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.
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.
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.