In September of 2015, Siegfried completed all closing conditions for its acquisition of the custom synthesis business of BASF and parts of the German group’s active pharmaceutical ingredients (APIs). Prior to purchasing these BASF assets for an estimated total consideration of €270 million, the Swiss drug contract manufacturer had already invested approximately €45 million in 2012 to take over California-based Alliance Medical Products (AMP) and €50 million in 2014 to acquire German group Hameln Pharma. CHEManager asked Dr. Rudolf Hanko, CEO of Siegfried, about the strategy behind these acquisitions, the integration process, present challenges and future plans.

CHEManager: Dr. Hanko, looking back, what were the driving forces behind the recent acquisitions? Did you follow a clear growth strategy or did you also strike when unexpected opportunities arose?

Dr. R. Hanko: The aim was to lead Siegfried through a strategic turnaround. Following a capital increase at the beginning of 2010, all of the preconditions were met to implement the “Transform” strategy. It addressed opportunities available to Siegfried in the CMO field, such as sterile filling as an attractive technology, but also strategic considerations like the backward integration to China. Last but not least, the Zofingen site underwent a competitiveness program which re-established the competitiveness of the whole company. In addition to these goals we aimed at fast yet sustained growth to reach critical size, which is so significant in this business, and to become market leader in the CMO market.

Through the acquisitions, Siegfried has grown significantly. Have you already reached the critical size necessary to play a leading role in the supplier market for the pharmaceutical industry?

Dr. R. Hanko: It is important to point out that our growth is not only due to acquisitions. Without the Swiss franc crisis, for instance, in 2015 we would have experienced double-digit growth in our original market segment. In combination with the above mentioned acquisitions we reached a size which makes us a leading company in the CMO business. Today, the company offers a broader range of products and services and, therefore, is more robust. It is market leader in the field of exclusive synthesis and controlled substances as well as an important supplier in sterile filling and of dossiers used for generic companies, inclusive manufacture of solid dosage forms. However, we are only at the beginning of a consolidation process in our market, and we expect the process to continue.

How did you manage the integration of the three BASF sites in Minden, Germany, Saint Vulbas, France, and Evionnaz, Switzerland?

Dr. R. Hanko: The post-merger integration is a process of several months which we take very seriously. To enable the new sites to become completely integrated into the Siegfried world, many coordination processes are taking place in the background so that we can operate on the market as one company, soon. We aim to uphold the attributes and success factors we cultivated before the recent acquisitions. I consider these factors to be customer orientation, flexibility, entrepreneurship and dynamics. At the same time, we are implementing the necessary structures required by a company of our new size.

Although being not far from each other in geographical terms, the three BASF sites have had different corporate legacies and cultures. Integrating them into the Siegfried family, did you see that cultural diversity as a challenge or rather as a chance?

Dr. R. Hanko: That is an important aspect of any integration activity. Siegfried has changed from a Swiss company with global activities to a global company headquartered in Switzerland. We are working very hard at bringing together our sites, also from a cultural point of view, and to make visible and utilizable the opportunities inherent in the new globalism. For our young management staff, especially, the BASF transaction provides entirely new possibilities concerning personal development and career opportunities, making Siegfried clearly more attractive for talents.

AMP and Hameln Pharma are active in comparable market segments but different regional markets. What kind of synergies in terms of technologies, services, customer relations and market coverage will you be able to leverage across your portfolio?

Dr. R. Hanko: We won customers with needs in the sterile filling segment which we were unable to supply before. Today, in the field of finished dosage forms, we are in a position to offer a complete package that doesn’t consist only of oral dosage forms but includes parenterals such as injections and infusions and if necessary in large volumes produced in Hameln. Furthermore, we are recognizing continued individualization in medicine with applications tailored to individual patients. Our range covers various dosage forms, and we can satisfy both the large-volume and the individualized demand for drugs.

Besides investing in acquisitions, what investments have you been making recently in creating or increasing capacity at your existing or new plants?

Dr. R. Hanko: The new production facility in Nantong, China, was inaugurated in August 2015 and initial commercial product batches have been successfully produced. Several important customers are showing great interest and have visited the site. In Zofingen, we put into operation a new production plant constructed in vertical flow technology in accordance with the latest technology. Its operation is significantly more efficient than the plant it is replacing. In addition, investments in technologies, such as required for the production of high potency drugs, or a state-of-the-art spray dryer, were essential and position us favorably in the market.

How have the requirements by pharma customers changed over the years, and what need suppliers like Siegfried to do to live up to them?

Dr. R. Hanko: A growing number of companies consider a comprehensive service to be the key to enter into or expand a strategic partnership. Thanks to the connection between chemistry and pharma, we developed a unique USP as an integrated supplier. Owing to our expertise in both chemistry and pharmacology, we are in a position to offer bridging technologies, such as spray drying and micronizing.

What are your plans for future growth in the years to come?

Dr. R. Hanko: It is too soon after “Transform” to demonstrate the full scope of our strategy. We shall do so in the course of this year. But to be clear, we will remain strategically active.

Core Objective: Critical Size

Siegfried Group reported sales of CHF 480.6 million (+52.4%) for the 2015 financial year, the highest in its history. EBITDA rose by 31.3% to CHF 77 million, corresponding to an EBITDA margin of 16.0%. The Zofingen, Switzerland-based drug contract manufacturer owes the strong growth in sales and results to a combination of internal and external growth. In 2015, Siegfried successfully completed its “Transform” strategy with the acquisition of BASF’s active pharmaceutical ingredients segment. The company that today employs a workforce of about 2,200 employees at nine sites on three continents now fulfills the necessary prerequisites to be a leading supplier in its market segments.