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Formula for growth

Biopharm company basing global drug HQ in Hopkinton

 

By Lisa Eckelbecker — Telegram & Gazette Staff
August 19, 2007

 

HOPKINTON—The stainless steel tanks at Lonza Group’s Massachusetts plant glimmer under fluorescent lights, silently awaiting a new biological brew from a customer.

But the silence won’t last long. The two-building center off Interstate 495, now occupying about 90,000 square feet of space, is scheduled to undergo a large-scale expansion that will add more than 100,000 square feet of space and bring about 250 additional workers to Hopkinton. Production of at least one additional drug is moving to Hopkinton, too.

The changes come because of new ownership at the plant — the sixth owner since the facility opened in 1987. Switzerland-based Lonza, already the operator of numerous drug and chemical manufacturing centers around the world, is consolidating its U.S. microbial pharmaceuticals production in Hopkinton and making the expanded plant the global headquarters for biological drugs produced by microorganisms.

Lonza is also banking on increasing demand for its services, whether it involves churning out peptides, proteins, vaccines or purified materials for customers who cannot or would prefer not to manufacture biologicals themselves.

“We certainly think there’s going to be a spike in demand, and we want to be ready for it,” said Anthony J. Rotunno, Lonza vice president of U.S. microbial operations.

Lonza’s expansion in Hopkinton is estimated to cost $32 million in its first five years, making it one of the state’s larger biotechnology expansions and a counterpoint to Bristol-Myers Squibb Co.’s plan to build a 397,000-square-foot biologicals manufacturing plant at Devens. The Bristol-Myers Squibb plant is expected to cost $750 million, employ about 350 people and produce biopharmaceuticals such as the rheumatoid arthritis treatment Orencia.

Together with the pilot-production center at Abbott Bioresearch Center in Worcester, which produces some materials for customers, and a small contract manufacturing operation at Xcellerex Inc. in Marlboro, the plants represent part of a biologicals manufacturing presence in Central Massachusetts.

The global contract manufacturing market for biopharmaceuticals is still small at an estimated $2.9 billion worldwide compared to the larger global pharmaceutical contract manufacturing market of $18.9 billion, according to Kalorma Information. But biomanufacturing is expected to grow at a compound annual rate of 16 percent during the decade ending in 2010, faster than other contract manufacturing segments, Kalorma reported in a 2006 forecast.

The force behind the growth is the number of new biotech treatments under development. More than 400 biotech products and vaccines were in human studies last year, according to a report from the Biotechnology Industry Organization, a trade group.

It can cost $300 million to $500 million and take several years to build and validate a plant. For that reason, many drug makers prefer to let contract manufacturers make their products.

Customers of Lonza’s Hopkinton plant include Merrimack Pharmaceuticals Inc. of Cambridge, Eisai Inc. of Woodcliff Lake, N.J., and GTC Biotherapeutics Inc. of Framingham. GTC, which has a farm in Charlton for genetically altered goats that make therapeutic proteins in their milk, ships frozen goat milk to the Hopkinton plant so protein can be purified for the drug ATryn, which treats blood clotting.

“We’re not at a stage where we’re anxious to use a lot of our resources to buy a lot of fixed assets, downstream assets, as Lonza has,” said Thomas E. Newberry, GTC vice president of communications.

Lonza posted $2.4 billion in sales in 2006, up nearly 16 percent over the previous year, and the company has been pushing its business more heavily into biopharmaceuticals. Lonza shed a polymer chemicals business and a high-tech film business in 2006, and it bought a peptides business, a biomanufacturing plant in Spain and Cambrex Corp.’s biologicals business, a $460 million deal that included the Hopkinton plant and a plant in Baltimore.

UBS Ltd. analyst Thomas Gilbert wrote in a report to clients last month that after Lonza’s repositioning, the company should achieve “double-digit five-year EPS (earnings per share) growth, ahead of chem and pharma sector averages as Lonza’s fermenters are filled with protein-based” products. UBS, which has done investment banking for Lonza, has a “neutral 1” rating on the stock.

Built in 1987 for Seragen Inc., a biotechnology company backed by Boston University, Lonza’s Hopkinton plant has been through a number of owners. Seragen transferred it to Marathon Biopharmaceuticals Inc., which sold it to Ligand Pharmaceuticals Inc. CoPharma Inc. bought it in 2000, then Cambrex purchased the plant in 2001.

Lonza will close its Baltimore plant in 2008. Production of Tercica Inc.’s growth-factor treatment Increlex is scheduled to move from Baltimore to Hopkinton. Mr. Rotunno, who has worked at the Hopkinton plant for 13 years for various owners, said all the Baltimore employees have been offered jobs in Hopkinton or at other Lonza sites.

Some biotech plants use mammalian cell cultures, such as hamster cells, to churn out proteins that get purified and mixed into drugs. Lonza’s Hopkinton plant uses microorganisms such as yeast to produce desired molecules.

Lonza expects to expand a research and development suite, add three large-scale production suites with equipment big enough to hold 2,000 to 3,000 liters of material and build an additional two to three stories onto one of its buildings. The additional 250 workers will grow Lonza’s current work force of 142 people.

With additional space and workers, Lonza expects to run its Hopkinton center around the clock, said Mr. Rotunno.

“We’re getting the expansion, obviously, which is going to double or triple our capacity,” said Mr. Rotunno, who described Lonza’s takeover of the plant as a chance to tap into more resources. “We’re getting upward of 250 people. We’re getting training.”

Lonza chose Massachusetts over Maryland for expansion, he said, because of the work force in the area, Mr. Rotunno said.

“There’s a great pool of people, both experienced and nonexperienced people coming out of college,” he said.

Lonza is tapping into an array of state and local financial incentives to launch its Hopkinton expansion. The company will receive a 5 percent state investment tax credit. The town granted the company an eight-year tax increment financing deal that will cut about $684,180 from Lonza’s property tax bills. But the company should still make about $1.6 million in local tax payments over eight years, said Lynn Tokarczyk, a government incentives consultant with Business Development Strategies Inc. of Medway, which worked with Lonza.

“The town really wanted to keep Lonza in Hopkinton because Lonza had other real estate options,” Ms. Tokarczyk said. “They’re an international company … they have other locations they could have expanded to throughout the U.S.”

More requests for help may be on the way. Hopkinton and Lonza officials are looking into whether the Massachusetts Opportunity Relocation and Expansion program could provide money to help Hopkinton wring more capacity out of its wastewater treatment system. The system, which sends some wastewater to Westboro for treatment and is running over capacity on certain days, will be important to Lonza because it expects to release an additional 10,000 gallons of wastewater a day after its expansion, according to J.T. Gaucher, Hopkinton director of public works.

“We’re looking at measures to seal up our sanitary sewer collection system,” Mr. Gaucher said.