Xoma has burned through a lot of shareholder cash over 30 years in business—$916 million at last count. Now that the venerable Berkeley, CA-based biotech (NASDAQ: XOMA) has come under pressure to shed employees and assets, it’s created new opportunity for a contract manufacturer to swoop in.
CMC Biologics, the contract biotech drugmaker in Copenhagen, Denmark and Bothell, WA, is announcing today it has acquired Xoma’s large-scale biotech drug manufacturing operations in Berkeley. Terms of the deal aren’t being disclosed, but Xoma said back in January that it would begin leaning more heavily on contract manufacturers in hopes of saving $13 million that would have been required to build and maintain its own facilities for clinical trials and commercial production. The Berkeley, CA facility has about 31,000 square feet of space, and three 2,750 liter bioreactors that can be configured to produce small and medium sized batches of biotech drugs, according to Stacie Byars, CMC’s senior manager of global marketing.
The transfer of brick-and-mortar assets from biotech companies to contract firms is part of a long-term trend, as biotechs are under pressure from investors to outsource key functions to hold down costs in an effort to boost returns. CMC, made its first big U.S. foray in 2007 by acquiring a contract biotech drugmaking facility from Icos. That facility is currently operating at maximum capacity with a team of about 225 people making biotech drugs, Byars says. The new Bay Area facility will essentially double CMC’s U.S. capacity, enable it to more quickly serve customers in its backlog, and be close to a deep pool of potential new customers in the San Francisco Bay Area biotech cluster.
“It’s really good for us to be in the Bay Area,” Byars says. “It’s one of the largest biotech hubs there is, and there are a lot of companies being born there.”
Many of these companies will need contract help to scale up manufacturing of their molecules at some point. Because handing off the technical process requires close collaboration, it’s a strategic advantage to have a manufacturing plant in the Bay Area, near so many biotech companies, Byars says. CMC expects to be in position to start making batches of biotech drugs in the former Xoma facility in early 2013, Byars says.