New warehouse addition will free up space in plant for envisioned second production line

New warehouse addition will free up space in plant for envisioned second production line
January 27, 2005
By Linn Parish
Journal Of Business
Hollister-Stier Laboratories LLC, the Spokane pharmaceutical maker, is taking an early first step toward a major manufacturing expansion at its northeast Spokane plant.
Tony Bonanzino, the company?s president and CEO, says Hollister-Stier plans to build this year a $2.2 million warehouse addition at its facility that will free up space elsewhere in the complex for an envisioned second production line. Such a line which would cost roughly $20 million to get up and running.
The company already has been growing of late. It added 40 people last year, giving it 346 employees, and it expects to add another 15 this year, Bonanzino says.
Also, Hollister-Stier has begun using a recently installed, $6 million freeze-dryer suite, which will allow it to grow its contract-manufacturing arm.
?The last year has been remarkable,? Bonanzino says. ?We believe we are in a very strong position to have another outstanding year.?
He declines to disclose revenue figures, but says sales in the company?s contract manufacturing division doubled in 2004, after declining a bit in 2003. The allergy division grew modestly last year, he says.
Bonanzino expects strong growth in the contract-manufacturing division this year, though probably not as dramatic as in 2004. Allergy work will grow modestly again, he says.
The contract-manufacturing work, which the company geared up about four years ago and involves making pharmaceuticals for other companies, accounts for about 55 percent of the company?s overall sales volume, with allergy products making up the other 45 percent.
Warehouse addition
Earlier this month, Hollister-Stier?s board gave the green light to the planned 10,000-square-foot warehouse addition to the north end of the company?s 120,000-square-foot plant, which is located at 3525 N. Regal.
The planned new warehouse space will have 30-foot-high ceilings and temperature controls that will keep it constantly between 59 degrees and 86 degrees Fahrenheit inside.
Construction crews likely will break ground on the expansion in March, and the facility will take about six months to complete, Bonanzino says. Once completed, it likely will take about three months to obtain U.S. Food and Drug Administration approval to use the facility to store pharmaceuticals, he says.
While the floor space for the manufacturing expansion likely will be available by year-end, the company doesn?t know yet when it will proceed with work on a second production line.
Its current production line is running at about 50 percent capacity, Bonanzino says. An additional production line, however, takes about three years to build, obtain FDA approval for, and make operational. Consequently, Hollister-Stier is trying to project when it will need the additional capacity.
?You need to have a lot of faith that you can fill that line,? Bonanzino says.
Hollister-Stier has the capacity to fill 30 million to 50 million vials a year?depending on vial size. In 2004, it used roughly half of that capacity, filling just over 20 million vials.
With a new production line, the company would be able to fill 60 million to 100 million vials a year. A new line would have all the functions of the existing line, including labeling and packaging in addition to vial filling.
Hollister-Stier would finance such an expansion either by securing additional capital from its current equity partner, Windward Capital Partners, of New York, or by borrowing through an established banking relationship, Bonanzino says. It wouldn?t be looking for an additional equity partner, he says. Return on investment with an additional production line likely would take two years to realize after completion, Bonanzino says.
?You need a strong stomach in this industry, or a lot of Tums,? he says.
Meanwhile, Hollister-Stier has begun producing its first revenue-generating batches on its new freeze-drying line, formally called a lyophilization suite.
With this technology, the company moves a sterile liquid product into the freeze dryer and converts the liquid into a powdery substance, Bonanzino says. Often, he says, it ends up as a dried cake.
A number of products, such as some vaccines and some cardiovascular drugs, are freeze-dried because they are more stable?and less likely to degenerate.
?In terms of the pharmaceutical industry, lyophilization is at the top tier in terms of technological complexity,? he says.
For this year, Hollister-Stier has secured enough business so far to operate the freeze-dryer suite at 50 percent capacity, Bonanzino says. Pending the outcome of trials for some clients, the company could have it fully booked through September.
The freeze-drying suite was constructed so that it can accommodate a second lyophilization line. The company will consider adding the second piece of equipment once the first one is operating at full capacity. Doing so would cost about $3.5 million.
Hollister-Stier makes allergy products, in addition to the contract manufacturing it handles for a host of other pharmaceutical companies. The company?s facility is licensed and inspected by the FDA for both pharmaceutical and biological products.
The company started in 1999 when a group of managers bought the facility from Bayer Corp.Under various owners, the plant has operated in Spokane since 1921.