Cambridge Major Laboratories Discusses Strategy on its Merger with AAIPharma Services

Cambridge Major Laboratories (CML), a provider of API development and manufacturing services, and AAIPharma Services, a provider of pharmaceutical analytical testing, product development, and manufacturing services, announced earlier this month their intent to merge. Patricia Van Arnum, Executive Editor with Pharmaceutical Technology, discussed the merger with Brian Scanlan, CEO and president of CML.

PharmTech: Can you explain the strategic rationale for the acquisition?

Scanlan (CML): On an immediate level, this merger of equals provides the opportunity for both CML and AAI to offer greater flexibility and more value-added services to our clients. By providing access to a more comprehensive suite of services, we can deliver greater overall value as well as accelerate the drug-development process.

And yet, this merger has the potential for strategic advantage beyond just expanded capabilities. First, both organizations are best-in-breed in their respective markets. They are strong organizations with track records of growth, technical excellence, and profitability. Second, size matters. Both organizations are of similar sizes and cultures, which is imperative as we look forward to a combined organization. Third, our combined entity provides local strength and global reach. Our new offering provides significant assets in North America, where the majority of innovation is based, but we retain our established presence in the Netherlands, where we have been serving the European market for years. Last, but not least, are the synergies obtained by combining strength in analytical chemistry across the combined organizations. Few, if any, integrated CMC [chemistry, manufacturing, and controls] competitors have equally balanced strength across the entire service offering of API, to analytical chemistry, to finished dosage form.

PharmTech: In terms of a business model, the resulting combined company offers API manufacturing, formulation development, and finished product manufacturing. Typically, chemical development and API manufacturing are provided by one contract service provider, and formulation development and finished product manufacturing by another. What are the benefits of this combined model and what differentiation do you hope to provide?

Scanlan(CML: Beyond the strategic rationale and immediate benefits previously described, we feel there are a few additional key points of differentiation that will ensure a unique and successful service offering.

First is world-class analytical chemistry that spans the continuum from drug substance through drug product. We believe that analytical chemistry is critical to successful and seamless transition from API into finished dosage form. Parallel development of methods that may be suitable for both API and dosage form can speed overall development. Strong analytical capabilities that enable rapid development of methods and structural elucidation of low-level impurities such as genotoxic compounds are critical.

Second is combined solid-state/preformulation services to de-risk drug development. Combined characterization services, such as CML’s solid-state chemistry and AAI’s preformulation expertise, enable identification of optimal approaches to enhance solubility and improve the quality of outcomes for overall dosage-form development. The combination of drug substance- and drug product-focused scientists working together will create a new, powerful paradigm in solid-state chemistry.

PharmTech: Can you provide an overview of the manufacturing facilities (type of manufacturing and location)of the combined company?

Scanlan(CML): [It would be as follows]: API development (preclinical, clinical, small-scale commercial) in Germantown, Wisconsin and Weert, the Netherlands; API large-scale clinical and commercial manufacture in Germantown, Wisconsin; finished dosage form development in Wilmington, North Carolina and Charleston, South Carolina; solid-dose manufacture in Wilmington, North Carolina; parenteral manufacture in Charleston, South Carolina; and analytical development and testing in Wilmington North Carolina, Edison New Jersey, and St. Louis, Missouri.

PharmTech: What will be the management structure of the combined company?

Scanlan(CML): Both entities possess experienced leadership teams that have combined to form an integrated team with direct accountability for a 100-day integration plan. We expect to announce the senior leadership organizational structure very shortly. Cambridge Major Laboratories Inc. and AAIPharma Services Corp. are merging under the ownership of American Capital. Each will retain its name and headquarters at the time of closing, and we expect to announce a new company name in 2014. The combined company will have approximately 800 employees.