The contract manufacturer, whose Tech Group division was jointly responsible along with the UK's Consort Medical for manufacturing the inhaled insulin device, said it will now be reimbursed for facility, inventory, raw materials and personnel costs "at levels that are consistent with the company's previously announced expectations".
No monetary amounts were disclosed, although West confirmed that it will incur an impairment charge of $12.9m in the fourth quarter of 2007 because of its investment in the Nektar contract, in line with its previously disclosed estimate of between $11.0m and $13.1m.
Meanwhile, in order to assure Nektar of a reliable source of supply as it resolves its plans for the Exubera product, West also said it has agreed to maintain the facility for a further period of between two and ten months.
In November, Nektar's Exubera commercialisation partner Pfizer agreed to pay Nektar $135m in compensation for unexpectedly pulling the Exubera device from the market due to poor sales. It also agreed to hand over its commercial interest and regulatory filings for the product. Nektar still has faith in the product's ability to sell and is seeking a new partner for the troubled device.
The repercussions of Pfizer's dramatic Exubera exit from the market have been gradually filtering through to West, with the company preparing to restructure its affected Tech Group contract manufacturing unit.
The Tech Group's investment in Exubera went beyond that of simply a contract manufacturer - together, Nektar and the firm custom built a plant dedicated to the Exubera device. Once the product got the green light from the Food and Drug Administration (FDA) in mid 2006, the Tech Group hired and trained over 100 new staff dedicated to making the Exubera device and added extra shifts.
Unfortunately, what started out as a potentially very lucrative deal for the firm has ended up as a bitter disappointment. A plant closure and job cuts are on the way for the wounded Tech Group, to be completed by the end of 2008, with an expected saving of $3m that year and annual operating savings of $7m thereafter.
Specifically, the company will consolidate two of its tool production operations into one facility, in Scottsdale, Arizona, and by reductions and consolidations at its other production, engineering and administrative operations in North America. 250 positions - 13 per cent of the current workforce - will be axed. Incidentally this is believed to be 50 more positions than are currently being filled by workers dedicated to the Exubera contract.
As part of this action, the company is also preparing to take a $12m hit in restructuring charges - roughly $2.5m of this was written down last year and an estimated $9.5m will be recognised in 2008.
