Chirex announces acquisition of Cauldron Process Chemistry

ChiRex Inc. announced the acquisition of Cauldron Process Chemistry of Malvern, Pennsylvania, a leader in the provision of rapid-response process research and development for the pharmaceutical industry.

ChiRex will operate the business as ChiRex Cauldron. Cauldron, founded by a Ph.D. organic chemist formerly at SmithKline Beecham, operates a versatile cGMP pilot plant and process development laboratory with 21 bench chemists. Cauldron has more than 30 pharmaceutical customers, including Abbott Laboratories, Agouron, Cephalon, Maxia, Merck, NAPP Technologies, Pfizer Inc., R.W. Johnson PRI, Sepracor, and SmithKline Beecham.

"ChiRex Cauldron significantly expands our process research and development capabilities in the US, adds to our customer base and provides a critically important customer service. The rapid-response competency of ChiRex Cauldron is highly complementary to our existing array of services for the pharmaceutical industry and fulfills our 1999 goal of adding to our North American small-scale capabilities," stated Michael A. Griffith, Chairman and CEO of ChiRex Inc, in a press statement. "ChiRex Cauldron has a substantial and growing book of business of its own and we plan to expand its facilities during 1999 and 2000 to further drive its revenue potential. In line with our strategy of offering fully integrated services, ChiRex Cauldron will join the existing ChiRex service network of the Technology Center in Boston, the Development Center in England and our two manufacturing facilities in England and Scotland."

ChiRex Cauldron's gross revenues grew substantially in 1998 to $3.9 million from $1.2 million in 1997. Process development and analytical development work is typically carried out first in the laboratory and then at 20 to 100 gallon scale. This compares to the ChiRex Technology Center, which has a maximum scale of 50 liters and the ChiRex Development Center, which typically operates at 100 to 300 gallon scale. ChiRex Cauldron's 23,000 square foot facility consists of laboratories for process development chemistry, quality assurance and analytical methods development. The modern and highly versatile pilot plant produces materials for pre-clinical evaluation and clinical trials under fully validated conditions, by a staff of 25 including 9 Ph.D. chemists.

Two chemists will lead ChiRex Cauldron, each with over 20 years experience in pharmaceutical process research and development. Dr Michael A. Christie, who founded Cauldron in 1992, will continue as General Manager of ChiRex Cauldron. Dr Christie was formerly Director of Chemical Development at SmithKline Beecham, and received his Ph.D. in Organic Chemistry at MIT. John F. Arnett, Ph.D, who joined Cauldron in 1997, will continue as Director of Process Research and Development of ChiRex Cauldron. Dr Arnett was formerly Associate Director of Process Research and Development at DuPont Merck, and received his Ph.D. in Organic Chemistry at Florida State University and completed a post-doctoral appointment at Harvard University.

ChiRex acquired all of the operating assets and working capital of Cauldron, Inc., a wholly-owned subsidiary of ProClinical, Inc., a privately-held company based in Phoenixville, Pennsylvania. The purchase price is approximately $5.5 million in cash up-front plus a $1.0 million cash payment due in September 1999 and an additional payment due in February 2000 that is to be calculated based on the performance of the business during 1999. The acquisition will be accounted for as a purchase. ChiRex intends to invest approximately $2.0 million to improve and expand the pilot plant and laboratories during the next eighteen months with the intention of doubling the revenue capacity of the facility.