Teva Pharmaceutical Industries Ltd., Orange County’s second-largest drug maker by employee count, plans to sell off a troubled manufacturing plant in Irvine, a move that raises questions about the company’s long-term plans in the area.
The generic drug maker, which is based in Israel and has U.S. headquarters in Philadelphia, last week announced plans to sell an injectable sterile manufacturing facility that is based at 19 Hughes, a roughly 88,000-square-foot building near the Orange County Great Park.
The company’s injectable-sterile business makes products that enter the body through a needle, syringe or an IV.
The move to sell the facility is a result of “our desire (to) supply more of our products from our more cost-effective locations,” Teva Chief Executive Jeremy Levin told analysts last week.
The company has five other Food and Drug Administration-approved manufacturing sites in the U.S. and abroad, according to Levin.
It’s possible that the buyer of the facility would continue to manufacture for Teva on at least a short-term basis, Levin said.
“Our goal is to sell the Irvine plant to a buyer with a strategic long-term interest in the facility,” Levin told analysts.
The move is part of a companywide initiative by Teva to shed between $1.5 billion and $2 billion in costs over the next four years.
Teva counts a market value of about $33 billion and had annual sales of about $20 billion last year.
The move shouldn’t be seen as a sign that the company is looking to get out of the generic injectable-sterile business in the U.S., which had large operations in Irvine, Chief Financial Officer Eyal Desheh said last week.
“It’s important to clarify that we’re not selling our business,” he said. “What we are doing is looking for a buyer for the facility.”
“All we’re doing at this particular moment is looking for someone to buy the facility, continue to supply (drugs during a) transition period and perhaps longer than that as we continue to develop our business here in the U.S.,” he said.
The building already has “seen much interest from a number of players,” he told analysts last week.
A potential sale price for the building, which is about 30 years old, has not been disclosed.
Teva values the plant at a price much higher than the building’s likely to sell for, based on its financial reports. The company said it expected to take a $98 million impairment as a result of the planned sale of the building, which made headlines in 2009 on a product recall and halt in production. High levels of toxins were found in vials of the drug propofol, a sedative that gained notoriety in the death of Michael Jackson.
Teva’s Irvine site received an FDA warning letter that detailed “significant” manufacturing violations there in late 2009.
It took until early 2011 for production at the plant to resume, reportedly costing Teva some $230 million in sales in 2010 alone.
Teva’s version of propofol wasn’t involved in the Jackson case, but the company said it stopped making the drug because it was difficult to produce and not particularly profitable.
Work Force
The planned sale’s impact on Teva’s local work force has not been disclosed.
The company last year ranked as OC’s second-largest drug maker by employee count, with about 420 workers here at the end of 2011.
Irvine-based Allergan Inc. is the county’s largest drug maker, with nearly 2,600 local employees.
Teva has announced several job cuts to its Irvine operations in recent years, including 65 jobs that were eliminated late last year.
Other Buildings
The 19 Hughes building isn’t the only local property that Teva leases or owns.
The company said in regulatory filings that it had operations spread over 342,000 square feet in eight different sites in the Irvine area as of the end of 2011.
The properties were used for manufacturing, research-and-development laboratories, and warehousing, according to filings with the Securities and Exchange Commission.
Brokerage data show at least 200,000 square feet of that Irvine space being on Hughes Road, a low-rise office park that’s just off Alton Parkway in the Irvine Spectrum area.
It’s not known whether the other buildings on Hughes that are also owned by Teva would be part of the proposed sale.
