New Faces at CPhI

October 4, 2007

Restructuring among contract manufacturing organizations and suppliers of pharmaceutical ingredients this year is bringing a new group of faces to CPhI Worldwide this year.

Milan, Italy (Oct. 4)-Restructuring among contract manufacturing organizations and suppliers of pharmaceutical ingredients is bringing a new group of faces to CPhI Worldwide this year.

Degussa becomes Evonik Industries
One of the more notable moves of 2007 is the new identity for the German chemical company, Degussa AG (Duesseldorf, Germany), which unveiled itself as part of the chemical business of Evonik IndustriesAG (Essen, Germany) in mid-September. Evonik is the new name adopted for the industrial group of  Degussa’s parent company RAG, the German conglomerate, whose portfolio includes chemicals, energy, and real estate. The industrial group, which includes its chemicals business, will operate under the name Evonik Industries, and the German coal-mining operations will be known as RAG, and will not be connected with Evonik. In fiscal 2006, Evonik Industries generated sales of  EUR14.8 billion ($20 billion) and operating profit of roughly EUR 1.2 billion ($1.6 billion). Evonik plans to enter the capital market in the first half of 2008.

Werner Mueller is the CEO of Evonik Industries AG, and the company has set an ambitious growth strategy. These goals include minimum returns before taxes of 16% in its chemical business. The company hopes in part to achieve those financial goals through innovation. Today, the chemicals business generates 20% of its revenues from products that are less than five years old. For the pharmaceutical market, Evonik supplies ingredients for formulation and services such as custom synthesis for active pharmaceutical ingredients and intermediates.

Cardinal Health’s PTS business reborn as Catalent
Another key move in the pharmaceutical outsourcing market in 2007 was the formation of Catalent Pharma Solutions (Somerset, NJ), the former Pharmaceutical Technologies and Services (PTS) business of Cardinal Health (Dublin, Ohio). The Blackstone Group completed its $3.3-billion acquisition of the PTS business from Cardinal Health in April 2007 and launched the new operating company, Catalent, in June 2007. Catalent employs approximately 10,000 at more than 30 facilities worldwide and generates more than $1.7 billion in annual revenues, according to company information. 

PPG, Isochem, Evotec exit fine chemicals
These high-profile deals in the pharmaceutical outsourcing market were also met by mid-sized restructuring activity. In September, PPG Industries (Pittsburgh, PA) agreed to sell its fine-chemicals operation for $65 million to ZaCh Systems (Milan, Italy) the fine- chemicals subsidiary of the Italian pharmaceuticals firm, Zambon (Vicenza, Italy). The sale includes PPG’s fine-chemicals facilities in LaPorte, Texas and Avrille, France. PPG will continue to operate a phosgene-derivatives plant in LaPorte. The sale is expected to be completed in the fourth quarter. The sale of its fine-chemicals business is part of a larger strategy by PPG to focus is portfolio in coatings and specialty products and services. In September, PPG also announced plans to sell its automotive glass business for $500 million to the private equity firm Platinum Equity.

In another sale to a private equity group, Group SNPE (Paris) sold its American subsidiary Isochem, Inc. (Lockport, NY) to Buckingham Capital Partners II, LP in June. Isochem manufactures phosogene derivatives used as intermediates for the fine-chemicals market. The company will be renamed VanDeMark Chemical Inc.

Last month, Evotec AG (Hamburg, Germany and Oxford, UK) sold its chemical-development business to the contract drug-development services company Aptuit (Greenwich, CT) for EUR 46.4 million ($63.9 million). Evotec’s chemical-development business consists of capabilities in pharmaceutical process research and development, custom preparation, analytical development, pilot-plant manufacturing, and formulation. The business employs approximately 210 people based in Oxford and Glasgow, United Kingdom. Aptuit intends to retain all of the employees of the chemical development business.

For Evotec, the deal is part of an overall strategy to focus on drug discovery and research. The company will continue to enter into collaborative research partnerships using its drug discovery technologies and platforms, including high-throughput screening, fragment-based drug discovery, and medicinal chemistry expertise. In addition, Evotec will continue to build its pipeline of central nervous systems drugs for which it will seek to partner with other pharmaceutical companies. As part of its focus on drug research, last month, Evotec agreed to acquire the biopharmaceutical company Renovis (South San Francisco, CA) for approximately $151.8 million. 

Aptuit continues growth by acquisition
For Aptuit, the acquisition of Evotec’s chemical development business is the latest in a series of acquisitions to build its portfolio in drug-development services. In June, Aptuit formed a new entity, Aptuit Laurus (Hyderabad, India), which the company formed through a phased acquisition with Laurus Labs Limited (Hyderabad). That deal positions Aptuit in the growing market for pharmaceutical outsourcing in India. Since its founding as Global Pharmaceutical Development in 2004, Aptuit has built its business largely through acquisitions with each deal positioning the company in a given aspect of the drug-development continuum. Since 2005, the company completed other key acquisitions: SSCI and EaglePicher Pharmaceutical Services in 2007; Pharma Consulting and InfoPro Solutions in 2006; and Almedica International and the early-development and packaging business of Quintiles Transnational in 2005.

SF-Chem, CABB unite
Earlier this year, the custom manufacturer SF-Chem (Pratteln, Switzerland) was acquired by the German specialty chemicals group CABB GmbH (Sulzbach am Taunus, Germany). SF-Chem and CABB manufacture and market sulfur and chlorine compounds, which include pharmaceutical intermediates. The combined company will have annual revenues of approximately CHF 400 million ($330 million).

Codexis and Novozymes enhance positions in biocatalysis
In 2007, two leading companies in biocatalysis, Codexis (Redwood City, CA) and Novozymes (Bagsvaerd, Denmark) enhanced their positions through acquisitions. In July, Codexis acquired BioCatalytics (Pasadena, CA), a private company producing custom and off-the-shelf enzymes used in chemical process manufacturing by pharmaceutical and fine-chemical companies. Also, in July, Novozymes agreed to acquire Biocon’s (Bangalore, India) enzyme business for about DKK 551 million ($102 million). Biocon is an Indian biotechnology company specializing in biopharmaceuticals, contract research, clinical research, and enzymes.

Cambrex restructures, Lonza builds portfolio in biologics
Another noteworthy deal in 2007 was the sale of Cambrex’s (East Rutherford, NJ) bioproducts and biopharmaceutical business to Lonza (Basel, Switzerland) for $460 million. Following the close of the deal earlier this year, Lonza named Hopkinton, Massachusetts, as the global US headquarters for its microbial biopharmaceutical business and announced plans to invest more than $30 million in its Hopkinton site to support growth plans for microbial process development and manufacturing.

The Cambrex acquisition netted Lonza additional biopharmaceutical services capabilities and small-and mid-scale microbial manufacturing capacity to complement existing microbial capacity in Visp, Switzerland. Lonza started producing current good manufacturing practices (CGMP) batches at a new 15,000-L microbial biopharmaceutical line in Visp, and a second line is mechanically complete.

In addition to the Cambrex acquisition, Lonza is strengthening its position in biologics. In March 2007, Lonza began construction of its second large-scale mammalian facility in Singapore. The final build-out of the facility is expected to be completed and operational in 2011. The $350-million facility will have four mammalian bioreactor trains, each with a flexible capacity of 1000–20,000 L, inclusive of purification units.

In May 2007, Lonza broke ground for a new $300-million, 330,000-ft2-facility for biopharmaceutical manufacturing technologies, support systems, and warehouses in Portsmouth, New Hampshire, where the company has commissioned its largest-scale mammalian cell-culture plant to date. Lonza is adding a 5000-L bioreactor to the existing facility, which has 93,000 L of capacity. It also increased its capacity by acquiring Genentech’s (South San Francisco, CA) mid-scale mammalian biopharmaceutical production plant in Porriño, Spain, in late 2006.

Lonza further added to its biopharmaceutical toolbox in August with the acquisition of the “AggreSolve” technology and service business of Zyentia Ltd. (Cambridge, UK). AggreSolve is an in silico protein-analysis platform that can be applied to solving the problems posed by protein aggregation. Zyentia was founded in 2002 as a spinoff from the University of Oxford, based on technologies around protein folding and aggregation first developed in Oxford then in Cambridge by Professor Chris Dobson and coworkers.

Clariant continues restructuring
Earlier this year, Clariant (Muttenz, Switzerland) announced plans to sell its custom manufacturing business to International Chemical Investors Group (ICIG, Frankfurt, Germany) to focus on its core competencies in colors, surfaces, and performance chemicals. The custom manufacturing business supplies intermediates and active ingredients for the agrochemical, pharmaceutical, and polymer industries. The transaction value was not disclosed. Last year, Clariant sold its pharmaceutical fine chemicals business to the private equity firm TowerBrook Capital Partners, which later launched the business as Archimica (Frankfurt, Germany).