Recro Pharma and Alkermes close deal on DEA-approved plant in Georgia

Pennsylvania-based Recro Pharma ($REPH) has picked up a new plant and jumped into the contract manufacturing business, while Irish drugmaker Alkermes ($ALKS) is now one plant shorter and out of the CMO biz.

The two companies announced in March that Recro would pay Alkermes $50 million in cash and up to $120 million in milestone payments, as well as royalties, to get a DEA-approved manufacturing facility in Gainesville, GA, as well as a number of pain drugs. Recro is a specialty drugmaker focused on developing nonopioid drugs for postoperative pain.

The low-double-digit royalties will come from Recro's commercialization of meloxicam IV/IM, a late-stage, parenteral formulation of a nonsteroidal anti-inflammatory drug that Recro acquired along with Alkermes' rights to pain drugs Ritalin LA, Focalin XR, Verelan, Zohydro ER and BiDil. The deal closed last month.

The 85,000-square-foot DEA-licensed facility has 165 employees and manufactures the 5 approved drugs that Recro is buying. Besides getting additional manufacturing capacity, the plant does contract work that brought in about $70 million worth of business last year, Recro said. Alkermes said in its Q1 report last week that the Gainesville facility and products that were included in the deal generated $19.2 million of revenue and $7.3 million of non-GAAP net income for Alkermes in the first quarter ahead of closing the deal.

Recro CEO Gerri Henwood said in the deal announcement that it not only gives the company a Phase III-ready acute pain product that complements its development portfolio but also "adds infrastructure and cash flow which may help fund the development of our pipeline in the future."

- here's Alkermes earnings release