Inconsistent performance in recent years prompted Patheon to review the contract manufacturing and development sector and its place in the market. Facility consolidation and closure of non-core operations have been proposed to help Patheon grow despite stagnation of the market.
“It is clear that we must aggressively improve the performance of our core operations”, Jim Mullen, CEO of Patheon, said. In a call with investors Mullen said performance has been “uneven at best”, but is confident future quarters will be better as a result of planned restructuring actions.
Patheon is looking to sell its Swindon, UK commercial manufacturing operation and early discussions have been held with parties interested in buying the asset as a going concern. Pharmaceutical development assets at Swindon will likely be retained by Patheon.
Operations in Canada are also being restructured. Patheon plans to transfer quality control work it performs in Burlington, Ontario to sites in Toronto and Whitby. Burlington is also used for clinical packaging and Patheon is pursuing strategic alternatives for these capabilities.
Cuts to operations in the UK and Canada follows previously discussed actions in Puerto Rico and Switzerland. Closure of the Caguas, Puerto Rico site is pending regulatory approval of product transfer to Manati. Patheon is also moving its European headquarters from Switzerland to the UK.
As part of the cuts Patheon will exit the semi-solid and clinical packaging sectors. By exiting these markets, which Patheon views as non-core, resources can be focused on other areas and targeted investments in solid oral doses and parenterals are planned.
Investment in centres
Following the restructuring Patheon will have six ‘centres of excellence’, four working on solids and two on steriles. Investments will be made in these centres to give Patheon the edge needed to gain market share and grow despite predicted stagnation of the contract manufacturing sector.
Patheon plans to investment to support: quick changeovers and high speeds in its hormones unit; large-scale high potency manufacturing; and, potentially, continuous processing at its speciality solid dose business.
Investments in the pharmaceutical development business are also planned. Patheon expects the market to grow as increased outsourcing penetration offsets declining research and development spending, and wants to equip itself to meet changing client demands.
Opening of a San Francisco early development facility in October may be following by expansion in Europe. Mullen also said he wants the capabilities to handle earlier stage projects.
Investments will initially focus high return areas to make the restructuring self-sufficient as quickly as possible. In the first phase Patheon will improve its core contract manufacturing business and a small expansion of pharmaceutical development capabilities.