Hikma looks at Roxane Labs plant for expanded contract work

(West-Ward Pharmaceuticals)

Jordan-based Hikma laid out a couple of billion dollars in cash and stock this year to buy Boehringer Ingelheim’s U.S. generic drug business Roxane Laboratories and says that addition is already transforming its own generics operations. And Hikma thinks it can squeeze some additional juice out of the deal by using a plant it acquired in the deal for contract manufacturing. 

The disclosure came in a call with analysts after the drugmaker released H1 results last week, showing a 28% jump in what it calls core revenue when measured in constant currencies.

“Roxane Laboratories which we now refer to as West-Ward Columbus. You can see from the slide that has really changed the shape of the group and it gives much more balance to our diversified business model,” CEO Said Darwazah told analysts, according to a Seeking Alpha transcript of the call. He pointed out a slide that showed the Roxane business generated $193 million in revenue during the four months in the first half in which Hikma was counting Roxane sales. That was about three times the $64 million that its legacy West-Ward Generics operation produced.

But execs said Hikma not only sees more growth from the portfolio of drugs it got in the Roxane deal, but they also think the company can use some capacity at the plant in Columbus, OH, toward its contract manufacturing operations.

CFO Khalid Nabilsi said Hikma has contract manufacturing obligations to fulfill for Boehringer Ingelheim but thinks there is more to be done there. “We are taking a look at what agreements we do have and new contract manufacturing coming through the plants," Nabilsi said. “But we are also optimizing our portfolio there as well to have additional capacity for contract manufacturing, so it doesn’t have a negative impact on the business moving forward.”

After announcing its $2.65 billion cash-and-stock deal for the Roxane operation last year, they returned some months later with a renegotiated price that cut Hikma’s cash contribution. They said the Amman, Jordan-based company would pay $647 million in cash and issue 40 million new shares to Boehringer, about $535 million less than the original deal called for. That was because Roxane's 2015 revenue was lower than it anticipated, primarily due to higher rebates paid to wholesalers, a factor that it expects to deal with for a couple of years.

With the deal Hikma got an 875,000-square-foot manufacturing site in Columbus, OH, where Roxane also has its R&D and marketing operations. Hikma is also taking on the 1,360 Roxane employees. The plant manufactured 88 products, and while its particular strength is in immediate-release solids, it also produces liquid, dry powder inhaler and nasal spray dosage forms. It also makes high-potency products, technically complex formulations and controlled substances.

When Hikma bought Boehringer's Ben Venue Laboratories last year in a $300 million deal, it also got a massive, but troubled, sterile manufacturing site in Bedford, OH. The German company had closed the plant at the end of 2013 and laid off its 1,300 employees after deciding that the business was not worth the additional investment to satisfy an FDA consent decree. Hikma agreed with that assessment and, rather than reopen the facility, stripped out the newer equipment and shipped it off to some of its other manufacturing sites. Last year it sold newer parts of that plant to Denmark’s Xellia, which is in the process of readying them for its own production.

- here’s the Hikma earnings release 
- read the earnings call transcript

Related Articles:
Hikma gets large U.S. plant in Boehringer Ingelheim generics deal 
Hikma slashes $535M from offer price for Boehringer's U.S. generics biz 
FDA modifies consent decree for Xellia on closed Ben Venue plant

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