The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A six-month construction delay has forced Pharmachem Technologies to lay-off 23 staff, with possibly more to follow, in what was yesterday described as a “major blow” for Freeport’s economy.

Tribune Business understands that the Grand Bahama pharmaceutical drugs manufacturer has moved to minimise the negative financial impact from the six-month gap between when its new $180m facility comes online and the planned closure of its existing plant.

Pharmachem had been planning for both events to occur simultaneously by year-end 2019, but slippage associated with the construction schedule for the new plant has pushed its physical completion back six months.

While this may be achieved by year-end, a further four to six months will be required to commission the new facility as its production processes will have to undergo testing, verification and certification.

This means Pharmachem will not be in position to start production from the new plant until some point in the 2020 second quarter - a timeline that takes it into the period from April to June. Yet its current plant will cease production by year-end 2019 in accordance with the company’s timetable.

The end result is that Pharmachem faces a potential six-month window in the 2020 first half when it may not be producing or selling any product. With no sales revenue or income coming in, the lay-offs announced last week are an effort by the company to lower its expenses ahead of time and minimise any financial fall-out from the non-production.

While other media houses reported that there have been 40 lay-offs, Tribune Business understands that the actual number was 23 - almost half this amount.

The total could rise to 40 via a potential “second tranche” of lay-offs depending on whether construction progress speeds up, with the first wave understood to include both full-time employees and persons on short-to-medium term contracts. The majority of those laid off are Bahamian, with some expatriates also included, and Pharmachem is due to issue a statement on the matter today.

K P Turnquest, deputy prime minister, told Tribune Business the drug manufacturer’s move represented “a significant blow” for Freeport’s still-struggling economy particularly given that it had provided “a consistent and strong base of employment” throughout the 15-year downturn.

“Obviously that’s a significant blow,” he said, “the number of persons that were laid-off. We understand the reasoning, and we hope they’ll be able to resolve their issues and get those people back to work as soon as possible.

“The success of Pharmachem has been a shining light for us. They have withstood all the clouds in the environment, both natural and man-made, and have been a consistent and steady base of employment and economic activity in Grand Bahama.

“Anything that delays and retards their progress is of concern to us, and we will be doing everything we can to ensure their success. As we understand it, the expansion will facilitate them to diversify their product and continue their growth,” Mr Turnquest added.

“From that perspective, what that translates into in terms of employment and economic activity is significant, and will ultimately be of tremendous benefit to Grand Bahama and the country as a whole. Pharmachem offers different career paths for scientists and researchers, so we hope they get the new plant up and running as soon as possible and continue to grow.”

Mr Turnquest confirmed the 23 lay-offs figure, and denied suggestions that Pharmachem’s actions may have stemmed from a loss of business or any failure by the Government and Grand Bahama Port Authority (GBPA) to issue the necessary permits/approvals to allow it to complete its expansion.

He declined to specify the “reasoning” for Pharmachem’s actions, saying he wanted that to come from the company itself. Tribune Business understands that the lay-offs will trim Pharmachem’s workforce to just over 100 persons.

The construction manager for the new plant is understood to be a Pennsylvania-based engineering firm, IPB, given the highly-specialised nature of the work. The main contractor is thought to be Freeport-based Quality Services Ltd, with multiple sub-contractors - both Bahamian and foreign - working under it.

The opposition Progressive Liberal Party (PLP) on Friday seized on reports of the lay-offs to slam the Government’s economic policies, and suggest that no turnaround is imminent for Freeport, but Tribune Business’s research suggests the situation has been driven more by company-specific issues.

Fred Mitchell, the PLP’s chairman, said in a statement: “The PLP is saddened by the news that 40 or more persons have been laid off from Pharmachem in Freeport. This is yet another gut punch for the city and the island of Grand Bahama.

“We want to know: Was the government aware of this in advance? Does the government know why? What relief is there for these people now dismissed?

“This action today by Pharmachem seems to give the lie to any of the propaganda points about a turnaround in this city. We again say that the Government of the FNM, with five MPs for Grand Bahama and three ministers from Grand Bahama, should put money on the ground in Grand Bahama.”

Pharmachem’s expansion project was last year said to have increased in value by $60m, rising from an initial estimate of a $120m investment to $180m. The company had also initially forecast an injection of some $47m into the Freeport economy, but in March 2018 projected this would increase to more than $100m, with some $18m already spent locally.

PharmaChem, which was founded by Italian entrepreneuer, Pietro Stefanutti, supplies antiretroviral API drugs (tenofovir disoproxil fumarate) for Gilead, which employs them in the worldwide treatment of HIV/AIDS.

The Grand Bahama-based company’s product helps treat one million persons, and the new plant is intended to give it the capability to produce an additional two to three drugs.