|The Bahamas Investor Magazine
June 23, 2009
June 23, 2009
It has long been accepted that the Bahamian economy is supported by two main pillars of revenue: financial services and tourism. Grand Bahama, however, has been working hard to construct a third: industry. Strong performances by a cluster of companies near the deep-water harbour on the west side of the island have helped bolster the industrial sector, with both the container port and Grand Bahama Shipyard chalking up impressive growth over recent years.
Nestled among these high achievers is a pharmaceutical plant that has undergone a quiet process of evolution since it was built in the 1960s to become one of the key suppliers of active pharmaceutical ingredients (APIs) and registered intermediates in the global fight against HIV/AIDS.
State-of-the-art production plant
Since buying the Freeport plant in 1996, Pietro Stefanutti, president and founder of current operator PharmaChem Technologies (Grand Bahama) Ltd, has invested around $50 million in creating a state-of-the-art plant on the 62-acre site. It currently produces tenofovir disoproxil fumarate—the active ingredient in HIV/AIDS drugs Atripla®, Truvada® and Viread®.
But it was a roundabout route of mergers and acquisitions that brought Stefanutti to these isles—and not once but twice.
In the early 1990s, Stefanutti—an Italian entrepreneur with a corporate background with Exxon and Shell—had acquired a company in Italy that owned a novel patented process to manufacture the API for Naproxen, a non-steroidal anti-inflammatory drug developed by Syntex Corporation and manufactured at the Freeport plant. When the patent on Naproxen expired, Stefanutti’s Italian-based company, Pharmaceutical Fine Chemicals, was in a perfect position to capitalize on the demand for the API as generic producers looked to secure supply. “We were already approved by the FDA [Food and Drug Administration] and the whole generic industry had to find an alternative source for the API,” he says. “We went from annual revenue of around $10 million to $125 million in a very short amount of time.”
Stefanutti looked to expand on this good fortune and bought the Freeport plant from Roche Holdings Ltd, which had bought Syntex in 1994. “The original idea was to modernize the plant to prepare it for FDA approval and as a result of integrating the Freeport plant into Pharmaceutical Fine Chemicals the group became the second largest producer in the world of Naproxen after Syntex/Roche. We wanted to build a flagship company that we could eventually take public.”
Things took a different course when, two years later, Allied Signal called and said it had a strategic interest in the facility. It made a “very generous offer” and Stefanutti sold the plant. However, within two years it looked like Grand Bahama’s sojourn into the pharmaceutical industry was to be put on hold indefinitely when the plant at Freeport got mothballed following a merger between Allied Signal and Honeywell International Inc.
In the meantime, Stefanutti had moved to Monaco and was living the quiet life. “It wasn’t long though before I grew tired of sitting around the house and started looking for something else to do,” he says.
Around this time, the entrepreneur came in contact with Gilead Sciences Inc—a biopharmaceutical company that discovers, develops, manufactures and commercializes therapies for viral diseases, infectious diseases and cancer. Gilead was leading the field with its groundbreaking once-a-day HIV medicines. The success of its FDA approved Truvada® and Viread® pills was so great that the producer could not secure a cost effective supply chain in a timely fashion with the capability to manufacture enough of the API tenofovir disoproxil fumarate (TDF) to meet demand.
By lucky coincidence, the late Andre Cartwright, then executive vice president at the Grand Bahama Port Authority, got in touch with Stefanutti to ask him if there was anything he could do to help resuscitate the Freeport plant and create more jobs. Stefanutti knew the plant had the equipment capable of producing the API needed by Gilead.
Not one to pass up a chance, Stefanutti agreed with the Port Authority on an 80/20 split to repurchase the facility outright from Honeywell and establish PharmaChem. Within six months the plant was up and running, producing its first industrial batch of TDF in January 2004.
Research and development
As awareness of the drug has increased, so has demand, with production at the plant multiplying ten-fold over the last five years. “We currently employ 80 people full time and we have 20-25 contractors who are here full time involved in maintenance, security and so on,” says Randy Thompson, administrator and business service manager at PharmaChem. “Ninety-seven per cent of our employees are Bahamian.”
With an eye on further expansion, in November 2007, PharmaChem was acquired by Groupe Novasep—a world leader in the pharmaceutical industry with global sales of €350 million (US$525 million)—with Stefanutti becoming chairman of the supervisory board. The move is designed to increase the plant’s visibility and open the door into new fields such as research and development and other API manufacture.
“As a matter of priority we have invested to keep up with demand,” says Thompson. “Now we think we are ready to take it to the next level. We have the technical facilities but we do not yet have the staff, which is why we are in the process of assembling an R&D team. But it is a slow process because this is such a specialized industry. We need at least three [people with] PhDs and four or five BA chemists both expat and Bahamian.”
Further investment is then planned to bring the second plant onstream. The pharmaceutical industry, after all, is one sector where investment is constantly justified. No matter how shaky the world economy becomes, people will always need medicines. “As I know from personal experience, as we age we need more medicines,” says Stefanutti. “Our commitment is to contribute and improve the health of the world’s population.”
Along similar lines with the producer’s objectives, Gilead initiated The Gilead Access Program in April 2003 which makes its two trade-marked medicines available to “least developed” countries at a no-profit price. The programme covers 95 countries including all African nations, and was expanded in 2005 to include the majority of the countries in the Caribbean, The Bahamas and low-income countries in Latin America.
The opening of the Freeport facility prompted then Prime Minister of The Bahamas, Perry Christie, to comment that “these are milestones in our region’s fight against HIV/AIDS. Countries in this region are too often overlooked in HIV/AIDS relief efforts. The need for effective drugs to treat HIV/AIDS infection around the world is large and growing, and this new facility in The Bahamas will help combat this need.”
PharmaChem’s continued growth through expansion and strategic acquisition by Novasep, is all good news for Freeport and the Grand Bahama economy. Not only does it provide jobs but it also brings trade to the container port and is actively involved in the local community promoting educational programmes, such as road safety, and awarding scholarships.
“Freeport is on its way back,” concludes Thompson, who although born in Nassau is a diehard Grand Bahama fan. “It’s just beginning to look up. Vopak [oil refinery] has big plans for the future and both the shipyard and container port are doing well. Along with us, the industrial side is extremely strong and we need to get the tourism and leisure side back up to speed. The Port Authority has some good ideas to motivate the sector and it is well on its way to becoming a prime city. But whatever we do, we have to do it well; it has to be long term and it has to be sustainable.”