Spokane Journal of Business

Hollister-Stier expands yet again

Spokane drug maker starts work on $20 million project

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With the paint barely dry on a recent $42 million expansion of its facility here, Hollister-Stier Laboratories LLC has started work on another multimillion-dollar project thats expected to boost its production capability further and heat up its already-scorching growth pace.

The $20 million project will add sorely-needed capacity for the contract drug manufacturer, which continues to make strong gains in an industry characterized by technological change, intense competition, and, for some companies in recent years, doubledigit percentage drops in revenue, says President and CEO Anthony Bonanzino. Hollister-Stier is hoping that the latest expansion project will help it stay ahead of the curve.

If youre not moving forward, youre falling behind, because everyone is trying to move forward, Bonanzino says.

The companys justification for starting another project so closely on the heels of its recent major expansion came from both a recognized client need and an injection of capital from its new owner, Indian pharmaceutical giant Jubilant Organosys Ltd., he says. Jubilant acquired Hollister-Stier last June in a $122 million transaction.

While Hollister-Stier has been posting solid revenue gainsaveraging overall growth of 22 percent a year over the past five yearsits aiming to kick it up a notch this year at the behest of Jubilant, which has challenged each of its units to achieve between 30 percent and 40 percent growth this fiscal year, which ends March 31, 2009, Bonanzino says.

If you want to grow at the accelerated rate theyre asking of us, you have to expand, Bonanzino says. We feel we have to keep pace with (Jubilant), and the larger you get, the more challenging it is to sustain that growth.

In 2006, Hollister-Stiers revenue topped $60 million. Since its now part of Jubilant, it cant provide information about its own revenues, but Bonanzino says last year was another record-breaking year for the company.

Hollister-Stier currently has roughly 480 employees and 32 immediate job openings, he says. It has budgeted to have roughly 550 employees by next March. Bonanzino expects the company will reach up to 650 employees within two years, which he says would max out its current infrastructure.

As part of its long-range planning, Hollister-Stier is looking at ways to develop roughly 6 acres of unused land it owns to the west of its facility in northeast Spokane. Those plans might include building a separate facility that could house more equipment and roughly 150 additional employees, he says, adding that such a project likely wouldnt start for another five to 10 years.

In the expansion projects it recently completed, Hollister-Stier added roughly 25,000 square feet of office and laboratory space to the east end of its 135,000-square-foot facility, at 3525 N. Regal, and a roughly 30,000-square-foot addition behind the west end of the building. The latter addition houses an $18 million high-speed sterile fill line that the company expects to have up and running in June, says Jeff Milligan, its vice president of technical operations. That new line will allow Hollister-Stier to fill roughly 75 million vials a year, which will more than double its current capacity, Milligan says.

In addition to sterile drugs, the companys contract manufacturing unit also makes freeze-dried drugs, which Bonanzino says are in increasingly high demand among clients, partly because they have a longer shelf life than drugs in liquid form. Its current expansion project involves demolishing the southern wall of the new west addition to make way for a 9,400-square-foot structure that eventually is to house three freeze-drying suites, Milligan says. Spokane-based Lydig Construction Inc. is the contractor for the project, which was designed by NAC/Architecture, of Spokane.

Hollister-Stier began using its first freeze-drier suite in 2003, and installed a second last year to handle demand. With the technology, the company moves a sterile liquid product into a freeze dryer and converts it into a powdery substance.

The company plans to install two more freeze-drier suites, which each cost $3.5 million and will have more capacity than either of its current two suites, in the new addition initially, and likely will start the process for adding the third suite within the next year, Milligan says.

Typically, it takes about a year to build, deliver, and obtain U.S. Food and Drug approval to operate such equipment, he says. The company has two potential clients waiting to use the new freeze-driers, so its planning to expedite the process by building most of the equipment on-site, rather than having it built overseas before its shipped here. While that likely wont save the company money, it could shave a few months off the process, and time is worth a lot of money in this industry, Milligan says.

Due to the time-consuming processes involved in adding new equipment, Hollister-Stier must plan far in advance to meet future client needs, which can be difficult in such a competitive, unpredictable industry, Bonanzino says.

Its a business risk, but if you leave the putt short, you have no chance of putting it in the hole, he says.

In addition to contract manufacturing, the company has an allergy unit that makes up about 30 percent of its sales. In contrast to the contract manufacturing side, which has been growing at an annual compounded rate of 44 percent for the past five years, the allergy units growth historically has been more modest, he says. Jubilant now wants the company to step up that units growth pace to eventually match that of the manufacturing unit.

Its going to require investments, and Jubilant understands that and is ready to provide that for the right opportunities, Bonanzino says.

Hollister-Stier is targeting 20 percent to 25 percent growth for the allergy unit this year. Its looking at ways to achieve that goal, and strategies might include pursuing acquisition opportunities and licensing new products, he says. One of its first steps was the recent launch of its ComforTen Multiple Skin Test System, a new allergy-testing device that the company asserts causes minimal skin trauma and is the only 10-test, self-loading, surgical-steel testing device on the market.

On the contract-manufacturing side, one of the companys main challenges involves continuing to make gains in an industry in which some of its competitors are struggling, Bonanzino says. He attributes the companys strong performance to its regulatory track record and its reputation for meeting clients deadlines.

Within its allergy unit, one of Hollister-Stiers primary challenges is that the whole market space is in the throes of change, with the constant arrival of new, innovative products, he says.

The company also faces the challenge of maintaining its work-force culture in the midst of rapid growth, and its learning different ways to operate structurally under the ownership of a giant, foreign company, he says.

Bonanzino says part of whats fueling his optimism for the future is the local economys continued resilience amidst woes in the national economy. Plus, Hollister-Stiers industry largely is immune to economic recessions because new technologies continually are being developed to try to prolong life, he asserts.

Everything is lining up properly for us right now, he says.

Hollister-Stier Laboratories was formed in 1999 when a group of managers bought the plant from Bayer Corp. Under various owners, the plant has operated in Spokane since 1921.

Contact Emily Proffitt at (509) 344-1265 or via e-mail at emilyp@spokanejournal.com.

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