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 February
2008
issue:
Spotlight On Diagnostics--
Dealmakers Targeting Diagnostic Testing Businesses
The diagnostic testing business is witnessing robust merger and acquisition
activity, spanning several sectors of health care, including Biotechnology,
Disease Management, Medical Devices and Pharmaceuticals.
...
Pharma Outsources
Manufacturing--
Sells Plants To Focus On Higher-Margin Activities
To concentrate on higher-margin activities,
many pharma companies are selling off proprietary manufacturing plants and
outsourcing the production of their drugs.
...
January 2008 M&A Market
January produced a total of 71 deals worth a
combined $9.0 billion. Despite challenges in the financial markets, deal and
dollar volume are comparable with figures over the past four-year period.
...
In the Departments
Services
-Health Care Services
-Deal Summaries
-Additional Transactions
Technology
-Deal Summaries
-Additional Transactions
-Health Care Technology
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Articles Archive
Companies Mentioned in this issue:
February 2008
A
Abbott Laboratories p8
Abbott Molecular p8
Adept Technology p15
Adeza p16
Advocate Health Care p4
Akrimax Pharmaceuticals p1
Albany Molecular Research p2
Alere Medical p8
Alfacell Corp. p13
Allscripts Healthcare Solutions p14
Alpharma p2
Ameri-Choice p6
AmeriHealth Mercy p6
AppTec Laboratory Services p16
Ark Therapeutics Group p14
B
Banc of America Securities p14
Baptist Health System of East Tennessee p7
Behavioral HealthCare Network p6
Benedictine Health System p6
Bial p15
BioCurex p8
Biogen Idec p14
Biosensors International Group Ltd. p15
Biotie p16
Bristol-Myers Squibb p10
Britannia Pharmaceuticals p16
C
Capital BlueCross p7
Care Investment Trust p4
Catholic Health East p4
CellzDirect p14
Cerebellum Automation p15
Clark-Holder Clinic p7
CMS, Inc. p15
CoGenesys p13
Community First Foundation p4
Condell Health Center p4
Cytyc Corp. p16
E
Elekta AB p15
Emory Healthcare p7
Emory Specialty Associates p7
Essentia Health p6
Exempla Healthcare p4
Extended Care Network p14
F
FineKem Laboratories Pvt. Limited p2
FineTech Laboratories p16
G
Galpharm Healthcare p16
Genmab p14
Genzyme Corp. p10
GlaxoSmithKline p14
Gottlieb Memorial Hospital p4
Group Health, Inc. p7
H
H. Lundbeck A/S p16
Health Insurance Plan of Greater New York p7
Heraeus Holding Group p15
Heraeus Vadnais p15
Highmark p7
Hikal p2
Hologic p16
Human Genome Sciences p13
I
IAC p15
Ibis Biosciences p8
ImaRx Therapeutics p14
Independence Blue Cross p7
Inverness Medical Innovations p8
Invitrogen p14
Isis Pharmaceutical p8
J
J.P. Morgan Chase & Co. p16
Johnson & Johnson p10
JW Medical Systems p15
K
Keata Pharma p2
KV Pharmaceutical Company p16
L
Lake Forest Hospital Foundation p4
Largo Medical Center p4
Lifecore Biomedical p15
Loyola University Health System p3
Lymphatix Oy p14
M
Marcus & Millichap p6
Matria Healthcare p8
Medical Society of the State of New York p7
N
Nabi Biopharmaceuticals p14
National HealthCare Corp. p7
NovaMed p7
Novo Nordisk p14
O
Odyssey HealthCare p3
Oncology Med p7
Ophthotech Corp. p14
Ortho-McNeil p10
P
Par Pharmaceutical Companies p13
ParadigmHealth p8
PDL BioPharma p14
Pfizer p2
PharmEng International p2
R
Resurgence Health Group p4
Roche Holding p1
Rockwood Realty Associates p6
Royal Senior Care, LLC p6
RxElite p16
S
Senior Management Concepts, LLC p4
Sepracor p15
Shandong Weigao Group p15
Sisters of Charity of Leavenworth Health System p4
St. Mary’s Health System p7
St. Mary’s Holston Health & Rehabilitation Center p7
St. Mary’s Hospital p4
Stada Arzneimittel p16
Stephens, Inc. p4
Strativa Pharmaceuticals p14
Sun Coast Hospital p4
Sun Trust Robinson Humphrey p8
SunLink Health Systems p4
Sunwest Management p6
Synovis Life p15
T
Taisho Pharmaceutical Co. Ltd. p16
Tenet Healthcare Corp. p4
Teva Pharmaceutical Industries p13
The Buying Group p7
The HealthCentral Network p15
The Maren Group LLC p8
The Perrigo Company p16
The Sterling at Aventura p6
Theratechnologies p16
U
Unison Health Plans p6
UnitedHealth Group p6
V
Ventana Medical Systems p1
VistaCare p3
W
Warburg Pincus p15
Waterbury Hospital p4
West Suburban Hospital p4
WiFiMed Holdings p7
WuXi PharmaTech p16
Wyeth p1 |
Pharma Outsources
Manufacturing--
Sells Plants To Focus On Higher-Margin Activities
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article to a friend
Email Editor
Big pharma companies wondering where their
next innovative blockbuster is coming from are having no difficulty in
figuring out what to do with their manufacturing units. They’re selling
off some of their nuts-and-bolts operations to generic pharma companies or
manufacturers of APIs so they can concentrate on higher-margin aspects of
their business, such as development, intellectual property and marketing.
For the production of the drugs they once manufactured in house, they will
now rely on outsourcing with contract manufacturing specialists. While
these are not the sort of deals we ordinarily include in our databases or
statistics, they are indicative of a strategy that established pharma
companies are adopting to cut costs, rationalize operations by a division
of labor and realize economies of scale.
Wyeth (NYSE: WYE) recently sold its drug product
manufacturing and packaging plant in Rouses Point, New York to Akrimax
Pharmaceuticals, an emerging branded pharmaceutical company. During a
transition period that terminates at the end of 2009, Akrimax will lease
the property back to WYE so WYE can continue manufacturing its products
while Akrimax integrates its own products into the facility. To capitalize
on any excess capacity at the plant, Akrimax also intends to bring
additional business through contract manufacturing agreements with third
parties.
Across the border in Ontario, Pfizer (NYSE: PFE)
has sold its manufacturing facility in Arnprior to PharmEng
International (TSX: PII). Concurrently, PharmEng subsidiary, Keata
Pharma, will enter into supply agreements with PFE for the exclusive
manufacture of certain Pfizer products for Canada for a period of three
years. Keata will also manufacture products at the Arnprior location for
two other major pharma clients with multi-year supply contracts.
It’s not just IT divisions and call centers being
outsourced to Bangalore. Pfizer and India’s Hikal (BO: HIKA) have
signed a long-term deal under which Hikal, based in the bustling capital
of Karnataka, will manufacture and supply bulk drugs to Pfizer. HIKA
already has a contract to supply Alpharma (NYSE: ALO) with a bulk
supply of a drug for veterinary products. To get in on the trend to
outsource manufacturing, Albany Molecular Research (NASDAQ: AMRI),
which provides contract chemistry R&D services to assist in drug discovery
and production, recently expanded its presence in India with the
acquisition of FineKem Laboratories Pvt. Limited, a manufacturing
facility in Aurangabad. AMRI paid less than $2.0 million.
Big pharma is realizing that the true value of its drugs
resides in the instructions on how to make them, not on where they are
made, and, once they are made, on seeing that they reach consumers. These
companies figure that the costs of outsourcing and transportation to and
from lower-cost countries will still be lower than the costs of
maintaining a plant locally. While they retain the all-important
intellectual property and marketing divisions, they can sell off the real
estate, plant and equipment and get a one-time bump in revenue from the
proceeds and an enduring benefit in not paying locally high wages or taxes
on the plant. And as pharma utilizes more sophisticated biotech platforms
and methods, making the industry even more knowledge-intensive, the trend
to outsource manufacturing should accelerate accordingly.
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