The Tribune

By FAY SIMMONS

Tribune Business Reporter

jsimmons@tribunemdia.net

PHARMACHEM Technologies’ sole customer yesterday confirmed to Tribune Business that it pulled the plug on the Bahamian drug maker due to cost overruns and its failure to meet production timelines.

A Gilead Life Sciences spokesperson said PharmaChem struggled to meet deadlines after its $400m plant expansion was com- pleted while the costs involved in making that investment “significantly exceeded our original estimates”.

They revealed: “In 2016, Gilead entered into an agreement with a con- tract manufacturer to build a new plant in The Bahamas to produce commercial product for Gilead. Unfortunately, the costs and timeline to reach commercial production has significantly exceeded our original estimates.”

Gilead thus decided to end its contract with PharmaChem Technologies so it can focus on other projects. The spokesperson maintained that the split, and subsequent closure of the Grand Bahama manufacturing facility, will not impact its ability to provide anti-HIV retroviral and other drugs to consumers.

“As a result, we have made the decision not to continue to fund this project further so that Gilead can allocate its resources where they can have the greatest impact for patients. This decision will not impact Gilead’s ability to deliver commercial product”, they said.

This confirms what Tribune Business reported last week in that PharmaChem Technologies had run into “technical and operational issues” with its $400m plant expansion, which one contact labelled as “a very ambitious project”.

The expansion, designed to expand the range of drugs supplied to Gilead, was said to have gone sinificantly over-budget due to cost overruns. And both Hurricane Dorian and the COVID-19 pandemic delayed the construction completion and production of test batches.

“In the chemical world, they have to do test batches, and each batch has to meet specific criteria before they can do a production run,” one contact, speaking on condition of anonymity said. It is understood there were issues with these test batches, while some PharmaChem staff were said to be reluctant to work the 24-hour production shift system that was required to meet Gilead’s orders.

Ultimately, with the Grand Bahama-based manufacturer unable to meet Gilead’s desired production timelines and volumes, the latter pulled its financial support from PharmaChem, resulting in yesterday’s closure announcement. Gilead is also thought to have provided a significant portion of the financing for the $400m expansion.

Pharmachem Technologies, in announcing its closure, said it will “immediately petition” for the company to be placed into full liquidation and wound-up. More than 120 workers have seen their jobs terminated by the closure which took effect last Friday.

Pia Glover-Rolle, minister of labour and the public service, yesterday said Howard Thompson, the director of labour, is currently in Freeport “wrapping up procedures” after the company gave the Government adequate notice of its intention to close down. She added that

employees are still receiving severance packages and the Ministry of Labour will be working to redeploy them in areas that fit their skills.

“Our director of labour, who has been very active and on the ground, is actually in Grand Bahama right now, in terms of PharmaChem, the wrapping up procedures,” Mrs Glover- Rolle said. “We’ve been a part of it since the notification from PharmaChem that they would have to wind-up, and we’ve been working with them in the process.

“These PharmaChem workers, most of them are very skilled and specialised workers, so we are work- ing with them right now. They’re still in the process of receiving packages and, as that process winds down, then we will look to see how we can place them in positions that can suit their qualifications, if possible, or in fact, just be able to give them some type of employment until we can meet their needs in terms of their qualifications.”

The Government’s desired solution would be for a buyer for Pharma- Chem Technologies’ new plant to quickly emerge and

re-hire all the terminated staff. However, any sale will take time to conclude and would face some potential obstacles, not least that the potential buyer field would be relatively small given the company’s specialised nature.

Several sources suggested the likeliest purchaser would be a European drug maker who wanted to manufacture product for export into the US using the duty and quota-free concessions provided by the Caribbean Basin Initiative (CBI) and Caribbean Basin Economic Recovery Act.

However, knowing the the vendors are in a position of weakness, buyers will likely try to submit

low-ball price offers so reaching agreement on a sales figure could be difficult and take some time.

PharmaChem, which was founded by Italian entrepreneur, Pietro Stefanutti, supplied antiretroviral API drugs (tenofovir disoproxil fumarate) for Gilead, which employed them in the worldwide treatment of HIV/AIDS. This product helped treat one million persons worldwide, and the new plant was intended to give it the capability to produce an additional two to three drugs.

“We manufacture the single API for Gilead, the anti-retro viral drug for HIV/AIDS. We are looking for a sustainable

future by diversifying our product line, and the new facility will be a multi-product facility so we can handle two or three products at the same time,” said PharmaChem chief executive, Randy Thompson, in 2018.

“The best-kept secret in The Bahamas - right here we actually produce material that treats more than one million HIV/ AIDS patients around the world. Gilead is committed to offering product at a discount price at cost to various countries. Like Gilead, we at PharmaChem believes it is our responsibility to extend medicine beyond developed countries around the world.”