In an exclusive interview, Patheon Executive Mike Lehmann talks DSM integration, further growth and how consolidation amongst CMOs may be driving strategic alliances with pharma.
The merger of Patheon and Royal DSM’s pharmaceutical product business was completed earlier this week , forming – according to some industry reports – the world’s second largest contract manufacturing organisation (CMO).
“In my opinion, we are looking at an industry right for consolidation,” President of pharmaceutical development services (PDS) at the newly-named company DPx Mike Lehmann told Outsourcing-Pharma.com. “What we’ve seen this week is somewhat indicative of what is happening and will continue to happen for the [CMO] industry to function.”
Lehmann, who is also interim Executive Vice President of Global Sales and Marketing, came to Patheon in 2012 from contract research organisation (CRO) Covance and whilst that industry has been shifting towards a strategic alliance model with pharma, the CMO industry – with consolidation bringing about more end-to-end development and manufacturing services – could see a similar trend, he told us.
At Patheon, client discussions over the last ten years have moved away from just short and long-term manufacturing contracts and have become more strategic, Lehmann said, with pharma asking the CMO more and more: “What have you seen, what do you think, and how best to leverage your scientists to further our programmes.”
However, it is not Big Pharma driving this change, he said, but small and mid-size firms leading these more innovative discussions as they look for a single company to provide full services.
“I’m not saying we’re there yet, but clearly strategic alliances are an important area going forward.”
The combination of Patheon and DSM “brings strategic elements to the PDS and CMO businesses,” bringing a more complete offering to DPx clients, though Lehmann told us it was unlikely one service firm would ever be able to offer everything.
However, one example of a gap in Patheon’s PDS business plugged by the merger is aseptic development in the US.
“As of Tuesday we now have a sterile offering in Greenville, North Carolina,” Lehmann said, with the ex-DSM site bringing services including aseptic liquids and filling, lyophilisation, and packaging and warehousing.
Synergies and Growth
There is some overlap in regards to capability and capacity between the two firms, expressed to some degree in the choice of name – DPx - for the new entity. The ‘D’ stands for ‘DSM’, ‘P’ for ‘Patheon’, and the ‘x,’ we were told, indicates ‘crossover’ between the two.
We therefore asked whether this would result in the closure of any facilities – as was the case following Patheon’s acquisition of Banner PharmaCaps – but there are “no plans for network consolidation,” Lehmann said.
“We really are talking about two synergistic companies,” and therefore “we would never say never in terms of network reductions. However, moving forward this merger is all about growth.
“Are we still in the mode to look for more growth? The answer is yes. There are still a couple of key areas remaining on the strategic compass,” he said, but added it would be premature to say in which areas.