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Custom Chemical Maker Saltigo Adjusts Its Stance

The former Bayer business has shifted its weight in pharmaceutical chemicals

by Rick Mullin
August 17, 2015 | A version of this story appeared in Volume 93, Issue 32

Credit: Saltigo
Schmitz says Saltigo’s current structure best matches the assets it inherited from Bayer.
Photo of Wolfgang Schmitz.
Credit: Saltigo
Schmitz says Saltigo’s current structure best matches the assets it inherited from Bayer.

Saltigo, the German custom chemical manufacturer, derives its name from the same Latin root as saltimbanque, a French word for the acrobatic circus performer popularized by Picasso in some of his Rose Period paintings. The Latin saltare means to dance, to which “Saltigo” adds the English word “go.”

The name is significant given the company’s heritage. To begin with, Saltigo’s 2006 launch involved a kind of double somersault. It was created as a business unit of Lanxess 18 months after Lanxess spun off from Bayer as a stand-alone performance chemicals company.

But the true intent in choosing the name Saltigo was to establish a brand distinct from the Bayer legacy. The name was intended to describe a spry, responsive manufacturing contractor, focused primarily on pharmaceutical and agricultural markets.

It’s worth noting, however, that a few of Picasso’s saltimbanques are old, heavy, and generally resting between acts. Were the comparison extended, it might raise the question of how far Saltigo has jumped from Bayer, whose huge logo still lights the sky over the sprawling Leverkusen, Germany, chemical complex in which Saltigo does the bulk of its manufacturing.

In its nearly 10 years in business, Saltigo has succeeded in turning a high-tech chemicals operation into a competitive custom fine chemicals company with annual revenues approaching $500 million. But its image suffered a setback in one of the main routines with which it debuted: pharmaceutical fine chemicals.

Saltigo had ambitious hopes of competing as a supplier of active pharmaceutical ingredients (APIs) to drug industry customers. But in 2012, the company folded the API business and its pharma intermediates business into the industrial fine chemicals unit. The move shifted emphasis to agricultural chemicals, which now account for nearly three-quarters of Saltigo’s revenue.

The reordering of businesses followed the end of operations at an API plant in Redmond, Wash., that the company bought in 2008. And it was executed under a new chief executive, Wolfgang Schmitz, who took over Saltigo in 2007.

According to Schmitz, the reorganization did not signal failure, even if it did scale back Saltigo’s plans for custom API manufacturing. It was an effort, he argues, to better align the pharmaceutical chemicals business with the company’s assets and create synergies in production across all its fine chemicals work.

Saltigo’s main manufacturing asset is Leverkusen’s central organics pilot plant, established by Bayer in the 1960s. The ZeTO, as it’s called, consists of twin facilities that once operated as the process development center for Bayer’s basic and fine chemicals business. Initially focused on dyestuffs, the ZeTO was being used for pharmaceutical and agricultural chemicals by the 1990s.

“Although the term ‘pilot plant’ is technically correct, it is rather an understatement, as the ZeTO is much more than a conventional pilot plant,” says Joerg Schneider, head of Saltigo’s fine chemicals business. “Today, Saltigo manufactures sizable volumes for customers in agrochemical, pharmaceutical, and other industrial segments.”

Schneider and Schmitz say the 2012 reorganization took into account the versatility as well as the heft of the ZeTO.

“In accordance with the structure in Leverkusen, we wanted to concentrate on the later steps of the life cycle of the drugs—from Phase III in clinical development onward,” Schmitz says. This meant less emphasis on pursuing risky, early-stage API projects. At the same time, Saltigo sharpened its focus on intermediates and building blocks that can be sold into multiple markets.

But others in the industry note that the reorganization followed an attempt to merge the API business with another large contract manufacturer. Sources familiar with the merger attempt say a partner was identified and a deal was nearly complete, but Lanxess management failed to sign off in the end. Saltigo would not comment on whether such a deal was considered.

As for the facility in Redmond, the company had hoped it would establish a pipeline of work from the West Coast biotech industry to Leverkusen. Schmitz admits the U.S. misadventure stoked a perception in the market that Saltigo failed in drug chemicals and was in retreat.

He portrays the problem as one of timing, given the economic slump that occurred right after the 2008 acquisition. “Perhaps we weren’t patient enough because now the pharma pipeline is improving,” Schmitz says. “But if you look back five years, everybody was moaning about the reduced number of new molecular entities coming on the market.”

James Bruno, president of the consulting firm Chemical & Pharmaceutical Solutions, disagrees with critics who say Saltigo stumbled in pharmaceuticals.

“I’m not sure I’d call it a failure on their part as much as a realignment,” Bruno says. “Their business model and their equipment are based on a lot of large-scale stuff, which fits better into agricultural chemicals.” This, he says, will allow them to focus more on intermediates and building blocks. “That is the place they are more comfortable.”

The realignment also gets the company out of the drug approval waiting game, which had been its main impediment in bringing the Redmond plant along. And it affords synergies between businesses, Bruno notes. “As opposed to making 10 products, they can make one product that can go into 10 applications—pharma, fine chemicals, flavors and fragrances, etc.,” he says.

Nor is Saltigo exiting API synthesis altogether. In fact, the firm recently landed a long-term contract with Relypsa to manufacture patiromer, a fluorinated polymer that treats high levels of potassium in the blood and is being reviewed for approval by the Food & Drug Administration. Bruno notes that the polymer is an ideal match for Saltigo’s strengths in fluorinated chemicals and polymer chemistry.

Meanwhile, Saltigo has managed to thrive in agricultural chemicals, where the firm considers itself one of the top three custom synthesis providers. Schmitz says he is not concerned with the current downturn in that market, characterizing the forecast drop in demand through 2016 as normal cyclicality.

“The underlying trends indicate that agchem will grow in the future,” Schmitz says. “By 2030, we will have 9 billion people on this planet. You have to feed these people, and without technology, we will not be able to do that.”

He emphasizes, however, that Saltigo’s focus on asset utilization and customer service supersedes concerns over developing individual pharma, agrochem, or industrial markets. The realignment of the business units, Schmitz says, has better positioned Saltigo as a service firm that maintains ties to its Bayer chemistry heritage.

And Schmitz remains optimistic about pharmaceuticals, including custom API manufacturing, where Saltigo is preparing a new routine. “We are right now in the process of ramping up production for an active pharmaceutical ingredient,” he says, referring to Relypsa’s patiromer. “So this year and the next we will have an interesting dynamic on the pharma side.”  


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