The biggest breaking news story at Informex USA 2010 was that AMRI is to acquire Excelsyn Molecular Development of the UK for $19 million in cash. This deal will expand AMRI’s geographic footprint, market share and customer base in Europe. It will cost $1 million to implement but is expected to be accretive to EBITDA this year.

Excelsyn has 60 employees at its site in Holywell, North Wales, which formerly belonged to Great Lakes, and had sales of $15 million last year. It provides pre-clinical and Phase I–III product development and commercial manufacturing services to the global pharmaceuticals and biotechnology industries worldwide.

The company was founded by its CEO, serial entrepreneur Ian Shott, with a USP of combining manufacturing, engineering and consultancy services. As Shott later admitted, this did not really work out and the engineering side, in North-East England, has since been closed down. However, Holywell has performed exceptionally well in recent years.

Speaking at Informex, Steve Jennings, senior vice president of sales, marketing and business development at AMRI, said that the deal had been in the making for some time. “We carried out an awareness campaign in Europe last year and found that the name was not very well known,” he explained. “Without small-scale chemical development and API manufacturing assets in Europe, we were at a disadvantage.”

AMRI had previously built up its medicinal chemistry capabilities in Europe, via the former ComGenex in Hungary. It also has laboratories in Singapore, a laboratory and chemical development site in Hyderabad, India, and manufacturing at another Indian site in Aurangabad, to complement its US manufacturing base. Chemical development in Europe was an obvious missing link.

“The company cultures and values are very similar – I have never seen two companies line up so well and we also hit it off personally,” said Jennings. “We have very little overlap in our customer base and what there is is complementary. Excelsysn has also done a good job of running lean; their cost structure can help us too. There are a lot of synergies.”

In addition, Jennings remarked, the acquisition would help to realign the AMRI customer base. Excelsyn is more slanted towards Big Pharma, where AMRI had been affected by weakening demand from Emerging Pharma companies, and also supplies into other markets new to AMRI, such as cosmetics, flavours and fragrances. The combined firm will be able to supply to all of these at any scale.

Shott himself said that the two firms had a “good strategic fit”, Western Europe having been “the obvious gaping hole” in AMRI’s footprint. Excelsyn, he added, is at a pivotal point in the development cycle and could feed projects into the Indian facilities, while also helping to bridge the time zone gap between the US and India.

Although Excelsyn had quadrupled in size in the past five years, it was still unable to exploit all of its customer relationships fully because of its size and Shott had become convinced that it needed to be part of a larger organisation. He had looked to the private equity sector to fund a possible buy-and-build strategy but the financial crisis had made partners hard to find, until AMRI came along.

“The Holywell site could double its turnover,” added Shott. “It isn’t running half-empty – last year’s sales were the highest ever, in fact – but it could operate much more effectively with a modest investment in more equipment.”
Currently most of the reactors are in the 500-2,000 litres range, though they go up to 4,000. Mainly it supplies the grams to hundreds of kilos range, carrying out multi-step syntheses to GMP from labs and kilo labs, transitioning to pilot plant and niche-scale production plant assets.

“Production in Wales is not cheap, but it’s cheaper than the US and we are told that we are not undercut on price by Asian firms,” Shott concluded. “Our specialisation, though, is being fast. We can go from a drawing of a molecule to first customer deliveries in three months.”

Shott will remain in a consulting role for a further 18 months and will continue to assist with customer relationships at Holywell. Thereafter, the site will be managed by Dr David Rowles as general manager, reporting to Dr Steve Hagen, vice-president of pharmaceutical development and manufacturing. Rowles has been chief operating officer at the site since 2004.