The contract development and manufacturing organisation (CDMO) acquired the Florence, South Carolina plant in November 2016 , and signed a multi-year deal to supply Roche with a variety of APIs - including the active ingredient for the chemotherapy drug Xeloda (capecitabine) – from the site.
And during a financial call Thursday, the firm revealed the Roche contract represented around $100m (€93m) of the new total contract value (TCV) for the first quarter 2017.
But the site will also provide Patheon with “new enhanced capabilities as well as additional capacity, which will at least temporarily help to alleviate capacity constraint of our API business,” CEO Jim Mullen told stakeholders.
“We were very capacity constrained last year, so we had to be very picky and choosy about what we were taking,” he said, adding the new site has “opened that funnel up.”
Michael Lagarde, Patheon’s president, added before the acquisition the CDMO had “a pretty active development pipeline of products [it was] working on already that [it] wouldn't have had the commercial capacity for,” and that it was now looking to quickly ramp up new, non-Roche business at the site.
“In the current year numbers there is virtually only Roche included, and that component of the take or pay is about $30m,” he said.
“We expect first revenues to show up there in a meaningful way in the next fiscal year. And then in the next couple of years we think that, as we mentioned previously, that that facility can ramp to north of $100m.”
Lack of Western capacity
Ramping up utilisation at Florence and its other North American facilities is a key strategy for Patheon, with Lagarde telling investors API capacity located in the western hemisphere is “pretty full” across the industry.
“In part that's just industry activity, in part it's also because a lot of what previously went further east has come back, [and] people have suffered through significant quality issues or unreliability, if you will,” he said, adding “a lot of that API production has been won by our API business and others that have high quality facilities here in the US as well as in Europe.”
He said other Western firms in the API space, including AMRI and Cambrex , were also seeing high demand for western capacity and were following a similar strategy in performing high value API production steps within its own facilities, while sourcing earlier chemistry steps from others.
“Our strategy is not to have a bunch of capacity to make this commoditised stuff: We have access to it. We have our own networks in those regions to get access to it so we can sort it on behalf of our customers.”
Mullen added Patheon would succeed in the API space “as long as we stay disciplined on where we can compete and compete well, which is new products, complex chemistry, API or the penultimate step or registry starting materials,” and not in the commoditised products or intermediate space.