Privately owned process development and active pharma ingredient (API) manufacturer Cedarburg Pharmaceuticals (Grafton, WI) says it has been struggling in the highly competitive generic pharmaceuticals market and so is switching its focus toward the ethical pharma market, including projects for 'virtual' pharma and major pharma.   The company tells CW that it recently raised $3.5 million from private investors and a debt offering to bolster this new direction.   The funding will primarily be used to expand the firm's capabilities in the virtual pharma sector, the company says.   Cedarburg also has a new corporate management team in place.

Cedarburg does not disclose sales and earnings figures, but says that generics currently generate more than 50% of sales and ethical pharma only a minority.   However, the company aims to shrink sales from generics to 25% and make ethical pharma its largest generator of sales.

Much of Cedarburg's new ethical pharma business will likely come from customers in the U.S., and much of its generics business will likely be from Europe, the company says.   Cedarburg is particularly seeking to provide services for new chemical entities (NCE) in clinical trial phases.

Due to its new ethical pharma strategy Cedarburg is on track to increase sales by 60% in 2007, says executive v.p. Charles M. Boland.   The company expects to more than double current sales to $30 million-$50 million/year in three years and increase staff to 80, from 45, Boland says.

Cedarburg expects to triple annual sales from virtual pharma companies and is already booking projects from such companies, Boland says.   Cedarburg's offering is about "making its customers' lives easier" through quality and speed of service combined with cost-efficient pricing, Boland says.   "The company is not differentiated solely on technology.   Executing the project and delivering on time--that's what it's all about."

Cedarburg had been searching for business in the virtual pharma area since about 2004, but projects then were sparse, and so it focused on generics and production of controlled substances.   The market is now different, however, Boland says. "I see many more requests for quotations coming in from the virtual pharma area and major pharma [companies].   With consolidation among major pharma, I believe there will be more projects outsourced," he says.

Cedarburg has production resources already in place to execute the anticipated increase in ethical pharma projects, Boland says.   Cedarburg has two shifts/day, five days/week at its manufacturing facility near Milwaukee.   "This can be increased to 24/7," he says.   The company says it can readily increase manufacturing capacity by 1,000 gal, lifting its total capacity to 3,500 gal to meet new customers' needs.

Boland acknowledges that the biggest threat to the company comes from lower-cost services offered by competitors in Asia.   The company recently began looking for a partner to undertake process development and chemistry activities in a country that can produce pharma materials at lower costs.   "We would still manage the projects from the U.S., while the client would realize the cost savings," he says.

Meanwhile, this year will be better than last, when the generics market "turned ugly" for Cedarburg, forcing it to reduce costs by letting go of about 20 of its 65 employees, Boland says.   "Generics wasn't a sustainable revenue stream that we could rely on, and 2006 really didn't pan out for us," he says.   "We had to scale back."

Boland blames the company's recent troubles in the generics sector on FDA's slow approval rate for generic pharmaceuticals.   Anticipated project timelines continued to slip in 2006 as FDA delayed generic dug approvals, he says.   The successful tactics of some of the pharma innovators to extend the patent life of their products had a direct effect on postponing some of Cedarburg's potential generics projects, he adds.

--Alex Scott  

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