Aussie opioid manufacturer cashed up following $33m sale of facility

While prescription opioids have been getting a pretty bad rap over the past few years amid revelations in the US about a certain Sackler family, they still have a vital role to play in healthcare where good guys like Palla Pharma (ASX: PAL) have strengthened their balance sheet with the sale of their manufacturing facility in Victoria. 

Selling the facility in Coolaroo, Victoria for $33.1 million will provide Palla with a long cash runway to recover from the impacts endured from the pandemic while the Company will have minimal disruption to their operation having leased it back on friendly terms. 

The cash injection will assist the pharmaceuticals manufacturer which experienced a sharp downturn in demand for its codeine products throughout the pandemic. In response to the rising case of COVID-19, public health systems were put under intense pressure which resulted in the halting of elective surgeries. 

This subsequently resulted in a decline in sales for Palla Pharma which reported $7.05 million in sales for the Half Year ended 30 June 2021 which was a 42% decline on the $12.25m from the previous corresponding period. 

Amid the difficult trading environment for Palla Pharma which has manufacturing operations in Australia and Norway, the Company appointed Giles Moss as its new CEO in September 2021. 

Prior to his arrival at Palla, Moss served as Vice President and General Manager Europe at GW Pharmaceuticals where he was responsible for establishing core international functions and the commercial organisation across Europe. 

Based in the UK, Moss has already signalled his intent to increase Palla Pharma’s European distribution network of their codeine products. This includes fresh applications with Irish and German regulators for Co-Codamol products which Palla is hoping to receive approval for in 2022. 

To support their European growth ambitions, Palla has increased its sales force with elective surgeries resuming, many of which have large backlogs across hospitals that have built up over the past 18 months. The Company reports that initial responses from key customers have been positive. 

New opportunities will also be explored under Moss’ leadership with Palla in a strong regulatory position through their capabilities to hold narcotic licenses, process, manufacture and store controlled substances and move them around the world within highly regulated pharmaceutical markets. 

The Company’s business is anchored by their supply chain where they process poppy straw to extract Narcotic Raw Material that can be used to manufacture morphine, codeine and various other opioids used for pain relief. 

Upon settlement of the property, Palla expects the book gain to be around $21 million with funds used to repay $15m in shareholder loans and strengthen their balance sheet.