A play titled Elegance molekuly (The elegance of the molecule) is performed twice a month in the Czech Republic capital of Prague. Recounting the accomplishments of Antonín Holý, a chemist who discovered the compound that led to Truvada—Gilead Sciences’ breakthrough HIV/AIDS therapy—the play sells out weeks in advance.
The chemical revolution
Holý, an eminent figure in the Czech science community for his work on nucleotide analog synthesis, died in 2012 at the age of 75. The Czech Republic issued a stamp in his honor. Holý’s work is important in a country that was looking for heroes during its long rebound from the repression of Soviet dominance after World War II. His achievements shine a light on the Institute of Organic Chemistry and Biochemistry of the Czech Academy of Sciences (IOCB), where he did his research, showcasing the strength of chemistry in the country. Czech chemistry has a heritage that stretches back more than 100 years before the Velvet Revolution in 1989, when Czechoslovakia emerged from socialism.
Accomplishment at the level of Holý’s is also meaningful for science in central Europe generally. Once dominated by state-run institutions serving the Soviet Union and Soviet bloc countries, the region has advanced since the 1990s beyond the manufacture of basic chemicals, antibiotics, and vitamins to higher-value pharmaceutical chemistry practiced by a fledgling contract research and manufacturing sector.
The region, however, is still evolving, managing the challenges of conversion, both scientific and cultural, at a time when the drug industry is re-forming at a rapid pace.
Strength in chemistry will be an advantage. “For some strange reason, organic synthesis and chemistry in the Czech Republic have always been quite well developed,” says Martin Fusek, CEO of IOCB Tech, the institute’s technology-transfer arm. “We have a good system of universities, so teaching is historically well developed and on a good level. We have a relatively large number of chemists. They are available and skillful.”
What the region lacked was a spry research infrastructure. And putting one in place presented a steep challenge in the years after the Soviet bloc dissolved and the country’s built-in market vanished, Fusek says.
But the end of socialism also created opportunity. It unleashed an entrepreneurial spirit in the sciences that launched new companies from legacy factories and laboratories and paved the way for wholly new research and manufacturing services for a world market.
Joseph Tessier, an American pharmaceutical services consultant, began visiting the region in the 1990s and is now based in Prague.
“At that time, we were still going to places where the attitude was left over from the Communists,” Tessier recalls. “Most of the places had been state owned. They fired the upper management and put the lower managers who had actually done all the work in place. They had lots of ideas and motivation.” But they also had environmental concerns and had a lot to learn about customer service.
The region was still behind in the 2000s when a cohesive pharmaceutical services sector began to emerge in the European Union and the US. “It took a while for companies to adopt EU regulations,” Tessier says. “But all the sites have been fairly well upgraded. You still see some of the remnants of old buildings, but it’s not a disaster anymore.”
▸ Area: 79,000 km2
▸ Population: 10.7 million
▸ First Czechoslovak Republic, 1918–39
▸ Protectorate of Bohemia and Moravia (Nazi protectorate), 1939–45
▸ Czechoslovakia, 1945–92
▸ Velvet Revolution, 1989
▸ Czech Republic separates from Slovakia, 1992
Universities with strength in chemistry
▸ Charles University
▸ University of Chemistry and Technology, Prague
▸ Palacký University Olomouc
▸ Masaryk University
▸ University of Pardubice
▸ $22 billion in annual sales (second-largest industry after automotive)
▸ 129,000 employees.
A visit to the Prague headquarters of the contract research firm Apigenex illustrates the juxtaposition of the old and new in the Czech Republic. The building, located in a drab industrial district on the edge of the city, houses research and small-scale production of active pharmaceutical ingredients (APIs) and fits inconspicuously into a landscape almost devoid of color.
Inside, however, a bustling staff moves through facilities indistinguishable from any pharmaceutical services operation in Italy, Germany, or Denmark, the last of which is home to Novo Nordisk, Apigenex’s longtime partner and main customer.
Apigenex began as part of the Research Institute for Pharmacy and Biochemistry, or VUFB, in the 1950s. By 1995 the institute, which served as the Czech government’s centralized research enterprise for pharmaceuticals, was split into an analytical services firm, a contract research firm specializing in biological testing, and RE&D VUFB, a research lab renamed Apigenex in 2010.
The transformation was not easy, according to Marek Kořínek, head of Apigenex’s peptide synthesis, a service that the company added in 2008. Activity at the former institute ramped down significantly in the early 1990s, he says. But RE&D VUFB continued its work, primarily in antihistamines and antidepressants. A paper that the lab’s scientists published on an antihistamine substance caught the attention of Novo Nordisk in 1995.
“They had the same compound in advanced research at the time,” Kořínek says. “They were surprised someone was working on the same structure in the Czech Republic, having the same or better results. So they called the research institute and started to cooperate with our lab.”
What began as an agreement to supply compounds to Novo Nordisk expanded to encompass comprehensive chemistry services and animal testing. The commercial relationship sustained the lab until 2007, when the Danish firm exited small-molecule drug research. Within months, work for a company that had accounted for nearly all the lab’s activity dried up.
At about the same time, Ladislav Drož, a chemist and researcher at Charles University in Prague, came to work at RE&D VUFB. The lab’s director and owner had recently died, and Drož, now CEO of Apigenex, began negotiations to acquire it. During this time, RE&D VUFB began work on peptide synthesis and reconnected with Novo Nordisk.
“We were lucky to hire some experienced peptide chemists from PolyPeptide Laboratories, which used to be in Prague but closed,” Kořínek says. The department grew from making 10 peptides in 2008 to over 100 the next year and eventually 500 per year. Apigenex supplies the bulk of its peptides to Novo Nordisk for research and clinical testing.
Today Apigenex has 12 chemists working in peptide synthesis and 30 in organic and medicinal chemistry. The company established small-scale manufacturing under the US Food and Drug Administration’s current good manufacturing practice (cGMP) quality standard in 2015. It currently manufactures three generic APIs and operates a pharmacology lab with animal testing.
Apigenex, with revenues of $5 million in 2019, is on the verge of expanding laboratory services and plans to soon open a scale-up facility in Pardubice, an hour and a half drive east from Prague. It will cost about $5 million, Drož says, about half of which will be covered by a government subsidy.
“Because we are very small, we are very open to new wishes and new tasks from our clients,” Drož says. “In 2007 and 2008 we had no knowledge of peptides. At this moment I can say that we are leaders in this region in peptides.”
A visit to Vuos, a fine and contract chemical firm located in Pardubice, begins with a drive through one of the Czech Republic’s largest and oldest industrial complexes, the Semtin zone. Vuos operates out of labs and manufacturing facilities surrounded by its parent company, Synthesia, a chemical company famous as the innovator of Semtex C-4 plastic explosives. Vuos itself specializes in hazardous chemistries, including phosgenation.
Vuos’s provenance illustrates the churn of institutional and private ownership experienced by many older companies in the Czech Republic. It began in 1941 as an organic chemistry lab owned by the Association for Chemical and Metallurgical Production. It was nationalized after World War II as an organic synthesis research institute and privatized in 1992. Vuos was acquired in 2004 by Synthesia, which in turn was acquired in 2009 by Agrofert Holding, a company run until recently by the current prime minister of the Czech Republic, Andrej Babiš.
“About 70% of our sales are fine chemicals; the rest is services, such as toxicological and analytical studies and some small amount of engineering,” says Josef Vaněrka, business director at Vuos. The company’s focus is on pharmaceutical intermediates, manufactured under cGMP standards.
“We can offer amounts from grams produced in the laboratory to kilograms from our semipilot plant, with the possibility of transferring projects to our mother company Synthesia in cases that amount to huge production,” Vaněrka says.
On a tour of Vuos’s facilities, a visitor cannot escape the feel of a Socialist-era industrial operation. The company still does much of its manufacturing in old building stock, and vacant prewar factory structures dot the Synthesia complex. Inside the buildings, though, are modern vessels handling organometallic and cryogenic chemistry, transition-metal catalysis, nitroalkane reactions, and high-pressure hydrogenation.
And the company, which booked revenues of $13.4 million in 2018, is expanding. A $4.5 million cGMP drug intermediates facility will open in February with five steel- and glass-lined reactors totaling 10,000 L, as well as filtration, distillation, and drying equipment. A new finishing facility—another $4.5 million investment—is slated to open next year.
Vaněrka, a PhD chemist, says the company’s core strength is the expertise of its staff. Of the roughly 200 people working at Vuos, about 150 are chemists, he says.
Farmak, one of the better-known pharmaceutical services companies in the Czech Republic, also operates on a large industrial campus. The firm, located in Olomouc, a 2-hour drive east from Pardubice, went through major changes over the past 80 years, reflecting the vicissitudes of the Czech Republic.
“The company was formed in 1934 as a chemical company that produced solvents and basic chemicals, and was converted to pharmaceuticals,” says Jan Novotný, business development manager. “It’s an interesting fact from history. It was given to Theodor Morell, the doctor of Adolf Hitler, to produce drugs for the German army. That continued after the war. The equipment was destroyed, but the skilled people remained.”
Farmak was repurposed as a state-owned manufacturer of vitamins and other chemicals. It was privatized in 1992 and in 1996 was acquired by Jiří Žák, a former general manager who orchestrated the shift to pharmaceutical services.
Žák invested in research labs in 2004, a kilo lab in 2008, and a multipurpose production line in 2015. Construction is currently underway on a small-scale API production unit.
Visitors to Farmak are shown an impressively produced video that portrays bustling operations in a state-of-the-art lab and manufacturing setting. The tour that follows measures up. The interiors contrast with the exterior infrastructure of the manufacturing campus, which features several buildings dating back to the company’s earliest operations.
Žák jokes that he also dates back. “I started here 59 years ago,” he says. “I am part of the furniture.” Today, his daughter and granddaughter hold management positions in the firm, giving Farmak the feel of a family-owned private company.
The road to contract services, Žák recounts, began with a serious setback. Massive flooding in 1997—a 100-year eventthat impacted the Haná Valley in eastern Czech Republic—submerged the company. But Farmak rebounded and pushed ahead.
The firm currently manufactures about 30 generic APIs, 5 under contract with pharmaceutical companies. Half the firm’s business is in Europe, and 10% is with US drugmakers.
Farmak is doing more business in the US than most Czech pharma service firms. It also has a foothold in Brazil and Japan, which, according to Commercial Director David Viktorín, helped boost revenue last year by 15% to $26 million.
Lately, the company has been trying to enter China, Viktorín says, but the market poses challenges to a newcomer. “We are looking for a reliable partner to help with intellectual property issues and the registration process for marketing our APIs,” he says.
Farmak dealt with another setback in 2014 with the exit of Pavel Hradil, its head of research. Hradil returned to teaching full-time at Palacký University Olomouc—where he had been working part-time—after a difference of opinion about management changes at the firm.
Tessier, the consultant, says Hradil has the reputation of being the top organic chemist in the Czech Republic. Hradil laughs this off. “Well, I have long experience in pharma,” he admits.
Hradil quickly put his chemistry know-how and industry connections to work and launched a venture with colleagues at the university that has spawned two new companies: Alven Laboratories, a contract manufacturing firm, and Scale Up Laboratory, which does process design and scale-up, as the name suggests. Hradil now heads the latter.
The companies are unique in being launched by entrepreneurs and having no operational link to Socialist-era, state-owned institutions. But Hradil says his decades of experience and that of partners such as Tomáš Bránecký, managing director of Alven, made early success possible.
“I assume you will not find many stories like ours in the region and that you will not find many people who believe that it makes sense nowadays to start an API business in Europe in general,” says Bránecký, previously the chief financial officer of CF Pharma, a Hungarian drug company. “There are not many newcomers on the market.”
Alven—the name means “to arrive” in Esperanto—operates on two floors in a building located in a science park owned by Palacký University. The facility, with a staff of 25, features a pilot plant with two 100 L glass-lined reactors and a kilo lab.
Alven and Scale Up coordinate efforts to serve clients, which are generally innovators with new molecules and no assets. “Pavel shoulders all the technology development work on synthesis for new molecular entities,” Bránecký says. After that’s developed, the project is transferred to Alven for commercial manufacturing.
The partners are also developing a generics portfolio. “Since our establishment in 2015, we’ve managed to develop over 20 cGMP-certified APIs, half original molecules and half generic entities.” Bránecký says Alven will log sales of $2.3 million for 2019.
While Alven’s university science park setting distinguishes it from most Czech pharmaceutical services firms, Scale Up’s location epitomizes the legacy landscape. Currently staffed by a research tag team called in by Hradil when projects arise, Scale Up is in a two-story former sugar factory in a low-slung industrial park predating the Velvet Revolution. Hradil expresses concern for his car’s tires on a drive to the building.
The 1,000 m2 interior is under renovation, though a 150 m2 laboratory and 90 m2 kilo lab are operational, and a cytotoxic lab is soon to open. Many of the researchers Hradil called in are from the Organic Chemistry Department at the university, where he is still on the faculty.
He plans to build the business to a point where a full-time staff is required. “It will take some time,” says Hradil, who is clearly enthusiastic about building a new company after leaving the corner research office of one of the most active API research labs in the Czech Republic. “It’s a question of money.”
The pharmaceutical services sector in Hungary has experienced changes similar to the postsocialism transformation in the Czech Republic. Service firms across central Europe are poised for growth in global markets, sometimes with western European partners.
Uquifa, a Spanish-headquartered maker of APIs for generics, recently acquired Soneas, a contract research and manufacturing firm in Budapest, Hungary, a 4-hour drive south from Olomouc. Started by three chemists at the Hungarian Academy of Sciences in 1996, Soneas was a partner of Ubichem, a UK bulk-drug distributor, before being sold to investors in 2011.
Uquifa bought it as part of an effort to offer more customized services. “Soneas was working for originators, providing custom research and manufacturing services, which fit nicely in Uquifa’s portfolio,” says József Répási, a founder and managing director of Soneas. “We are bringing in a lot of research expertise, which is strong in Hungary.”
Soneas has grown steadily since its founding, Répási says, and currently employs 200 people at three locations in Budapest. One employs 30 chemists focused on process development. The others are a cGMP pilot plant for clinical-scale production and a large-scale production site.
Hungary is particularly strong in chemistry, Répási says. And the region was central to pharmaceutical development in the Soviet bloc before 1989. “During the Communist regime, Hungary was specialized in the development and manufacturing of APIs,” he says.
As happened in the Czech Republic, companies in Hungary imploded when the Soviet bloc fell apart. “But there was a very good talent base and experienced people here,” Répási says. Along with strong university programs in chemistry, this talent base set the table for firms such as Soneas.
In recent years, the firm has developed expertise in metathesis catalyst development in partnership with the catalyst specialist XiMo, Répási says. “We started the project about 7 years ago,” he says. “This year we’ll be manufacturing metric tons, with the goal of 40 metric tons by 2021.”
Soneas achieved revenues of $17 million in 2018, a 41% annual increase. “I believe the company is at an inflection point where we can grow much faster,” Répási says. “A number of projects we’re involved with are just becoming commercial, and we can start on larger-scale supply.” Several of them are in specialty chemical areas including cosmetic ingredients.
Uquifa is not the only western European company to have accessed central European chemistry expertise. The Dutch company Mercachem acquired the Prague lab and pilot-scale manufacturing operations of another Dutch firm, Synthon, in 2014. Three years later, Mercachem merged with Syncom, forming Mercachem Syncom Group, a contract services firm with more than 300 employees and operations in the Netherlands and Prague.
Synthon may have been the first western European firm to set up in the Czech Republic after the Velvet Revolution. The firm’s founders visited and formed a partnership with researchers in Prague and Brno in 1991. They were aware of the high level of chemical expertise—an innovative spirit born of the years of being cut off from world markets for chemical ingredients during Soviet domination.
“Chemists were forced to apply themselves to the development of completely synthetic routes,” a Synthon presentation says. “I.e. they had to start from scratch.”
Fusek at the IOCB says that spirit remains an attraction for potential partners. “It’s really about the people,” he says about the region’s appeal to potential partners in western Europe. “They are maybe more flexible than in Germany and Switzerland.” Operating costs that are lower than in the western European centers are another obvious draw.
Chemists in the Czech Republic are paid less then they would make in western Europe, but Fusek’s sense is that not many leave for higher pay. “People tend to go back to the Czech Republic after their postdoc abroad,” he says. “They earn less, but the cost of living is also lower. And home is home.”
The big challenge for service firms in central Europe will be to tap the US market. There hasn’t been much motivation to cross the Atlantic, Tessier says, noting that central European firms have been happy to concentrate on developing business in Europe. “They can fill their capacity, so why go to the US?” he asks.
Fusek sees plenty of room for growth. Pharmaceutical services represent a small part of the chemical industry in the Czech Republic, he says, “but it’s an important part that is developing quite progressively. I believe there is some hope for the future.”
This article was updated on Jan. 13, 2020, to correct the directions from Prague to Pardubice and Pardubice to Olomouc. The direction is east in both cases, not west.