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The new multi-year contract runs to the end of 2013. It includesapproximately two years of manufacturing site transfer and process validationactivities followed by five years of commercial production, which is scheduledto begin in 2009. Commercial production is expected to generate incrementalrevenues in excess of US$120 million over the five year period of 2009 through2013. The transfer of equipment and production technologies, which is inprogress, is expected to generate additional cumulative revenues during 2007and 2008 of approximately US$6 to US$8 million. The contract also contemplatesoptional extensions beyond 2013.
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"The signing of this contract is a reflection of the solid business modelat DRAXIS," said Dr. Martin Barkin, President and CEO of DRAXIS Health. "Weare honoured to have been selected from more than 80 international contractmanufacturers under a rigorous and comprehensive global selection processconducted over an extended multi-year period."
Dr. Barkin added, "This contract includes prescription andnon-prescription products and will significantly improve capacity utilizationin the semi-solids section of our non-sterile operations. The confidence shownin DRAXIS demonstrates our ability to deliver top quality, market leadingproducts in a highly regulated industry, which supports our efforts to buildshareholder value."
Manufacturing Site Transfer Activities
The process of transferring these products to DRAXIS Pharma and validatingmanufacturing procedures for each new product was initiated in late 2006 andwill continue through 2007 and 2008. Improvements to the existing semi-solidmanufacturing facilities were undertaken during the recent regular shutdown ofoperations for preventative maintenance during June and July of 2007. Somecompounding rooms were enlarged and supplied with required services toaccommodate new equipment and additional floor space was created through theconstruction of a new mezzanine within the existing DRAXIS facility. Capitalcosts for facility improvements and new equipment specific to this contractwill be recovered through a financing agreement.
Commercial production of the products is scheduled to start as soon aslate 2008 and ramp up to achieve near full utilization of existing capacityfor non-sterile semi-solid products by mid-2009. The contract will result inthe creation of approximately 80 to 100 new positions at DRAXIS operations inthe Montreal area.
Additional DRAXIS Facility
With the signing of this contract, a second DRAXIS facility in theMontreal area will be required in order to meet increased logistics andsecondary packaging activities. This is due to the large number and wide rangeof finished product formats represented by this new business. All productswill be formulated and filled in the existing facility in Kirkland, Quebec.The new secondary facility will be used for operations such as labeling,assembling different product configurations for different markets, cartoning,shipping etc.
This new facility is expected to open during the summer of 2008 and willinitially be staffed with approximately 50 DRAXIS employees. This secondfacility marks the first expansion by DRAXIS Health beyond its existing247,000 square-foot, FDA-approved production facility in Kirkland.
Conference Call
DRAXIS will hold a conference call to discuss this announcement
