Welcome to Contract Pharma’s first profile of Top Contract Service and Outsourcing Companies. In this annual feature, we’ve endeavored to build an overview of the leading companies in the industry. Information in the profiles was derived from annual reports, interviews, company statements and discussions with Contract Pharma’s Editorial Advisory Board.

To the best of our knowledge, no magazine has attempted a project as broad as this one. While other magazines have profiled publicly held CROs, drug discovery companies or other sectors, we’ve assembled the many aspects of pharma and biopharma contract services and outsourcing into a useful guide. Given the number of privately held firms, in addition to the contract service providers that are buried several layers deep in corporate ownership, extracting information about corporate activities and revenues proved to be a trial.

The biggest question any reader will have, of course, is how we settled upon the companies that were included in the feature. It was my intention to cover as many aspects of the outsourcing arena as possible. This meant including CROs, CMOs, contract packagers, lab services providers and other categories, each of which spawn numerous subcategories. Faced with this proliferation of sectors, I made several educated guesses, called numerous EAB members and pored over annual reports and industry studies, hoping to cover the leaders in these fields and not miss any of the major players.

At first, I considered placing the companies in separate sections, but the breadth of services offered by many of these firms defied easy characterization. When a company such as Covance, widely known as one of the top CROs in the world, begins providing biomanufacturing services, one cannot simply list it as a research provider. Covance makes the lion’s share of its revenues from research services, but it also provides contract manufacturing services. This led to our decision to include companies alphabetically, with a description of services offered.

We hope that this feature offers our readers an insight into the workings of the major outsourcing companies. As the use of pharma and biopharma outsourcing grows, it becomes increasingly important to know more than simply the capabilities of the outsourcers. Understanding how the providers have acted and reacted in the current marketplace may help the sponsors make better informed decisions about their outsourcing needs.

Finally, I must offer the following caveat. As mentioned earlier, the selection process involved a good deal of legwork and, I hope, covers the major contract service and outsourcing companies. However, the list is a man-made one and, like all man-made systems, is susceptible to Kurt Gödel’s twin theories of undecidability and incompleteness. Unfortunately, companies may have been missed; sectors may have received short shrift. In order to make next year’s profile of the Top Contract Service and Outsourcing Companies more complete, I’d like to hear from readers on both the sponsor and provider sides to discuss features we can improve and companies that should be added.

Albany Molecular Research
21 Corporate Circle
Albany, NY 12203
Phone: (518) 464-0279
Web site: www.albmolecular.com

Revenues: $43 million in 1999 ($22 million in net contract revenue, $21 million in license fees, milestones and royalties).

Key Personnel: Thomas E. D’Ambra, Ph.D., chief executive officer, chairman of the board; James J. Grates, vice president, human resources; Frank W. Haydu, III, director; Lawrence D. Jones, Ph.D., vice president, business development; Donald E. Kuhla, Ph.D., director, president, chief operating officer, secretary; Harold Meckler, Ph.D., vice president, chemical development; Kevin O’Connor, director; Chester J. Opalka, director, vice president, laboratory operations; Anthony P. Tartaglia, M.D., director; Michael P. Trova, Ph.D., vice president, medicinal chemistry; David P. Waldek, chief financial officer, treasurer.
Major Divisions: EnzyMed research services; American Ad-vanced Organics; Organichem Corp. (minority ownership).

Capabilities/Capacities: Albany Molecular Research, Inc. (AMRI) offers drug discovery, medicinal chemistry, pro-cess R&D, analytical chemistry and custom manufacturing services. The company provides a pool of chemical scientists and lab resources. The EnzyMed division provides drug discovery and development services. The American Advanced Organics division produces intermediates and other fine organic chemicals. Organichem is a custom cGMP manufacturer and commercial producer of intermediates and APIs.

Comments: AMRI went public in February 1999, a move that “allowed the company to strengthen itself and take advantage of the rapidly accelerating business of chemistry outsourcing,” according to chairman and chief executive officer Thomas E. D’Ambra, Ph.D.

During the year, the company added 20 new customers and posted record quarterly earnings and revenues. For the year, AMRI recorded net contract revenues of $22 million, up from $13.6 million in 1998. The company also increased its scientific staff from 101 to 148 and completed a 60,000-sq.-ft. expansion of its Rensselaer site.

The company used its public launch to help finance a series of mergers and acquisitions. AMRI completed a merger with Iowa City, IA-based EnzyMed and made a strategic investment in Organichem Corp. The latter move, according to Dr. D’Ambra, “completed the vertical integration of AMRI’s chemistry service offerings.”

Organichem was formed through a management buyout of Nycomed Amersham’s chemical manufacturing facility in Rensselaer, NY. The plant, which has manufactured both ethical and OTC drugs for more than a century, has a base of long-term customer contracts. AMRI purchased 37.5% of Organichem’s shares, which may convert to 75% ownership in 2003.

The company purchased EnzyMed with $20.6 million in stock. EnzyMed’s combinatorial biocatalysis discovery services uses enzymes and microbial systems to produce new synthetic transformations of compounds. This can produce greater diversity of novel compounds for lead discovery and optimization.

In February 2000, AMRI purchased American Advanced Organics (AAO) for $2.3 million in cash and stock. Syracuse, NY-based AAO is a 14-person contract manufacturer of gram to multi-kilogram lots of novel compounds, pharmaceutical intermediates and test drug substances. According to AMRI, the company was noted for its rapid response and setting aggressive timelines for production.

Catalytica Pharmaceuticals
Intersection US 13/NC 11 and US 264
Greenville, NC 27834
Phone: (252) 758-3436
Web site: www.catalytica-inc.com

Revenues: $400 million from contract services in 1999.

Key Personnel: Michael Thomas, president, chief executive officer; James A. Cusumano, chairman, chief strategic officer; Lawrence W. Briscoe, vice president, finance and administration, chief financial officer, Catalytica, Inc.; Ricardo P. Levy, Ph.D., president, chief executive officer, Catalytica, Inc.

Major Divisions: Catalytica Pharmaceuticals is a division of Catalytica, Inc. Other subsidiaries include Catalytica Combustion Systems and Catalytica Advanced Technologies.

Capabilities/Capacities: Catalytica Pharmaceuticals has 100,000 chemical reactor gallons for producing active pharmaceutical ingredients. The company can press seven billion tablets annually and manufactures more than 80 products in more than 200 different final packaged forms.

Comments: The biggest news for Catalytica Pharmaceutical was the June 2000 retirement of president and chief executive officer Dr. Gabriel Cipau. Michael Thomas has replaced Dr. Cipau in both of those roles. Mr. Thomas was previously group president and chief executive officer of R.P. Scherer’s Americas and Global Hardcapsule division. He also spent two years as president and chief executive officer of London International U.S. Holdings, Inc., a medical supplies company. Prior to that, Mr. Thomas spent 20 years at Bayer, where he held various positions, including vice president, international strategic marketing, director of product management and assistant to the president.

In 1999, Catalytica Pharmaceuticals doubled its research staff. The company has 45 ongoing research projects for customers whose products are primarily in Phase II or Phase III development. Pharmaceutical research revenues more than doubled to $22 million in 1999. Catalytica spent 8% of its revenues ($31 million) on R&D in the year.

In September 1999, the parent company acquired Wyckoff Chemical Co., which develops, manufactures and markets active pharmaceutical and advanced fine chemical ingredients. Wyckoff sells its products and custom synthesis services principally to pharmaceutical companies that sell branded or generic products. During that month, Catalytica Pharmaceuti-cals also was forced to close its Greenville, NC facility due to the effects of Hurricane Floyd.

Two-thirds of the company’s 1999 revenues were from sales to Glaxo Wellcome; 38% of total revenues derived from Glaxo’s original supply agreement with Catalytica. As part of that agreement, Glaxo guaranteed revenues paid to Catalytica will meet a specified minimum level of revenue each year. Catalytica purchased its Greenville facility from Glaxo in July 1997. In 1998, 79% of revenues came from Glaxo, with 72% from the original supply agreement. R&D expenses increased 32% in 1999, corresponding to the increase in R&D income and attributable to increased staffing and expenses at the Greenville facility, which is expanding its chemical process and formulation development services.

In December, the company announced that it would expand its service capabilities to include clinical trial material packaging and labeling for its customers. Shumena B. Horton was named senior development scientist, clinical trial packaging.

In addition, Catalytica has completed plans to expand its chemical pilot plant scale-up facilities to accommodate growing customer demand for its services. By adding and expanding these services, the company planned to address early stage needs in the drug development process.

The company will expand its pilot plant scale-up facilities through a capital investment of approximately $6 million. It will improve its Greenville facility and increase reactor capacity, as well as providing additional small-scale drying and blending equipment at its South Haven, MI facility. Construction is scheduled to begin in 2000.

Last month, the parent company announced that it would form Catalytica NovoTec, a new subsidiary within the Catalytica Advanced Technologies company. NovoTec is intended to “rapidly improve chemical manufacturing processes using scalable techniques and high throughput tools for the discovery and development of new catalysts,” according to the company.

Lancaster Laboratories
2425 New Holland Pike
PO Box 12425
Lancaster, PA 17605-2425
Phone: (717) 656-2300
Web site: www.lancasterlabs.com

Revenues: $44 million in 1999.

Key Personnel: Wilson Hershey, Ph.D., president; Wes Neumann, vice president, pharmaceutical operations; Tim Oostdyk, Ph.D., vice president, environmental operations; Tom Wolgemuth, vice president, finance and administration; Mike McDowell, director, business development; Anne Osborn, manager, marketing and communication services.
Major Divisions: Pharmaceutical Sciences; Environmental Sciences.

Capabilities/Capacities: The company’s core business is analytical services. The Pharmaceutical Sciences division’s major areas of operations are microbiology, raw materials, stability and analytical development. The Environmental Sciences division performs soil, water, wastewater, air and biota testing.

Comments: Lancaster continued its ongoing expansion of services, facilities and investments. In 1999, a new facility doubled lab space and increased total square footage to 175,000. The company is presently fitting out a new 15,000-square-foot pharmaceutical micro lab, which will be occupied by the end of the year.

In 2000, the company has doubled its raw materials testing lab space, expanded its R&D services with 50% more staff and has added stability chambers to augment its present 18,400 cubic feet of chamber space. In addition, Lancaster plans to purchase an additional building to house stability chambers and stability staging areas.

Lancaster’s corporate owner is presently involved in spinning off the company to new ownership. Said Wes Neumann, the company’s vice president, pharmaceutical operations, “We are extremely optimistic about the outcome. We will continue to focus on our core business, with further growth and expansion in our future.”

Patheon
2100 Syntex Ct.
Mississauga, Ontario
Canada L5N 7K9
Phone: (905) 821-4001
Web site: www.patheon.com

Revenues: $87 million in 1999.

Key Personnel: Robert C. Tedford, chief executive officer; Nick A. DiPietro, president, chief operating officer; Martin W. Heikoop, executive vice president, global operations; Michael S. Harding, senior vice president, quality and technical affairs; Ron J. Quon, senior vice president, human resources, environment, health and safety; John M. Van Schepen, corporate controller, vice president, administration; Aldo Braca, general manager, European operations; Dr. Shabbir T. Anik, vice president, scientific affairs and global PDS operations; Martina Meoli, vice president, PDS and pharmaceuticals sales; Laura Macdougall, vice president, marketing and communications; Dan L. Ruch, vice president, business management and commercial sales.

Major Divisions: North American Com-mercial Operations; European Commercial Operations; Phar-maceutical Development Services (PDS).

Capabilities/Capacities: Patheon and its 48%-owned Global Pharm affiliate offer more than 1.3 million square feet of manufacturing capacity. Together with the skills of 1,800 employees in five North American and three European facilities, Patheon’s Pharmaceutical Development Services (PDS) business offers drug formulation services including analytical method development, pre-formulation development, clinical trial materials manufacturing and scale up. These services are fully scalable from Phase I through commercial manufacturing.

Comments: Revenues totaled $85 million in fiscal 1999, up 81% from the previous year. Patheon improved its compounded annual growth rate during the last five years to 41%. Last fiscal year, Patheon added 26 new clients and signed contracts for 45 additional products. Prescription products and PDS services now account for more than two-thirds of revenues, with OTC products accounting for the remaining third. Most of the growth in fiscal 1999 came from higher commercial volumes of prescription products and higher revenues from the PDS group. In 1999, 35% of revenues were generated in Europe and 65% were from North America.

Patheon has been solely focused on providing outsourced manufacturing services to the pharmaceutical and biotech industries since 1974. The company does not develop or manufacture any of its own products. In 1997, Patheon began gaining critical mass through the acquisition of high quality pharmaceutical manufacturing sites in the world’s two largest pharmaceutical markets, North America and Europe. The corporate headquarters, located in Mississauga, Canada, was purchased from Roche in January of that year. Less than two years later, Patheon entered the European market with the purchase of a manufacturing site in Monza, Italy from Roche. The close of 1999 saw the acquisition of two additional European facilities, located in Swindon, UK, and Bourgoin, France, from Aventis. This move firmly established Patheon in both the North American and European markets. Patheon became one of the first independent outsourcers to establish substantial operations in both of these markets.

Patheon is currently expanding its Pharmaceutical Devel-opment Services (PDS) group in North America and plans to establish these service offerings in two of its European sites. In 1999, Dr. Shabbir Anik, Ph.D., M.B.A., was hired to head this initiative as vice president of scientific affairs and global PDS operations. Commenting on Dr. Anik’s appointment, chief executive officer Robert Tedford said, “Dr. Anik brings more than 20 years of experience in drug development to the organization. This experience, combined with his world-class scientific knowledge, will further strengthen Patheon’s services, specifically in the areas of formulation development, analytical development, pilot plant operations and related activities.” He added, “Dr. Anik will be instrumental in taking our PDS business to the next level in North America and establishing a PDS business in the European Market.” Patheon also hired Colin M. Minchom, Ph.D., as director, formulation development. Dr. Minchom, who has more than 14 years of drug development experience, is responsible for the company’s formulation development group.

On June 30, 2000, the Ontario Superior Court of Justice issued an order regarding Patheon’s October 1999 application for the equitable winding-up of Global Pharm, Inc. The court ordered that Patheon be given the opportunity to conduct due diligence with respect to Global Pharm and thereafter make an offer to purchase the shares of Global Pharm which it does not own. The other shareholder of Global Pharm will have the opportunity either to accept Patheon’s offer, in which event Patheon will become the sole shareholder of Global Pharm, or, alternatively, agree to purchase all of Patheon’s interest in Global Pharm on the same terms.

Looking to the future, Mr. Tedford said at the annual shareholders meeting, “We expect high rates of growth from both existing and new clients as we attract new business to increase capacity utilization. We also expect to acquire additional plants that meet our criteria, as well as to look at opportunities to acquire competitors under the right circumstances. An even more strategic play would be to acquire a number of sites from one or two pharmaceutical companies, thus taking a quantum leap in the size of our manufacturing network worldwide.”

Quintiles Transnational
P.O. Box 13979
Research Triangle Park, NC 27709-3979
Phone: (919) 998-2000
Web site: www.quintiles.com

Revenues: $1.6 billion in 1999.

Key Personnel: Dennis Gillings, Ph.D., chairman, chief executive officer; James L. Bierman, chief financial officer; John S. Russel; senior vice president, general counsel, secretary, head, global human resources; Derek Winstanly, M.D., president, Japan and South Korea CPO; Oppell Greeff, M.D., president South Africa and India CPO; Andrew Howden, president Asia-Pacific CPO; Ludo Reynders, chief executive officer, Clinical Development Services; Joseph P. Clancy, chief executive officer, Early Development and Laboratory Services; Richard Johnson, M.D., chief executive officer, Quintiles Integrated Strategic Solutions; Gregory Porter, chief executive officer, Quintiles Informatics; James Mauzey, chief executive officer, Quintiles Commercialization; Joseph J. Colatuno, president, clinical development services; Julia MacMillan, senior vice president, corporate administration; Santo J. Costa, vice chairman; Neil G. MacAllister, senior vice president, strategic corporate development and planning.

Major Divisions: Product Development (including Early Development and Laboratory Services and Clinical Devel-opment Services), Commercialization (includes Integrated Strategic Solutions and Commercialization) and Quinternet Informatics.

Capabilities/Capacities: Quintiles offers global expertise in drug development from early compound development through regulatory submission, as well as an array of integrated services to accelerate commercial success of customers’ drug products. The company also offers web-based information tools and market analyses for the pharmaceutical and other healthcare sectors. Quintiles has experts and infrastructure in 31 countries.

Comments: Quintiles recently revamped its operating structure in order to “enhance customer focus and efficiency,” according to chairman and chief executive officer Dennis Gillings, Ph.D. The company’s new units are Early Devel-opment and Laboratory Services and Integrated Strategic Solutions. The company began restructuring efforts in 1999, consolidating several offices and laying off 800 workers, mainly in the product development service group, at a cost of approximately $55 million. Revenue for the year was $1.6 billion, a 14% increase from 1998. Net income grew 23% to $109.3 million from $88.6 million for 1998.

During the year, Quintiles engaged in a series of moves designed to increase its geographic presence, breadth of services and size of contracts. The moves included: signing an agreement with Shanghai Xingling Scientific and Technology Pharmaceutical Co., a Chinese pharmaceutical company, to conduct clinical research for herbal products to treat stable angina; acquiring Premier Regulatory Affairs Consultancy to strengthen its South African portfolio; signing an agreement with VHA Inc. on web-based transactions for a national healthcare network; acquiring MediTrain, the Netherlands’ leading pharmaceutical sales representative training organization; acquiring a provider of physician meetings and educational events for pharmaceutical companies in the U.S.; launching a service with drkoop.com to recruit clinical trial patients on the internet; adding more than 500 jobs in Kansas City, MO and making that city’s operation a regional hub; acquiring Minerva Medical to expand late-phase clinical research; allying with Best Practice LLC for CNS drug development consulting; forming an allergy and respiratory therapeutics group; launching a 100-employee clinical trial manufacturing production facility; expanding its network of clinical trials labs by acquiring Medlab Pty Ltd. and the assets of the Niehaus and Botha (N&B) partnership in Pretoria, South Africa; opening a clinical development services office in Warsaw, Poland; acquiring Scott-Levin, a market research company; forming a pediatric and adolescent care group; forming an exclusive cancer research collaboration with the National Comprehensive Cancer Network and acquiring Oak Grove Technologies, a pharmaceutical validation and engineering company.

The most noteworthy of Quintiles’ moves was the sale of Envoy Corp. to Healtheon/WebMD. Quintiles received $400 million in cash and 35 million shares of Healtheon/WebMD stock and will support the company with as much as $100 million to develop internet-based products in three areas: drug development, physician detailing and direct-to-consumer information delivery.

Commenting on the sale of Envoy, Dr. Gillings remarked, “This deal transforms Quintiles from outsourcing into web-based B2B in one fell swoop. We believe the Healtheon/ WebMD-Envoy combination creates a clear winner in the electronic healthcare business. This agreement also creates a structure in which the market can more fully value Quintiles’ core development and commercialization services as well as Envoy in its new environment. When completed, this alliance will represent the premier health information platform for the internet age.”

In June 2000, the company opened the Quintiles Academy in Gotenba City, 50 miles from Tokyo. The in-residence facility offers training for medical representatives of client pharmaceutical companies in Japan, as well as clinical research coordinator and Clinical Research Associate training. In addition, the Acade-my will offer training for senior management of pharmaceutical companies. Training will be provided by an experienced faculty knowledgeable in the Japanese regulatory environment, global standards of GCP and the requirements of Japan’s Medical Rep-resentative Training Center, according to Quintiles.

“Quintiles’ purchase and outfitting of this building as a dedicated, in-residence training facility reflects its long-term commitment to the Japanese pharmaceutical market,” said Derek Winstanly, M.D., president of the Quintiles Contract Pharma-ceutical region that includes Japan and South Korea. “The Academy’s faculty, which includes Quintiles experts and faculty from local universities, will use the Academy’s state-of-the-art computer- and audio-visual-equipped training facilities to provide instruction in clinical development, sales and marketing, healthcare informatics and management skills.”

In May, Quintiles opened the Japan Pharma Center at its Kansas City hub. The center is designed to help Japanese pharmaceutical companies enter the U.S. market, providing a full range of services in pharmaceutical product development, spanning preclinical through regulatory approval, as well as services in commercialization and healthcare information. The company plans to open a second Japan Pharma Center in Edinburgh, Scotland, to help companies enter the EU.

West Pharmaceutical Services
101 Gordon Dr.
Lionville, PA 19341
Phone: (610) 594-2900
Web site: www.westpharma.com

Revenues: $469.1 million in 1999 ($384 million from Device Product Development group; $83.8 million from Contract Services group; $1.3 million from Drug Delivery R&D group).

Key Personnel: William G. Little, chairman, chief executive officer; George R. Bennyhoff, senior vice president, human resources and public affairs; Steven A. Ellers, executive vice president; John R. Gailey III, vice president, general counsel, secretary; Stephen M. Heumann, vice president, treasurer, assistant secretary; Lawrence P. Higgins, corporate vice president, operations; Herbert L. Hugill, division president, sales and contract services; Donald E. Morel, Jr., division president, drug delivery systems; Anna Mae Papso, vice president, finance; Anthony A. Sinkula, vice president, chief scientific officer.

Major Divisions: Device Product Development, Contract Services, Drug Delivery Research and Development.

Capabilities/Capacities: West offers technologies for pharmaceutical packaging and closures; the development and manufacture of medical devices and device components; drug delivery research and development; contract laboratory services; clinical research services; contract packaging and manufacturing.

Comments: In 1999, West Pharmaceutical Services acquired the clinical research unit of Collaborative Clinical Research, Inc. The acquisition enabled West to undertake clinical research trials in Phase I with an 80-bed hospital unit, in Phases II and III with a site management network.

During the year the company established three business divisions: Device Product Development, Clinical Services and Drug Delivery. The structure is intended to allow the company quicker response time to client needs.

After filing an Investigational New Drug (IND) application in December 1999, the company commenced Phase I clinical trials for its proprietary technology for nasally delivery morphine. The company has also filed an IND for a nasal formulation of leuprolide acetate, which will be tested to treat indications of endometriosis. Both formulations are based on West’s proprietary chitosan-based technology.

West’s revenues were up 4.1% to $469.1 million in 1999, due primarily to the Device Product Development group, which posted revenues of $384 million, an increase of 4.8%. Revenues from the Contract Services group were up slightly to $83.8 million, while the Drug Delivery R&D group dropped to $1.3 million from $1.5 million in 1998.

Although the acquisition of the clinical services business units in April 1999 added $10.1 million to 1999 sales, project postponements and cancellations diminished their contribution to West’s bottom line.

Sales of contract manufacturing and packaging services decreased by 11% from 1998. West attributed the decline to several factors, including: a loss of sales related to two product lines that sponsors converted to in-house production; low demand for certain sponsors’ products; postponements of sponsors’ new product launches and sponsor product cancellations due to regulatory issues. West has responded to these results by increasing the size of its dedicated sales force, while continuing to leverage other sales resource efforts to offer sponsors the full supply chain capability of all its business units.

In other company news, former chairman and president William S. West died in August 1999. Mr. West, who began his career with the company in 1950, was the son of the company’s founder, Herman O. West. He was elected president in 1965, retired from active management 30 years later and left the board of directors in 1997.

For the full Top Contract Service and Outsourcing Companies profiles, check out the print version of Contract Pharma’s July/August issue. Companies covered include: