Sagent Pharmaceuticals passed a milestone last year when it bought out a Chinese partner and took ownership of a manufacturing plant in Chengdu. The foundation of Sagent's ($SGNT) model is having lots of contract partners to quickly turn out products when a competitor's manufacturing problem has created a market vacuum. Now the U.S. drugmaker wants to try another first and is out shopping for some proprietary products to tuck into its portfolio.
Sagent CEO Jeffrey Yordon told Reuters he would spend up to $500 million for the right products. He likes the opportunities in cancer drugs, anti-infectives and treatments that can be sold directly to hospitals. "A lot of bigger companies have developed products that are probably a little too small, they may be in the $50 million (in sales) category. Those are the products that we have a lot of interest in," he said.
Schaumburg, IL-based Sagent has been on an upward trajectory since its founding in 2006 to specialize in injectable drugs. Last month it reported that its 2013 revenues grew 20% to $64.1 million. Its strategy has been to work primarily with contractors for manufacturing, saying it provided flexibility. But consolidation in the industry is creating some challenges. For example, Actavis ($ACT) canceled a Sagent contract last year after its buyout by Watson Pharmaceuticals the previous year. So Sagent spent $25 million to get full control of a new, 300,000-square-foot, FDA-approved facility in Chengdu, China, that it initially partnered on. And now it is pondering an expansion.
During a conference call with analysts last month, Yordon said the company is assessing a $30 million investment so it can add a second manufacturing line. While the first line primarily makes oncology and highly toxic drugs, the new line would be for "high-value" products Sagent has in its pipeline, he said, according to a transcript from Seeking Alpha. The new line is also expected to have about four times the capacity as the first, Yordon said.