Three’s a crowd

Lundbeck acquires French CMO and principal supplier Elaiapharm

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COPENHAGEN—In an effort to find a cheaper option tothird-party manufacturing, Danish drugmaker H. Lundbeck A/S has acquired Frenchcontract manufacturing organization (CMO) Elaiapharm S.A., one of Lundbeck'sprincipal suppliers.

The deal will provide the group with production andpackaging facilities to complement its facilities in Copenhagen. By taking overthe former supplier, Lundbeck enhances flexibility in its pharmaceuticalproduction, while also reducing its costs. Financial terms of the deal were notdisclosed.


Based in France, Elaiapharm offers a range of dry, liquidand sterile form manufacturing capabilities as well as packaging and Europeandistribution services. The company has worked with Lundbeck for almost a decadeas a subcontractor.


Lundbeck spokesman Mads Kronborg says the acquisitionprovides a unique opportunity and the companies' past relationship provides anumber of strategic advantages.


"The fact that we know Elaiapharm from working with thecompany for several years was an important factor when we decided to do thedeal," he says. "Elaiapharm was already producing for Lundbeck, so in terms ofintegration we really got off to a head start. Also we already knew the highquality and flexibility that Elaiapharm's employees are capable of deliveringwhich made the deal very attractive to us."


Elaiapharm employs 130 people at its factory near Nice inthe south of France. A profitable business generating annual revenue ofapproximately $22.1 million, Elaiapharm manufactures and packs pharmaceuticalsfor a number of international pharmaceutical companies.


Elaiapharm owns a pharmaceutical factory that processesactive pharmaceutical ingredients from chemical factories into finished tabletor vial medicines and subsequently packs the products. The factory complementsLundbeck's pharmaceutical production unit in Copenhagen so that the group willnow have two pharmaceutical factories, copying the structure of its chemicalproduction, which is handled by two factories in Lumsås, Denmark, and Padua,Italy.


Through the deal Lundbeck gains Elaiapharm's activepharmaceutical ingredient (API) production facility in Nice, which it believeswill complement its manufacturing plant in Copenhagen, Denmark.


Lundbeck will retain all 130 Elaiapharm employees, expectsthe integration process to be completed this year and, according to Kronborg,does not plan to alter operations at the CMO in the short term.


"Elaiapharm will continue its operations as before and allemployees will be retained," notes Kronborg. "Going forward, the biggest changewill probably be the fact that an increasing share of capacity will be taken upby Lundbeck ourselves."


According to Kronborg, the advantages over outsourcing aretwofold: "We are able to lower costs when producing in-house instead ofoutsourcing and we increase our flexibility within our global production bygetting a new production site," he notes.


Having two pharmaceutical factories also makes Lundbeck lessvulnerable to business interruptions at one factory, as it would then be ableto transfer assignments to the other factory. The new structure optimizesLundbeck's opportunities for retaining and improving its very high reliabilityof supply.


"For quite some time, we have reaped the benefits of havingtwo chemical factories, and the Elaiapharm acquisition provides us with asimilar structure for our pharmaceutical production. Our production output willbecome more flexible and even more reliable than it is today," adds Lars Bang,executive vice president of supply operations and engineering at Lundbeck.


The acquisition also fits with other recent strategic movesundertaken by the Danish drugmaker, most notably in September when it announcedplans to cut as many as 220 jobs in favor of greater use of insourcing andchanging the travel activities of its employees.


Moving forward, there will be some clear markers that willenable Lundbeck to achieve success of the acquisition.


"For years, Lundbeck has been increasing its production efficiency andbringing down its production costs," notes Kronborg. "We want to continue doingthat and buying Elaiapharm is one of our initiatives to secure that. So we willbe looking at the development in our combined production when measuring thetake over of Elaiapharm."  

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