment was below management's expectations. As a
result, an impairment charge was recorded reflecting the asset value associated
with the discontinued product line. The closure costs relate to a domestic
facility and include asset write downs, disposal, and other related costs.

Severance charges, which apply to a Rutherford Chemicals domestic site and
the Corporate office, relate to the termination of approximately 19 employees.
As of January 31, 2003, all these employees have been terminated.
78

CAMBREX CORPORATION AND SUBSIDIARIES

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

(19) RESTRUCTURING, IMPAIRMENTS AND OTHER CHARGES -- (CONTINUED)

The accrual balance related to the 2002 actions for severance and other
costs included above was approximately $1,200 at December 31, 2003.

The following table displays the activity related to the 2002
restructuring, impairments and other charges through December 31, 2003 (in
millions):

Facility closure costs and severance costs are expected to be paid by June
30, 2004.

(20) OTHER INCOME AND EXPENSE

The Other-net component of Other (income) expense is $139, $7,890 and
$(323) for 2003, 2002 and 2001, respectively. The 2003 expense consists
primarily of a number of asset write-offs totaling approximately $900 partially
offset by an earn-out received of $(795) on the sale of the In Vitro Diagnostic
business that was sold in 2002. The 2002 amount consisted primarily of two
equity investment impairments totaling $7,344 related to investments in emerging
technology companies. One company, in which an investment was held, had
experienced significant financial difficulties in 2002. This led Cambrex to
evaluate the market value of the investment. This evaluation indicated that a
decline in the market value was other than temporary and accordingly, an
impairment charge was recorded for $3,089. Cambrex did an assessment in the
carrying value of the other investment and concluded that a $4,255 impairment
was necessary in the second quarter 2002. See Note #2 for further detail. Also
included in the 2002 expense were $312 in write-off costs due to a convertible
debt arrangement that was abandoned, and $194 in write-off costs associated with
an investment in a joint venture. 2001 consisted primarily of gains on a
marketable security, classified as trading, royalty and miscellaneous income
partly offset by asset write-offs.

(21) SEGMENT INFORMATION

Cambrex is a life sciences company dedicated to providing essential
products and services to accelerate drug discover, development and manufacturing
processes for human therapeutics. The Company primarily supplies its products
and services worldwide to pharmaceutical and Biopharmaceutical companies,
generic drug companies, biotech companies and research organizations. In the
fourth quarter 2003, the Company began reporting results in three segments:
Human Health segment (formerly Human Health and All Other), consisting of Active
Pharmaceutical Ingredients and Pharmaceutical Intermediates produced under Food
and Drug Administration cGMP for use in the production of prescription and
over-the-counter drug products,

79

CAMBREX CORPORATION AND SUBSIDIARIES

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

(21) SEGMENT INFORMATION -- (CONTINUED)

imaging chemicals used in x-ray contrast media, and other fine custom chemicals
derived from organic chemistry; Bioproducts segment (previously part of
Biosciences segment), consisting of cell culture, endotoxin detection products
and services, electrophoresis and chromatography products; and Biopharma segment
(previously part of BioSciences segment), consisting of contract
biopharmaceutical process development and manufacturing services. The Company
allocates corporate expenses to each of its subsidiaries. The allocation of
corporate expenses in 2002 and 2001 have been adjusted to be consistent with a
new allocation methodology adopted by the Company in 2003.

No one customer accounts for more than 10% of the Company's total
consolidated revenues.

The following is a summary of business segment information:

80

CAMBREX CORPORATION AND SUBSIDIARIES

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

(21) SEGMENT INFORMATION -- (CONTINUED)

81

CAMBREX CORPORATION AND SUBSIDIARIES

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

(21) SEGMENT INFORMATION -- (CONTINUED)

(22) FOREIGN OPERATIONS AND EXPORT SALES

The following summarized data represents the gross sales and long lived
tangible assets for the Company's domestic and foreign entities for 2003, 2002
and 2001:

Export sales, included in domestic gross sales, in 2003, 2002 and 2001
amounted to $22,100, $23,684, and $20,934, respectively.

Sales by geographic area consist of the following:

82

CAMBREX CORPORATION AND SUBSIDIARIES

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

(23) COMMITMENTS

The Company has operating leases expiring on various dates through the year
2012. The leases are primarily for office and laboratory equipment and vehicles.
At December 31, 2003, future minimum commitments under non-cancelable operating
lease arrangements were as follows:

Total operating lease expense was $4,205, $5,017 and $3,618 for the years
ended December 31, 2003, 2002 and 2001, respectively.

In the first quarter 2003, the Company reached an agreement with Mylan
Laboratories, Inc. under which the Company would contribute $12,415 to the
settlement of consolidated litigation brought by a class of direct purchasers.
Approximately $4,415 was paid in April 2003 in accordance with the agreement,
with the remaining $8,000 to be paid over the next five years. At December 31,
2003 future commitments under this agreement were as follows:

(24) 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/or disclosures as deemed necessary based on
these facts and circumstances.

Environmental

In connection with laws and regulations pertaining to the protection of the
environment, the Company is a party to several environmental remediation
investigations and cleanups and, along with other companies, has been named a
"potentially responsible party" for certain waste disposal sites ("Superfund
sites"). 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 Company had accruals, included in other non-current liabilities of
$4,900 and $4,542 at December 31, 2003 and December 31, 2002, respectively, for
costs associated with the study and remediation of Superfund sites and the
Company's current and former operating sites for matters

83

CAMBREX CORPORATION AND SUBSIDIARIES

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

(24) CONTINGENCIES -- (CONTINUED)

that are probable and reasonably estimable. The increase in the accrual is due
to currency fluctuation of $458, partially offset by $100 in payments. Included
in the liabilities mentioned above are environmental liabilities discussed in
the "Sale of Rutherford Chemicals" section of this Note. Based on currently
available information and analysis, the Company's accrual represents
management's best estimate of what it believes are the probable environmental
cleanup related costs of a non-capital nature. After reviewing information
currently available, management believes any amounts paid in excess of the
accrued liabilities will not have a material effect on its financial position or
results of operations. However, these matters, if resolved in a manner different
from the estimates could have a material adverse effect on financial condition,
operating results and cash flows when resolved in a future reporting period.

Litigation

Mylan Laboratories

In late, 1998 the Company and its subsidiary Profarmaco S.r.l. (currently
known as Cambrex Profarmaco Milano S.r.l., "Profarmaco") were named as
defendants (along with Mylan Laboratories, Inc. ("Mylan") and Gyma Laboratories
of America, Inc., Profarmaco's distributor in the United States) in a proceeding
instituted by the Federal Trade Commission ("FTC") in the United States District
Court for the District of Columbia (the "District Court"). The allegations arise
from exclusive license agreements between Profarmaco and Mylan covering the drug
master files for lorazepam and clorazepate, two active pharmaceutical
ingredients ("APIs"). The FTC alleged violations of the Federal Trade Commission
Act; including unlawful restraint of trade and conspiracy to monopolize markets
for the APIs. A lawsuit making similar allegations against the same parties
seeking injunctive relief and treble damages, was filed by the Attorneys General
of 31 states in the District Court on behalf of those states and persons in
those states who were purchasers of the generic pharmaceuticals.

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.

On February 9, 2001, a federal court in Washington, DC entered an Order and
Stipulated Permanent Injunction as part of a settlement of the FTC and Attorneys
General's suits. Under these settlement documents Mylan agreed to pay over
$140,000 on its own behalf and on behalf of most of the other defendant
companies including Cambrex and Profarmaco. In the Order and Injunction, the
settling defendants also agreed to monitor certain future conduct. Mylan had
been fully covering the costs for the defense and indemnity of Cambrex and
Profarmaco under certain obligations set forth in the license agreements.
Cambrex agreed to cover separate legal defense costs incurred for Cambrex and
Profarmaco on a going forward basis beginning August 1, 2000. The private
litigation continues.

On April 7, 2003, Cambrex reached an agreement with Mylan under which
Cambrex would contribute $12,415 to the settlement of consolidated 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. Approximately $4,415 was paid in April
2003 in accordance with the agreement, with the remaining $8,000 to be paid over
the next five years. 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. As of December 31, 2003, the outstanding balance for
this liability was $7,186.

84

CAMBREX CORPORATION AND SUBSIDIARIES

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

(24) CONTINGENCIES -- (CONTINUED)

Vitamin B-3

On May 14, 1998, the Company's Nepera subsidiary, a manufacturer and seller
of 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. The Company understands that the subpoena was
issued as part of the Federal Government's ongoing anti-trust investigation into
various business practices in the vitamin industry generally. In the fourth
quarter of 1999, the Company reached a settlement with the Government concerning
Nepera's alleged role in Vitamin B-3 violations from 1992 to 1995. On October
13, 2000, the Government settlement was finalized with Nepera entering into a
voluntary plea agreement with the Department of Justice. Under this agreement,
Nepera entered a plea of guilty to one count of price fixing and market
allocation of Vitamin B-3 from 1992 to 1995 in violation of section one of the
Sherman Act and agreed to pay a fine of $4,000. Under the plea agreement, Nepera
was placed on probation for one year, which has ended. The fine was paid in
February 2001. 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.

An accrual of $6,000 was recorded in the fourth quarter 1999 to cover the
anticipated government settlements, related litigation, and legal expenses.
Based on discussions with various plaintiffs counsel, as well as current
estimates of expenditures for legal fees, an additional accrual of $4,400 was
established in the fourth quarter of 2001. The Company believed that the current
reserves would be sufficient to cover resolution of the remaining related
litigation matters. However, during 2002, based on information developed during
the year, the Company determined that the remaining litigation matters would be
more costly than previously anticipated. Therefore, during 2002, the Company
increased reserves by $10,000. The balance of this accrual as of December 31,
2003 was approximately $3,836. This accrual has been recorded in accrued
liabilities.

Litigation in the United States under the U.S. antitrust laws was commenced
some years ago by a group of European purchasers. On motion by the Vitamin B-3
defendants, the District Court dismissed the litigation, under the long-standing
rule that foreign purchasers cannot sue in U.S. courts under U.S. antitrust
statutes. Recently, the Federal Circuit Court reversed the District Court's
decision. The Vitamin B-3 defendants, supported by the U.S. Department of
Justice, appealed to the United States Supreme Court and the hearing is
currently scheduled for April 2004. The Company strongly believes that the claim
should be dismissed, however, the Circuit Court's decision is so unusual that we
cannot predict the disposition of this matter.

Mallinckrodt

During February 1999, the Company's Charles City facility ("CCC") sold
several batches of 5-NIPA, an x-ray contrast media raw material, to
Mallinckrodt, Inc. In April 1999, Mallinckrodt verbally notified CCC that some
of the 5-NIPA batches appeared to be out of specification. CCC requested that
Mallinckrodt cease production and return the product for refund or replacement.
CCC's quality control tests indicated that the material met the agreed
specification, but CCC was ready to issue a credit to Mallinckrodt upon return
of the questionable material. Nevertheless, it appears that Mallinckrodt
continued to use the material.

In August 1999, Mallinckrodt issued CCC a schedule that summarized the
total costs allegedly incurred by Mallinckrodt related to the questionable
5-NIPA in the amount of approximately $4,800. In July 2000, Mallinckrodt sent
CCC a letter claiming that CCC breached its supply agreement by delivering
contaminated 5-NIPA to Mallinckrodt and claiming damages for its costs. The
Company responded that, among other things, CCC delivered in-specification
material and did not breach the supply agreement. On October 2, 2000,
Mallinckrodt filed suit in United States District Court in St. Louis, Missouri
alleging, among other things, that

85

CAMBREX CORPORATION AND SUBSIDIARIES

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

(24) CONTINGENCIES -- (CONTINUED)

CCC breached the Supply Agreement and claiming significant damages. On December
27, 2000, the Company filed our answer, denying Mallinckrodt's claims.

Mediation was held in June, 2003 but was unsuccessful. A second mediation
occurred in November 2003; we did not reach agreement, but continued discussing
settlement as we prepared for trial, which had been scheduled for early January
2004. In December 2003, we reached a settlement with Mallinckrodt for $3,200
which has subsequently been paid. The Company has a $1,000 deductible under its
insurance policy. The Company exhausted a majority of the deductible through the
costs of defense which had been previously reserved. The Company has
subsequently been reimbursed approximately $3,000 by its insurance company.

Sale of Rutherford Chemicals

As previously announced, the Company entered into an agreement for the sale
of its Rutherford Chemicals business. The transaction was completed on November
10, 2003 subject to working capital adjustments. Under the agreement for the
sale the Company provided standard representations and warranties concerning the
business, operations, liabilities and financial condition of the Rutherford
Chemicals Business. Most of such representations and warranties will survive for
a period of thirty days after the Buyer's preparation of its audited financial
statements for year-end 2004. Therefore, claims for breaches of such
representations would have to be brought during that time frame. Certain
specified representations and warranties, such as those relating to employee
benefit matters, will survive for longer periods. Under the sale agreement, the
Company has indemnified the Buyer for breaches of representations and
warranties, such indemnification is subject to a deductible and a cap at a
percentage of the purchase price.

The Company has retained the liabilities associated with existing general
litigation matters, including Vitamin B-3 as stated above. With respect to
certain pre-closing environmental matters, the Company retains the
responsibility for (i) certain existing matters; including violations and
off-site liabilities, and (ii) completing the on-going remediation at the New
York facility. Further, as a result of the sale of the Bayonne, New Jersey
facility, the obligation to investigate site conditions and conduct required
remediation under the provisions of the New Jersey Industrial Site Recovery Act
was triggered; and the Company has retained the responsibility for completion of
any such investigation and remediation With respect to all other pre-closing
environmental liabilities, whether known or unknown, the Buyer is responsible
for the management of potential future matters; however, the Buyer and the
Company may share the costs of associated remediation with respect to such
potential future matters, subject to certain limitations defined in the
agreement for sale.

Class Action Matter

In mid-October 2003, the Company was notified of a securities class action
lawsuit filed against Cambrex and five former and current Company officers. To
date, five class action suits have been filed with the New Jersey Federal
District Court and we have been served with process in several of the cases. The
original and later lawsuits were brought as class actions in the names of
purchasers of the Company's common stock from October 21, 1998 through July 25,
2003. The complaints allege that the Company failed to disclose in timely
fashion the January 2003 accounting restatement and subsequent SEC
investigation, as well as the loss of a significant contract at the Baltimore
facility.

Under the rules applicable to class action litigation, the various
plaintiffs appeared in Federal Court on January 12, 2004, and the Court
designated the lead plaintiff and selected counsel to represent the class. The
plaintiff has sixty (60) days to amend the complaint. The Company will have a
further forty-five (45) days to

86

CAMBREX CORPORATION AND SUBSIDIARIES

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

(24) CONTINGENCIES -- (CONTINUED)

file a motion to dismiss. We consider the complaints to be substantially without
merit and will vigorously defend against them.

Securities and Exchange Commission

The Securities and Exchange Commission ("SEC") is currently conducting an
investigation into the Company's inter-company accounting issue. 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. To Cambrex's knowledge, the
investigation is limited to this inter-company accounting matter, and the
Company does not expect further revisions to its historical financial statements
relating to these issues. The Company is fully cooperating with the SEC.

Other

The Company has commitments incident to the ordinary course of business
including corporate guarantees of financial assurance obligations under certain
environmental laws for remediation, closure and/or third party liability
requirements of certain of its subsidiaries and a former operating location;
contract provisions for indemnification protecting its customers and suppliers,
etc. 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.

As permitted under Delaware law, the Company has agreements whereby we
indemnify our officers and directors for certain events or occurrences while the
officer or director is, or was serving, at our 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 we could be required to maker
under these indemnification agreements is unlimited; however, we have a Director
and Officer insurance policy that covers a portion of any potential exposure.

The Company believes the estimated fair value of the above indemnification
agreements is not significant, and as such the Company has no liabilities
recorded for these agreements as of December 31, 2003.

While it is not possible to predict with certainty the outcome of the above
litigation matters and various other lawsuits, it is the opinion of management
that the ultimate resolution of these proceedings should not have a material
adverse effect on the Company's results of operations, cash flows and financial
position. These matters, if resolved in an unfavorable manner, could have a
material effect on the operating results and cash flows when resolved in a
future reporting period.

87

CAMBREX CORPORATION

SELECTED QUARTERLY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

- ---------------
(1) Earnings per share calculations for each of the quarters are based on the
weighted average number of shares outstanding for each period, as such, the
sum of the quarters may not necessarily equal the earnings per share amount
for the year.
(2) The first quarter 2003 includes a special pre-tax charge of $11.3 million
recorded in operating expenses for the settlement of certain class action
lawsuits involving Mylan Laboratories.
(3) Cambrex Corporation restated its results for the third quarter 2003. This
restatement resulted from the recording of a valuation allowance to the
Provision for income taxes of $5.4 million for deferred tax assets arising
from unrealized hedge losses and minimum pension liabilities the benefits of
which had previously been included in Accumulated other comprehensive income
(loss). The Company also is recording an additional valuation allowance of
$1.5 million for the 2002 tax benefit related to the investment impairment
the Company has recorded in the second quarter 2002 (see Note #2 to the
consolidated financial statements). These charges in the third quarter 2003
are consistent with the Company's determination that domestic net deferred
tax assets were deemed unlikely to be realized and that a valuation
allowance must be recognized (see Note #10 to the consolidated financial
statements). The total $6.9 million expense for the two items above is
recorded in the third quarter 2003 Provision for income taxes. The Company
also recorded a $1.9 million reduction to Loss

88

from discontinued operations due to the reversal of deferred tax liabilities
related to the Rutherford Chemicals segment that were not previously taken
into consideration in determining such loss from discontinued operations.
(4) Cambrex Corporation restated its results for the second quarter 2002. This
restatement resulted from an assessment of the carrying value of an equity
investment in a privately held emerging biotechnology company. The Company
concluded that $4.3 million of the investment should have been impaired as
of the second quarter 2002 and the remaining $0.7 million should have been
initially classified as an intangible asset related to a licensing agreement
entered into concurrent with the equity investment. The impairment charge of
$4.3 million was recorded in Other expense and a related $1.5 million tax
benefit was recorded in Provision for income taxes and as a deferred tax
asset. Net income and total stockholders' equity decreased by $2.8 million.
This restatement did not have an effect on the Company's cash flows.
(5) The second quarter of 2002 continuing operations also includes additional
special charges of $2.9 million comprised of $0.4 million expense for fixed
asset impairments charged to operating expenses and a $2.5 million
investment write-down recorded in other expense. Discontinued operations
include a special benefit of $5.6 million comprised of a $3.8 million
arbitration award and a $1.8 million benefit related to an insurance
settlement.
(6) The third quarter of 2002 continuing operations include special charges of
$2.7 million comprised of $2.1 million for severance and a facility closure
which are recorded in operating expenses and an investment write-down of
$0.6 million recorded in other expense. Discontinued operations include net
special charges of $12.1 million comprised of an accrual for Vitamin B-3
settlement and litigation costs of $6.0 million, $6.9 million of asset
impairments, inventory write-downs and severance and $0.8 million benefit
related to an insurance settlement.
(7) The fourth quarter 2002 continuing operations include special charges of
$1.7 million comprised of $0.8 million in severance and $0.9 million for
facility closure costs recorded in operating expenses. Discontinued
operations include special charges of $8.0 million comprised of an accrual
for Vitamin B-3 settlement and litigation costs of $4.0 million and a
goodwill impairment of $4.0 million.

89

ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

None.

ITEM 9A CONTROLS AND PROCEDURES.

With the participation of the Company's Chief Executive Officer and Chief
Financial Officer, management has evaluated the effectiveness of the Company's
'disclosure controls and procedures' (as defined in the Rules 13a-15(e) under
the Securities Exchange Act of 1934 (the 'Exchange Act') as of the end of the
period covered by this annual report. Disclosure controls and procedures are
designed to provide reasonable assurance that the Company is able to meet the
objective of filing reports under the Exchange Act that contain disclosure which
is recorded, processed, summarized and reported pursuant to the disclosure
requirements and within the time periods specified in the rules and forms of the
Commission. Based on such evaluation, including consideration of the matter
discussed below, the Chief Executive Officer and Chief Financial Officer have
concluded that the Company's disclosure controls and procedures were effective
at the reasonable assurance level at December 31, 2003.

Senior management and the Company's Audit Committee were informed by the
Company's independent auditors, PricewaterhouseCoopers LLP, that there were
material weaknesses (as defined in AU 325, Communication of Internal Control
Related Matters Noted in an Audit, of the AICPA Professional Standards) in the
Company's internal controls relating to the adequacy of documentation and level
of personnel within the Company's corporate tax department. The insufficient
documentation and inadequate level of human resources within the tax department
led to untimely identification and resolution of certain tax accounting matters
that included matters leading to a restatement of the Company's third quarter
2003 results. These matters included: (i) a valuation allowance to the Provision
for income taxes of $5.4 million for deferred tax assets arising from unrealized
interest rate swap losses and minimum pension liabilities, the benefits of which
had previously been included in Accumulated other comprehensive income (loss);
and (ii) a $1.9 million reduction to Loss from discontinued operations due to
the reversal of deferred tax liabilities related to the Rutherford Chemicals
segment that were not previously taken into consideration in determining such
loss from discontinued operations.

The Company has taken and is taking the following actions to address these
weaknesses in its tax department:

- Retained a consultant with significant experience in managing corporate
tax functions to review and complete documentation of critical procedures
within the corporate tax department, specifically including documentation
requirements, in order to strengthen the reliability and timeliness of
the Company's tax accounting and to prepare for internal control audits
pursuant to Sarbanes-Oxley Section 404;

- Initiated searches for the two key recently vacated positions - a Vice
President of Tax and a Tax Manager - which are in progress with several
candidates for each position having been identified;

- Increased the level of involvement of its external tax advisers
pertaining to, among other things, the adequacy and design of the
Company's tax strategies and entity structure;

- Increased the level of review and discussion of significant tax matters
and supporting documentation with senior finance management;

- Increased the level of discussion and review of tax accounting matters
with the Company's independent auditors;

- Identifying interim resources both inside and outside the Company to
augment the existing personnel on an interim basis until the weaknesses
are remediated.

While the Company is responding to these weaknesses, management estimates
that it will take at least three to six months from the date of filing this
annual report to fully resolve them. Management believes these weaknesses do not
have a material effect on the Company's consolidated financial statements
through December 31, 2003, other than the third quarter of 2003 which was
restated as described above.

90

PART III

ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

ITEM 11 EXECUTIVE COMPENSATION.

ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

ITEM 14 PRINCIPAL ACCOUNTING FEES AND SERVICES.

The information called for by Part III is hereby incorporated by reference
to the information set forth under the captions "Principal Stockholders,"
"Common Stock Ownership by Directors and Executive Officers," "Board of
Directors," "Election of Directors," "Section 16(a) Beneficial Ownership
Reporting Compliance," "Code of Ethics," "Compensation Committee Interlocks and
Insider Participation," "Compensation Committee Report on Executive
Compensation," "Executive and Other Compensation," "Executive and Other
Compensation," "Audit Committee Report" and "Principal Accounting Firm Fees" in
the registrant's definitive proxy statement for the Annual Meeting of
Stockholders, to be held April 22, 2004, which meeting involves the election of
directors, which definitive proxy statement is being filed with the Securities
and Exchange Commission pursuant to Regulation 14A.

In addition, information concerning the registrant's executive officers has
been included in Part I under the caption "Executive Officers of the
Registrant."

PART IV

ITEM 15 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a) 1. The following consolidated financial statements of the Company are
filed as part of this report:

(a) 2. (i) The following schedule to the consolidated financial statements
of the Company as filed herein and the Report of Independent Accountants on
Financial Statement Schedule are filed as part of this report.

All other schedules are omitted because they are not applicable or not
required or because the required information is included in the consolidated
financial statements of the Company or the notes thereto.

(a) 3. The exhibits filed in this report are listed in the Exhibit Index on
pages 95-97

The registrant agrees, upon request of the Securities and Exchange
Commission, to file as an exhibit each instrument defining the rights of holders
of long-term debt of the registrant and its consolidated subsidiaries

91

which has not been filed for the reason that the total amount of securities
authorized thereunder does not exceed 10% of the total assets of the registrant
and its subsidiaries on a consolidated basis.

(b) Reports on Form 8-K

The following are the Form 8-Ks filed (or furnished) during the fourth
quarter, 2003:

October 22, 2003 regarding the press release dated October 17, 2003
announcing the amendment to the August 7, 2003 Asset Purchase Agreement for
Rutherford Chemicals.

October 24, 2003 regarding the third quarter 2003 earnings release by
Cambrex Corporation dated October 23, 2003.

November 25, 2003 regarding the completed sale of the Rutherford Chemicals
business.

January 23, 2004 regarding the press release dated January 22, 2004
announcing the financial results for the fourth quarter and full year of 2003
and providing guidance for 2004.

92

SCHEDULE II

CAMBREX CORPORATION

VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(DOLLARS IN THOUSANDS)

93

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

CAMBREX CORPORATION

By /s/ JAMES A. MACK
------------------------------------
James A. Mack
President, Chairman of the Board of
Directors

Date: March 15, 2004

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

94

EXHIBIT INDEX

- ---------------
See legend on following page.

95

EXHIBIT INDEX

- ---------------
See legend on following page.

96

EXHIBIT INDEX

(A) Incorporated by reference to the indicated Exhibit to
registrant's Registration Statement on Form S-1
(Registration No. 33-16419).
(B) Incorporated by reference to registrant's Registration
Statement on Form S-8 (Registration No. 33-21374) and
Amendment No. 1.
(C) Incorporated by reference to registrant's Annual Report on
Form 10-K dated June 5, 1989.
(D) Incorporated by reference to the indicated Exhibit to
registrant's Annual Report on Form 10-K for 1989.
(E) Incorporated by reference to the indicated Exhibit to
registrant's Registration Statement on Form S-8
(Registration No. 33-37791).
(F) Incorporated by reference to registrant's Current Report on
Form 8-K dated July 1, 1991.
(G) Incorporated by reference to the registrant's Annual Report
on Form 10-K for 1991.
(H) Incorporated by reference to the registrant's Current Report
on Form 8-K dated April 10, 1992 and Amendment No. 1 to its
Current Report.
(I) Incorporated by reference to registrant's Registration
Statement on Form S-8 (Registration No. 33-81780) dated July
20, 1994.
(J) Incorporated by reference to registrant's Registration
Statement on Form S-8 (Registration No. 33-81782) dated July
20, 1994.
(K) Incorporated by reference to registrant's Current Report on
Form 8-K dated October 26, 1994.
(L) Incorporated by reference to the registrant's Annual Report
on Form 10-K for 1994.
(M) Filed herewith.
(N) Incorporated by reference to registrant's Registration
Statement on Form S-8 (Registration No. 333-22017) dated
February 19, 1997.
(O) Incorporated by reference to the registrant's Current Report
on Form 8-A dated June 12, 1996.
(P) Incorporated by reference to the registrant's Annual Report
on Form 10-K for 1995.
(Q) Incorporated by reference to the registrant's Current Report
on Form 8-K dated October 8, 1997.
(R) Incorporated by reference to the registrant's Current Report
on Form 8-K dated December 4, 2001.
(S) Incorporated by reference to registrant's Registration
Statement on Form S-8 (Registration No. 333-57404) dated
March 22, 2001.
(T) Incorporated by reference to the registrant's Current Report
on Form 8-K dated November 10, 2003.