For the past nine years, a northwest Wichita sterile-pharmaceuticals compounder has recorded an annual growth rate of 30 percent.
But now, JCB Labs is looking beyond so-called organic growth to reach a higher rate of sales growth. Officials said a merger or acquisition may be in the offing for the privately held company whose primary business is to produce sterile drugs and solutions for health care providers.
“Possibly in the next 18 months,” said Brian Williamson, JCB Labs’ CEO and a partner in the enterprise. The most logical acquisition would be a similar company located on the East or West Coast, he said.
A month ago JCB relocated its operations to 7335 W. 33rd St. North, moving to an 8,100-square-foot facility that is nearly three times the size of its first building. The company invested $1.5 million in the facility. It also received forgivable loans of $30,000 each from the city and county last year, and a $225,000 grant from the Kansas Bioscience Authority.
A bigger building was necessary in order to keep pace with the firm’s growth, as well as enable it to target new business sectors. It also will allow for a growing workforce. Williamson said the 13-employee company expects to add six more people in the first half of the year.
The jobs at JCB are not insignificant. “Compounding” raw ingredients to make specific drugs and other sterile solutions means employing pharmacists and technicians with four-year degrees in chemistry. The company’s average annual wage is $62,000 a year, said Williamson, who also is a pharmacist.
The drugs JCB compounds are customized, high-risk, sterile medical injections – medicines that can be injected intravenously or into muscle – ophthalmic products, and nasal sprays and irrigations. A lot of the drugs it prepares are in short supply, either because of production or regulatory issues, or because manufacturers deem they are no longer cost-effective to make.
JCB’s clients are ambulatory surgery centers, clinics and doctors. A larger facility allows JCB to pursue even more of that business, and provides JCB the chance to break into chemotherapy drugs.
A bigger ‘clean room’
Included in JCB’s new building is a 2,000-square-foot clean room, where it prepares its sterile drugs and solutions.
The clean room is actually a self-contained unit that was shipped from Michigan to Wichita by truck. It has separate ventilation, and heating and cooling systems that maintain a steady room temperature of 62 degrees and humidity of 45 degrees.
It also has air exchangers that “change” the air inside 30 times an hour. The clean room comprises several rooms, including a negative pressure room.
The negative-pressure room is something JCB did not have at its original facility at 3510 N. Ridge Road. The negative-pressure room will allow it to break into chemotherapeutics, a segment of the market that Williamson said accounts for 24 percent of all drug shortages.
“So we definitely saw an expansion opportunity,” he said. The primary customers for chemotherapeutics are chemotherapy infusion centers.
“It’s not a totally different business model or sales model,” Williamson said, adding that at some point in the future that sector alone could account for 20 percent of JCB’s overall sales.
Besides chemotherapeutics, the larger clean room also gives JCB the chance to manufacture new drugs in clinical trials, Williamson said.
“A lot of big pharmaceutical companies don’t want to shut down a whole line to make 100 doses,” he said. At best that new area of business could contribute an additional 10 percent to JCB’s overall sales, he said.
The biggest boost to the company’s growth so far is signing deals to be the exclusive provider of sterile compound pharmaceuticals with group purchasing organizations (GPOs), which are generally hired by large health provider chains to supply them with their medicines. Williamson said JCB has engaged two consultants – one in Iowa and the other in Atlanta – who are former employees of big pharma company GlaxoSmithKline who have helped the company get the attention of GPOs and gain the business of one.
“That’s exploded our business,” Williamson said. “That’s been a big plus to our sales model.”
Trish Brasted, CEO of Wichita Technology Corp., was one of Williamson’s mentors when he was doing his year-long fellowship in the Pipeline entrepreneurship grooming program last year.
She thinks his company has a lot of potential because it is in a somewhat niche market with few competitors. And in nine years in operation JCB has focused on its core expertise of sterile compounding “and doing it really, really well.”
Joni Cobb, president of Pipeline, said she has a lot of confidence in Williamson and the company’s growth. She said she saw him transform from “a pharmacist running a great business to a skilled business leader who is scaling a scientific company.”
“High growth has high risk associated with it, and Brian and his team are now well positioned to maximize this opportunity,” Cobb said.
Brasted said she sees the company’s biggest challenge coming from maintaining the expertise it has developed while growing at a faster clip. Growth means more employees, she said, and it will be crucial that the employees it adds – especially the clean-room technicians who do a lot of the compounding – have similar knowledge and skill as JCB’s current staff.
Williamson agrees. “That’s going to be the biggest challenge we face.”
That’s why the company is seriously considering a merger or acquisition. While there aren’t many companies that focus only on sterile compounding – Williamson estimates there are two or three nationally – there are a lot more that do both sterile and non-sterile pharmaceutical compounding.
That will help the company get to where Williamson wants it to be, “the preferred sterile compounding provider in the U.S.” with “multiple locations strategically and geographically placed throughout the U.S.”