SAFC Sets Forth an Ambitious Growth Strategy

SAFC (St. Louis, MO), part of the life sciences chemicals giant Sigma-Aldrich (St. Louis, MO), is moving ahead on a plan to deliver double-digit growth in 2008 and beyond. After achieving revenue gains of more than 10% in 2007, SAFC president Frank Wicks recently outlined the company's strategy. This strategy involves growing organically and by targeted technology acquisitions.

"We hope to achieve sales of greater than $600 million in 2008," says Wicks. "We feel this goal is possible as we grow the business internally and through acquisitions that build our technological capabilities and in turn, broaden our talent pool."

SAFC had sales of roughly $573 million in 2007. The company consists of four major businesses. SAFC Supply Solutions is the largest part of SAFC, accounting for 41% of revenues. It provides customized raw materials and related support services such as regulatory compliance to the pharmaceutical, diagnostics, and flavor and fragrances industries. SAFC Biosciences is the next largest piece of SAFC, accounting for 27% of sales. This business provides raw materials for cell-culture manufacturing, including media, sera and supplements, and custom-media development and manufacturing services. SAFC Pharma, representing 20% of SAFC's revenues, provides contract small-molecule and biologics manufacturing. And SAFC Hitech, which accounts for 12% of revenues, offers specialized chemistry services to the electronics industry.

Wicks is optimistic that SAFC can continue to deliver double-digit growth, a goal that it has achieved since 2005. "Our diversification strategy has worked," he says. "Overall consistency between segments and regions suggest that the business remains strong. For 2008, we expect to deliver on our goal of 10% annual growth," says Wicks. "We will seek niche technology opportunities in pharma to complement our current performance profile. We will also strengthen our existing skills as the responsive experts to the biopharmaceutical industry and will continue our focus and innovation with supply solutions."

Wicks also plans to continue diversifying the business with the goal of each business segment (SAFC Pharma, SAFC Biosciences, SAFC Supply Solutions, and SAFC Hitech) contributing roughly 25% of SAFC overall revenues by 2011. This strategy involves sustaining recent growth patterns for SAFC Supply Solutions and raising revenue expectations for SAFC Pharma and SAFC Biosciences, two business segments that support the pharmaceutical and biopharmaceutical industries. An analysis of SAFC Pharma's investments in 2007 illustrates the path on how this segment plans to attain that growth.

SAFC Pharma expands in China

As part of its strategy for growth, SAFC is planning its first greenfield investment in China. The company is investing $25 million in Wuxi for acquiring 20 acres of land and building a large-scale, non-CGMP (current good manufacturing practices) multipurpose plant to produce raw materials, intermediates, and final products to support SAFC Pharma, SAFC Supply Solutions, and SAFC Hitech. The Wuxi site will include a manufacturing plant and analytical, packaging, and warehousing facilities. It is expected to be completed by 2009. Future development phases at the site will support SAFC's parent company, Sigma Aldrich's research chemicals business by further extending analytical, packaging, and warehousing facilities. The ground-breaking for the Wuxi site is scheduled for this month.

SAFC's investment in China was one of several major expansions announced or completed by SAFC Pharma last year. "We invested in both our core businesses—commercial-scale active pharmaceutical ingredients (APIs) and process-development capabilities as well as broadening our technology base with niche technology investments," says David Feldker, vice-president of US sales and operations of SAFC Pharma.

SAFC invests in custom synthesis for small molecules and biologics

In addition to its investment in Wuxi, investments in SAFC's Pharma core businesses in 2007 included $5.4 million for a 17,200-ft² CGMP storage-capacity expansion at its process-development facilities in Buchs, Switzerland. SAFC also enhanced production capacity at Buchs by 25% through improved materials flow and separation.

At its commercial-scale API facility in Arklow, Ireland, SAFC Pharma invested $4.7 million for equipment to increase capacity. It added a 2000-L Hastalloy reactor that increased large-scale API manufacturing capacity by 15%. SAFC Pharma also added a pilot-scale filter dryer with 15 kg of capacity that allowed it to double capacity for small-scale (10–100 kg) API manufacturing.

A key part of SAFC Pharma's strategy is to build its capabilities in niche technologies. "We intend to be the leader to provide development and manufacturing services for complex, niche technologies, and where we can be the number one or two provider in market niches with high-growth potential" says Feldker.

For now, these areas include high-potency API manufacturing, niche biologics applications, and solid-state chemistry services. SAFC Pharma's investments in 2007 supported this strategy.

In high-potency API manufacturing, SAFC Pharma invested $4.5 million for increasing kilo-laboratory and pilot-plant capacity at its facility in Madison, Wisconsin. The expansion is scheduled for completion in the first quarter of 2008 and adds two 100-L CGMP portable jacketed reactors and a 1200-ft² kilo laboratory. SAFC also added a new high-potency API conjugation suite at its St. Louis, Missouri, manufacturing campus, which is scheduled for completion in the first quarter of 2008.

Another key development in high-potency API manufacturing is a $29-million investment for expanding fermentation capacity at the Sigma-Aldrich Jerusalem, Israel facility, due for completion in 2009.

Growth in niche technologies

In 2007, SAFC Pharma announced plans to increase capabilities in biologics manufacturing with a $12-million expansion at its niche biologics production facility in Carlsbad, California. The company plans to add two viral-product manufacturing suites with disposable bioreactor technologies. The suites add 8000 ft² of manufacturing space and enable 100-L batch production in stirred tank bioreactors and 1000-L batch manufacturing in disposable bioreactors. The expansion will add to SAFC's current 44,000-ft² site and be Biosafety Level 2 compliant that will allow manipulation of human pathogens. The suites are scheduled to be operational in the third quarter of 2009. SAFC acquired the Carlsbad facility with its 2007 acquisition of Molecular Medicine BioServices.

SAFC also invested $16 million to add two protein API facilities at its St. Louis, manufacturing campus in 2007. It added a new 25,000-ft² CGMP purification and manufacturing suite for transgenic plant and other nonanimal-derived protein APIs and a 6000-ft² facility for purification of animal-derived protein APIs.

Solid-state chemistry was a third area of investment for SAFC in 2007. It announced the second-phase of a $600,000-expansion of its solid-state services research facility in Cambridge, United Kingdom. The company is adding 7500 ft² of laboratory capacity that is scheduled for completed in the first quarter of 2008.