Albany Looks for Offshore Site to Cut Custom Research Costs

STRATEGIES

Albany Molecular Research, the largest custom research organization (CRO), is looking “with an incredible sense of urgency” to establish a contract chemistry research and chemical production business in a low-cost country such as China or India, says Thomas E. D’Ambra, chairman, president, and CEO. That decision follows a gradual decline in custom research sales at Albany, for which D’Ambra cites competition from low-cost countries.

D’Ambra: Looking at Asia.

Albany Molecular says it is under “significant price pressure” in some areas and has been lowering prices to keep customers. “We continue to experience a decline in demand in traditional discovery chemistry, including combinatorial chemistry and parallel synthesis,” D’Ambra says. Discovery chemistry has been a strong sales growth driver for the company, but Albany Molecular expects full-year sales to be down more than 25% in 2004, he says. The company reported a net operating loss of $20.8 million in the second quarter, compared with a profit a year earlier of $8.3 million. Total sales were down 22.2%, to $42 million, and contract sales fell 27.6%, to $28.1 million.

Albany Molecular plans to establish a presence in a low-cost location by the end of 2005, but it will try to execute its plan far sooner, D’Ambra says. The company did not disclose the likely size and structure of the overseas operation, or whether it is seeking for a local partner. Albany Molecular staff would likely be relocated from the U.S. to run the planned overseas operations, he says. The offshore operation would provide medicinal chemistry, analytical chemistry, and chemical development services as well as production of pharmaceutical intermediates.

Meanwhile, the company is striving to generate nonservice revenues via milestone payments and royalties from intellectual property, D’Ambra says. Albany Molecular says it is in negotiations with several potential partners to form collaborations that will provide access to novel chemical compound libraries with pharma applications from which Albany Molecular could generate royalties and milestone payments. -ALEX SCOTT

Copyright Chemical Week Associates Sep 1, 2004