Recro Pharma takes manufacturing business 'bi-coastal' with $50M deal for CDMO Irisys

With manufacturing operations already locked up in Georgia, Recro Pharma is taking its CDMO ambitions coast-to-coast. 

Recro has dished out nearly $50 million to acquire CDMO peer Irisys. The deal for the San Diego-based contract manufacturer jettisons Recro into the role of “full-service CDMO” with operations on both coasts, the company said in a release.

Georgia-based CDMO Recro specializes in oral solid dose drugs, while Irisys’ bread-and-butter spans formulation development to commercial manufacturing on a range of delivery formulations. 

Irisys expects to gin up $15.4 million in revenue this year and comes equipped with a Rolodex of nearly 40 customers across six countries, Recro said. The company provides “manufacturing support” for four commercial and “near-commercial” products, Recro added. Meanwhile, Recro will get its hands on automated aseptic fill-finish and freeze-drying capabilities that Irisys recently added at its existing plant.

Irisys has about $23 million on hand courtesy of its contracted backlog and “vetted sales pipeline,” Recro said. With the deal under its belt and $2.1 million in Irisys net income on the horizon, Recro says it will draft an update to its financial guidance in the third quarter.

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With its new “bi-coastal footprint,” Recro figures it’s better-positioned to tackle pre-investigational development through commercial manufacturing and packaging work for both its U.S. customers and those outside the U.S.

Recro has been on a quest to renovate its business across four categories: Strengthening leadership and talent, expanding and diversifying its client base, “fortifying” its financial position and enhancing its “capabilities and competencies,” David Enloe, president and CEO at Recro, said in a statement. The Irisys deal advances all four of those goals, he said.

All of Irisys' roughly 65 employees have joined the Recro team, a Recro spokesperson said over email. Meanwhile, Irysis’ San Diego environs should allow Recro to tap into to the “West Coast human capital hotbed,” the company said in its release.

Irisys deal aside, Recro operates two facilities outside Atlanta in Gainesville, Georgia, the spokesperson said. One plant focuses on development while the other is attuned to commercial production. For its part, Irisys has been doing work at its single, 24,500-square-foot San Diego manufacturing facility since 2014. 

Aside from its drugmaker clients, which include international pharmas and “start-up to mid-tier biotech companies,” Irisys also works with the National Institutes of Health (NIH) and the National Cancer Institute Developmental Therapeutic Program.  

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The deal for Irisys features a $25.5 million cash payment, 9,302,718 shares of Recro stock that the company will pay out in six months, plus a $6.1 million seller promissory note. 

In recent years, Recro has gone all-in on its CDMO business as it dealt with regulatory setbacks around its non-opioid pain drug meloxicam. The FDA bounced back the drug's application in February 2018, raising chemistry, manufacturing and controls-related questions. Less than a year later, meloxicam received a second complete response letter. 

The FDA finally cleared the drug to help manage moderate to severe pain in February 2020. The approval was granted to Baudax Bio, which spun out from Recro in November 2019. The Baudax separation also signaled Recro's transformation into a dedicated CDMO, the company said at the time.