Compounding pharmacies and pharma companies are more likely than dedicated contract manufacturing organisations (CMOs) to have been approved for the largest loans—between $5M and $10M—from the US government’s Paycheck Protection Program (PPP), according to a GlobalData analysis of data released by the Small Business Administration (SBA). PPP loans are intended to help small businesses to continue to pay staff and expenses during the Covid-19 pandemic.

Compounders made up 20% of the pharma contract service providers authorised for $5M-$10M loans, despite accounting for only 8% of pharma contract service providers in the US, the GlobalData Pharma Intelligence Center Contract Service Provider database shows. Similarly, pharma companies operating as excess capacity CMOs accounted for 40% of authorised $5M-$10M loans to service providers, although they make up only 17% of US service providers. Meanwhile, dedicated CMOs were far underrepresented among high-value PPP loans relative to other pharma contract service providers: they accounted for 40% of authorised $5M-$10M loans, although they make up 74% of US service providers.

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The compounders approved for the largest loans—in the $5–10M range—were LeeSar Inc (Fort Myers, FL, US) and New England Life Care Inc (South Portland, ME, US), a non-profit that also offers nursing services. Loans of this size were also approved for Bioanalytical Systems Inc (Emeryville, CA, US), a contract research organisation (CRO) that offers analytical services and instruments; and the excess capacity pharma companies Mission Pharmacal Company (San Antonio, TX, US) and Tris Pharma Inc (Monmouth Junction, NJ, US). Of these five, only Bioanalytical Systems is publicly owned.

A further 26 service providers were approved for loans in the $2–5M range, 32 were approved for loans in the $1–2M range, and 85 loans were valued at less than $1M. The SBA has stated it will automatically audit loans greater than $2M. The SBA did not reveal recipients of loans valued at less than $150,000, so the true number of PPP loans approved for the pharma industry may be higher.

Table 1: CMOs Approved for $5–10M PPP Loans.

Source: GlobalData, Contract Service Provider Database (accessed 18 August 2020); SBA.gov.                                                                                                              

Notes: Some companies were approved for PPP loans but later declined to take them. Others have returned a portion of the funds.

Companies mentioned in this article were contacted before publication. The companies approved for these loans span small CMOs to large excess capacity pharma companies, such as Unichem Laboratories (Mumbai, India), listed on the National Stock Exchange of India, which markets 140 drugs and has six manufacturing facilities, according to the GlobalData Drugs and Contract Service Provider databases. A spokesperson for the small CMO Ceutical Labs, which took a $350,000–1M loan, told us it used the money for salary relief: “Our clients stopped paying their invoices, due to Covid-19.”

Figure 1: Contract Service Providers Approved for PPP Loans.

Source: GlobalData, Contract Service Provider Database (accessed 18 August 2020); SBA.gov.

The PPP loans, part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, were intended to allow companies to apply for low-interest, private bank loans to cover their payroll, rent, and other designated costs that would be backed by the SBA. The loan will be partially or fully forgiven if the business keeps its current level of staffing and stable wages.

The SBA issued guidance on August 11 to clarify that loans may be forgiven for non-payroll spendings such as mortgage interest, rent, or utility bills. CMOs have larger labour and infrastructure costs, which may be forgivable under PPP rules, than innovator pharma companies, which spend more on ineligible R&D costs.

A total of 95% of CMOs that were approved for PPP loans were private companies. Publicly owned pharma companies and CMOs that were approved for PPP loans are covered in more detail in the September 2020 B/POR article, More Public Pharma and CMOs Took PPP Covid-19 Small Business Loans, Government Data Release Shows, and the May 2020 B/POR article, Eligibility Questions as 49 Publicly Traded Bio/Pharma Companies and CMOs Accept Small Business Covid-19 Relief Loans.