BUSINESSWEEK ONLINE : MAY 29, 2000 ISSUE
COVER STORY Albany Molecular Research: All R&D, All the Time Albany Molecular Research Inc., Albany, N.Y. PRODUCT Contract chemistry SALES $46 million WHAT'S HOT Pharmaceutical companies, facing a shortage of organic chemists, are outsourcing more and more lab-research work When chemist Thomas E. D'Ambra was working at Sterling-Winthrop Inc. in the 1980s, he saw promising projects get put on hold because there were simply not enough chemists to work on them. For the pharmaceutical industry, he says: ''That's the recipe for going nowhere.'' So in 1989, the Massachusetts Institute of Technology-trained D'Ambra left Big Pharma and two years later founded Albany Molecular Research Inc. (AMRI) to help plug the hole. ''We saw an opportunity to build a company to provide high-value research and development,'' he says. But getting his Albany (N.Y.)-based company off the ground in 1991 wasn't easy. Drugmakers hadn't yet gotten used to the idea of hiring outsiders to perform the painstaking chemical research needed to turn a promising compound into an actual drug. ''It was a new market and took a while to crack,'' says D'Ambra, 44. But luckily for him, one of his early jobs led to the development of a new way to manufacture a substance. The patent on that process led to a key payment--and later, a stream of royalties--that came at a time when Albany was struggling to build its contract business. Now, dozens of other companies are following Albany's strategy. But D'Ambra remains at the head of the pack, with Albany ranking No. 4 on Business Week's Hot Growth list this year. ''I'm not sure there is a tougher, better competitor,'' says Michael A. Martorelli, an analyst at Pennsylvania Merchant Group in West Conshohocken, Pa. It's hard to argue with the results. Albany's revenues--about half from contract work--rose an average of 100% a year over the past three years, while earnings climbed 151%. Albany plans to add 50 chemists to its scientific staff of 150 by yearend. With customers such as DuPont Pharmaceuticals, Eli Lilly, and Pfizer, Albany's ''client list reads like a 'Who's Who' of the pharmaceutical industry,'' notes Deutsche Banc Alex. Brown analyst James S. Patricelli. Albany's businesses extend beyond contract work. Soon after D'Ambra founded the company in 1991, he was hired to purify a substance from a mixture of compounds. The effort failed, but D'Ambra was able to devise--and patent--a whole new process for making the substance. The stuff became Aventis' blockbuster allergy drug Allegra. Now, Aventis pays Albany royalties of more than $21 million a year. That windfall has helped Albany grow. ''It's an advantage they enjoy,'' says Michael T. Flavin, founder, president, and CEO of rival MediChem Research Inc. in Lemont, Ill. The good times for Albany should continue. ''Right now, there is a shortage of synthetic organic chemists,'' says DuPont Vice-President Paul Anderson. ''As long as this shortage exists, these companies are going to do very well.'' Indeed, in its contract business, one of Albany's biggest challenges is finding enough top-notch chemists. ''We've been growing rapidly ever since 1995,'' D'Ambra says. ''Growth is very positive, but it brings many challenges and stresses.'' Albany's best hope for stratospheric growth is also the chanciest--coming up with another nugget such as its Allegra patent. ''They're going to be madly trying to repeat that success, but odds are they won't,'' predicts MediChem's Flavin. That would be a big disappointment to investors, who have bid the stock up to a lofty price-earnings ratio of 59 on the chance that D'Ambra can pull it off, analysts say. D'Ambra says Albany scientists are already working with compounds that show promising activity against cancer cells. If something does pan out, Albany's prospects will remain golden for a long time to come. By JOHN CAREY _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Hot Growth Companies TABLE: The Revenge of Brick and Mortar WWF: One Rock-'Em, Sock-'Em Company Direct Focus: Flexing Its Marketing Muscle Meade Instruments: Back from a Black Hole Diamond Technology: Attack of the Killer Apps Children's Place: Hey, Good-Looking Albany Molecular Research: All R&D, All the Time SERENA Software: Keeping All Systems Go U.S. Concrete: Breaking the Cement Mold What Happened to the Class of '98? TABLE: The 1998 Winners...and the Losers TABLE: Hot Growth Companies, 2000 (.pdf) ONLINE ORIGINAL: Somera: Top-Notch Profits from Old Tech Gear INTERACT E-Mail to Business Week Online

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