Issue Date: March 28, 2005
THE ALLURE OF THE GARDEN STATE
Former New York City mayor Rudolph Giuliani, arguably a politically astute dinner speaker, may have been a little off his game when he addressed the annual Drug, Chemical & Associated Technologies Association (DCAT) banquet at New York City's Waldorf-Astoria Hotel in 2002. He told a lot of New Jersey jokes.
New pilot-scale manufacturing and research operations are also coming into the state. Some companies claim that these assets are key marketing tools for the U.S., especially when commercial-scale production takes place in Europe or Asia. This, according to Guy Villax, chief executive officer of Lisbon-based Hovione, an API manufacturer that recently opened a marketing, research, and pilot production operation in East Windsor, N.J., is most important when marketing to small and emerging pharmaceutical companies.
According to Villax, there was very little question about where to set up in the U.S. "Why pick New Jersey? From our prospective, it seems like step one," he says. "This is the traditional cradle of pharma chemistry in the U.S., and it has a very high concentration of customers."
THE CONGREGATION of large drug companies also has created an unmatched talent pool for companies developing, manufacturing, and selling fine chemicals and APIs, according to contract manufacturing executives. And there is only a six-hour time difference between New Jersey and home offices in Portugal, France, and Switzerland, compared with a nine-hour difference between Europe and California. Newark Liberty International Airport provides a major conduit to Europe as well as to biotech hubs anywhere between Boston and South San Francisco, they say. And proximity to New York City is also attractive to European executives.
But in the end, customer proximity outweighs all other conveniences. "There are lots of flights to Lisbon," Villax says. "There is a large Portuguese population in Newark and helpful banks. Those are extra wonderful to have, but they are not the key criteria. The key criteria are called Bristol-Myers Squibb, GlaxoSmithKline, et cetera."
Even in the Internet age, marketing directors agree that managing accounts with large drug companies requires a local full-time staff. "Kneecap to kneecap selling is crucial," says Steven E. Spardel, North American business development director for EMS-Dottikon, based in Dottikon, Switzerland. "In this industry, it's 'out of sight, out of mind.'"
Spardel grew up in Wayne, N.J.; studied at the New Jersey Institute of Technology, in Newark; and received an M.B.A. from Rice University, in Houston, where he began working in commodity chemicals in the 1980s. When Spardel came back to New Jersey in the 1990s, he went to work for the pharmaceutical chemicals division of French government-owned SNPE before taking the position at EMS in 2002 at its office in Verona, N.J.
Spardel says chemical industry career opportunities in his home state have funneled almost entirely into the pharma sector, as most commodity chemical manufacturing has moved out of state.
Fabrica Italiana Sintetici (FIS), headquartered near Venice, Italy, opened a U.S. office in Glen Rock, N.J., four years ago. Steven DeSalvo, the company's one full-time U.S. sales representative, says that in his first two years, he worked primarily to introduce the company, which manufactures only in Italy, to the U.S. market. "It takes a while to establish a track record," he says. "But my role now is more project management. Things are moving from paper to the plant."
Both Spardel and DeSalvo say they are minutes away by car from their big pharma customers; longer trips are devoted to pursuing new business with biotech firms. DeSalvo says a single-day round trip to Boston by car is not unheard of. Both say their companies see business picking up and are evaluating the prospect of adding staff to their U.S. operations.
Spardel notes that EMS added a salesperson in Ohio last year; that person reports to the office in New Jersey.
More recently, Produits Chimiques Auxiliaires et de Synthése (PCAS), made a commitment to the U.S. in New Jersey (C&EN, Jan. 24, page 12). "For years, I kept telling them, 'Whenever you're ready! Whenever you're ready!'" says Joseph Tessier, PCAS's newly hired vice president in charge of marketing for the U.S.
Tessier, who was working for Summit Pharmaceutical, had the goal of convincing PCAS to open a U.S. marketing operation in his home office in Hoboken, N.J. "It was a running joke every year at CPhI," says Tessier, referring to the annual European fine and pharmaceutical chemicals exposition. "Well, last year, they said they were ready."
According to Tessier, PCAS had grown rapidly through acquisitions in Europe, and the U.S. market was taking on increased importance. For a sustained drive, he says, PCAS needs to have a local contact. Tessier, who previously worked in France for another French contract manufacturing firm, SEAC, and is fluent in French, says the move is starting to pay off. "Our R&D in France is very busy now. That is partly because of me."
THE QUESTION remains whether small companies based outside the U.S. will need to complement local marketing operations with local R&D and pilot-scale manufacturing. For SNPE, which has one of the longest standing permanent offices in New Jersey, U.S. research and production were part of the strategy from the beginning, according to Daniel Slick, head of SNPE's North American fine chemicals operation in Princeton. At the center of that strategy is phosgene chemistry, the company's specialty.
"We are pioneers," Slick says. "We started in November 1985 as SNPE North America," becoming one of the first European pharmaceutical fine chemicals companies to move from distribution through agents in the U.S. to operating a subsidiary. Its first manufacturing venture was a now-defunct joint phosgenation operation with Dow Chemical in LaPorte, Texas. In the late 1990s, the firm purchased Van de Mark in Lockport, N.Y., and Multiple Peptide Systems, a San Diego firm that has since merged with SNPE's NeoSystem peptides operation to form NeoMPS.
As SNPE's fine chemicals business gained momentum in the 1990s, the firm moved an executive from Paris, Thierry Malfroot, to New Jersey for three years to help establish the company locally. Back in Paris, Malfroot is now general manager of Isochem, the name of SNPE's fine chemicals unit since 2002. Last year, another Paris-based executive, Xavier Jeanjean, Isochem's commercial director for pharmaceuticals, moved to the Princeton office as the commercial director for pharmaceuticals for North America.
David Simonnet, executive vice president for pharmaceuticals at Isochem in Paris, says Jeanjean's move to Princeton accompanies a second phase in developing the U.S. business in which the company plans to transfer production of an API to the Lockport plant later this year following an upgrade of the site.
Dynamic Synthesis, until last year the fine and custom chemicals wing of German holding company MG Technologies, also has a well-established presence serving North America through its office in Berkeley Heights, N.J. But the company--made up of Dynamit Nobel Special Chemistry, Rohner, and Finorga--was recently purchased by Rockwood Specialties and merged with Groupe NovaSep, headquartered in the U.S. in Berwyn, Pa., west of Philadelphia.
Donald Mammato, vice president of business development for Groupe Novasep Synthesis, says he won't be moving to Berwyn--he will continue to work in New Jersey from his home office in Clinton, which he says is in an ideal location.
"Within 10 minutes of my house is Merck headquarters," he says. "I'm a half an hour from Sanofi-Aventis, which was Hoechst Roussel, in Bridgewater. It's a half an hour to Pfizer's global manufacturing division in Peapack. It's 35 to 40 minutes to Bristol-Myers Squibb in New Brunswick and 15 to 20 minutes to Johnson & Johnson. Novartis is 45 minutes away."
According to David Hoffman, president of Hovione's U.S. operations, the New Jersey location of the company's $19 million Technology Transfer Center (TTC) is a big part of its success. The firm currently has five major drug companies and 10 biotech or emerging pharmaceutical firms as customers.
While large drug companies are generally less concerned with inspecting pilot operations, start-up firms prefer to be intimately involved, Hoffman says. "They want to be part of the development--maybe not working on the bench, but they want to come and visit and kick the tires," he says. "They want us to speak the same language."
According to Hoffman, TTC has been in full operation for about four months and has signed on nine new customers over the past year. He emphasizes, however, that New Jersey projects that advance are all transferred to Hovione's kilo-scale and commercial production facilities in Lisbon and Macau, China. "We have a philosophy that we don't want to repeat the project in New Jersey," he says. "We do it one time before we hand it off to the next site. We're here to widen the mouth of the funnel to send projects off to commercial reality in Lisbon and Macau." So far, the firm has transferred two significant projects to its commercial production sites.
Tessier says PCAS had looked for a facility to purchase in the U.S., but without success. Others had a similar problem--a former Avecia executive told C&EN that Avecia's 2000 purchase of Canada's Torcan followed an exhaustive search for assets in the Garden State.
Other companies, such as FIS, are convinced that they can grow in the U.S. with manufacturing done in Europe. This year, FIS is commissioning a $1.3 million kilolab in Italy, a project enthusiastically advocated by DeSalvo, who saw a need for more kilo-scale production to promote business with U.S. biopharmaceutical companies. "When I got to FIS, I asked Steve if there was anything he needed to help in North America," says Roger Laforce, who joined FIS last year as general manager for sales and marketing. "I was expecting him to ask me for a new computer."
Yet some other firms have succeeded in taking over existing New Jersey assets in recent years. Rhodia Pharma Solutions, for example, consolidated all of its U.S. pharmaceutical fine chemicals operations at a rented site on DuPont's sprawling Deepwater, N.J., complex.
And Suven Life Sciences LLC, a new U.S. subsidiary of Indian contract research firm Suven Life Sciences, acquired the R&D and kilo-lab assets of Synthon Chiragenics in Monmouth Junction, N.J., in 2003. In both cases, the New Jersey sites are intended to do lab and pilot-scale work that is eventually transferred to commercial-scale manufacturing in the U.K. and India, respectively.
ANOTHER ASIAN firm, Sumitomo Chemical, moved its pharmaceutical chemical business to Edison, N.J., last November. Simon Sellers, president of Sumitomo's fine chemicals division, says the company had been managing contract manufacturing sales from offices in Houston and New York City. The latter, Sellers says, is a "business incubator" for the Japanese conglomerate.
Sumitomo's integration of its pharmaceutical services subsidiary, Sumika, was a final step in the full incubation of U.S. pharmaceutical chemical operations. Sellers, who hails from the U.K., is currently commuting between Edison and his home near Chicago. While admitting that he has to warm up to the new location, he says the firm saw New Jersey as the obvious place to base U.S. pharmaceutical operations.
Most of the marketing managers at the U.S. operations of overseas firms are U.S. citizens. In fact, nearly all of them grew up in New Jersey, Pennsylvania, and New York. Many know each other from working together in previous jobs in the industry. As they mingled around the famous clock in the Waldorf-Astoria lobby at this year's DCAT dinner earlier this month, Laurie Seifert, a sales and marketing manager with Hovione who joined the company last year, had a hard time getting the attention of her colleague Hoffman as he greeted drug industry acquaintances. "This guy," she says, "knows everyone."
And transplants, such as Isochem's Jeanjean, born and raised near Cognac, say New Jersey is a comfortable environment. "Frankly speaking, it was a really good surprise how much my wife and I like it here," Jeanjean says. He says the university town of Princeton, situated an equal distance from New York and Philadelphia, affords an abundance of cultural diversity. "You can find pretty much what you want, which is good, because it is important from time to time for the French to smell a good cheese."
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