Piramal Presses On In Contract Manufacturing

In 2010, Piramal Enterprises sold its generic drug business to Abbott Laboratories for more than $3.7 billion. Last September, the Indian conglomerate announced the closure of its Mumbai laboratories, one of the most advanced drug discovery centers in India. To a casual observer, it would seem as though Piramal were systematically getting out of the drug business.

But that would ignore Piramal Pharma Solutions, the company’s contract research and manufacturing business, which has kept on expanding quietly over the past decade.

Posting sales of $328 million in the fiscal year that ended on March 31, Piramal Pharma Solutions is one of the world’s largest players in the contract manufacturing of pharmaceutical chemicals. With production facilities in India, North America, and Europe, it promotes itself as a supplier of a full range of services, from early-stage contract research all the way to commercial manufacturing of finished formulations.

Flexibility in serving customers is the mantra. “We want to be positioned correctly from a size perspective, from a capacity perspective, and from a competency perspective,” says Vivek Sharma, chief executive officer of Piramal Pharma Solutions. The business, he says, is investing in all of its facilities worldwide. “We are adding capabilities and capacity where it could be of use to our customers.”

Despite its large and growing size, Piramal Pharma Solutions isn’t very well-known, even within industry circles. The head of a major contract manufacturing firm based in China said he couldn’t offer an opinion on Piramal because he was unfamiliar with it. And Ramesh Subramanian, a veteran contract research and manufacturing executive who became Pharma Solutions’ vice president of marketing a few months ago, tells C&EN that he was initially surprised by the size of the company.

Over the past decade, acquisitions have played an important role in Pharma Solutions’ growth. In 2005, the company bought Avecia’s custom manufacturing business, a move that provided it with plants in Grangemouth, Scotland, and Aurora, Ontario. The following year, it bought a Pfizer pharmaceutical chemical facility in Morpeth, En­gland. Then this past January, Piramal paid $31 million to an affiliate of the University of Kentucky to acquire Coldstream Laboratories, a contract manufacturer of injectable drug formulations based in Lexington, Ky.

Pharma Solutions is also growing organically. At its discovery services center in Ahmedabad, India, the company recently added a building, giving it room for 400 scientists.

Piramal started to commit more intensively to contract work in 2010 after it sold its generic drug business to Abbott. The transaction, Sharma explains, had a transformational effect on Piramal. Some of the proceeds from the sale went to boost other businesses within Piramal Enterprises, notably financial services, but some ended up with Pharma Solutions.

The focus at Pharma Solutions remains to expand services and know-how in areas where it perceives demand. Buying Coldstream provided Piramal with injectable treatment manufacturing capabilities that it had lacked. It was clear that the company would find customers for this new service, Sharma says, because some firms that were hiring Piramal to produce antibody-drug conjugates (ADCs) in Grangemouth were then going to Coldstream for finished drug formulation.

“A lot of customers love this acquisition because they can stay with us till the end,” he claims. The Grangemouth unit is a leader—along with the Swiss firm Lonza—in the production of ADCs. Typically developed as cancer treatments, ADCs are administered by injection.

Looking from a customer’s perspective, Subramanian thinks Piramal’s many services and geographical locations are appealing. “Let’s say that a project has four steps; we can offer to do the first three steps—the unregulated ones—in India, so that they can save money. And then we can do the last step in North America or Europe.”

Western customers, he adds, appreciate that Piramal has people they can talk to and meet with in both Europe and North America. Sharma himself is based in Boston. A few other senior executives are based in Europe.

The company’s wide range of capabilities also provides Piramal a chance to “up sell” services to a customer that basically came for one thing, Subramanian points out. For example, a company that hired Piramal just to conduct contract research at its labs in India may end up sufficiently impressed to also rely on it for manufacturing. “We can migrate people up the value chain,” he says.

That said, Piramal doesn’t shove additional services down its customers’ throats, points out James R. Bruno, president of the New Jersey consulting firm Chemical & Pharmaceutical Solutions. “They have a lot of capabilities, but they don’t push you to buy all the services,” he says. “You can talk to the dosage guy, if you want to, or only continue to talk to the guy in research.”

Bruno remains unconvinced that a one-stop shop like Piramal is what buyers of contract research and manufacturing services should look for. “I’m not comfortable with the idea that you show up with some formulas scribbled on a piece of paper and you get a formulated drug at the end,” he says.

Still, Piramal’s geographical reach is a definite plus, he acknowledges. “Many biotech start-ups are scared of India,” he says. “But they like a company that has a global network, that can produce materials for clinical trials in both America and Europe.” Moreover, Piramal is an Indian company that the Food & Drug Administration has so far not cited for quality problems or data inconsistencies, Bruno observes. Rightly or wrongly, many people in the industry believe that Indian companies have a systematic problem meeting FDA requirements. “Piramal has escaped that,” he says.

Whether most customers are buying the full range of Piramal’s pharmaceutical services or just some of them, the business is growing well. Over the past five years, its average annual sales growth has been 18%, which is double the custom manufacturing industry’s average, Subramanian says.

The company, Sharma adds, has benefited from changes in the way drugs are being developed and manufactured. On the one hand, small biotech firms with limited capabilities account for a larger share of the new drugs coming out of the pipeline. On the other hand, major drug companies are culling their manufacturing capabilities—as illustrated by Piramal’s purchase of the Pfizer plant—and relying more on outside contractors.

For future growth, Piramal Pharma Solutions will let fast-changing market trends guide the way. “We try to anticipate what the customer wants, so for where we will go tomorrow, we have an idea,” Sharma says. “But if the market changes, we will adapt.”