The Tribune

• Due to GB drug maker’s massive insolvency

• Sole client is the main creditor at $350m-plus

• Gilead hires local receiver to protect interest

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The liquidation of PharmaChem Technologies has been placed under the Supreme Court’s supervision due to the company’s massive insolvency, Tribune Business can reveal.

Justice Camille Darville-Gomez signed an Order dated Monday, March 4, that affirmed Craig A. (Tony) Gomez, the Baker Tilly Gomez accountant and partner, as the official liquidator for the Grand Bahama drug manufacturer that shuttered its plant less than two months ago with the loss of some 120 jobs.

Mr Gomez declined to comment when contacted by this newspaper, adding that he did not discuss his clients’ business in public, but the judge’s Order stipulated: “It is ordered that the liquidation of the company be continued under the supervision of the court.” Mr Gomez, who is also handling CLICO (Bahamas) long-running winding-up, was named in the documents as the liquidator.

Switching PharmaChem Technologies’ winding-up from a voluntary process to one that is overseen by the Supreme Court should not be interpreted as a signal that wrongdoing, or something untoward, was involved in the company’s demise. Rather, it has been motivated by the fact the company has no income, and precious few assets, to repay massive liabilities that total hundreds of millions of dollars.

“It’s under the supervision of the court,” one contact confirmed. “This is a company that has limited resources.” Tribune Business sources, speaking on condition of anonymity, revealed that PharmaChem’s sole client, California-headquartered Gilead Sciences, is by far its largest creditor since it is owed a sum thought to be $350m or higher for financing the Grand Bahama plant’s now-failed expansion bid.

Other creditors, including Bahamian vendors and suppliers, are understood to be due more modest sums totalling several million dollars combined. Included in this group are Grand Bahama Power Company and Grand Bahama Utility Company, whose continued provision of electricity and water, respectively, are vital to preserving hazardous chemicals and materials stored at the site.

And, in a new twist to efforts to resolve PharmaChem’s fate and, ultimately, find a buyer for its plant, Tribune Business understands that Gilead has appointed its own receiver for the Grand Bahama-based manufacturer. It is entitled to do this under the terms of the debenture and other security it took over PharmaChem’s assets in return for financing the plant’s expansion.

This newspaper was informed that a Bahamian accountant has been hired by Gilead to protect its interest in assets secured by the debenture, although their identity could not be determined before press time last night. While the receiver is charged solely with securing Gilead’s interest, Mr Gomez - as the Supreme Court’s official liquidator - has to look out for the interests of all PharmaChem creditors.

Having both a receiver and court-appointed liquidator take over the same distressed Bahamian company and its underlying assets is not new. The same situation occurred with Baha Mar, where the project’s secured lender, the China Export-Import Bank, named Deloitte & Touche as its receivers while Ed Rahming, the Intelisys Bahamas partner, acted as the court-appointed provisional liquidator.

The key to a smooth liquidation/winding-up will be the nature of the instructions that Gilead has given to the receiver, and whether they and Mr Gomez can form a productive working relationship. The process will involve maintaining the PharmaChem plant’s security and integrity, dealing with any remaining chemicals that may pose an environmental and health risk, and keeing creditors happy ahead of a sale.

“They are in the vaults. They are very well sealed. That’s not the issue,” one source, speaking on condition of anonymity, said of the remaining chemicals. “It’s protected. The plant is running in terms of power and water. There’s a security company involved.

“The issue is just to make sure they [the remaining chemicals] get out of Freeport on a timely basis, are safely transported and sold, and any waste is disposed of outside the country.” Ginger Moxey, minister for Grand Bahama, told the House of Assembly on February 2, 2024, that the site is secure and 20 former PharmaChem employees will be hired by Gilead to complete the disposal of any hazardous materials.

“All chemicals are secured in tanks, road tankers and aqueous waste basins. All chemical storage is bonded to contain any spills from going into the groundwater,” she added. “Two former senior personnel make periodic checks of the site. The site was shut down using their usual hurricane shutdown protocol and is secured.”

Vaughn Miller, minister for the environment and natural resources also told the House: “The Department of Environmental Planning and Protection are aware of it. We are in communication with them. We are aware the chemicals are on the property and the chemicals are to be liquidated. That’s in the process, but we will certainly follow up to make certain that everything is on schedule and going as planned.”

Grand Bahama Power Company and Grand Bahama Utility Company, and other critical suppliers, have leverage to ensure any debts owed to them are repaid early as maintaining electricity and water services to the PharmaChem plant is vital to ensuring the continued safe storage of any hazardous chemicals.

How much Gilead will recover of its $350m-and-greater investment is ultimately to be determined by the sale of PharmaChem’s plant to a new buyer. Given that the facility was designed for a specific industrial purpose, interest will likely be confined to pharmaceutical sector players.

Several sources have suggested that interested purchasers will likely emerge from pharmaceutical industries in countries such as Switzerland, Sweden, Belgium and, possibly, China. Freeport’s strategic location just off Florida makes the PharmaChem site attractive for drug manufacturers seeking to export their products to the US under the tariff-free and quota-free access afforded by the Caribbean Basin Initiative (CBI).

Gilead, thanks to its security, heads PharmaChem’s creditors queue. Next comes the Government with any taxes and fees that are due and owing, but the company’s employees - who would normally be next in line - have already received their due severance and other benefits.

The California-based, publicly traded company, previously told Tribune Business that it pulled the plug on the Bahamian drug maker due to cost overruns and its failure to meet production timelines. A spokesperson said PharmaChem struggled to meet deadlines after its $400m plant expansion was completed while the costs involved in making that investment “significantly exceeded our original estimates”.

They revealed: “In 2016, Gilead entered into an agreement with a contract 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.

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 the January 12 closure.

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.

Adrian Hunt, a Graham, Thompson & Company attorney, is Mr Gomez’s legal representative in the liquidation.