OUTSOURCING
AMRI confronts change, again On the verge of going private, the drug services innovator sorts through a stream of acquisitions
“W
hen we started our company in 1998, we studied AMRI,” recalls Greg Reid about American Advanced Organics, a contract research and custom synthesis firm he and other ex-Bristol-Myers Squibb researchers launched in Syracuse, N.Y. AMRI, known formally as Albany Molecular Research Inc., had made a name for itself as a contract research organization. Indeed, its chief executive officer at the time, Thomas E. D’Ambra, was often called the innovator of the contract research organization (CRO) model in pharmaceuticals. “If we had to make a picture of what we thought we would be, we thought in five to 10 years we’d love to be AMRI,” Reid says. The dream became reality two years later when AMRI acquired American Advanced Organics in an effort to bolster its chemical development service offering. Reid claims the Syracuse facility for AMRI, later moving to its headquarters to manage the chemical development division until his departure in 2004. AMRI closed its Syracuse operation two years ago, refusing to sell it back to Reid, who now runs a one-man consultancy, ChemDev Solutions, near Boston. “They didn’t want to compete with us,” Reid says. The story of the Syracuse facility is one of many tales of acquisition and operational change that characterized D’Ambra’s time at the helm of AMRI. Another round of acquisition and consolidation followed under William S. Marth, who took over as CEO in 2014. That second series of maneuvers shifted
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C&EN | CEN.ACS.ORG | JULY 31, 2017
the firm’s business mix toward AMRI has dients (APIs), and advancing pharmaceutical chemical manestablished a lab its own pipeline of drug canufacturing and culminated in in Buffalo as its didates. After completing an June in a $1.5 billion deal with primary locus for initial public offering in 1999, two investment firms, Carlyle drug discovery and AMRI went on to adapt its Group and GTCR, to go private. development. model to include commercial Once again, AMRI finds itself production of APIs, becoming herding a sprawl of activity into a recogniz- a pioneer contract development and manable business model while trying to explain ufacturing organization (CDMO). to the outside world where it wants to go. The company capped a cycle of rapid Founded in 1991 by D’Ambra, a former expansion with the 2010 acquisitions of research chemist at Sterling Winthrop, Excelsyn, a British pharmaceutical chemAMRI developed a unique business of ofical maker, and Hyaluron, a finished-dose fering research services to drug companies, drug formulator in Burlington, Mass. Then codeveloping active pharmaceutical ingreit stalled. AMRI was already bracing for the loss of a big source of earnings: royalties from its discovery of a new route to fexofenaBusiness units (% revenue): dine, the API in the allergy medicine Allegra, which faced patent expiry. Then a U.S. Finished drug manufacturing Food & Drug Administration warning let15% ter for its Burlington plant and an unfavorable arbitration ruling on a dispute with Borregaard Synthesis over a raw materials contract complicated the grim near-term outlook for the company. Discovery, API and fine development, D’Ambra assured investors that the piecchemicals and analytical es were in place to put AMRI on a growth services manufacturing track within a year. But there were ques68% 17% tions about how all the pieces fit together ▸ Revenue: $570 million and whether they were in the right place. ▸ Net income: –$70 million Some analysts, for example, wondered why ▸ R&D spending: $16 million the company had chosen Singapore as an ▸ Employees: 3,100 alternative to China for research services ▸ Acquisitions from 2014 to 2016: 7 in Asia when it also had labs in India. ▸ Generic drug codevelopment deals with At the end of 2013, D’Ambra, who is now chair of AMRI’s board, passed the royalty opportunities through 2020: 12 ▸ Phase III manufacturing programs: 44 reins to Marth, who had joined the board ▸ Research and manufacturing sites in in 2012. Marth, former head of Teva Pharmaceutical Industries’ Americas operaU.S., Europe, and India: 21 tions, soon began combining pieces. He Note: Financial figures are for 2016. also took several off the table, including Source: AMRI
AMRI at a glance
C R E D I T: A MR I
RICK MULLIN, C&EN NEW YORK CITY
The company has a long-range goal of the Syracuse plant and the Singapore R&D growing its API business to $750 million in center, both of which he closed. annual sales. For finished drugs, the target Meanwhile, AMRI launched a new wave is $500 million; for drug discovery and of acquisitions—seven between 2014 and development services, it’s $200 million to 2016—and established a research center $250 million. in Buffalo by becoming an anchor tenant AMRI forecasts revenue of $725 million of a biotech hub sponsored by the state of for 2017 and aims to cross the $1 billion line New York. But the growth has yet to bring next year. Although acquisition has fueled profits. The company posted a $70 million loss last year, due largely to the cumulative much of the growth until now, Marth points out that AMRI has been posting orimpact of so many acquisitions and loss of ganic growth of approximately 8% per year. the fexofenadine royalties. Assessing the company’s evolution Marth acknowledges that a significant through the latest run of acquisitions, transformation has taken place at AMRI under his leadership—three years in which Christopher Conway, senior vice president the company’s revenue more than doubled of drug discovery, chemical development, and analytical services, points to specialto $570 million in 2016, primarily through ization. “In discovery and development, growth in manufacturing. for many years we kind of got into every“The difference between 2010 and thing,” says Conway, a former marketing now is stark,” he says. On the other hand, manager at Johnson & Johnson. “When D’Ambra’s innovation in pharmaceutical Bill [Marth]came in a few years ago, we services established a base from which to focused our business on very specific grow, he says. high-barrier-to-entry areas.” But Marth and his team wanted to push The company’s immediate concern going services further into the downstream part of their customers’ drug development pro- forward, according to Marth and Conway, is to put all the new pieces in place. But future cess. “We felt from our experience at Teva acquisitions are not out of the question. that we could build a robust API business Marth says the compathat could serve the ny will have to add bioneeds of brands as well logics API manufacturing as generics,” he says. at some point as drugs in “What we didn’t want that pipeline move forto do was produce a ward. And Conway points lot of white powder,” to a “gap in drug discovhe says, referring to ery” in Europe, given that easy-to-synthesize prodAMRI operates major ucts. His target was difficult chemistry. —William Marth, CEO, AMRI labs in Buffalo and India. James Bruno, managIn 2014, AMRI acing director of the consulting firm Chemquired Wisconsin-based Cedarburg Pharical & Pharmaceutical Solutions, raises maceuticals, a specialist in low-volume the question of whether AMRI’s financial controlled substance and steroid APIs. buyers will seek an exit strategy that The company also built on the small breaks the company up. In his view, AMRI injectable drug business in Burlington has had a history of acquiring haphazardly. with the acquisitions of Oso Biopharma“And they never pulled it together,” he ceuticals Manufacturing in Albuquerque, says. “I am not sure where they are going. I N.M., and an Aptuit business in Glasgow, wouldn’t be surprised if [the new owners] Scotland. started taking it apart piece by piece.” The big moves in APIs came with the Marth and Conway counter that Carlyle acquisitions of Spain’s Gadea Biopharma in 2015 and Italy’s Euticals last year. Gadea and GTCR back AMRI’s growth strategy brought a $90 million-per-year business in and its goal of establishing end-to-end research and manufacturing services focused APIs for both branded and generic drugs. on high-end science. Achieving that goal, With about $250 million in annual sales, however, will depend on customers’ ability Euticals operates several sites, including to recognize AMRI’s business model, one API production facilities in Italy, France, and Springfield, Mo., and a chemical devel- that Reid of ChemDev Solutions sees veering toward supplying generic APIs. “Going opment center in Frankfurt. from CRO to CDMO to generic drug comWith its latest moves, AMRI has grown pany, they end up with pieces that are no its API business to about 65% of sales. longer part of their core activities,” Reid Marth estimates that about 60% of its API production is for customers’ generic drugs says. “I still don’t understand why they and 40% for their more profitable branded shut down the Syracuse site. They could have made a lot of money.” ◾ drugs. He’d like to strike a 50-50 balance.
“The difference between 2010 and now is stark.”
JULY 31, 2017 CEN.ACS.ORG | C&EN
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