CPL bought the 40,000 sqm plant from US major Bristol Myers-Squibb (BMS) in 2005 in an effort to expand capacity for the production of both branded and generic pharmaceuticals.
But, despite investing a further $4.5m (€m), demand and hence capacity utilisation did not reach the levels the contract manufacturing organisation (CMO) had expected.
Jan Sahai CPL spokesperson told the Buffalo News that CPL, which owns another facility just across the border in Ontario, Canada, decided to close its US plant because it does not expect “utilization increasing anytime soon in this economy.”
Sahai explained that: “Many pharmaceutical companies are pulling back many of the products they outsourced to fill up capacity at their own plants.”
Outsourcing cuts?
Whether this manufacturing pullback is a genuine industry trend or something that has impacted CPL specifically remains to be seen.
The prevailing wisdom has been that pharmaceutical firms are reducing in-house manufacturing capacity and outsourcing production to CMOs to reduce costs and refocus on core innovative R&D.
However, in recent months there have been an increasing number of deals between Big Pharma firms and generic drugmakers, most recently Abbott’s acquisition of Piramal and Pfizer deals a number of Indian generics firms.
And, while these agreements have focused on boosting Big Pharma’s presence in the non-branded sector, most of the firms involved have mentioned additional low-cost manufacturing capacity as a motivation.
So, while CPL’s difficulties should not be extended to the industry as a whole, the firm’s suggestion that pharma firms are taking more manufacture in-house should at least be borne in mind by the CMO sector.