Gold­man Sachs jumps aboard Bain-backed 503(b) com­pound­ing phar­ma­cy with a $275M debt loan to sup­ply hos­pi­tals

Long the bane of the FDA’s ex­is­tence, com­pound­ing phar­ma­cies have seen a mi­nor resur­gence in the past year as short-term sav­iors for hos­pi­tal drug short­ages. Now, a 503(b) com­pa­ny spe­cial­iz­ing in hos­pi­tal meds has earned a big backer to keep ex­pand­ing its 200-drug strong port­fo­lio.

Alex Chi

Gold­man Sachs and Owl Rock Cap­i­tal Part­ners have doled out a $275 mil­lion debt loan to Qu­Va Phar­ma, a 503(b)-cer­ti­fied out­sourc­ing fa­cil­i­ty pro­vid­ing com­pound­ed drugs to hos­pi­tals, the com­pa­ny said Thurs­day.

 

The com­pa­ny sports Bain Cap­i­tal as a share­hold­er and will use the pro­ceeds from the loan to ex­pand its net­work of part­nered hos­pi­tals and add new prod­ucts to grow its more than 200-prod­uct port­fo­lio, ac­cord­ing to a state­ment. Mean­while, the com­pa­ny plans to add up to 75,000 square feet of space at its Sug­ar Land, TX site south­west of Hous­ton by 2022, it said.

“We be­lieve Qu­Va of­fers a com­pelling val­ue propo­si­tion to hos­pi­tals in need of a re­li­able, cost-ef­fec­tive sup­ply of es­sen­tial in­jectable med­ica­tion,” said Alex Chi, Gold­man Sachs’ head of pri­vate cred­it in­vest­ing group in the Amer­i­c­as, in a state­ment.

Qu­Va re­cent­ly added 80,000 square feet of floor space in New Jer­sey, bring­ing the com­pa­ny’s to­tal foot­print be­fore the Texas ex­pan­sion to 240,000 square feet. With all the new el­bow room, Qu­Va said it hopes to bring its to­tal work­force to more than 1,000 as well as “im­ple­ment in­no­v­a­tive au­toma­tion ini­tia­tives unique to the in­dus­try” at its sites.

Long a tar­get for FDA reg­u­la­tors over the con­sis­ten­cy of the drugs they pro­duce, com­pound­ing phar­ma­cies have seen a turn of for­tune dur­ing the pan­dem­ic as hos­pi­tal sys­tems have looked for a con­stant sup­ply of drugs. Com­pa­nies in the 503(b) pro­gram have far more over­sight — and ac­cep­tance — than a stan­dard com­pound­ing phar­ma­cy with the FDA re­quir­ing them to sell specif­i­cal­ly to health­care sys­tems for of­fice use.

Back in April 2020, the FDA loos­ened its no­to­ri­ous­ly tight re­stric­tions on the com­pound­ing in­dus­try in the ear­ly days of the pan­dem­ic, al­low­ing hos­pi­tals to source med­i­cines di­rect­ly from those firms. It was an un­prece­dent­ed de­ci­sion the FDA at the time said was tied di­rect­ly to chron­ic short­ages.

Stu­art Hinchen

Those short­ages have high­light­ed the need for a sta­ble sup­ply of cheap med­i­cines, par­tic­u­lar­ly anes­thet­ics used in sur­gi­cal care, and pri­vate in­dus­try has seen enough, ap­par­ent­ly, to jump on board.

“This new fund­ing re­flects the na­tion­al scale Qu­Va has achieved as the in­dus­try leader, and the im­por­tance of the 503B in­dus­try in meet­ing hos­pi­tal’s high qual­i­ty stan­dards and cost ef­fec­tive­ness re­quire­ments,” Stu­art Hinchen, Qu­Va Phar­ma’s co-founder and CEO, said in a state­ment.

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