Merck divests API plant; hands out large contract

The closure of the sale of the facility, located in Riverside, Philadelphia, was announced yesterday by the proud purchaser, PRWT Services. The divestment is the latest in a series of fat trimming exercises being undertaken by Merck since November 2005, when it first announced plans to slash its workforce by 11 per cent (around 7,000 employees), closing five factories and three manufacturing facilities in the process. The cost-cutting measures were designed to save the firm up to $4bn by 2010. Under PRWT's new ownership, the site, which makes antibiotics, has been set up as a new wholly-owned subsidiary and renamed Cherokee Pharmaceuticals, although it will continue to carry out business as usual and retain the 400 existing Merck employees. What has allowed this to happen is the lucrative API supply contract that Cherokee was given by Merck as part of the purchase agreement - currently valid for five years and reportedly worth $100-200m annually. Meanwhile, PRWT said it plans to make "considerable"​ capital investments in the facility in order to facilitate future growth. PRWT's core business is providing "back-office support" services for a variety of industries wishing to outsource these functions. This is the firm's maiden voyage into pharmaceutical waters. Commenting on such a diverse move, Willie Johnson, CEO and chairman of PRWT, said that the acquisition of the Cherokee plant is "consistent with PRWT's vision of growing the company by expanding into new markets, services, and lines of business".​ "By establishing a presence in the Life Sciences market, PRWT can now participate in an industry with tremendous growth potential and establish a strategic supplier relationship with Merck, one of the premier pharmaceutical companies in the world."​