Earlier this year, North Carolina-based AAIPharma Services Corp. bolstered its materials testing business with the acquisition of Celsis Analytical Services, which has facilities in Edison and St. Louis, Mo.
Last week, I spoke with AAIPharma’s chief executive, Patrick Walsh, about the acquisition and the company’s plans for future growth.
AAIPharma has been around for more than 30 years, but its current growth trajectory dates back to 2009, when Chicago private equity group Water Street Healthcare Partners purchased the pharmaceutical development division of AAI’s predecessor company, AAIPharma Inc.
Water Street gave the company a new management team and an ambitious plan for growth.
The Celsis acquisition, Walsh said, adds to the reputation of the company’s material testing business.
“We’d like to become the number one company in terms of material testing in North America,” Walsh said. “And we love the Celsis business because it is the industry leader in turnaround times for sample process.”
Walsh said the deal also helps the company geographically, giving AAIPharma its first foothold in New Jersey and the Midwest. That’s helpful for clients who want to work with a local partner, he said.
In addition to its material testing services business, the company also has a manufacturing business and an analytical and pharmaceutical development business. Each division makes up about a third of the company’s revenues, Walsh said. AAIPharma has about 600 employees in total.
The pharmaceutical industry once was very vertically integrated and reticent to work with external partners, but Walsh said the paradigm has shifted as companies look to bolster their pipelines and do research as efficiently as possible.
That’s led to a high competition within the three sectors in which AAIPharma is active. Walsh said his firm hopes to stand out because of its size and the comprehensive range of services it can provide. He said there are more than 400 analytical testing companies in theU.S., but when you screen out those with fewer than 25 employees or $20 million in sales, you’re left with “a pretty small number.”
“So it’s a lot of smaller companies that don’t necessarily have a national scope or the ability to scale,” he said.
Walsh said he’s already seeing Big Pharma firms looking to consolidate their external partnerships as they increasingly prefer to deal with a small number of contractors with wide capabilities, as opposed to a large number of smaller contractors.
Going forward, Walsh said he’s expecting growth in every sense of the word. The company just opened a new 40,000-square-foot lab in its Wilmington, N.C.headquarters. They’re also planning to expand the Edison and St.Louis Celsis sites.
Walsh said the company is also preparing to grow through additional acquisitions. He said now’s a good time to be a buyer.
“I’ve been in this industry almost 30 years and I’ve never seen so many assets in play,” he said. “Pharma companies are looking to shed facilities. Small companies are looking to get bigger that don’t have the capital. It’s a very opportunistic time for a company that’s well positioned to look at these kinds of things.”
Walsh said the company expects to add 50-60 new positions this year, including new hires in Edison. Walsh said now’s a good time in that arena, too.
“It’s never been a better time to hire because there’s an abundance of highly skilled technical workers with great experience who unfortunately have been caught up with the various down-sizings in our sector,” he said. “For us, that’s a very rich talent pool, and those are exactly the kind of employees we’re looking for.”