MUSC sells PDC startup for $5.8M

Charleston Post and Courier
August 1, 2001

Believing that the company could grow much faster as part of a private corporation, the Medical University of South Carolina and its affiliates have sold the Pharmaceutical Development Center to a Wilmington, N.C., drug development firm.

According to university officials, aaiPharma Inc. agreed to purchase the PDC for $5.8 million. In addition, the university would get 4 percent of all revenues over $8 million the PDC makes in each of the next five years.

Meanwhile, the university’s Health Sciences Foundation will purchase the recently completed 48,000-square-foot manufacturing facility on Faber Place Drive, which the PDC leased, from an ownership group for $9.85 million.

The foundation will lease the facility back to aaiPharma, which could purchase it after a year, officials said.

Jon Gavigan, a spokesman for aaiPharma, said none of the PDC’s 40-plus employees will be laid off as a result of the purchase.

Dr. Ray Greenberg, MUSC’s president, said the move brings a major international pharmaceutical firm to Charleston.

“The short version is that the PDC, while it’s been around for a while, is in essence a small startup company,” Greenberg said. “It required a lot of investment to get it going. But you need more capital than the Health Sciences Foundation and other affiliates at the university could provide.

“It’s very hard to compete against others in the industry that have more access to capital.”

Greenberg said the sale should help the center grow. In addition, he said university students would get new training opportunities within the industry as a result of the deal. aaiPharma and MUSC reached an affiliation agreement in addition to the sale.

Formerly Applied Analytical Industries Inc., aaiPharma is a specialty pharmaceutical company with drug development capabilities in the United States, Asia and Europe.

The firm has more than 1,100 employees and last year the company took in more than $104.2 million in total revenue. It is traded on the Nasdaq stock exchange. On Wednesday its stock closed up more than 2 percent at $21.10.

MUSC, University Medical Associates and the Health Sciences Foundation owned the PDC, which contracts with drug companies to manufacture pharmaceuticals for clinical trials.

The university launched the firm in 1979 as an educational tool to give pharmacy students some industry experience. The center grew in the 1990s as more drug companies contracted with outside firms for pharmaceutical development and production.

That growth led to the construction of the manufacturing facility that was key to the deal for aaiPharma.

Acquiring the Development Center gives aaiPharma expanded overall manufacturing capability but, more specifically, the company gets the production capabilities it previously lacked.

That will allow the company to manufacture some critical care products it acquired only a week ago that require sterile facilities.

AAI International, aaiPharma’s contract business unit, will manage the local operation.

In a news release, officials said the Charleston facility will complement what AAI International already has. “With PDC, AAI International now has the ability to manufacture just about every type of dosage form,” said David Johnston, president and COO of AAI International.

The Medical University is banking on some fast success because its deal has the potential to bring millions more dollars beyond the base $5.8 million.

Greenberg said the deal gives the university a set amount for the sale of the PDC, and protects it in case the value of the center increases substantially after the sale.

The PDC has not yet brought in close to $8 million in revenue – it’s expected to have finished its most recent fiscal year with $4.6 million, said Thomas P. Anderson, CEO of the Health Sciences Foundation.

Yet that number has been growing and has the potential to be much bigger – in 1998 officials said they hoped the PDC would make $50 million by 2008.

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