Dishman set to bail on API manufacturing in once-promising China

Dishman Pharmaceuticals & Chemicals ($DISHMAN.NS) appears poised to give up on manufacturing for now in China, which it believed held great promise when it first bought land there in 2005.

But having already invested $20 million in an API plant that may still be years away from approval, the company is looking instead at selling the site to pay down debt. Otherwise the company will use the plant to produce Category III HAPI.  

Dishman is in advanced negotiations with prospective buyers and expected to get $25 million for the facility near the Shanghai Pudong International Airport, Dow Jones reported recently. CFO V.V.S. Murthy told Dow Jones that Dishman hoped to close a deal by June and would use the money to pay down debt.

On Monday, Dishman spokesman Christian Dowdeswell told FiercePharmaManufacturing in an email that having been unable to get Chinese Food and Drug Administration (SFDA) approval as expected, selling the plant was one of a couple of options.

"It is estimated that it will take up to three years for the SFDA to grant GMP status," he said. "The first option is to retain the Shanghai plant for the production of Category III HAPI (Safebridge Category III) and the second option would be to divest the Shanghai plant and focus on API manufacture in India."

Like many other pharmaceutical companies, Dishman had great expectations for what it could achieve in a market with less expensive labor and utility costs. Dishman initially planned to buy a 20,000-square-meter parcel but opted on one four times that size because of the potential of the market. The plant was built to produce pharmaceutical intermediates and active pharmaceutical ingredients for its U.S. and European clients.

Construction began in 2006 on the facility, which includes a production plant, a warehouse, dedicated on-site utilities and administrative/quality control offices. The facility's large-scale capacity (10 reactors with total capacity from 2,500 L to 8,000 L) is designed to produce multiton quantities. Dishman completed the trial production of its new China facility in May 2010, reported.

Dishman expected to have it approved and operating by September 2008. But three and a half years later, it still does not have local regulatory approvals and so the facility at the Shanghai Chemical Industry Park is up for sale. 

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