In October Gallus BioPharmaceuticals acquired Princeton, NJ-based Laureate Biopharmaceutical Services. The move boosted Gallus’ process development and clinical manufacturing capacity, while also providing a pathway for Laureate’s development-stage clients to reach commercial scale.

We covered that development in a news brief in our October issue (bit.ly/HrFPG7), but I wanted to find out more about the rationale behind the acquisition, so I spoke to Gallus’ president and chief executive officer, Mark Bamforth, about Laureate, the bio-CMO landscape, and more.

—GYR

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Contract Pharma: Congratulation on buying Laureate Biopharmaceutical Services!
Mark Bamforth: Thanks very much! We’re thrilled at the acquisition and think it’s going to lead to some good things.

CP: What’s the gap that Laureate helps Gallus fill?
MB: There isn’t so much of a gap as an opportunity to help Gallus accelerate the flow of products through to commercial. I founded the company three years ago, and we acquired a site from Johnson & Johnson six months later (May 2011). From day one we were manufacturing two commercial products for J&J. Since then, we’ve built a development and clinical organization in addition to our commercial unit.

Today, we have a number of clients in place, ranging from preclinical to Phase III. We have a pipeline that’s developing nicely, but Laureate helps add further mature pipeline of client molecules. They’ve been a CMO for 12 years and they’ve run that site for 30 years, so they’ve got a longer history with clients and a more developed client base. So this move accelerates the growth of Gallus’ pipeline of client molecules.

CP: On the flip side, what benefits does the Laureate team see from this acquisition (besides the obvious)?
MB: Laureate has a solid track record of process development and clinical manufacturing, but its commercial manufacturing was quite limited to small volume products. In order to continue to serve clients, Laureate needed access to larger scale commercial manufacturing. That’s what we provide, through our facility in St. Louis. It’s really a very powerful combination.

CP: Had they looked at building their own capacity?
MB: They evaluated different ways of gaining commercial capacity, whether building internally or finding other ways. That’s what drove the opportunity.

CP: How important is scale for bio-CMOs?
MB: There are different ways of looking at scale. Bioreactor scale isn’t as important as it once was, thanks to high titers. The scale that we’re at — which is 2,000 liters maximum for either stainless steel or single-use — is very adequate for most molecules that are in development today.

The other notion of scale is the total capability of an organization. In our case, we’ve doubled the capacity we have for process development, so we can support more clients. In that way, scale allows us to work on more client molecules. The reality is that many molecules fail in the clinic, so scale helps us work through the ebb-and-flow of the development process.

CP: You also added development-scale fill/finish through this acquisition. How important was that for you?
MB: Gallus’ original business plan included adding that capability in St. Louis. As we developed our plan and worked with clients, we realized that it would be a big effort to establish both the capability and the credibility necessary. We concluded that others have the capability and it wouldn’t be the best use of our resources to pursue it.

So it’s a very nice added benefit that Laureate has that in place. They’ve been doing aseptic fill/finish for 25 years, including commercial filling for more than 15 years. So it was a great component of this merger of our businesses.

CP: What’s the size of the combined company?
MB: There’ll be approximately 350 employees, but we can’t disclose the revenues or the acquisition cost.

CP: How long had you been negotiating with Laureate?
MB: I’ve known the chief executive officer at Laureate for a couple of years. Around a year ago, they started their quest for the right solution to their commercial-scale gap. We started talking at the end of 2012 about doing something with them. It turned more serious around five months ago, at the BIO annual meeting.

CP: Had you done any projects with them previously?
MB: No, we hadn’t.

CP: Which of Laureate’s senior managers are going to stay with Gallus after the acquisition?
MB: Michael Griffith, the chief executive officer, will stay for a few months to help with the transition. Michiel Ultee, who was Laureate’s chief scientific officer, will be joining Gallus in that role. We’re thrilled with the experience and depth of Laureate’s leadership team. Mike Ultee’s been part of Laureate for more than 25 years now, so it means a lot to have someone like him continue to work with us. He’s known and respected throughout the industry, and he’ll work closely with the head of process sciences at Gallus.

Bob Broese, who’s also been at the Laureate site for 25-plus years, ran the commercial team there. He’ll work closely with Joe Coffey, the chief commercial officer at Gallus. We’re really thrilled to retain Mike and Bob, because of their tremendous knowledge of the site and the industry.

CP: Are there any late-stage projects that are slated to move from Laureate’s Princeton, NJ site over to Gallus in St. Louis?
MB: There are several that we expect to migrate in the next one to two years. Our plan is to build an additional commercial suite in St. Louis, which would have 2,000L stainless steel bioreactors to mirror the 2,000L stainless clinical bioreactors that are in place in Princeton. That’ll cost around $20 million capital investment.

CP: Have you spoken to clients of either company about how they think this integration should work?
MB: Absolutely! As part of our due diligence, we reached out to a number of existing clients and shared them what we were planning to do. We’ll continue to work with all of Laureate’s clients in the weeks and months ahead to make sure we’re meeting their short-term needs and planning for their long-term needs.

I think many of them are happy that there’s now a secure pathway to commercial, which Laureate was seeking for its clients.

CP: What role does biosimilar development play in where you’re headed?
MB: We’re a pure-play CMO, so we’re not working on any products for ourselves. Some of our clients have biosimilars in their portfolio, but the majority of products that we’re working on are novel. Biosimilars are a piece of the landscape, but they’re not a major component.

CP: . . . Yet?
MB: I’m not quite sure. Certainly, in the U.S. there’s still a lack of clarity about the pathway for biosimilars. In Europe, the pathway is more established. A lot of the companies developing novel products really value having a U.S.-based, high-quality manufacturer. I expect we’ll continue to see a high proportion of novel products going forward.

CP: Are there any layoffs planned with the acquisition?
MB: There’s a very limited overlap. The organization in St. Louis has grown by 50% in the past two-and-a-half years, from 160 to about 250 today. Our plan is to do the same today in Princeton. The vast majority of people there are doing process development, clinical manufacturing, running the facility: all of those people are essential. Our goal is to maintain that base and to grow from there.

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Biographical Note
Mark Bamforth is the president and chief executive officer of Gallus BioPharmaceuticals. He founded Gallus in 2010 and completed the financing to acquire its St. Louis site in 2011. He has 22 years of experience from running global operations and a pharmaceutical CMO business for Genzyme. Prior to Genzyme, he was a chemical engineer in the whisky industry and a petroleum engineer exploring for North Sea oil. Mr. Bamforth serves on the MassBio Board and is a founding Trustee of the Saltire Foundation, a charity that offers young Scottish entrepreneurs the opportunity to experience and learn in high growth companies in the U.S. and beyond.

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Gil Roth has been the editor of Contract Pharma since its debut in 1999.