In March 2011, Fujifilm Corporation bought all equity interests of the Merck BioManufacturing Network from Merck & Co., Inc (“Merck”). The new name for the Merck BioManufacturing Network is “Fujifilm Diosynth Biotechnologies.” The formation 

of Fujifilm Diosynth Biotechnologies (FDB) is part of Fujifilm’s strategy to enter the life sciences market. Through FDB, Fujifilm looks to be a leader in the biopharmaceutical contract manufacturing market. 

History

Merck Biomanufacturing Network (“MBN”) was formed last year after Merck purchased Avecia Biologics and merged it with Diosynth Biotechnology, which Merck had acquired as part of its Schering-Plough merger in 2009. Diosynth Biotechnology became part of Schering-Plough when SP purchased Organon Biosciences in 2007. Before Merck’s creation of MBN, both Avecia Biologics and Diosynth were leading providers of biopharma CMO services.

Transaction Details

Under the terms of the agreement, Fujifilm purchased all equity interests in two Merck subsidiaries, which together own all assets of MBN. The purchased assets are located in Billingham, UK and Research Triangle Park, NC. Along with the two facilities, other purchased assets include manufacturing contracts, business support operations, intellectual property and a highly skilled workforce. Also as part of the agreement with Fujifilm, Merck has committed to continue certain development and manufacturing activities with the new Fujifilm Diosynth Biotechnologies. 

While the financial details of the transaction were not disclosed, Nikkei English News reported that Fujifilm Corp. acquired MBN for $490 million. In March 31, 2011, Merck recognized a $134 million gain from this sale. A year earlier, Merck purchased Avecia Biologics Limited for $190 million. Merck allocated the purchase price to Avecia Biologics’ property, plant and goodwill based on fair market values. Merck did not disclose the book value for Diosynth. FDB is expected to generate $155 million in revenue. 

Fujifilm Strategy and Organization

Fujifilm was founded in 1934, and it has primarily been serving the photo imaging market. In the past few years, Fujifilm has set a strategic direction to enter the life sciences market. In 2008, Fujifilm purchased Toyama Chemical, a midsized pharmaceutical developer. As of January 2011, Toyama Chemical had seven pharmaceuticals in its pipeline under various phases of development. The acquisition of FDB builds on Fujifilm’s life sciences strategy.

FDB will become part of Fujifilm’s Pharmaceutical Products Division. This division is headed by Yuzo Toda, director, corporate vice president and general manager. Stephen Spearman, Ph.D., MBA, becomes president of the U.S. operation, and Steve Bagshaw is managing director of the UK operation. The two operations will merge as a single CMO that offers process development and cGMP services. While this is a new organization, the respective firms have extensive experience in providing biomanufacturing contract manufacturing services.

Future Plans

It is interesting to note that Merck sold MBN just one year after its creation, which occurred when Merck acquired Avecia Biologics. Merck acquired Avecia Biologics after they had entered into a Strategic Development and Supply Agreement. After a strategic review of MBN by Merck, Merck decided to divest MBN. In Merck’s strategic review of MBN, Merck had concluded that contract manufacturing was not a strategic fit with its business plans. It was also seen that as an independent CMO, MBN would be able to better support its customers. As noted in Merck’s financial filings, Merck will remain a key customer of FDB.

As explained by Mr. Bagshaw, “The strategic development agreement included both contract development and process development and contract manufacturing services. Avecia had worked with Merck on four to five different projects under this agreement, using both Pichia and bacterium. The strategic development agreement continues to be in place, and Merck has a long-term commitment to use Fujifilm Diosynth Biotechnologies for both contract process development and contract manufacturing.” 

Fujifilm intends to further develop its CMO business by investment in people, assets and technology, and seeks to align its service offerings to meet the changing needs of the global biotech and pharmaceutical industry. “Fujifilm’s long-term goal is to develop this combined operation into a world-leading CMO by offering unrivalled service and technology,” noted Dr. Stephen Taylor, vice president business development, FDB, Billingham UK. Dr. Taylor added that this acquisition “furthers Fujifilm’s company vision: ‘To lead the global Biologics CMO industry through the continuous innovation of technologies, service delivery and quality — contributing to the enhancement of the quality of life of people worldwide.’”

Under its new owner, FDB is committed to the CMO business model, and plans to expand further in this market. Mr. Bagshaw explained, “Fujifilm Diosynth Biotechnologies will continue to invest in innovations to support the growth in microbial fermentation and mammalian cell culture production technologies. In addition, we are expanding our mammalian cell culture production cGMP facility at RTP.”  

William P. Downey is president of HighTech Business Decisions. He can be reached at wdowney@hightechdecisions.com