Fujifilm Entering Growing Market of Vaccine Contract Manufacturing: A Subsidiary CMO to Acquire Kalon Biotherapeutics, LLC

Fujifilm Entering Growing Market of Vaccine Contract Manufacturing:
A Subsidiary CMO to Acquire Kalon Biotherapeutics, LLC

October 27, 2014

FUJIFILM Corporation (President: Shigehiro Nakajima, referred to as FUJIFILM hereafter), announced an agreement to acquire Kalon Biotherapeutics, LLC (College Station, Texas, U.S.A., referred to as Kalon), a biopharmaceutical* contract manufacturing organization** (CMO hereafter) having expertise in vaccine manufacturing, and will enter the vaccine CMO market to expand its biopharmaceutical business.

On October 22, 2014, FUJIFILM Diosynth Biotechnologies U.S.A., Inc. (FDBU), a FUJIFILM subsidiary, signed an Interest Purchase Agreement, with the owners of Kalon: the State of Texas, acting by and through the Office of the Governor, and The Texas A&M University System*** (TAMUS). At the initial closing of this transaction*4 expected to occur within the next few months, FDBU will acquire 49% of the total membership interests in Kalon and will be entitled to appoint a majority of Kalon's board members. Thereafter, FDBU may increase its interest share up to 100% based on achievement of certain milestones set forth in the Interest Purchase Agreement.

Kalon is a biopharmaceutical CMO with advanced technologies and facilities, founded in 2011 by TAMUS, and is a key subcontractor to one of the three Centers For Innovation In Advanced Development and Manufacturing (CIADM) awarded by the U.S. Department of Health and Human Services, Biomedical Advanced Research and Development Authority (BARDA*5) to develop and manufacture medical countermeasures to protect public health in emergencies, including incidents of bioterrorism or an outbreak of pandemic influenza. The state of Texas, through the Texas Emerging Technology Fund*6, provided funding critical to the development and support of this center.

Kalon's strength is in manufacturing vaccines using the technique of mammalian cell culture. It employs world class technologies for robust, high containment manufacturing*7, which completely contains the viruses used to manufacture vaccines inside production suites, thereby enabling safe, stable manufacture of vaccines to be used as public medical countermeasures against threats such as pandemic influenza, Ebola and Anthrax. Additionally, Kalon utilizes state-of-the-art mobile clean rooms (MCRs) featuring high containment, compactness and mobility. Up to twenty MCRs can be installed at the National Center for Therapeutics Manufacturing facility operated by Kalon. The MCRs enable concurrent manufacturing of several types of vaccines. Moreover, the ability to easily expand the number of MCRs allows for prompt response to increasing capacity demands.

These MCRs are suitable not only for cell-cultured vaccines, but also for all kinds of biopharmaceuticals, including antibodies, and meet the growing demand for high-variety low-volume manufacturing. FUJIFILM continues to enhance its commitment to the vaccine field with support from the State of Texas and TAMUS.

Biopharmaceuticals are expected to increase their share within the total pharmaceutical market because of their high efficacy and safety, and their CMO market is anticipated to grow by a compounded annual growth rate ("CAGR") of about 7%*8, amongst which, the vaccine CMO segment is anticipated to grow by CAGR of more than 10%*8, corresponding to its expansion from prophylactic use to therapeutic use.

FUJIFILM entered biopharmaceutical CMO business by acquiring FDBU and FUJIFILM Diosynth Biotechnologies UK Limited from Merck & Co., Inc*9 in 2011 and has been expanding their businesses through the partnership with Mitsubishi Corporation, who has extensive experiences in the pharmaceutical business. It has since been manufacturing high-quality biopharmaceuticals with high efficiency, by adopting its expertise in precise production control and strict quality assurance, cultivated through its long history in photographic film business. FUJIFILM intends to expand its biopharmaceutical business by establishing one-stop services for the wide variety of needs for vaccine manufacturing, combining Kalon's expertise and the already-available high-end technologies of microbial culture (pAVEway™), mammalian cell culture (Apollo™) and insect cell culture.

  • *Biopharmaceutical: Pharmaceutical products manufactured through biological process, which usually functions differently from small molecule drugs. It includes various products such as vaccine, insulin, growth hormone, antibodies, etc.
  • **Contract Manufacturing Organization: An organization which provides contract services to the pharmaceutical industry. Its services range from early cell line development to process development, stability study, manufacturing of clinical materials, and commercial production, etc.
  • ***One of the largest systems of higher education in the United States, with a statewide network of 11 universities, including flagship, Texas A&M University and ten regional universities across the state. Additionally, the A&M System provides service and education to the people of Texas through seven state agencies, two service units and a system administration office.
  • *4After signing of Interest Purchase Agreement, the transaction will be subject to certain government approvals and customary closing conditions prior to closing of the transaction.
  • *5BARDA is an agency within the U.S. Department of Health and Human Services responsible for development and supply of necessary products to treat public health medical emergencies.
  • *6Texas Emerging Technology Fund is a $500M technology investment fund created by the Texas Governor's office to provide investment funding in research, development, and commercialization of emerging technologies in Texas.
  • *7The facilities are able to comply up to BSL-3 (Biosafety Level) containment, which is in the top-tier level as a facility for commercial use.
  • *8According to internal investigation.
  • *9Merck & Co., Inc is known as MSD outside the U.S.