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October 30, 2006
Volume 84, Number 44
p. 9

Asset Shift

Lonza Will Buy Cambrex Biotech Businesses

Cambrex will shrink to half its size in $460 million deal

Rick Mullin

Cambrex has agreed to sell its biopharma and bioproducts businesses to Lonza, the Swiss contract manufacturer of fine chemicals and biologics, for $460 million.

Separately, Cambrex is selling active pharmaceutical ingredient (API) facilities in Cork, Ireland, and Landen, Belgium, to International Chemical Investors Group (ICIG), a Luxembourg-based holding company, for an undisclosed sum.

Cambrex
Lonza will add this Cambrex bioreactor to its portfolio.

The sales result from a strategic review Cambrex launched in January after announcing that it had abandoned plans to become a specialty therapeutics company. They will leave Cambrex a much smaller company operating just part of its human health division, which conducts contract manufacturing of drug intermediates and APIs.

Cambrex will concentrate its efforts on sites in Charles City, Iowa; Karlskoga, Sweden; and Milan, Italy. CEO James Mack notes that these remaining plants can manufacture controlled substances and highly potent products as well as handle high-energy reactions.

The biopharma business being sold includes biologics facilities in Hopkinton, Mass., and Baltimore. The business manufactures two commercialized biopharmaceuticals—Ligand's Ontak cancer drug and Tercica's Increlex growth factor. The bioproducts business markets cell-biology-based research, therapeutic, and testing products for drug discovery and manufacturing.

Corporate Arc

Cambrex built itself up largely through acquisitions

1981 Founded as a producer of castor oil and derivatives

1991 Enters API business through acquisition of a Solvay business

1997 Enters bioproducts business with the purchase of BioWhittaker

1999 Acquires European API assets and FMC's bioproducts division

2001 Acquires biologics manufacturing facilities in Hopkinton, Mass., and Baltimore

2003 Sells Rutherford Chemicals, its specialties operations

2004 John R. Leone succeeds James Mack as CEO and announces plans to transform Cambrex into a specialty therapeutics company

2006 Leone resigns, Mack returns as CEO, and company says it will explore strategic alternatives

Together, these biotech businesses accounted for 42% of Cambrex' 2005 sales of $452 million. Lonza CEO Stefan Borgas says the addition will "accelerate the delivery of Lonza's strategic shift toward life sciences that we mapped out two years ago."

Borgas says the bioproducts business is the more important of the two because it will bring Lonza into the new field of biotech research products, where it will compete with firms such as Invitrogen and Sigma-Aldrich. The biopharma business, meanwhile, will add microbial fermentation reactors to the mammalian cell culture reactors that dominate Lonza's biopharmaceutical business.

For Cambrex, the sale reverses a long, acquisition-driven build-up. "Cambrex is unwinding about 10 years of progress," says Dimitry Silverstyn, an analyst with Longbow Research. "The only difference between the company today and in 1996 is that it no longer has the Rutherford Chemicals specialty business."

He notes, however, that Cambrex is selling its biotech-related businesses at a good price. "It is probably about $80 million higher than they thought they would get for it," he says.

Although Cambrex says it continues to explore strategic options, Silverstyn says the firm is not aggressively marketing the remaining assets and may even seek to expand its contract manufacturing business. "They refer to themselves as a pharmaceutical services company, which may imply services beyond contract manufacturing," he says. "They may go into contract research."

Former Lonza executive and now independent industry analyst Peter Pollak, however, characterizes the deal as illustrative of the exit of U.S. firms from custom pharmaceutical manufacturing, a market traditionally dominated by European players. "Both Cambrex and Lonza justified their transactions with being in the best interest of their shareholders, albeit with a small nuance," he says. "Cambrex referred to their short-term, Lonza to their long-term interests."

For its part, ICIG plans to merge the Cambrex sites it is buying into a new company, Corden PharmaChem, that will include other pharma-related businesses the investment group has purchased over the past two years. Since June 2005, ICIG has acquired an Albemarle fine chemicals business, six businesses from RAG's Rütgers division, and the former Enka subsidiary of Acordis.

Chemical & Engineering News
ISSN 0009-2347
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