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October 21, 2002
Volume 80, Number 42
CENEAR 80 42 p. 24
ISSN 0009-2347


AIMING FOR THE TOP
Dow Chemical uses technology strength to carve out a place in the pharmaceutical market

Europe is the historic cradle of the business of making pharmaceutical intermediates and active ingredients for third parties, and to this day none of the world's top pharma chemical manufacturers is based in the U.S.

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UP TO PAR Dow's Mirfield, England, site is one of four at the firm that adhere to current Good Manufacturing Practice standards.
ASCOT PHOTO
Undaunted, Dow Chemical is trying to build up a pharmaceutical business with a range of capabilities rivaling that of the European leaders. In fact, Dow executives see their company emerging as one of the top five players in contract pharmaceutical manufacturing as the market matures and consolidates in the years to come.

Dow launched Dow Pharmaceutical Services only a year ago and named a business director--Nick Hyde, former vice president of Avecia Pharmaceuticals--just last month. But the company emphasizes that it is no newcomer to pharmaceuticals.

George Biltz, vice president of Dow's custom and fine chemicals business, the parent to the pharma services unit, points out that Dow was active in pharma chemicals for decades as the owner of drugmaker Marion Merrell Dow. Dow sold MMD in 1995 to what was then Hoechst but retained its plants, its chemists, and its engineers.

Later that year, Dow formed Dow Contract Manufacturing Services to offer the expertise of the former MMD manufacturing organization, as well as that of other Dow business units, to third parties.

Dow's range of contract services subsequently grew through acquisition. In 1998, it acquired Hampshire Chemical, a leader in hydrogen cyanide chemistry. In 2000, it bought Collaborative BioAlliance, a maker of pharmaceutical proteins via microbial fermentation. And in 2001, it purchased Ascot plc and its three key units: Chirotech, a provider of chiral technology and compounds; Mitchell Cotts Chemicals, a pyrethroid chemistry expert; and custom processor Haltermann Products.

According to Biltz, the pharmaceutical services unit was conceived after Dow realized it needed to focus specifically on drug industry customers. The contract manufacturing unit was split up, with nonpharma services becoming part of Dow Haltermann Custom Processing. The company won't disclose financial details for the pharma unit, other than to say sales are several hundred million dollars a year out of the $600 million for custom and fine chemicals as a whole.

NEW TO THE COMPANY, Hyde says he has been both surprised and impressed by the range of technologies available from Dow. "If you talk to the fine chemicals leaders today, they will say, 'Dow is a big company, but we're not sure what it is doing,'" he says. "Dow has a greater degree of engagement with the pharmaceutical industry than it gets credit for."

Hyde and Biltz attribute Dow's low profile to its midwestern roots and a belief in not trumpeting capabilities until they are ready. But they say the company will be appearing on the radar screen more often. At the recent CPhI trade show in Paris, for example, Hyde announced that Dow will be building a commercial-scale oligonucleotide plant in Midland, Mich.

Oligonucleotides, compounds used in antisense therapy, are attracting attention, in part because of large drug development deals involving Aventis and Eli Lilly. But in contrast to chemical firms that only now seem to be jumping on the nucleotide manufacturing bandwagon, Dow has spent the past four years quietly building up competence in the field, Hyde notes.

Biltz says oligonucleotide chemistry is just one of several areas of expertise that stem from the huge range of technology residing in Dow, the world's largest chemical company. As another example, he points to the firm's work combining chelating agents and radioactive metals. With Human Genome Sciences, Dow helped develop a protein-based drug that can deliver radioisotopes to malignant cells while minimizing damage to healthy ones.

Dow's degree of contact with small and "virtual" drug companies might also surprise outsiders, Biltz says. One of its early successes was a manufacturing process for Renagel, a phosphate absorber developed by GelTex Pharmaceuticals for kidney dialysis patients. "GelTex talked to a lot of people, but they came to us because we could fill everything, from discovery to commercial," Biltz says.

Dow has a venture-capital arm that invests in start-up drug and biotechnology companies, Biltz says. And it offers process development and kilogram-scale chemistry on a fee-for-service basis, he says, belying the perception that the company is interested mainly in commercial-scale deals.

Biltz realizes that to be on the same footing as European giants like Lonza and DSM, Dow needs to offer biopharmaceutical manufacturing. The company started by acquiring the modestly sized Collaborative BioAlliance and is now deciding how best to proceed. "We are not ready to declare our intentions, but we are spending a lot of time and money to make the right decision," Biltz says.

Andrew N. Liveris, president of Dow Performance Chemicals, the $5 billion-a-year business that includes Biltz's group, was in Paris earlier this month to reinforce what he calls the top-level commitment Dow made to the drug industry two years ago.

Liveris is aware that several U.S. chemical companies had hatched big plans for pharma businesses, only to scale back when the going got tough. But he points out that such firms generally sought to move downstream into pharmaceutical ingredients from positions in building-block chemicals. "Dow started from a different point," he says. "We were already in the business."



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