Norway's Weifa bets growth on separate API biz

Norwegian drugmaker Weifa figures its consumer health biz and its contract active pharmaceutical ingredient operations both have a better shot at growth if they go their separate ways. To make that happen, Weifa plans on spinning the API business off into a contract manufacturing operation, with its first contract to make the APIs for Weifa.

The drugmaker said it has created a subsidiary, Vistin Pharma, to which it plans on selling its tablet production and API operations. The plan then calls for Vistin to raise about 170 million Norwegian kroner ($21.5 million) in a public offering with a listing on the Oslo Axess exchange. It will pay Weifa about 120 million kroner ($15 million) as the value of the hived-off operations and keep the rest for operating capital. It said the offering is already guaranteed by Weifa's current large shareholders.

The way the board sees it, the consumer health business will do better as a "pure consumer brand player," with its position in pain relief and cough and cold medicines. But it is the contract manufacturing operation where it sees a big chance for expansion, with "growth potential in the international metformin and opioids market."

The company's current CEO, Kjell-Erik Nordby, will take the top spot at Vistin, which will have about 140 employees and projected 2015 sales of 387 million kroner ($50 million), the company said in its announcement. It will start off with a 5-year manufacturing agreement with Weifa.

Contract manufacturers have seen the potential for growth as large drugmakers downsize their own manufacturing networks to save money. There has also been quite a bit of M&A action in the CMO field, and while Weifa did not mention that possibility, a separate company would make that kind of deal much easier.

Patheon, which is part of DPx Holdings, has been particularly aggressive. Just this month the large CMO announced deals to buy U.S. companies IRIX Pharmaceuticals, a specialist in difficult-to-manufacture APIs, and Agere Pharmaceuticals, a specialist in bioavailability. Among other deals in the category, Baring Private Equity Asia laid out about $668 million in November to buy Bushu Pharmaceuticals, Japan's largest CMO, from Tokio Marine Capital.

Others are growing organically. China's WuXi PharmaTech ($WX) intends to spend about $200 million on capital projects for its CMO operations, including spending about $40 million on two plants in Philadelphia and expanding a plant in China.

- here's the Weifa announcement