Drug firms sell off plants

In a flurry of deals over the past two weeks, several drug companies agreed to sell unwanted plants. The sales show that the move by major drug firms away from in-house manufacturing is not letting up.

Perrigo, a big generics maker, agreed to sell its active pharmaceutical ingredient (API) facility in Israel to SK Capital, a private equity firm, for $110 million. As is often the case in such deals, SK will continue to supply APIs to Perrigo under a long-term agreement.

SK entered drug manufacturing in 2015 with the purchase of Halo Pharmaceutical. Last year it acquired Noramco and Tasmanian Alkaloids, sister opioid manufacturers, from Johnson & Johnson.

Pfizer signed a deal to sell a sterile drug production facility in Liscate, Italy, to Avara Pharmaceutical Services. Formed in 2015, Avara has now acquired five API and finished-drug facilities from drug companies including AstraZeneca, Merck & Co., and UCB.

Bristol-Myers Squibb will sell a biologic drug plant in Bothell, Wash., to Seattle Genetics, a smaller drugmaker, for about $43 million. Seattle Genetics says the facility will produce antibodies for its antibody-drug conjugate and immuno-oncology pipelines.

The facility sale is the second pending for BMS. In June the firm agreed to sell a small-molecule API plant in Ireland to SK Biotek, a South Korean pharmaceutical chemicals firm, by the end of the year. BMS said it will shift its manufacturing focus in Ireland to biologic APIs.

Drugmakers have been jettisoning plants for some years, and Jim Miller, head of the outsourcing consulting firm PharmSource, expects the trend to continue. He says it will be driven by acquisitions, which create consolidation opportunities; patent expirations, which render facilities unnecessary; and the transition of drug pipelines away from small molecules to biologics.

But big drug companies don’t only sell facilities. Miller points to Merck & Co.’s recent deal to buy a plant in Austria from the drugmaker Shire. Merck intends to convert the facility from human drugs to animal vaccines.