Following a company-wide review, Patheon will launch a new corporate strategy, exiting clinical packaging and semisolid manufacturing, optimizing the CMO network, and focusing on development services. In a press statement, Patheon’s chief executive officer, James Mullen, said, “We will create the premier, customer-focused, contract pharmaceutical development and manufacturing organization in the world. This should enable attractive earnings and cash flow to reinvest in the business and grow over the long-term.”

As part of the initiative, Patheon will look for a buyer for its Swindon, UK commercial operations. During the quarterly earnings conference call in which the new strategy was unveiled, Mr. Mullen, noted that the company had received interest in Swindon’s cephalosporins business. He noted that the site’s sterile fill operations could be better conducted at one of Patheon’s two sites in Italy, and that the site’s development services business will be retained.

The company also plans to consolidate QC operations at its Burlington, Ontario site into its Toronto site, but has not fielded any offers for a sell-off or spin-out for the site’s clinical packaging operations. Regarding the decision to exit clinical packaging, Mr. Mullen remarked, “Competitors’ moves in that space have made them larger and larger. We’re not in a position to compete without making a large acquisition, and I don’t believe that’s a good idea in the near term.”

Patheon will focus on expanding its commercial operations through a Centers of Excellence (CoE) transformation. With its remaining network, Patheon plans to operate its sites as six CoEs, with four focused on solids and two on steriles. “We can substantially increase revenues in the network through the facilities we have, even after exiting Swindon,” Mr. Mullen commented.

Mr. Mullen remarked that the market for commodity contract manufacturing officers is stagnant, but rebuffed an analyst’s question about a potential merger or acquisition for Patheon, commenting, “We don’t agree that the CMO market is contracting. I don’t think it’s growing at rapid rate, but I think it’s growing in mid-single-digits.”

The company will also dedicate resources to improving its Pharmaceutical Development Services (PDS) business. In the earnings call, Mr. Mullen noted that nearly 20% of Patheon’s commercial manufacturing business resulted from PDS relationships. He added that PDS revenues were expected to climb, even as R&D budgets shrink overall. Patheon plans to expand PDS into Early Development services, beginning with a new facility in San Francisco that is scheduled to launch in October.

Previously, Patheon had announced plans to move its European HQ from Zug, Switzerland to the UK and to transfer operations from its Caguas, PR facility to Manati, PR. The cost of the new moves was not provided. Eric Evans, Patheon’s chief financial officer, said in the earnings call that the cost of implementation would be “cash-neutral at the beginning, with a one- or two-quarter lag.” Consulting for the review, including operational consultants on the production floor, cost $2.4 million in 3Q11.