Catalent Pharma Solutions Spreads Its Wings
At the time of the announcement of the sale of Cardinal Pharmaceutical Technology and Services (PTS; Somerset, NJ) last fall, the buzz was that Cardinal Health was letting go a problem child that took up too much management attention for its relative impact on Cardinal's bottom line. By unloading the division, Wall Street expected Cardinal to be more focused on its pharma distribution services, and on its push toward pharmacy automation and related downstream services.
All that may have been true then, but what a difference a year makes. The newly branded company, Catalent Pharma Solutions, was purchased by Blackstone Group (New York) for an eye-popping $3.3 billion in January. In the intervening months, Catalent has enjoyed some of the bounce provided by its new owner, which went public in June, bringing Blackstone over $4 billion for a 12% publicly traded stake, and thereby becoming the poster child for aggressive wealth generation in the hedge fund world.
As the dust settles on the financial arrangements, Catalent (the name is a combination of "catalyst" and "talent") has been busy realigning its divisions, bringing in additional top management, and replacing central back-office functions left out when it separated from Cardinal. "We are pleased to begin this new chapter in our history," says John Lowry, CEO of the company. "We have a long heritage of providing customers with creative solutions and consistent service, and we expect to create even more value for our customers in the future with Blackstone as our partner."
Lowry is being backstopped on the newly formed Catalent board with two men who have a history with PTS: George Fotiades, the 2000-2004 president of PTS (and former COO of Cardinal), and Aleksander Erdeljan, former CEO of R.P. Scherer, one of the key acquisitions that led to the growth of PTS, and a manager at Blackstone.
Four divisions
Right out the gate, Catalent is one of the largest—if not the largest—provider of outsourced services to pharma. Pro-forma annual sales were valued at $1.8 billion at the time of the spinoff. The company has more than 30 facilities spread around the globe, primarily in North America and Europe, but with operations in Japan, Australia and South America as well. It has over 10,000 employees.
Catalent will now be organized into four divisions:
- Development: Biochemical characterization, mammalian cell culturing, preformulation, formulation, gene expression (GPEx technology), bioassays and analytical services.
- Drug delivery systems: Softgels, fast-dissolve, DelPouch unit-dose packaging, powders, inhalant solutions and suspensions, metered-dose inhalers.
- Manufacturing: Gel encapsulation, lyophilization, sterile fill/finish, creams, lotions, gels, ointments and powders.
- Packaging: Cartons, labels, inserts/outserts, compliance (unit-dose) packaging, kitting, anti-counterfeiting technologies
"Over the past five years, we've invested nearly $750 million in facilities," notes Cornell Stamoran, VP corporate strategy and development at Catalent. The most recent of these, he notes, were a custom-built sterile facility optimized for prefilled syringes, which went online in Brussels, Belgium in 2006; a biotech facility in North Raleigh, NC, for sterile manufacturing (also in 2006), vial filling and lyophilization; and a global R&D center in Somerset, NJ, for oral products (in 2003). "Ramping up the Brussels and North Raleigh facilities is our priority right now," he says.
Besides those facilities, the company is also busy with building out new IT and procurement services, both of which had been handled on a corporate-wide basis by the former parent, says Stamoran.
Market leadership
Cardinal Health had called PTS "the leading contract manufacturing and service provider for the pharmaceutical industry," although because it's in so many different service areas, it's hard to quantify it as No. 1 worldwide. The company will be unveiling some more-detailed financial figures later this year, according to Stamoran, which will identify its performance and market share more clearly. For now, he says, the company is roughly split between oral products production and packaging services, with sterile manufacturing a distant third.
Overall, it's helpful to think of Catalent as a "general contractor, with ownership of the underlying assets," says Stamoran. By this he means that clients can come to Catalent for a wide range of commercialization and development services, and pick and choose from among which services will be provided by Catalent, and which will be retained or outsourced elsewhere. For example, Catalent can take an API, develop a formulation, help meet regulatory approvals, scale up production of the product, and package it in a variety of drug delivery technologies. On the evolving developmental side, the company can help scale up production of clinical-trial volumes of a candidate drug, then help work out fullscale production methods.
Stamoran stresses the capabilities that Catalent has for tailoring drug formulations to the needs of the marketplace. For example, its compliance packaging can feature "calendarized" containers that help patients maintain adherence to a drug regimen, or to to provide fast-dissolve formulations suitable for children or those who have difficulty swallowing.
Another emphasis is on helping manufacturers negotiate the harsh financial pressures of today's marketplace. "When you can provide a formulation or packaging system that raises adherence rates or improves health outcomes, payors or hospital Pharmacy and Therapeutics (P&T) committees might be more inclined to put that drug on the first tier." Stamoran makes a similar case for prefilled syringes, whose production Catalent is ramping up in Brussels for its European clients. Prefilled syringes have a larger market share in Europe as compared to the U.S., but that may change as restricted Medicare payments for injectables make a self-administered drug preferable here, he says.
In the packaging arena, the company has been building up a toolkit of anticounterfeiting technologies. In 2004, it unveiled a brand security program with over a half-dozen technology partners. Last year, PTS and the distribution arm of Cardinal participated in a field trial of RFID technology, and just last month, announced a new initiative to bring an optimized 2D barcode and tracking system to the market with Secure Symbology, Inc. (Wayne, NJ).
Finally, Stamoran says that the door is open to collaborate with other pharma-services properties of Blackstone Group, including Gerresheimer, a German healthcare packaging company, Klockner Pentaplast, a German rigid-plastics producer, Biomet, a Warsaw, IN, manufacturer of dental and medical products.
Source: Secure Symbology, Inc.