Is Closing Your Manufacturing Plant The Best Option?
By Rob Wright, Chief Editor, Life Science Leader
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This year there have been a number of companies announcing pharmaceutical manufacturing plant closures. For example, Catalent Pharma Solutions announced the closing of its Allendale, NJ, facility. Solgar Inc., a subsidiary of NBTY, announced the closing of its plant in Lyndhurst, NJ. These pharma manufacturing plant closings equate to 196 jobs lost for New Jersey. Jeremy Levin, CEO of Teva Pharmaceuticals, is looking at net income being down 26.7%. When income is down, companies look to cut costs. For Teva, one of the cost-cutting solutions is the proposed closure of the company’s West Rockhill Township, PA, manufacturing facility, resulting in the loss of 450 jobs. That comes on the heels of Teva’s previously announced closing of a plant in Irvine, CA and its 403 jobs. These are tough decisions and have a lasting impact on the families of 1,049 people. Having been laid off before, I know how it feels. You tell yourself it is just business and not to take it personally — this is easier said than done. The business decision to close a plant has a negative ripple effect on the economy as those who are unemployed begin spending less, stop contributing to 401K investment plans, pay fewer taxes, and draw unemployment. But what if you didn’t have to close the plant?
In St. Louis, MO, there is a 27-year-old biopharmaceutical manufacturing facility that has been part of Wyeth, Pfizer, and most recently J&J. Had Mark Bamforth (who worked for Genzyme at the time) gotten his way, it would have become part of the Boston-based biotech. Twice he tried to negotiate purchasing the site for his former employer, and twice the decision was made not to proceed with the acquisition. Bamforth was so impressed with the people at the facility he set out to buy it himself, successfully closing the financing to purchase the site in May 2011. Today, Bamforth is the president and CEO of Gallus BioPharmaceuticals, a unique start-up — profitable from day one with a 27-year history. He credits his company’s success to the former J&J staff he retained who weren’t interested in selling the site but instead wanted to create a sustainable, separate business.
Facing a similar decision of having to close a facility within your company? Perhaps you should consider the option of selling in order to position your business for success. J&J’s approach may have required a little more effort, but instead of having 160 employees collecting unemployment, they are now contributing positively to the U.S. economy.
In this month’s issue, I interview Dr. Bill Hait, an executive with J&J (see page 18). During our discussion, Hait commented, “Doing good in the world. That’s what ethical companies do.” For example, J&J developed Remicade, the first drug specifically approved for patients with moderate to severe Crohn’s disease, an ailment which affects less than 0.2% of the U.S. population. The company didn’t set out to create a blockbuster. It set out to fill an unmet medical need. The drug has since gone on to receive 15 additional indications, and in 2012, generated $6.1 billion in sales. Interestingly enough, Gallus BioPharmaceuticals is one of the facilities which manufacture Remicade, as well as another J&J product, Stelara. As you can see, J&J has a vested interest in Gallus being successful but not just because the J&J family of companies appears on the products label. It’s what ethical companies do.