Quality is the hook at French facilities such as Axyntis’s Orgapharm plant in Pithiviers.
OUTSOURCING
Finding high-end chemistry and services in vogue, major players are investing at home RICK MULLIN, C&EN NEW YORK CITY
A
years-long upturn in the pharmaceutical chemicals business has left many companies with a lot of cash on hand. Players are weighing acquisitions far afield, many of them European and Asian firms looking to invest in the U.S. Everybody seems to be on the verge of something transformational. In other ways, though, the pharmaceutical chemicals business has an immutable regional quality—one that is well illustrated by the French. Contract manufacturing organizations there are pursuing world markets, and some are expanding outside the country. But they remain purposely rooted, committed to a European approach to high-quality manufacturing despite France’s comparatively high costs and exacting environmental, health, and safety standards. No company is more quintessentially French than Isochem. The company, once the fine chemicals division of the former state-owned explosives and munitions manufacturer SNPE, operates three manufacturing facilities situated in a ring around
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C&EN | CEN.ACS.ORG | JANUARY 2, 2017
Paris. These are long-standing sites, dating back to SNPE. Isochem sees high standards coming back in vogue, according to Amélie Arboré, vice president of sales and business development. The company, she claims, is putting its European chemistry heritage to work by meeting rising expectations for quality and transparency in a market that is continually evolving toward more complex science. If anything, the company has spent the five years since gaining its independence from SNPE reining operations back into France. Seeking to focus on custom active pharmaceutical ingredients (APIs), it divested ventures in Hungary and the U.S. It also recently separated from a U.K. nonactive drug ingredients firm, Wychem, that was purchased by Aurelius, the holding company that acquired Isochem in 2011. Aurelius, a German firm, is an exception to Isochem’s French essence. But Arboré says she and other managers are acting autonomously as they reassert and heighten Isochem’s cultural focus—highend fine chemistry at its plants in France.
“This is the story of a transformation,” she says, “in which we have had to deal with two challenges. First, the conversion to a midsized fine chemicals company after being part of a state-owned firm. Second, dealing with the forecasted decline of agricultural business. We were manufacturing low-cost molecules, and manufacturing was moving to low-cost countries. We were not going to be competitive anymore.” The company answered both challenges in 2014 with the sale of Framochem, a Hungarian subsidiary that supplied phosgene derivatives mainly for the agricultural market, to the U.S. firm VanDeMark. Today, Arboré claims, custom synthesis, mainly of pharmaceutical chemicals, accounts for 60% of revenue. Exports have increased from 50% to 75% of sales in the past five years, she notes, with 45% of exports going to the U.S. Isochem is working hard to enhance both research and manufacturing, Arboré says, investing about 5% of sales annually in new resources. “There is a high demand for analytical development skill, as pharmaceutical companies want suppliers to track impurities that can lead to adverse effects,” she says. Isochem’s transformation program has shown one key result, Arboré says. “When
CREDIT: AXYNTIS
French pharma chemical firms assert their culture
we developed our strategy in 2011, one of our targets was to reach 60 million euros in sales from our three plants. And we did it,” she says. The company is now targeting 10% annual growth for the next three years. At PCAS, a larger French firm, R&D has been the focus of late. In November, the company acquired a 10,000-m2 R&D facility in Porcheville, France, from U.S.-based R&D services firm Covance. “This new center will gradually become the central platform for PCAS’s R&D projects,” says Vincent Touraille, the firm’s chief executive officer. Touraille notes that the facility, originally a Sanofi research center, is located near PCAS’s manufacturing site in Limay. Shifting research from its five other facilities in France will reduce development time and take advantage of synergies between its pharmaceutical and industrial specialties businesses, he says. The site’s pilot facilities can accommodate the small-scale manufacturing that now takes place at the company’s disparate research locations. Rather than shrink in the consolidation process, R&D staffing will increase by 20 to 25%, Touraille anticipates. Like Arboré at Isochem, Touraille points to increased demand for analytical services that will require the company to increase scientific staffing. “Quality is very important right now,” he says. Although PCAS won’t disclose the amount it paid for the Porcheville site, Touraille says the firm has upped annual investment in its facilities from below 10% of sales to between 18 and 20%. In addition, it is currently spending about $20 million to boost capacity at its API manufacturing facilities. Much of the investment is in support of the complex molecules currently being developed by drug companies, but PCAS is also looking to generally boost capacity, which
has been the limiting factor in its fast-growa bad fit with the company’s API focus. ing pharmaceutical chemicals business. CEO David Simonnet says the acquisiYet PCAS will not be increasing the size of tion will advance Axyntis’s effort to comindividual manufacturing contracts, keeping bine manufacturing and chemistry services, within a comfort zone of between 1,000 and a push that began three years ago when 1,500 metric tons. “It isn’t a question of volAxyntis formed Kyrapharm, a joint venture ume,” Touraille says. “We are faced with very with Fuji Silysia that offers high-perforcomplex chemistry. mance liquid chromatogInstead of seven steps, raphy services. now there are 20 to 40 And the new facility has steps.” kilogram-scale producPCAS isn’t the only tion labs that will allow French company exAxyntis to pursue work in panding by acquiring highly potent APIs. Comthe unwanted local —Vincent Touraille, CEO, PCAS bined with Orgapharm, assets of international Axyntis will have 120,000 firms. In 2015, the French custom manuL of industrial capacity in addition to three facturer Fareva acquired Merck & Co.’s API R&D labs, Simonnet says. plant in Saint-Germain-Laprade, France. Axyntis has a target of doubling annual Fareva said the purchase brings 128,000 L of sales to $200 million by 2020 through a reactor capacity, equal to the capacity it has combination of internal growth and further among its three other API plants in Germaacquisition. A U.S. R&D site with kilony and France. Fareva is spending around gram-scale manufacturing capacity might $28 million to make the plant a high-conbe of interest, Simonnet says. tainment facility by mid-2017. Minakem, another French pharmaceutiLast month, the French contract recal chemicals maker, has been on the looksearch provider Oncodesign completout for U.S. assets for a couple of years now, ed the purchase of GlaxoSmithKline’s according to Frédéric Gauchet, CEO of the François Hyafil Research Centre in Villecompany, which is a division of the French bon-sur-Yvette, France. GSK will provide 57 firm Minafin. “To be frank, it’s a difficult employees and about $40 million over four market,” he says. “Prices are very high.” years to support transfer of the site. The company’s API business is doing And in October, Paris-based Axyntis acwell, Gauchet says. The market for contract quired 3M’s API facility in Pithiviers. Axynservices remains strong, but companies tis will merge the operation with its Organeed to adapt to new technological and regpharm division, which operates in the same ulatory needs. Having facilities in the U.S. industrial area. Roughly 60 3M employees would provide some flexibility. will remain with Axyntis. Operating costs in Europe are high, The Pithiviers site includes two API Gauchet observes, and particularly so in plants and a final-dose drug manufacturing France. Adding to the challenge of doing facility, as well as a 1,000-m2 R&D facility business, the French drug companies Sanoand a similarly sized quality-control lab. fi and Servier have major API manufacturAxyntis intends to transfer the final-dosing divisions that compete for business. age plant to a business partner, deeming it “And unfortunately for us, we are waiting
“Everybody is turning toward the French way.”
The major players in French fine chemicals Novasep
PCAS
▸ 2015 sales: $277 million ▸ Plants in France: Chasse-
▸ 2015 sales: $187 million ▸ Plants in France: Limay,
sur-Rhône, Le Mans, Mourenx, Pompey ▸ Plants outside France: Boothwyn, Pa.; Gosselies and Seneffe, Belgium; Leverkusen, Germany; Shanghai ▸ Recent milestone: Advancing a “back-to-basics” strategy of divesting noncore businesses, refinancing, and reorganizing
Couterne, Aramon, VilleneuveLa-Garenne, Bourgoin-Jailleu ▸ Plants outside France: Saint-Jean-sur-Richelieu, Quebec; Turku, Finland ▸ Recent milestone: Acquiring a 10,000 m2 R&D facility in Porcheville, France, where corporate research will be centralized
Axyntis
▸ 2015 sales: $71 million ▸ Plants in France:
Minakem
▸ 2015 sales: $167 million ▸ Plants in France: Beuvry,
Montluçon, Grasse, Pithiviers, Calais ▸ Recent milestone: Buying a 3M business in Pithiviers
Dunkirk ▸ Plants outside France:
Leuna, Germany; Louvain-laNeuve, Belgium ▸ Recent milestone: Opening an amino acids blending facility serving Ajinomoto at new plant in Belgium
Isochem
▸ 2015 sales: $68 million ▸ Plants in France:
Gennevilliers, Pithiviers, Vert-le-Petit ▸ Recent milestone: Breaking 60 million euros in sales from its three API plants
JANUARY 2, 2017 | CEN.ACS.ORG | C&EN
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to see who will be the next president,” he says, pointing to the recent surprise announcement by French President François Hollande that he will not run for reelection. “We will have several levels of reform for business,” he predicts. Minakem, whose parent company already owns U.S. operations, has always had its eye on the world outside France, Gauchet says. The company has plants in Germany and Belgium, and Asia is on the radar screen, he says. “Our long-term plan is not necessarily to be in China, but in Asia. If you look, China is developing good assets in fine chemicals, but so are India, Thailand, and Singapore.” Novasep, the largest pharmaceutical chemicals company in France, may have undergone the most thorough transformation over the past five years. Launched in 1996 as a chromatography specialist, the
company added chiral separation and API manufacturing through a series of acquisitions. The company purchased Aventis’s Seripharm, for example, whereupon it began manufacturing the cancer drug paclitaxel. Novasep merged with Rockwood Holdings in 2004 and became part of a U.S.based conglomerate. In 2009, Novasep was purchased by a group of investors and relaunched on its own, but with huge debt from its acquisitions. A refinancing ensued, during which Minafin proposed a merger with Novasep—by invitation of the French government, according to Gauchet. “In France, it’s rather complicated,” he told C&EN at the time. “When a significant company is in trouble here, it becomes a political issue.” The deal was rejected. Under new leadership, Novasep leaned into its original area of specialization with a $40 million investment in its largest chromatography facility, in Mourex, France.
Meanwhile the company expanded highly potent API manufacturing and in 2015 announced plans to build an antibody-drug conjugate facility in Le Mans. Novasep completed a new round of refinancing last year as it pursued a “back-tobasics” program of focusing on pharmaceutical services. In November, the company struck a deal to provide process development and production services for two HIV vaccines developed by France’s Vaccine Research Institute. Last month it sold TangenX, a U.S. subsidiary that supplies biomanufacturing filtration technology, to Repligen for about $40 million. Like Novasep and its French compatriots, pharmaceutical chemical companies around the world are positioning themselves to compete using a compelling mix of manufacturing and services. But there is a distinctively Gallic angle to strategies under way at the French firms, one based on a tradition of meeting high expectations. “France has always been very demanding on environmental performance as well as health and safety,” PCAS’s Touraille says. “That has meant some investment. But now other countries are making those investments. Everybody is turning toward the French way, and right now I would say France is very competitive.” ◾
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CREDIT: PCAS
PCAS will centralize its R&D at a 10,000 m2 facility recently acquired from Covance in Porcheville, near its production site in Limay.
