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Cambrex Keeps Focus on Small Molecules
A leaner, but more focused Cambrex (East Rutherford, NJ) following its $460-million sale of its biopharmaceutical and bioproducts business to Lonza (Basel, Switzerland) in 2007, is banking on growth in contract manufacturing of small-molecule active pharmaceutical ingredients (APIs) but with a decidedly valued-added offering. Although contract manufacturing of APIs and intermediates has long been a mainstay of the company, Cambrex is emphasizing value-added services such as drug-delivery technologies and a focus on contract manufacturing of specialized APIs such as high-potency compounds and controlled substances as part of its growth strategy.
A change of leadership
Cambrex is led by Steven Klosk, who became CEO and president of Cambrex in May 2008. Klosk held various senior-level positions with Cambrex beginning in 1992 and was most recently executive vice-president and chief operating officer of Cambrex before assuming the top post last year. He replaced James A. Mack, president and CEO since 1995, who retired in 2008.
Cambrex’s exclusive focus on small molecules follows two important recent decisions: the decision to exit the biologics market and divest its bio business to Lonza in 2007 and a decision not to pursue becoming a specialty pharmaceutical company, something it considered in 2006. That left the company with certain core businesses, its generic API business and custom API manufacturing business, which included capabilities in two niche, but higher valued segments: high-potency APIs and controlled substances.
Refining its strategic focus
In seeking to grow those businesses, Klosk had to devise a strategy to overcome certain market weaknesses, namely industry-wide overcapacity for large-scale manufacturing and increased competition, particularly in generic APIs, from suppliers in India and China.
“To stay competitive, Cambrex must differentiate its offering to provide value to customers while avoiding direct competition with low-cost international API suppliers,” says Klosk. A case in point is the market for controlled substances. “The market is less competitive because of the high level of regulation from such agencies as the US Drug Enforcement Agency and the US Food and Drug Administration and is not subject to Asian competition.” Cambrex’s controlled-substances business has approximately 10 products, and had revenues of roughly $15 million for 2007.
In its generic API business, Klosk also emphasizes the company’s selection of products. “Our focus is typically not on blockbuster APIs, but on niche products where the competition is reduced.”
Cambrex is also offering valued-added services in drug delivery to differentiate its position in the generic API market, and taking its generic API business beyond its exclusive focus on API manufacturing. “We see terrific growth potential in such areas as enhanced forms of generic APIs with improved delivery characteristics,” says Klosk. Cambrex has a technology position in several areas, including transdermal, thin-film, transmucosal, polymeric drug delivery, and taste-masking.
In 2007, the company had roughly $15+ million in revenues from its drug-delivery business through five over-the-counter products, a good start from a business that that was just formed three to four years ago. To support the business, Cambrex added new formulation-development laboratories at its facility in Charles City, Iowa, in 2008. It is currently working on 12+ APIs in its formulation facilities.
Cambrex is also seeking to differentiate itself by investing in high-potency API manufacturing. Klosk says the company has had capabilities in manufacturing high-potency APIs since 1999 and can manufacture product from laboratory to commercial scale. In 2008, Cambrex added a new 11,500-ft2 facility with five process development/kilo laboratory production suites for high-potency APIs as well as enhanced facilities for analytical development and quality-control activities. It also expanded its high-potency micronization facility in Charles City. It now offers small-scale to commercial-scale micronization for high-potency APIs.
Other investments in small molecules
Cambrex made other investments in its small-molecule API business in 2008. It invested roughly €20 million ($26 million) to increase the capacity of its API finishing facility in Milan by 20–30%. The expansion was completed in 2008 and is now operational. The company also invested $20 million for setting up a mid-scale API facility in Karlskoga, Sweden. The facility is scheduled to become operational in the first quarter of 2009.
Cambrex also added to its small-scale development capabilities through the acquisition of Prosyntest (Tallinn, Estonia), now called Cambrex Tallinn. ProSyntest was formed in 1990 as a spin-off from the Tallinn University of Technology. “This acquisition provides additional manpower to work on proprietary products and early-stage development molecules, including route selection and chemical process-development capabilities,” explains Klosk. With the acquisition, Cambrex gained laboratories and a pilot-plant facility. Cambrex had worked with the Estonian facility for roughly 15 years and was familiar with the company’s capabilities, says Klosk. The facility is located near Cambrex’s Karlskoga’s facility.
Cambrex’s selection of a contract manufacturer in Eastern Europe fits into the company’s plans and also represented a decision, for now, not to seek acquisitions in Asia. “At this time, we have no plans to build facilities in those markets, but we are always alert to market trends in both of these areas and have made numerous exploratory trips to scout opportunities.”
On an industry basis, Klosk remains bullish on the market for custom manufacturing of APIs. “In terms of the short-term and long-term outlook for custom manufacturing, we see the market growing at 5-7% per year with the primary reasons for growth being the continued consolidation of Big Pharma facilities and their continued reliance on the outsourcing of manufacturing and the growth of small pharma and biotech companies that must outsource their new compounds.”