A.L. Pharma Inc.

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A.L. Pharma Inc.

One Executive Drive
P.O. Box 1399
Fort Lee, New Jersey 07024
(201) 947-7774
Fax: (201) 947-5541

Public Company
1975 as A.L. Laboratories Inc.
Employees: 2,700
Sales: $469.3 million
Stock Exchanges: New York
SICs: 2834 Pharmaceutical Preparations; 2833 Medicinals and Botanicals

Known as A.L. Laboratories Inc. until October 1994, A.L. Pharma Inc. is an international pharmaceutical company involved in manufacturing and marketing specialty generic and branded pharmaceuticals for people, as well as animal health products. Beginning as a subsidiary of a Norwegian pharmaceutical company, A.L. Pharma initially focused on producing animal feed antibiotics, particularly bacitracin, then increasingly became involved in manufacturing and marketing human Pharmaceuticals. By the mid-1990s, A.L. Pharmas U.S. and international presence in the human pharmaceutical and animal products markets had increased considerably from the companys modest beginnings, positioning it as one of the emerging companies in the global pharmaceutical market.

A.L. Laboratories was formed in 1975 as a wholly owned subsidiary of Apothekernes Laboratorium A.S., a Norwegian manufacturer and marketer of pharmaceutical and health products for humans and animals. Founded in 1903, Apothekernes Laboratorium had been involved for years in the manufacture of bacitracin, an antibiotic for animal feed use. Initially, when Apothekernes Laboratorium began manufacturing bacitracin at its production facility in Oslo during the early 1950s, the substance was marketed as a pharmaceutical grade bulk antibiotic. Shortly thereafter, the applications for bacitracin broadened, and by the late 1950s Apothekernes Laboratorium began marketing the product as an animal feed additive. Bacitracin became the mainstay product for the newly-formed A.L. Laboratories when it established its headquarters in Englewood, New Jersey, in 1975.

Instrumental in the formation of A.L. Laboratories was I. Roy Cohen, who, along with Einer W. Sissener, would figure prominently in the companys history for roughly the next 20 years. Under Cohens and Sisseners stewardship, A. L. Laboratories would experience dramatic growth, evolving into a well-rounded pharmaceutical company that, like its progenitor Apothekernes Laboratorium, would enjoy considerable presence in the pharmaceutical markets for both humans and animals. Initially, however, Cohen, who served as A.L. Laboratories president, steered the company toward further growth in the bacitracin field; with annual revenues totaling $6 million shortly after formation, the full development of the company into other segments of the pharmaceutical market would take time.

The expansion of A.L. Laboratories size and scope was facilitated by its relationship with Apothekernes Laboratorium. With its parent companys backing, A.L. Laboratories received more favorable terms on bank credit than competitor companies of commensurate size. This was an invaluable asset during the companys formative years, particularly when it came to acquiring other companies.

An important step toward increasing the companys U.S. and European presence in the bacitracin field was taken in 1979, when A.L. Laboratories acquired the chemical and fermentation businesses of Dawes Laboratories, Inc. Located in Chicago Heights, Illinois, these facilities included chemical, fermentation, and blending installations that provided A.L. Laboratories with its entry into organic chemical production and augmented its bacitracin manufacturing capabilities. Ground was broken the following year for a multi-million dollar expansion of the Chicago Heights facilities that, as Cohen related to Chemical Marketing Reporter at the time, would greatly increase antibiotic production capacity [and] multiply our output of feed grade bacitracin. With the bacitracin manufactured at these facilities, A.L. Laboratories marketed its primary product, Bacitracin-MD, a feed supplement, used for disease prevention, growth promotion, and feed efficiency in the poultry and swine industries.

Prior to the expansion of A.L. Laboratories Chicago Heights facilities, many of the products marketed as animal feed antibiotics were found to cause pernicious side effects. The FDA, responding to the complaints by meat and poultry producers, stepped in and began closely scrutinizing the production of animal feed antibiotics. Excluded from these charges of product inferiority was A.L. Laboratories Bacitracin-MD, a product meat and poultry producers favored because it did not develop tissue residues in animals. Demand for Bacitracin-MD, and its companion product, Solu-tracin 50, consequently shot up, providing a boost to A.L. Laboratories business and creating a need for increased production, a need the expansion of the Chicago Heights facilities was designed to meet.

With business steadily growing, A.L. Laboratories entered the early 1980s propelled by the increasing popularity of bacitracin. By 1983, the companys Bacitracin-MD had been renamed as BMD. That year, A.L. Laboratories completed a major transaction, perhaps the most pivotal purchase in the companys early history, when it acquired a Danish health concern named A/S Dumex. Based in Copenhagen, Dumex was a manufacturer of branded pharmaceuticals, fermentation antibiotics, and nutritional beverage products, which the company sold in more than 40 countries. Included in the deal were manufacturing facilities that, along with Dumex product line, complemented A.L. Laboratories business in the United States and in Norway and gave the company access to important markets in Africa and Asia, where historically it had maintained only a nominal presence.

The following year, A.L. Laboratories became a publicly-held corporation, as Apothekernes Laboratorium gradually began to cede a part of its stake in its formerly wholly owned U.S. subsidiary. The year of A.L. Laboratories initial public offering also marked the first full year that the companys 1983 acquisition of Dumex contributed to annual revenue. For the year, A.L. Laboratories generated $85.9 million and posted $4.3 million in net income, a laudable increase in nine years time. However, shortly thereafter, expectations would run high, leading A.L. Laboratories management, still led by Cohen, to set goals of financial growth that dwarfed the companys record of growth during its first decade.

Generally, this desire to become a much larger company meant that A.L. Laboratories would increasingly become involved in the manufacture and marketing of pharmaceuticals for humans and pursue less aggressively its interests in the animal antibiotic market. This new business strategy was manifested in 1987, when A.L. Laboratories acquired Baltimore, Maryland-based Barre-National from Revco D.S. Inc. for $95 million. The largest U.S. manufacturer of generic cold medicines, Barre-National manufactured more than 200 prescription and over-the-counter drugs, giving A.L. Laboratories a substantial stake in the pharmaceutical market. But, the greatest asset the acquisition gave the company was Barre-Nationals commanding lead in the liquid (as opposed to tablets or capsules) generic drug market. In this expanding niche of the more broadly defined pharmaceutical market, Barre-National controlled 40 percent of the U.S. market, an entirely new market for A.L. Laboratories that represented the companys future.

Before being acquired by A.L. Laboratories, Barre-National had produced $45 million in annual revenues; by the end of 1988, the first full year under A.L. Laboratories corporate umbrella, Barre-Nationals revenues jumped to $65 million, pushing A.L. Laboratories revenue total for the year to $236.4 million. The growth of Barre-National (which, like Dumex, operated as a subsidiary of A.L. Laboratories) and the initial success recorded in the companys new market validated the decision by A.L. Laboratories management to seek expansion through the manufacture and marketing of liquid generics, which promised to increase in popularity in the coming years. From 1989 to 1994, the liquid generics market was projected to nearly triple in dollar volume to reach $400 million, a substantial portion of which A.L. Laboratories expected to garner through Barre-Nationals tight grip on the market. Moreover, there was a relative paucity of competition in the field; only 12 percent of branded (non-generic) liquid pharmaceuticals had generic counterparts, while 25 percent of the branded pharmaceutical tablet and capsule products competed against generic equivalents. With these encouraging signs pointing toward potentially dramatic growth, Cohen gave the rest of the companys management a formidable goal: by the end of the 1990s, Cohen expected A.L. Laboratories to be a $1 billion company.

In late 1989, pharmaceutical sales composed 65 percent of the companys business, while animal health products contributed 20 percent. Although A.L. Laboratories had shifted its focus to pharmaceuticals for human use, the company still held an enviable position in the animal antibiotic industry, which continued to suffer from allegations that many of the products contained harmful residues. A.L. Laboratories had avoided these charges and earned a profitable reputation as one of the few reliable animal antibiotic manufacturers. Barre-National, by now in its second full year under A.L. Laboratories management, continued to grow, contributing $85 million, or 30 percent, to its parent companys revenue total. Shortly after Cohen made his prediction that A.L. Laboratories would reach the $1 billion plateau by the end of the decade, the company recorded $266.2 million in revenue. Although still a long way from the target figure, Cohen had plans to help A.L. Laboratories achieve the goal.

The most expeditious path was through the acquisition of pharmaceutical and animal antibiotic companies, a course of action for which Cohen prepared. Also during this time, Cohen, then in his late 60s, began looking for a suitable replacement for himself. This would be the first change in leadership in the companys history. After months of discussions in 1990, a suitable replacement was found in Richard P. Storm, an executive with 30 years of experience in the pharmaceutical industry. Of British and Norwegian descent, Storm was born in Argentina, where he later worked for Pfizer Inc., spending 19 years at the Argentinean operations of the giant pharmaceutical company. After leaving Pfizer, Storm moved to the United States in 1980 to join Abbott Laboratories, where he spent another four years before joining Rorer Group, a Fort Washington, Pennsylvania-based pharmaceutical manufacturer.

Selected as A.L. Laboratories president and chief executive officer in January 1991, Storm left his position as executive vice-president at Rorer Group and immediately set himself to the task of achieving his new companys financial goal. The year of A.L. Laboratories predicted ascension to the $1 billion level had been formally pushed back to 2000, but Storm, nevertheless, approached its fulfillment with a sense of urgency. Several months before Storm assumed stewardship of A.L. Laboratories, the company had purchased NMC Laboratories Inc., a Glendale, New York-based manufacturer and marketer of prescription creams and ointments. The acquisition of NMC added $14 million to A.L. Laboratories annual revenue total, but, by the time Storm came aboard, Cohen had much more to offer his protégé.

In the months leading up to Storms selection, Cohen had arranged the financing to launch a series of acquisitions, obtaining $220 million from a consortium of 11 European banks led by Union Bank of Norway. Accordingly, Cohen not only handed Storm the reins of the company in January 1991, but also a considerably fattened corporate wallet. Storm took both, clearly elated by the opportunity before him. In an article for the Business Journal of New Jersey, Storm related, It has been my objective to be a CEO of a NYSE-listed company. This is a major move; hopefully, the last in my career. To the New York Times Storm succinctly related that becoming chief executive of A.L. Laboratories fulfills all my ambitions.

Six months later, however, Storm was gone, leaving without explanation at the end of July 1991. In response to Storms departure, company officials stated that his background at large pharmaceutical companies did not conform to A.L. Laboratories entrepreneurial style. To fill the void left by Storms exit, the company created a three-member office of the chief executive comprising Jeffrey E. Smith, A.L. Laboratories chief financial officer since 1984, Cohen, and Sissener, who had been and continued to be the boards chairperson.

Two months after Storm left, A.L. Laboratories acquired the entire feed additive line of Solvay Animal Health Inc., a $12 million company that fleshed out A.L. Laboratories animal health product line. The following year, in 1992, a story of significant importance to A.L. Laboratories appeared in the Wall Street Journal, announcing the possibility that the company was intending to combine some or all of its businesses with Apothekernes Laboratorium, which by this point held a less than 40 percent stake in the company. Actually, talk of somehow combining the complementary businesses of Apothekernes Laboratorium and A.L. Laboratories first began in the mid-1980s, but by the early 1990s these discussions had become much more purposeful and explicit. After several years of negotiations, it was agreed in October 1994 that A.L. Laboratories would purchase the pharmaceutical, animal health, aquatic animal health, and bulk antibiotics businesses of its former parent, Apothekernes Laboratorium.

Beyond the material assets gained, the acquisition also led to a name change for A.L. Laboratories to A.L. Pharma Inc., which the companys management felt better reflected the scope of the companys operations and its greater interest in pharmaceuticals. Bolstered by the addition of Apothekernes Laboratoriums valuable assets, A.L. Pharma entered the mid-1990s with Sissener at the helm, serving as both the chairperson and chief executive officer. Commenting on the acquisition, Sissener stated, The objective of the combination is to create an entity that will be in a stronger position to compete on a worldwide basis in specialized human pharmaceutical and animal health products. With this expectation, A.L. Pharma plotted its course beyond the mid-1990s, intent on eclipsing the $1 billion mark.

Principal Subsidiaries

Barre Parent Corp.; Barre-National, Inc.; G.F. Reilly Co.; ParMed Pharmaceuticals, Inc.; Biomed, Inc.; NMC Laboratories, Inc.; Able Acquisitions, Inc.

Further Reading

A.L. Laboratories Buys Danish Drug Concern, Chemical Marketing Reporter, September 12, 1983, p. 9.

A.L. Laboratories Buys Dawes Laboratories; Vitamin Line Is Included, Chemical Marketing Reporter, October 22, 1979, p. 4.

A.L. Laboratories Inc., Wall Street Journal, April 13, 1992, p. B4.

A.L. Laboratories Inc., Drug and Cosmetic Industry, August 1991, p. 62.

A.L. Laboratories Inc., Fortune, December 5, 1988, p. 140.

A.L. Laboratories Inc., Wall Street Journal, October 2, 1987, p. 32.

A.L. Labs Completes Acquisition, Wall Street Journal, October 4, 1994, p. A8.

A.L. Laboratories Picks Richard Storm for Two Top Posts, Wall Street Journal, January 15, 1991, p. B10.

Bacitracin, Other Drugs Expanded with New Plant, Chemical Marketing Reporter, July 28, 1980, p. 5.

Byrne, Harlan S., A.L. Laboratories Inc.: It Steers Clear of Generic Drug Troubles, Barrons, November 20, 1989, p. 58.

Cuff, Daniel F., Chief Executive Named for A.L. Laboratories, New York Times, January 15, 1991, p. D4.

Peaff, George Jr., Super CEOs, Business Journal of New Jersey, April 1991, pp. 245.

Skin Deep, Business Journal of New Jersey, October 1990, p. 16.

Storm Resigns as Head of Drug Maker A.L. Labs, Wall Street Journal, July 31, 1991, p. B4.

Jeffrey L. Covell