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Cambrex to acquire dosage-form drug contractor Halo

With purchase, manufacturer of active pharmaceutical ingredients will move downstream into finished drugs

by Michael McCoy
July 23, 2018


A photo of a person in Cambrex's Charles City, Iowa, facility.
Credit: Cambrex
Cambrex executive Joe Nettleton in the firm's API plant in Charles City, Iowa.

Departing from its focus on producing active pharmaceutical ingredients (APIs) for drug industry customers, Cambrex has signed an agreement to acquire Halo Pharma, a contract manufacturer of finished-dose drugs, for about $425 million.

Halo produces solids, liquids, creams, and ointments for about 70 customers at facilities in Whippany, N.J., and Montreal. It will generate sales this year of more than $100 million, Cambrex says. A former Abbott Laboratories business, Halo is currently owned by the private investment firm SK Capital Partners.

Cambrex had sales last year of $526 million, mostly of small-molecule APIs for innovator and generic drug industry customers. It is one of only a handful of large, U.S.-based contract development and manufacturing organizations (CDMOs) that focus on APIs.

“With the acquisition of Halo we are entering a new market within the overall CDMO space,” Cambrex CEO Steve Klosk said in a conference call with stock analysts. “Not unlike the API market, the finished-dosage market is large, fragmented, and growing.”

In recent years, a number of API makers have moved downstream into finished-dose drug production. Lonza, for example, acquired Capsugel last year to enter the business. In 2015, the API maker Hovione purchased a finished-drug plant near its headquarters in Portugal.

Cambrex has been a holdout, a fact that Klosk acknowledged during the conference call. “We’ve been looking at the finished-dosage space for a while,” he said. “While we didn’t think not being in finished-dosage form was hurting the growth we had in APIs, we always did feel that there would be customers where you could create value by combining.”

A Cambrex presentation for analysts puts the global small-molecule API market at $50 billion to $60 billion per year, with 50–60% of it outsourced. In contrast, the finished-dosage market is roughly the same size but with only 30–35% outsourced.

One reason API makers move into the finished-dose drug business is to be able to offer customers a one-stop shop of both chemical manufacturing and formulation into finished-dose form. “We believe we will have customers who will value that,” Klosk said on the call.

James Bruno, president of the consulting firm Chemical & Pharmaceutical Solutions, says he would have advised Cambrex to instead add to its core API manufacturing business, perhaps by entering the biologics or biosimilars market.

He suggests Cambrex executives felt forced to embrace the finished-dose drug business, since so many of its competitors have. “I still consider the two types of business to be very different,” Bruno says.


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