Growth equity: Catalytica, Inc.
Overview
Our investment in Catalytica sought to capitalize on our expectation of high growth in the outsourcing of pharmaceutical manufacturing. In 1997 we identified Catalytica, Inc. ("Catalytica") as a potential partner with whom to execute a plan to create a world-class pharmaceutical manufacturing facility. At the time of our initial involvement, Catalytica was a public company with a market capitalization of $80 million that employed proprietary catalytic technologies to provide more efficient and cleaner production processes for the pharmaceutical and the powergeneration industries.
The opportunity
Trend toward outsourced pharmaceuticals manufacturing:
Through our proprietary research, we understood that large pharmaceutical companies were beginning to explore outsourcing of pharmaceutical manufacturing due to increased competition and pricing pressures, shorter drug development cycles and more stringent environmental and FDA regulations. To capitalize on this trend, we identified Catalytica and its management team, including one of its founders, Ricardo Levy, and partnered with them to evaluate, structure, finance and consummate the acquisition of a world-class pharmaceutical facility.
Our approach
Partnering with an experienced management team to execute our investment thesis:
In July 1997, Catalytica acquired a pharmaceutical manufacturing facility in Greenville, North Carolina from Glaxo Wellcome. This allowed it to become a substantial provider of bulk actives, chemical intermediates and sterile pharmaceutical products for leading pharmaceutical companies, including Merck, Pharmacia & Upjohn, Pfizer and Bristol- Myers Squibb. In connection with the acquisition, the company entered into a long-term agreement with Glaxo Wellcome to manufacture various pharmaceutical products.
Results
In 2000, DSM acquired Catalytica, Inc.'s pharmaceutical business. This was preceded by a spin-off of Catalytica Combustion Systems and Catalytica Advanced Technologies, now know as Catalytica Energy Systems, Inc. [NASDAQ:CESI].
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Our propriety, research-based model resulted in early identification of opportunities in pharmaceutical manufacturing and helped forge our partnership with Catalytica.