The Doctor Is In At Aptuit, But Needs To Hang A New Shingle

By Louis Garguilo, Chief Editor, Outsourced Pharma

Surveying the global biopharma service provider landscape at the turn of the New Year, a piece turned up missing.

Where was Aptuit? After years of a more public persona, it seemed conspicuous by its marketing absence. If rediscovered, would it also tell us something about the outsourcing industry as we head into 2015?

At the risk of giving the ending away, a frank discussion with CEO Jonathan Goldman did provide insight on the company, and proffered a balance to the industry tug-of-war between the expanding and focused service camps.

And, as these things go, just as this article was going to press, Aptuit resurfaced with the announcement it was divesting some “non-core” assets to Albany Molecular Research, Inc. This, in fact, serves as prelude to our investigation.

All That Is Hidden Is Not Lost

An initial search for Aptuit evidences a neglected website, three press releases issued for all of 2014, and modest representation at scientific and other industry events. Before contacting CEO Goldman, I first spoke with Paul Overton, executive vice president for business development and marketing at Aptuit since July.

“Yes, we’ve been quite hidden away on the marketing side,” he says with an ironic laugh. “We’ll change that as we go forward.”

Overton says he had the same questions about Aptuit starting early last year, when he was at Huntingdon Life Sciences. “I thought I knew Aptuit. I always saw it as essentially the packaging piece [a business sold off to Catalent], and API focused. But you look at the image, lack of marketing, and something was not right,” he says. 

He called CEO Goldman, who arrived at Aptuit in December 2013 after serving as an executive vice president at ICON Clinical Research. “He explained the new strategy,” says Overton. “The more I learned, the more I thought their proposition of now focusing on pre-clinical is unique. I understood Aptuit had the pieces in place.”

New Prognosis From The Doctor

For all my wondering about secrecy, Goldman is open throughout our discussion. A rare breed of CEO who is a medical doctor (cardiologist) and MBA holder, he acknowledges the lack of overt marketing, but quickly points out Aptuit is exactly where it—and he—should be within the overall healthcare industry.

To answer our narrowest question first, Aptuit didn’t go away, but it went a different direction, quietly. The explanation of which provides some insight into the biopharma outsourcing industry. The lessons surround, interestingly enough, how to sell off non-core service sectors to become a full-service provider, and also private vs. public funding.

The last significant news from Aptuit had been in February 2012, when it sold off its clinical trials supply business to Catalent Pharma Solutions, in a deal valued at $400 million. Now we have last week’s smaller announcement with AMRI (valued at about $60 million). Why was the clinical trial supply business divested?

“First, we are private-equity owned,” says Goldman, “and equity companies are always looking at when the valuations of an asset are at the optimal level to justify a transaction, or when debt is paid off. On both counts, that is where we were with that business. We divested to a company that saw synergies in the acquisition. It was good strategy for both sides … and one that matched industry trends.”

In other words, Catalent, who subsequently did an IPO and has made more acquisitions of technologies and platforms, follows the trend of adding capabilities to offer more to biopharma from a single provider. But what trend was Aptuit following?

According to Goldman, in this full-service vs. focused offering debate reverberating around the biopharma outsourcing industry, Aptuit figured out how to have it both ways.

Aptuit transitioned from a company formed by a series of “bolt-on acquisitions” to one built around the 2010 acquisition of a “truly unique asset, a former large pharma R&D Center providing all discovery and development functions under one roof.”

“The business that remained following the Catalent deal has grown on the tailwinds of market opportunity,” he says. The key to riding those winds was the acquisition of the former GSK R&D Center, in Verona, Italy, which now serves as the nucleus of the new Aptuit. The new market focus is on pre-clinical, or late discovery/early development, with discovery spanning target-to-candidate, and development candidate-to-IND services.

“Now we are focused on supporting a faster growing segment of the market,” Goldman explains. “Market penetration is essentially leveling off in clinical outsourcing, but the pre-clinical piece is under-penetrated at about twenty to thirty percent, and growing ten to twelve percent a year.” 

The Treatment

Goldman says that as a cardiologist, medical professor and having worked in pharma as chief medical officer, he knows the clinical side of development well. “With clinical outsourcing there are a variety of paradigms, only some of which we see in non-clinical,” he says. “But the one that creates the most value for a customer from a total cost of ownership perspective is the integrated perspective. Clinical research organizations like Quintiles, ICON, Covance offer everything sponsors need to go from IND to NDA.”

“However,” he says to add the kicker, “even though it’s called ‘under one roof,’ on the clinical side it’s really under a hundred roofs, multiple (global) locations, different project managers and many changes of scientific and technical hands.”

Goldman saw an opportunity to employ an enhanced integrated services model to a focused market segment. “We can literally do lead optimization through to IND under one roof, not just under one company, and with a team that has operated together for many years. This is a different paradigm.”

So why the low-key marketing?

Goldman says his strategy has been simple, if not a bit overblown. He contends the company is able to identify prospective clients and get a direct audience with decision-makers. The ROI is higher than from traditional marketing tools. “Using channel partners like UK Trade Industry Association, other C-level networking events to develop relationships with executives, have proven effective. We’ve seen sectors of quarterly sales growing over 35% year on year,” he says.

Goldman shared with me a proprietary slide-deck used in that face-to-face sales pitch to sponsors. The elucidation of a variety of pricing models grabs one’s attention, especially a risk-share model.

“At times we’ll really make a bet on cost and risk-share with sponsors for large integrated programs,” he says. “We’ll tell a sponsor we can take you from candidate to IND at a fixed price and a fixed timeline.” Specifically, Goldman says “for candidate to IND, all of the activities we provide in Verona might be $2.5 to $3.5 million dollars over 6 and 12 months.” He quotes Tufts data stating that the industry average is $5 to $6 million dollars over 18 months to 2 years.

The New Shingle

We’ve been able to relocate Aptuit within our provider landscape—literally ensconced in Verona, Italy, in a just as literal one-stop-shop at the former GSK facility.

However, while the strategy is now clear, it does come with its associated risks. For one, as Dr. Goldman surely knows, outcomes are not determinable in almost any part of healthcare. Arriving at a set price and time prior to running experiments can end up a costly exercise. Pharma negotiates tough risk-share and milestone deals, another Aptuit model. Other companies, such as Evotec, have trumpeted their risk-share models for years, but the verdict is still out on whether that has lead to increased profitability. (To be clear, Evotec, unlike Aptuit, also maintains its own internal research portfolio.) It’s also plausible to ask whether Aptuit stays private; IPOs have become more commonplace, and they can affect business strategy.

In our discussion, Goldman hinted that more news could be forthcoming, perhaps sooner than later. And we should note Aptuit still retains some API capabilities. Goldman said in last week’s press release, "Future announcements will describe new additions to our capabilities in discovery and non-clinical development, as well as innovative strategic partnerships.”

It’ll be interesting to see what our surveying of the landscape presents us this time next year. It appears, though, we won’t have to look hard to find Aptuit anymore.