Patheon’s strategic platform launched in US
$30m deal provides 530 pharma manufacturing jobs and introduces a ’second tier’ in outsourcing structure
Patheon Inc. based in Mississauga, Toronto in Canada will provide long-term manufacturing and supply services to Aventis Pharmaceuticals Inc. in a deal where Patheon buys the Aventis pharmaceutical manufacturing and development site located in Cincinnati, Ohio, USA.
The agreement means Patheon provides employment to all 530 employees while continuing to manufacture and supply all Aventis products currently produced at the site.
Patheon will also take over from Aventis existing service contracts with ten third-party pharmaceutical companies.
Bob Tedford, CEO of Patheon Inc. sees the US as an important market for Patheon. "The Cincinnati site will bring a conveniently located operating presence to serve that market."
Currently about one-third of Patheon’s total revenues are derived from services to US pharmaceutical and biotech clients.
"With these new contracts, our US based revenues will exceed the 50% level."
The transaction is expected to be completed by the end of December 2002, subject to due diligence, contractual consents, approvals from the State of Ohio and the local municipality.
"The development facility with its analytical and formulation capabilities, together with its proximity to leading academic institutions, will be an excellent platform for expanding our successful pharmaceutical development services in the US," Tedford added.
The facility is located on a life sciences campus, which incorporates the University of Cincinnati Genomics Research Institute and a development scale manufacturer of active pharmaceutical ingredients
Projected revenues in the first 12 months of operation will be in the range of US $95 million. About 28% of this will be from manufacturing and supply agreements with Aventis that have an initial term of five years with renewal provisions.
The ten other third-party contracts represent 72% of the first year’s annual revenues. Five of these contracts, one of which contributes 13% of revenues, have remaining terms of around two years. The other five contracts have remaining terms beyond two years and have renewal provisions.
The purchase price for the facility is $16 million, subject to adjustments, plus about $13.8 million for inventory. Patheon will finance the transaction through debt facilities, including attractive, long-term, fixed-interest-rate loans from the State of Ohio.
Over the first three years, Patheon plans to invest additional capital for sustaining capital improvements of approximately $10 million and for facility improvements of an additional $13 million including the expansion of PDS capabilities and the installation of new information systems. The investments will be funded from operating cash flow and debt facilities.
The 30-acre site, located within an hour of Cincinnati’s International Airport, includes a 372,000 square-foot manufacturing facility and an 85,000 square-foot development facility comprising both analytical and formulation capabilities.
Patheon will also take over the leases of a 120,000 square-foot warehouse that is currently leased by Aventis.
The FDA-approved site manufactures solid, semi-solid and liquid dosage forms, encompassing more than 65 products sold in 18 countries. About a half of the manufacturing revenues in the first twelve months of operations will be derived from prescription pharmaceutical products. The remainder will come from OTC products.
Keywords : Patheon Aventis Contract pharmaceutical manufacturing Supply agreement Pharmaceutical development services (PDS)
