Issue Date: June 20, 2011
Sticking With the plan has served Porton Fine Chemicals well. When Porton’s founders launched the company in 2002, they meant to establish a producer of pharmaceutical intermediates that consistently meets the needs of foreign buyers. Not even a decade later, the company is expanding into active pharmaceutical ingredients (APIs) while considering a $100 million stock market offering.
It’s largely at the request of its foreign customers that Porton is preparing to enter the already crowded market for APIs, says Oliver Ju, chairman and chief executive officer of the Chinese firm. At its site in the Changshou district of Chongqing, a city in central China, the company has started construction of an API plant that will comply with the U.S. Food & Drug Administration’s current Good Manufacturing Practices (cGMP), a set of standards that suppliers of drugs to the U.S. must follow.
“Producing APIs has been part of our plans for a long time, and our key customers now want us to produce GMP materials for them,” Ju says. “They are looking for sources of APIs in a low-cost country, and they feel comfortable with us even if we haven’t yet proven ourselves as a GMP-compliant manufacturer.” Porton recorded sales of $67 million last year and is on target to hit $100 million this year, he adds.
Entering the API market will open up new opportunities for Porton while at the same time making some potential customers less enthusiastic about sourcing from the firm. “The shift in their business model will make them appear as a competitor in the field of APIs, which makes companies like ours more hesitant to source intermediates from them,” says Roger LaForce, general manager of marketing and sales, R&D, and logistics at the Italian API producerFabbrica Italiana Sintetici.
Nonetheless, joining the API fray is the right thing for Porton to do, LaForce adds, because patients in China and other emerging markets are starting to demand pharmaceuticals made to the same quality standards as those found in advanced countries. But to be competitive, LaForce emphasizes, Porton will have to consistently meet the quality requirements of the multinational companies supplying those drugs.
cGMP-compliant manufacturing is a challenge that Porton managers do not seem to underestimate. Their new plant was entirely designed by the U.S. firm Jacobs Engineering “because we did not think that a local firm was good enough,” Ju says.
At the same time, Porton is upgrading its managerial depth. For the past year, Shuguang Zhu, a chemist with cGMP manufacturing experience in Canada and the U.S., has been in charge of project management in Chongqing. Kerry Yu, a former quality manager at a GlaxoSmithKline plant in China, now manages Porton’s quality.
The management board of Porton now includes Thomas Archibald, a former NextPharma Technologies executive who has decades of experience in process scale-up and energetic chemistry. And Porton has hired David Lan, who previously managed an FDA-approved plant in Chongqing, as manager of its new cGMP plant.
Competent managers and a well-designed plant do not mean that Porton will easily master cGMP manufacturing, Ju acknowledges. “It takes time to nurture a GMP workforce,” he says.
In tandem with beefing up manufacturing, Porton is upgrading its R&D capabilities. The firm already employs 70 researchers in Chongqing and 65 in Shanghai. Porton needs an R&D center in Shanghai, Ju says, because that’s where China’s most talented people tend to be. In coming years, he vows, the company will expand R&D in Shanghai, Chongqing, and Chengdu, a city in Sichuan province, to the west of Chongqing, which has a number of universities that graduate chemists.
One of Porton’s thrusts is the development of new manufacturing technologies, Ju says. For instance, the company wants to fully harness the potential of glass microreactors produced by Corning that in theory enable the synthesis of pharmaceuticals via continuous processes.
To finance its continued expansion, Porton is considering an initial public offering of stock. The listing would be offered only to Chinese investors because company valuations in China are higher than in foreign markets, Ju says. The IPO would raise about $100 million, although Ju is not clear about when it would occur. “Market listing is complicated,” he says.
And the future for custom drug manufacturing in China is bright, Ju says. “Costs have noticeably risen recently,” he says. “But the cost advantage in terms of land, engineering, and chemists remains strong.”
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