Perrigo plans ‘massive transformation’ of API production
pharmafile | August 26, 2009 | News story | Manufacturing and Production | India, Perrigo
Pharmaceutical manufacturer Perrigo has taken a majority stake in Vedants Drugs and Fine Chemicals in a move that will shift production of some of its active pharmaceutical ingredients (APIs) to India.
In addition to manufacturing over-the-counter and generic prescription pharmaceuticals, with a particular focus on switching products from Rx to OTC, Perrigo operates a division that manufactures APIs for its own products as well as other companies.
Perrigo's chairman and chief executive Joseph Papa said that the $12 million deal was ''the next phase in the evolution of our API business'' which would help the company reduce future development and production costs across the board and broaden its product pipeline.
The announcement was made during Perrigo's fourth-quarter results conference, at which the firm reported record sales of more than $500 million, up 7%, and operating profit up more than 26% on the same period last year.
At the heart of the agreement is access to Vedants' manufacturing facility, located 30 miles outside Mumbai, which is due to come on line in the middle of fiscal 2011. This unit will manufacture APIs that are currently made in Germany and Israel.
At the moment Perrigo makes less than 10% of the APIs used in its own products, but expects the new facility in India to allow it to expand that markedly, including a number of the Rx-to-OTC switch products that the company expects to launch in the next five years.
The shift will be accompanied by the closure of Perrigo's API manufacturing facility in Germany, which was acquired alongside Israeli drug and API manufacturer Agis in 2005, by the first quarter of 2011. Meanwhile the company will close one area of its Israeli facility and use capacity freed up at the plant by the transfer to India to manufacture other specialty APIs.
In the fourth quarter, Perrigo's API business managed only a 2% net increase in sales to $39 million as there were no major product introductions for the unit, but saw operating profit advance a whopping 146% to $9 million, as a result of dramatically improved gross margins and cost management as well as improved plant efficiencies.
The deal with Vedants is the second investment in manufacturing for Perrigo in the last 12 months. In September 2008, Perrigo expanded its manufacturing capacity in the USA via the purchase of JB Laboratories for $44 million, to serve internal production needs as well as contract manufacturing customers. That deal is expected to add around $70 million in annual sales for the firm.
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