Big Pharma company Johnson & Johnson has sold its largest manufacturing plant in India as demand for the company's goods weakens.
The 55.27-acre plant in Penjerla in the southern state of Telangana was completed in 2016. It was meant to produce a variety of consumer health goods, including skin care products, earbuds, electrolyte drinks, oral care products and baby care products.
The Economic Times, an English-language Indian outlet, reported that the plant was never opened. When Johnson & Johnson broke ground on the ambitious manufacturing facility in 2014, it promised to employ 1,500 people, and local dignitaries hailed the initiative and its promise to bring major development to a rural area of Telangana.
Johnson & Johnson has not provided any official reason for leaving its Penjerla plant idle. Sources interviewed by the Economic Times said the company is having difficulty grappling with reduced demand for its consumer health products, especially baby care products.
Sources also claimed that the company has decided to discontinue its toxic talc-based baby powder globally beginning in 2023 following charges of alleged contamination with asbestos, a known carcinogen. This comes more than two years after it ended sales of the product in the United States due to the deluge of consumer safety lawsuits. The company has since promised a transition to selling cornstarch-based baby powder.
All of these controversies impacted the company's image in India and led to a decrease in its revenue, although the company claimed its decline in revenue for the current fiscal year was mostly due to Wuhan coronavirus (COVID-19) pandemic-related disruptions to economic activity.
This diminished trust in the company led the state government of Maharashtra, just north of Telangana, to cancel Johnson & Johnson's manufacturing license for its factory in the city of Mulund in the interest of "public health at large" after talc samples were collected from failed quality checks.
Johnson & Johnson's revenues in India for 2021 to 2022 fiscal year have dropped by 49 percent year-over-year to 29.11 billion rupees ($352.048 million).
Indian pharma company acquires Penjerla factory
The plant was acquired by Hetero Drugs, an Indian pharmaceutical company based in the state of Hyderabad. Financial company PwC acted as the exclusive financial adviser of Hetero Drugs.
The financial details of this sale have not been disclosed, but the deal does include the Penjerla manufacturing facility, together with the land, plant and machinery in a slump sale. While unconfirmed, sources told an Indian news outlet that the facility was sold for 1.3 billion rupees ($15.713 million). Furthermore, Johnson & Johnson has to pay an impairment charge of about 3.1 billion rupees ($37.478 million) for never conducting operations at the site.
Following the announcement of the purchase, Hetero announced that it was investing more than 6 billion rupees ($72.548 million) into upgrading the manufacturing facility to turn it into the company's flagship sterile pharmaceutical and biologics manufacturing unit. (Related: High Court in India puts Bill Gates on notice over doctor's death due to COVID-19 vaccine.)
Hetero further claimed that, once the upgrades are complete, the new flagship factory will generate 2,000 new jobs. These jobs will be in the fields of biochemistry, pharmaceutical sciences, molecular biosciences, engineering and ancillary services.
"We are committed to an investment upwards of $75 million to upgrade and enhance existing facilities at the site and expand manufacturing of our global biologics and sterile pharmaceutical products," claimed Hetero Managing Director Vamsi Krishna Bandi.
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Sources include:
EconomicTimes.IndiaTimes.com 1
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