Biotechnology

Corporations

Table 4a - Significant Biotechnology/Pharmaceutical Firms in North Carolina: Integrated Firms

Table 4b - Biotech: Contract Research Organizations

Table 4c - Biotech: Manufacturing

Table 4d - Biotech: Services

Biogen Idec

Biogen Inc. was one of the few integrated biotechnology firms in the biotechnology industry that managed a drug right from the discovery stages to the production of the drug in its final dosage form. Biogen Inc's merger with Idec Pharmaceuticals in late 2003 placed the combined entity as the world's third largest biotechnology company, after Amgen and Genentech. The merger between Biogen and Idec was a strategic move not only in terms of product differentiation, but also to achieve synergies in their respective R&D areas. Idec's expertise in cancer products stemmed from a large knowledge base in autoimmune diseases, which coincides with Biogen's area of specialization creating a large potential for the complementary usage of drugs. The company's unaudited pro-forma combined revenues for 2006 were $2.68 billion, 11% up from 2005. Biogen Idec employs 3,750 people worldwide, of which 129 are employed at Research Triangle Park (RTP), North Carolina.

Biogen Idec represents a relatively new breed of drug companies that produce drugs based on chemo-genomic processes, rather than by traditional pharmaceutical methods. It has a strong focus on the oncology and immunology sectors, with its lead drugs Rituxan and Avonex generating $811 million and $1.17 billion in 2006 worldwide sales, respectively. In the oncology sector, Biogen Idec also produces Zevalin, which is complementary to the use of Rituxan in the treatment of B-cell non-Hodgkin's lymphoma. In the immunology sectors, Biogen Idec produces Avonex which is the leading treatment for relapsing forms of multiple sclerosis (MS), and Amevive, a treatment for chronic psoriasis. It currently has two other projects in the pipeline: Antegren, an enhanced treatment for MS and Crohn's disease, and BG-I2, a new oral therapy for psoriasis.

Biogen Idec's strategy of growth makes perfect economic sense when one considers that the R&D component is the single largest overhead cost that both medical biotechnology and pharmaceutical firms face. Although the firm produces products for the relatively small and focused markets of lymphoma, psoriasis and multiple sclerosis (MS), compared with 'blockbuster' products with general applicability such as Pfizer's Viagra and Lily's Prozac, it is able to streamline its costs due to the R&D synergies that underlie the chemistry behind the treatments in these markets. This will allow it to continually improve the products it has in the market, in order to defend Biogen Idec's share against potential competitors. A case in point would be Avonex, which has come under competitive pressure by the recently developed products of Rebif (Serono) and Copaxone (Teva Pharmaceuticals), both of which claim superior performance. Biogen Idec responded by developing Antegren, which treats MS by attaching alpha-4-integrin to T and B-cells, in contrast to Avonex which only worked with T-cells.

Increasing manufacturing capacity is the other major thrust for Biogen Idec. The existing facility in RTP boasts 90,000 liters of bioreactor capacity, one of the world's largest production capabilities. Biogen Idec is also adding a similar large-scale manufacturing plant in Oceanside, CA, and in Hillerod, Denmark. The addition in capacity may be a response to the potential of drugs still in the development pipeline. It may also open the avenue to contract manufacture for other biotechnology firms that produce drugs by chemo-genomic means. The apparatus for cell culture can be readily adapted for the production of such drugs. Biogen Idec has readily expressed its desire to become a partner of choice for the co-development of innovative biopharmaceuticals with other firms. Existing Biogen Idec products have been developed through such alliances, for example Antegren with Elan Corporation and the adaptation of Rituxan for rheumatoid arthritic treatment with Genentech, LaRoche and Zenyaku Kogyo.

For a more detailed discussion on Biogen Idec's corporate strategy, see the following pdf file.

Diosynth Biotechnology

Diosynth Biotechnology is a subsidiary of the Netherlands-based conglomerate Akzo Nobel, which deals with healthcare products, coatings and chemicals. It has only two facilities, one in RTP and one in the Netherlands, both of which are capable of biomanufacturing on different scales. Diosynth gained presence in RTP via the purchase of Covance Biotechnology Service by Akzo Nobel in June 2001. The firm generated over $120 million in sales from their North Carolina plant, which has over 111 employees. Diosynth employs approximately 3,000 people worldwide, of which 595 personnel are based in RTP.

Diosynth specializes in the design of chemo-genomic production systems. It also executes the actual production of recombinant proteins/peptides and DNA products from cell types such as the Chinese Hamster Ovary (CHO), E. coli and NSO. Diosynth's main focus was on supplying such ingredients to Organon, a large pharmaceutical firm under the Akzo Nobel umbrella. It has recently received contracts from other US firms for ingredients in the production of Somavert for Pfizer, and Retavase for Johnson & Johnson.

Diosynth's recent external deals reflect the direction of its thrust in the US market. It currently markets itself as a cGMP manufacturer of biopharmaceuticals. Such a move may be pertinent due to a chain of factors. The discovery of new conventional pharmaceutical ingredients used in drugs has been slowing, while costs continue to rise. The chemo-genomic approach to the discovery and production of ingredients for drugs (such as naturally occurring proteins) was a result of the Human Genome Product. The unrealized potential for gene target identification is large, thus one can extrapolate a high future growth in the manufacture of biopharmaceuticals. Due to the disparity in production methods between conventional pharmaceuticals and biopharmaceuticals, existing pharmaceutical firms may not have the capability to produce biopharmaceuticals. Coupled with the high capital outlay associated with biopharmaceutical manufacturing, Diosynth could well capture a niche in the outsourcing market for biomanufacturing, given its existing competencies. The strict regulatory guidelines that take the form of GMP requirements are also a barrier to entry of this particular sector in the value chain. Diosynth has capitalized on the fact that it is a certified cGMP manufacturer.

One implication of this strategy is a potential for an increased scale of production by Diosynth in RTP. Currently, the Netherlands plants do large-scale commercial manufacturing. RTP handles small to medium sized biomanufacutring, primarily for clinical lots of US pharmaceutical firms. This contract could, however, follow through to the provision of biopharmaceutical ingredients for large-scale commercial drug production. Diosynth currently has spare land of 54 acres in RTP that could well facilitate the ramping up of production.

For a more detailed discussion on Diosynth's corporate strategy, see the following pdf file.

Quintiles

Since its was founded in 1982, Quintiles has grown to become a market leader in providing a full range of integrated product development and commercial development solutions to the pharmaceutical, biotechnology and medical device industries, as well as market research services and strategic analyses to support healthcare decisions and healthcare policy consulting to governments and other organizations worldwide. This broad range of services helps customers lower costs, while reducing the length of time involved in drug discovery. Based in Durham, North Carolina, Quintiles is the largest company in the pharmaceutical outsourcing services industry as ranked by their 2005 gross sales of $2.4 billion, hiring close to 16,000 employees in 50 different countries.

After going public in 1994, Quintiles has been involved in a string of acquisitions in different segments of the value chain in order to strengthen its position in marketing services and clinical research. In 2000, Quintiles started developing the industry's first globally supported, comprehensive Internet platform. It also launched Strategic Research Services in 2003, a new global business division to blend Quintiles' existing "late phase" and strategic consulting business units all under one umbrella for better control, co-ordination and communication. These four units exist in the US, Great Britain, Japan and Australia.

Quintiles initially specialized in the product development section of the bio-pharmaceutical value chain. However, consolidation in the pharmaceutical industry created giants that focused on making products already on the market more profitable. Products in the development pipelines were less plentiful, which affected the business of contract research organizations (CROs) like Quintiles. In 2000, Quintiles reported that revenue from product development had declined by 5 percent from $849 million in 1999 to $809 million. Product development, the business unit that contracts with drug companies to conduct clinical trials, is the unit on which Quintiles built its reputation. The same year, commercialization, the business unit in charge of sales and marketing, reported a 12 percent increase in revenue from $706 million in 1999 to $790 million. The sales and marketing sector has been more successful due to Quintiles' venture into the contract sales organization (CSO) industry when it took over Innovex in 1996.

Recently, Quintiles has hit another bout of flagging earnings and has revised its strategy to survive in an increasingly competitive industrial scenario. In March 2003, Dennis Gillings, its founder and chairman, named Pam Kirby, formerly an executive with Switzerland-based F. Hoffmann-La Roche, as CEO. Kirby restructured the company, cutting jobs and announcing that the company would develop its own drugs besides doing research and sales for other drug makers. At the same time, PharmaBio was established to work together with Innovex and allows Quintiles to proceed beyond fee-for-service sales and marketing services. To that end, Quintiles will seek to buy small companies with promising drugs. By making its own drugs, Quintiles will compete directly with its customers.

For the last two years, PharmaBio has entered seven risk-share-gain-share deals involving a total of $150 million. To share the risk, Quintiles may buy stock of a biotech company, extend a line of credit or infuse the company with venture capital. Gains may range from royalty payments to interest payments to an increasing value of the stake Quintiles owns in the respective company. One of the more potentially successful projects Quintiles is involved in concerns Cymbalta, which was developed by Eli Lilly and partly funded by Quintiles, which has also agreed to use its 500 sales force at Innovex (in New Jersey) to sell the drug. The U.S. Food and Drug Administration approved the drug on August 4th, 2004.

For a more detailed discussion on Quintile's corporate strategy, see the following pdf file.

Cardinal Health

North Carolina fits into Cardinal Health's corporate strategy in a number of segments. The firm maintains a rather diverse presence in the state, including staffing services, nuclear pharmacies, and a biomanufacturing plant in Raleigh. This presence is actually quite recent, and has grown over the last few years as Cardinal has expanded its pharmaceutical technologies division. The firm gained a 75,000 square foot biomanufacturing facility and separate pharmaceutical development facility in Research Triangle Park in 2002 when it acquired Magellan Laboratories, Inc., a major contract pharmaceutical development organization. Compared to its global employee population of 55,000 workers, close to 1,000 of Cardinal's employees are located in North Carolina. Cardinal's various business segments are headquarted in cities around the U.S., including Houston, San Diego, and Dublin, Ohio.

Cardinal Health located portions of its organization in North Carolina because it pursued a strategy of acquiring some of the top firms in biopharmaceutical and pharmaceutical development, products, and services during its last two growth spurts. As Cardinal Health continues to expand into biotech through its pharmaceutical technologies business segment, North Carolina will continue to be attractive as a biotech cluster - established infrastructure, specialized workforce, and organizational synergies. If Cardinal continues its pattern of growth by acquisition, the best way for North Carolina to attract more of Cardinal's business is to continue facilitating the development of smaller, innovative companies already in the state.

For a more detailed discussion on Cardinal Health's corporate strategy, see the following pdf file.

Cato Research

Cato Research is a Triangle-founded CRO that performs a variety of activities, but is especially strong in navigating the protocol of regulatory agencies for its clients, as well as designing, developing and implementing preclinical through Phase 4 clinical activities. Cato also provides services in statistical analysis, data management, production of study reports (medical writing), preparing and submitting regulatory applications, management of chemistry, manufacturing and control programs. If a pharmaceutical company has an idea, Cato can essentially do the rest.

Cato began in Chapel Hill in 1988 with 6 employees and has since pursued a strategy of controlled growth that has gradually introduced them to the international market. By 1990 it had moved to Durham and taken on 35 employees. Throughout the 1990s the company extended its reach internationally, establishing branches first in Canada, then Israel. During the same period of time the company expanded domestically by opening offices in Washington, D.C., San Francisco and San Diego. By the time the Washington office was established in 1997 Cato Research had grown to more than 150 employees. Growth continued after 2000. Offices were opened in South Africa in 2002, and interest was acquired in Studika Monitoring + Audit GmbH, a German company of 10 employees that manages clinical trial programs in the EU. At the time Cato Research employed approximately 300 people. Most recently the firm has continued to consolidate its US presence, opening offices in Waltham, MA and forming an alliance with etrials in order to provide a suite of specialized eClinical software to its clients for the management of the clinical trial process.