This week’s announcement that Albany Molecular Research Inc. will acquire Cedarburg Hauser Pharmaceuticals—a $41 million deal—has us on the verge of declaring a trend. You will recall that last October, AAIPharma purchased another Midwest active pharmaceutical ingredients (API) producer, Cambridge Major Laboratories. All we need is one more to feel that the black ice of overcapacity in pharmaceutical fine chemicals is finally starting to melt.
[Note: The DSM/Patheon deal does not count as it has not, as of yet, led to any consolidation in API manufacturing stewardship.]
Industry watchers have long bemoaned the need—some would call it the obvious-if-not drastic need—for consolidation in the contract pharma chemicals sector. The problem of too few jobs for too many producers is long-standing to the point of seeming sustainable. But action may be triggered now by the nature of those jobs. Customers, transitioning from the block-buster era into the age of targeted therapies, want much smaller volumes of chemicals than they did only a couple of years ago. And the molecules they want have become increasingly more complex. The stronger contractors, such as AMRI, are on the lookout for ready-to-go advanced API synthesis capacity. Companies like Cambridge Major and Cedarburg are perfect targets, especially for diversified service firms such as AAI and AMRI that want to build out their API offerings.
But there are other ways to deal with overcapcity in pharmachem. In Europe, lately, contract fine chemical makers have been investing in non-pharma production, or in other ways shifting emphasis from pharma to markets such as agricultural chemicals, electronic chemicals and catalysts for specialty polymers. Saltigo not long ago combined pharma and non-agricultural fine chemicals into one fine chemicals group, leaving agchem as a separate business. In January, Isochem, the French fine chemical firm, announced plans to build a $2 million plant at its facility in Pont-de-Claix to service an $18 million contract for a high performance polymer catalyst. And last week, Minakem, another French firm, announced plans to expand capacity at its Minafin facility in Tennessee for bio-based 1,2-pentanediol, a key ingredient for cosmetics and an intermediate for agricultural applications and other specialty markets.
Isochem, on the other hand, is among the firms that have cash on hand and are looking to acquire API and general pharmaceutical chemical capacity. Others API makers, such as Siegfried, are looking to make further acquisitions downstream in final dosage, fill-and-finish, and other formulation services. Then, there is DSM and Patheon (see previous post at Fine Line). One aspect of that story is that the DSM pharma chem business will no longer be held by a publicly-traded firm. The same is true for Ampac Fine Chemicals, now that its parent, American Pacific Corporation, has been acquired by H.I.G. Capital. This will allow for fast, or much faster, action on any possible acquisition.
Pharmachem executives in town for DCAT Week earlier this month all said business is good. Good as in steady, solid. Growth, however, is not really in the cards, which seem very much stacked for that third, trend-establishing deal.
In other thaw news, I happened to turn a page in The Complete Poems of Hart Crane on the ferry from Hoboken this morning, discovering this poem just as we sidled up to Wall Street under the Brooklyn Bridge. I took it as a good sign that April, cruel as it is, will not be coming in like a lion.
Awake to the cold light
of wet wind running
twigs in tremors. Walls
are naked. Twilights raw—
and when the sun taps steeples
their glistenings dwindle
slips along the ground
like a mouse under pussy-
willows, a little hungry.
The vagrant ghost of winter,
is it this that keeps the chimney
busy still? For something still
nudges shingles and windows:
but waveringly, —this ghost,
this slate-eyed saintly wraith
of winter wanes
and knows its waning.