Pharmaceutical Technologist - November 2007 - (Page 43)

// Q&A our position as a leader in our business of drug development and contract manufacturing. They also have confidence in the prospects of our business, in our operations and in our management. Moreover, JLL has made a number of successful investments in the healthcare field so they bring expertise as well as capital. What did the restructuring involve in practice? After completing the recapitalization in April, we decided that as part of our strategy to focus on developing and manufacturing prescription pharmaceutical products, we would divest our Niagara-Burlington Operations in Canada, which are focused on the commercial manufacturing of over-the-counter products. Our objective is to refine our service offering and, more specifically, focus our resources and capital on areas where we believe we can grow our business and create greater value — for both our clients and shareholders. We are making good progress on this initiative; we have completed preliminary due diligence with interested parties and the next step will be to negotiate a definitive agreement with a preferred party. In addition, to improve capacity utilization and the profitability of our remaining Canadian operations, we are transferring existing business at our York Mills site in Toronto to our site in Whitby (ON, Canada). This process is also proceeding well. We have completed the planning discussions with our clients and will begin transferring production to Whitby this autumn. What do you think was the biggest lesson that senior management has learned from this? Throughout much of the past decade, until 2004, Patheon had a very measured approach to growth. We acquired one site at a time from global pharmaceutical companies, concurrently entering into long-term manufacturing agreements to continue manufacturing the products that were being made at those sites. This provided the time to secure additional business from more clients over a period of years, diversifying the client base and growing the business at each site. We successfully acquired and integrated eight sites using this approach during a 10-year period. In 2004, with the acquisition of MOVA Pharmaceuticals, with three sites in Puerto Rico, we took a different approach. MOVA was a competitor with a different business model, based on manufacturing comparatively few products with very high volumes. Unfortunately, issues started to emerge shortly after the purchase, and we have experienced declines in revenues and earnings from most of the major products. The major lesson is that there is a big difference between growth through acquiring one site at a time and growth through acquiring an entire business with a different model. Having said that, we are confident that we can restore the profitability of these operations through the right mix of attractive capacity and management expertise. When we can diversify our client and product base in Puerto Rico, we will have a successful operation in a low tax rate jurisdiction. How does the company’s new strategy differ from the past? Formerly, our strategy was focused on becoming one of the world’s largest providers of outsourced pharmaceutical development and manufacturing services. With our capacity, expertise and capabilities across our network of facilities in North America and Europe, we have achieved that goal. We now aspire to be a leading pharmaceutical product development and commercial manufacturing company. We want to be the company that our clients feel will be the natural choice for them when they’re considering an outsourcing partner. We want to make sure that the range of services we provide meet our clients’ needs, but also meet our own financial expectations. Accordingly, we are focusing on growth in higher-margin opportunities, with higher valueadded for our clients, whether that’s in the pharmaceutical development services area or in more specialized commercial manufacturing capabilities. What areas will you be focusing on? We see significant opportunities to grow our business by providing increasingly specialized manufacturing capabilities — making us a more valuable partner to clients and increasing our competitive advantages while generating higher quality revenues. In addition to the ability to manufacture conventional solid, semi-solid and liquid dosage forms, we have specialized capabilities in high-potency, cephalosporin, controlled/sustained release, liquid-filled hard capsule and sterile manufacturing, including aseptic filling and lyophilization. Having access to our specialized capabilities provides strategic benefits to our clients — leading to stronger relationships and opportunities for higher-quality revenues. www.ptemagazine.com 43 http://www.ptemagazine.com

Table of Contents Feed for the Digital Edition of Pharmaceutical Technologist - November 2007

Pharmaceutical Technologist Contents Editor's Comment News Morpheus Feeling the Pressure Legal Crusaders The Holy-Grail of Start-Up Biotech Special Feature Q&A

Pharmaceutical Technologist - November 2007

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