AMRI Picks Up Manufacturing Plants in India

PharmaManufacturing.com
05/22/2007

Albany Molecular Research, Inc. announced May 21 that it has signed a definitive agreement to acquire two pharmaceutical manufacturing sites, along with additional land for future expansion, in Aurangabad and Navi Mumbai, India.

Under the terms of the agreement, AMRI will acquire the assets — including facilities, employees, products and equipment — of Ariane Orgachem Pvt. Ltd. in Aurangabad and Ferico Laboratories Ltd. in Navi Mumbai for approximately $11 million in cash. All of the facilities are currently owned by the Runwal Group and manufacture a range of pharmaceutical intermediates and bulk active ingredients, including treatments for diabetes, heart disease and asthma.

As part of the purchase, AMRI will obtain additional land in Aurangabad and plans to invest approximately U.S. $15 million to expand capabilities there over the next three years. The proposed expansion includes increasing capacity, as well as bringing these facilities into compliance with U.S. Food and Drug Administration regulations for manufacturing clinical trial materials and commercial drug substances. Subject to customary closing conditions, the transaction is expected to close during the second or third quarter of 2007. The purchase is projected to be neutral to slightly dilutive to AMRI's earnings by approximately ($0.01) to ($0.02) this year, and accretive by the end of 2008. In fiscal year 2006, these assets collectively generated approximately U.S. $5 million in revenue.

"We are pleased to announce the globalization of our manufacturing operations," said Thomas E. D'Ambra, Ph.D., AMRI's chairman, president and CEO.  "Initially, the purchase of these sites augments and provides a reliable and cost-effective supply chain for AMRI's U.S. based manufacturing operations. It offers us the flexibility to produce raw materials and process intermediates to support our Rensselaer, New York plant. Longer-term, as we increase capabilities in India, we expect to leverage AMRI's small-scale/development resources on two continents — including our laboratory operations in Hyderabad, India — and offer our customers cost-competitive solutions for their outsourcing needs."

D'Ambra continued, "Today's announcement culminates a multi-year search. Just as we have expanded our lab scale operations to include global facilities operating in a range of lower cost structure environments, we have continued to believe that globalization of our manufacturing operations was also critical to the survival and growth of this component. During our search for this facility, we evaluated a range of options - from large volume, existing large revenue-based operations, to several greenfield sites. While the purchase announced today is small in comparison to some of the options we evaluated, it gives us an immediate presence and base we can capitalize and build on; something that a greenfield location would have taken years to achieve. I am confident that long term, this expansion of our business will provide our customers with increasing options and solutions, provide our business the opportunity to accelerate our future growth and expand our global market, and provide our shareholders increasing returns as AMRI becomes a larger, more successful competitor on the world stage."

"As we invest in additional capacity and ramp up production, we expect these facilities to add significantly to our Large Scale Manufacturing contract revenue in future years," noted Mark T. Frost, AMRI chief financial officer. "Ultimately, we expect to realize cost savings resulting from re-engineering our supply chain operations. That cost savings will be used to improve competitiveness and productivity in our Large Scale Manufacturing business component."

The aggregate size of the facilities, including both the Aurangabad and Navi Mumbai sites, is over 9,100 square meters with additional land available for expansion. To ensure a smooth transition, AMRI has established an integration team and plans to continue the employment of the approximately 200 people working at the facilities. Harold Meckler, Ph.D., vice president of science, technology and support services at AMRI, will lead the integration effort during the transition process.

Aurangabad and Mumbai are both located in Maharashtra, one of India's largest and most populous states. The Maharashtra Industrial Development Corporation has developed land into industrial estates and Special Economic Zones to provide an infrastructure that encourages industrial development. As a leading education center in India, Aurangabad offers a burgeoning pharmaceutical sector, as well as a skilled workforce in engineering and bulk manufacturing.