PharmAust winds up subsidiary after contract loss

PharmAust has appointed liquidators to wind-up its biotech subsidiary Epichem after it lost its lifeline contract and succumbed to cost pressures. 

Epichem’s parent company PharmAust, one of the state’s biggest suppliers of chemicals for medical purposes, announced it had voluntarily appointed Grant Thornton Australia liquidator’s David Hodgson and Andrew Hewitt to wind-up its subsidiary’s operations.

The decision was made after Epichem’s major contract with the Drugs for Neglected Diseases initiative (DNDi) was not renewed past March and it began operating at a loss.

Epichem was a contract research organisation (CRO) that specialised in medicinal and synthetic chemistry and the supply of specialised materials for the pharmaceutical industry from its lab in the Bentley Technology Park.

In December, PharmAust announced that Epichem had secured its final contract extension and confirmed the end of the 14-year partnership between the two parties, citing program funding changes.

DNDi awarded contract extensions to Epichem on an annual basis valued between $1 million to $1.3 million to provide synthetic and medical chemistry support for its drug development projects.

In today’s announcement, PharmAust said Epichem heavily relied on the pharmaceutical sector that had been significantly impacted by COVID-19 and was experiencing a “significant shift” towards overseas operations.

PharmAust said the trend towards overseas operations could be largely attributed to the cost of running a contract research organisation in Australia.

“Many CRO’s have elected to shift or expand their manufacturing facilities, research and development centres, and clinical trial operations in countries with lower production costs or emerging markets with high growth potential,” AustPharm said.

PharmAust said the shift towards overseas operations had led to a decline in local opportunities for contracts and a reduction in domestic employment opportunities.

“While Epichem has remained operational through these times, the increasing overseas presence raises challenges in terms of securing ongoing contracts when competing against overseas contract research organisations who can operate at a lower cost,” AustPharm said.

“This can be seen through the loss of Epichem’s longstanding contract with DNDi.

“Funding for the research in this sector has dried up in Australia with much of the work being awarded to overseas contract research organisations who can produce similar work for a reduced cost.”

PharmAust said Epichem was unable to secure long term replacement contracts and that it had engaged external advisors to conduct a review of the business.

Following the review, PharmAust determined to cut its funding to Epichem and wind up its operations in a decision it said was made in the best interests of its shareholders.

PharmAust’s shares were trading down 2.47 per cent to 7.9 cents at 10:45AM AWST.