Dive Brief:
- Dublin-based Endo Pharmaceuticals announced earlier this week it completed a “comprehensive review of its manufacturing network.”
- This review will lead to the closure of its Huntsville, Alabama facility, to occur over the next year to 18 months.
- Shuttering the manufacturing facility will result in the reduction of 875 jobs at Endo, including 35 positions that were currently unfilled.
Dive Insight:
Endo says it will incur a pre-tax restructuring charge of $325 million, including about $60 million in cash charges and accelerated depreciation of approximately $165 million, as well as intangible asset and property, plant and equipment impairment charges of $90 million.
Overall, the plant closure will result in about $55 million to $65 million in pre-tax cost savings in the fourth quarter of 2018.
The decision to close the Alabama plant was based on the "declining volume of commoditized products," and is meant to Help the company right-size its manufacturing capabilities to meet lower demand.
"today's announced action enables a redeployment of investment from commoditized products to more differentiated capabilities and products that represent our core areas of future growth," said Paul Campanelli, president and CEO of Endo, in a statement.
Endo works in the area of generics manufacturing as well as branded pharmaceuticals.
The manufacturing news comes on the heels of Endo's decision to pull one of its key products from the U.S. market after facing a demand from the Food and Drug Administration. In June, Endo voluntarily pulled its oxymorphone Opana ER from the market, which had come under scrutiny due to the ongoing opioid abuse crisis.
After analysis of post-marketing data, the FDA concluded the drug is highly abused and that people have found ways around the abuse deterrence measures it incorporates, namely moving from nasal administration to injected abuse. The abuse of injectable drugs like Opana has led to a spike in deaths from opioid overdose, and may also be behind outbreaks of hepatitis C due to needle sharing.
The closure of the Alabama facility, however, is more likely due to pressure on the company’s generics business, which has been facing rising pricing pressures.
The company’s base generics business includes all solid and oral pain products. Investors will be watching keenly Aug. 8 when Endo reports second quarter earnings to get a better sense of just how much the business is hurting.