DCAT Week 2014
Things could not have been more “up” at DCAT Week, the annual occupation of the Waldorf Astoria and environs by the Drug Chemicals and Allied Trades association that wrapped up last night. (Each March, DCAT hosts the largest black tie banquet of the year at the grand old hotel). Business in the pharmaceutical chemicals sector is up for the third year in a row, in fact, making for a kind of “up momentum”. While growth is not a major feature of the current gestalt, a "firmness in the upside" is. The center is expected to hold at least through 2014.
No need to recap trends and transformations, which C&EN cataloged in our recent coverage of CPhI and Informex. But many of these were embodied in the strange presence of a “new” company called DPx.
Formed in the merger of DSM’s active pharmaceutical ingredients (API) division and Patheon’s two pharma services and manufacturing businesses last November, DPx is really no stranger to DCAT’s membership. And the deal has been a sector focus for a few months now. The strangeness had to do with its entertaining guests in separate suits after the banquet— the traditionally huge DSM suite and a less-active Patheon suite. The new company name, which was announced early in the week (it stands for DSM/Patheon and whatever you attribute to an x subscript—perhaps just an intersection of two lines) was absent in signage, though the crowd at the DSM suite was so large that there may have been low-hanging logos that I didn’t notice.
Patheon also entertained the press on its own earlier in the week. I met on Wednesday with David Hamby, vice president of business services [note: titles of Patheon and DSM personnel in this post are likely in flux, but it can be assumed that people will continue in their current function in DPx]. He explained that DPx will merge API production with formulation services, final dosage manufacturing, and all the R&D along the chain for a full-services, as opposed to one-stop-shop (I suppose there is a difference between the two approaches), menu for pharma clients. The businesses will operate somewhat autonomously, but the focus is on “synergies”, says Hamby. DPx's plan is to offer pretty much everything, he says, “hopefully at the right time in the right way, helping our clients with a more integrated offering.”
Right time/right way is the crux, of course. But there is also the question of managing two fundamentally different business—services and manufacturing. API producers, such as Siegfried and Hovione, have been trying to find the right balance in expanded offerings, the former very aggressively. And Lonza actually attempted to buy Patheon in 2009. Now that a major deal—$2.65 billion—has been struck to create of a huge soup-to-nuts player, people are wondering if it will work. There is also a bit of speculation regarding what DPx is really up to.
“This is not my favorite deal,” Marianne Späne, director of business development and sales at Siegfried, told me at the Swiss company’s hospitality suite after the banquet. She sees an outsized competitor pursuing a business model that Siegfried had perceived as its competitive advantage against an API producer such as DSM.
In discussions, some DCAT attendees speculated that DSM will sell its share in the company, completing an exit from pharmaceutical chemicals. Others wondered if the company has designs on becoming a full fledged pharmaceutical firm.
Aslim Malik, whom I met in the halls (which, by the way, have lots of tremendous photographs of yester-guests, ranging from comedian Rich Little to French president Charles de Gaulle), emphazied an aspect of the deal that most interests him: The DSM unit is now, like American Pacific, Ampac’s parent, a private company via a recent acquisition. “I told you,” he said, reminding me or our discussion at Informex in Miami earlier this year. “This this is a trend.”
And it’s the first thing Lukas Utiger, the former president of DSM’s pharmaceutical products division and head of API work at DPx, mentioned when I found him in the packed DSM suite. It will be much easier to launch the kind of business that Hamby described to me earlier in the week as a private company, Utiger said. “There will be no quarterly reports.”
The DSM suite at the Waldorf minutes before going way over the occupancy limit. (Photo by Andreas Wagner for DSM)
A few other interesting developments going about town this week—
I met with Michael Staff, US-based president of M2i life sciences, a company formed by Philippe Guerret, the former chief financial officer of French API maker Minakem, in 2012. The group purchased an R&D facility in Pau, a city on the edge of the Pyrenees in southern France, and a manufacturing site in Salin de Giraud near Marseille. M2i is looking to provide process design and other services and has businesses in crop science and biocontrol, where it specializes in pheromone chemistry, according to Staff. He says M2i (the name derives from Melchoir Investissement et Industrie, a backer of Guerret’s ventures) had hoped to announce a new acquisition at DCAT, but that things were held up. Any day now, as they say.
Zhejiang Hengdian Apeloa, known as Hengdian, a Hanzhou, China-based API producer that specializes in fluorine chemistry, is expanding its sulfur tetrafluoride capacity, according to Nick Kosarych, head of business development for North America. This was of interest to Greg Butler, vice president of Oakwood Chemical, who invited me to the Chinese firm’s suite at the Waldorf on Wednesday afternoon. Oakwood, based in West Columbia, S.C., is looking to contract with Hengdian for commercial scale fluorine chemistry production on projects advancing in its pipeline.
Meanwhile, Aesica, the UK-based API producer, announced that it’s $45 million high capacity manufacturing facility in Queenborough has received commercial validation. Ian Muir, newly-appointed commercial managing director, noted that the company, which has been built largely through acquisition of ex-big pharma manufacturing sites, has grown its services business to half of its 2013 revenue $415 million. Aesica’s emphasis on services, including finished dosage manufacturing, may be reflected in Muir’s resume. He comes to Aesica having previously worked as vice president of oral release technologies at Catalent Pharma Solutions.
[Muir’s take on DPx: “It’s a bold move. It will test the market for that combination of API production and full services.” To those who doubt it will fly, he responds that nobody has really tried it yet.]
Other highlights for me included breakfast with Guy Villax, CEO of Hovione, the Portuguese API producer, who says this will be a big year for RX-360, the supply chain management consortium (watch this space), and lunch with Roger LaForce, who recently resigned as CEO of Zach System, the Italian API producer. After two years, he determined that he and Zach were a bad fit. This note will serve as a follow-up to the profile I wrote last year on his attempt to turn the company around. Many viewed LaForce's move to Zach in 2012 as an attempt to reprise his seven-year run managing the business at another, very different Italian firm, Fabbirca Italiana Sintetici, better known as FIS. I’m expecting there will be news to report from Roger before long as well.
Another highlight, of course, was the speaker at the banquet, former Secretary of State Hillary Rodham Clinton. As expected, she did not announce her candidacy for the presidency in 2016. She did, however, deliver a campaign-worthy speech followed by an on stage (somewhat staged) interview. Despite the obvious control influences, her intelligence and generally reasonable take on issues ranging from tensions in the Ukraine to healthcare (an item on her resume from the 1990s) won over a huge crowd in the banquet hall and the spill-over rooms. This year marked a record attendance at the DCAT dinner.
Lukas Utiger in the DSM suite: "No more quarterly reports." (Photo by Andreas Wagner for DSM).
So, yes, Hillary Clinton won over a crowd largely made up of marketing executives in the drug industry. Funny how intelligence and reason will do that. “Funny”, also, how the European marketing executives like her so much more than their American counterparts!
Former Secretary of State, Hillary Rodham Clinton was well received by a huge gathering of pharmaceutical marketing executives. (DCAT photo)