Philadelphia-based PRWT Services Inc., (No. 62 on the BE INDUSTRIAL/SERVICE list with $65 million in sales) is expanding its reach with the acquisition of a chemical manufacturing plant from Whitehouse Station, New Jersey-based Merck & Co. Inc.
The venture marks a new direction for PRWT which has primarily offered business process outsourcing and facilities management services. “We saw the opportunity to move into the life sciences space and grow in this rapidly-growing healthcare market,” says Skip Lee, executive vice president of Business Development for Life Sciences for PRWT.
The plant, which produces active pharmaceutical ingredients (APIs), the ingredients that go in antibiotics, is located in Riverside, Pennsylvania. On Jan. 1, it became part of PRWT’s wholly owned subsidiary, Cherokee Pharmaceuticals L.L.C. While financial details of the sale were not disclosed, Cherokee and Merck have entered into a five-year supply agreement for an estimated $100 million to $200 million per year.
“The sale of the Cherokee plant, along with the supplier relationship Merck has established with Cherokee Pharmaceuticals, is another important step in the realigning of our manufacturing operations,” said Larry Naldi, senior vice president for Science & Technology, Merck Manufacturing Division, in a statement.
Not only does the acquisition make PRWT the first minority-owned company in the U.S. to manufacture APIs, but it propels PRWT to another level, says Lee. “It moves our enterprise from being a $77 million business to being close to a $300 million business. It also provides us with a scale and sophistication to be a top player in multiple areas-life sciences, U.S. facilities, and [business process outsourcing],” he adds.
It’s not unusual for large pharmaceutical companies to divest some of their manufacturing units and then continue to do business with [those units] says Kirsty Barnes, editor of Outsourcing-Pharma.com, a Website that covers the pharmaceutical industry.
Many pharmaceutical companies no longer consider some manufacturing functions to be a core part of their business, Barnes says, particularly the “manufacturing of drugs that have gone off patent or aren’t bringing in a lot of money anymore. They’ll sell the facility because it’s expensive to run it and then they’ll get the new buyer to continue [operations] as normal.”