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Layoffs at The Tech Group

January 25, 2008

3 Min Read
Layoffs at The Tech Group

West Pharmaceutical has started its restructuring of The Tech Group, the Scottsdale, AZ-based contract plastics manufacturer it purchased several years ago. The initial announcement concerning the restructuring was made Dec. 12. A total of 250 employees, 13% of Tech’s workforce, were laid off, and there was also a consolidation of facilities, including closing a moldmaking plant in Erie, PA and shifting that work to Tech Group’s Scottsdale CEC location.

The restructuring plan addresses the recent reduction in business primarily related to Pfizer’s abandoning the Exubera Powder Insulin Inhalation product due to a variety of problems, including a lack of acceptance by the market, according to some business reports. In a press release from Pfizer dated Nov. 13, 2007, the company announced it had reached an agreement with Nektar Therapeutics “resolving outstanding contractual issues” between the two companies with regard to the Exubera product and Nektar’s “innovative Next Generation Inhaled Insulin (NGI) product currently in Phase 1 clinical development.”

Under terms of this agreement between Pfizer and Nektar, Nektar will receive a one-time payment of $135 million from Pfizer in satisfaction of all remaining obligations under existing agreements relating to Exubera and NGI. It also states that if Nektar finds a new partner, Pfizer has agreed “to transfer its remaining rights and all economic benefits for Exubera and NGI.”

The transfer of Pfizer’s interests would include the transfer of the Exubera New Drug Application and Investigational New Drug Applications and all ex-U.S. regulatory filings and applications, continuation of ongoing Exubera clinical trials, and certain supply chain transition activities.

A spokesman for West, Mike Anderson, said that “to some extent things haven’t been concluded yet but at this point only so much can be said,” adding that the Exubera facility on Rockford Drive in Tempe, AZ, is still open pending the outcome of decisions regarding existing business there, which isn’t known yet. “What Nektar’s going to do with the Exubera product we don’t know yet, but we don’t expect to produce much [out of the Rockford Drive facility] this year,” he said. “Our preference would be, in the event Exubera is going nowhere, that we’d find good use for that facility with another customer, but we don’t know what that will be at the moment. That will unfold as Nektar’s plans for that product are determined.”

Other facilities remain intact with continuing operations in Guadalajara, Mexico and Grand Rapids, MI. “What we have in Mexico we’re committed to stay with and in Grand Rapids we’re achieving our goals for transferring work from the old facility there and taking on some new business.

A press release from West noted that “The Tech Group continues to have a very strong market presence and the restructuring aligns the plant capacity and workforce with the current business outlook and longer-term strategy of focusing the business on proprietary products.”

West said it will incur $12 million in restructuring charges including an estimated $2.5 million or $0.05 per diluted share in 2007 and an estimated $9.5 million or $0.19 per diluted share in 2008. These charges include severance costs and fixed asset write downs.—[email protected]

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