One year after its rebirth as an independent company, Hollister-Stier Laboratories LLC, the Spokane-based allergy-products maker, is building its role as a contract manufacturer for other pharmaceutical companies and, in that role, is broadening its scope well beyond allergy-related products.


Hollister-Stier is producing 15 products under six contracts with other companies and is negotiating a dozen other possible contracts, company officials say. The company has contracts or is negotiating contracts to make antibiotics, hypertension-controlling medication, medicines for heart conditions, veterinary products, and enzymes. Confidentiality agreements limit the details that can be released about the companys projects.


Nearly all of the contract-manufacturing business has been developed since Jan. 1, says Charles Moore, Hollister-Stiers director of contract manufacturing.


Contract manufacturing now accounts for between 10 percent and 15 percent of Hollister-Stiers revenue, says Bill Bauernschmidt, the companys vice president of business development. He says making pharmaceutical products for other companies eventually could make up as much as 40 percent of Hollister-Stiers annual revenue. He declines to disclose revenue figures.


When we were looking at buying the company, we examined the contract-manufacturing operations and knew those would have to be developed, Bauern-schmidt says.


Hollister-Stiers plant, at 3525 N. Regal, had been owned by Leverkusen, Germany-based pharmaceutical giant Bayer AG, from 1974 until last June, when a group of former Bayer managers here and other investors bought the operation.


Bayer wasnt interested in contract manufacturing and only occasionally took on manufacturing jobs for other companies in between work on its own primary products here, including allergenic extracts and sterile injectables, Bauernschmidt says. Under that stopgap approach, it was often difficult to find projects that fit in when the facility here had time to do such manufacturing. Now, contract manufacturing is a central part of Hollister-Stiers plans, he says.


The same employees who produce Hollister-Stiers own products also make the items produced under contract. Only two of the companys more than 280 employees focus solely on contract manufacturingMoore, who seeks out potential contract jobs and evaluates their feasibility for Hollister-Stier, and Peggy Sowers, senior supervisor of contract manufacturing, who oversees work in progress. Contract-manufacturing jobs should boost the Spokane plants output of bottled medicines and tests by 30 percent by next year, Moore says. That growth wont require any additional hiring, but Moore hopes to increase employment later.


Marketing its expertise


Hollister-Stier is marketing its contract-manufacturing services to start-up research companies that are developing new drugs but dont have the funds to build multimillion-dollar, U.S. Food and Drug Administration-approved manufacturing facilities or lack the manufacturing expertise to operate such facilities, Bauernschmidt says. Hollister-Stier touts its state-of-the-art facility, highly trained work forcewhich can be hard for a start-up company to find in todays tight labor marketand years of experience.


When you deal with biotechnology companies, you forget how much youve learned and how long it takes, Moore says. These companies are making mistakes we made 30 years ago.


For example, he says Hollister-Stiers employees know what FDA reviewers expect and how to fill out the regulatory forms that the agency requires.


One client had found that a significant amount of test batches of its product made at its own laboratory were lost in the production and packaging process. When production was moved here, a Hollister-Stier team fine-tuned the process to limit losses and increased the output from each batch of the medicine, Moore says.


By targeting small start-ups, Hollister-Stier hopes to build its own contract-manufacturing volume as its client companies grow. Many of the items Hollister-Stier makes for fledgling companies still are being tested in laboratories and clinical trials. By the time an item is approved for commercial use, Hollister-Stier will have established a relationship with the company thats bringing it out and will have a team in place that knows the manufacturing process for the product, Moore says.


With the cost of bringing a new drug to market estimated to be as high as $500 million, pharmaceutical companies are looking for ways to trim costs, and using contract manufacturers rather than building their own plants is one way to do that, he says.


Says Bauernschmidt, Outsourcing is exploding in pharmaceuticals. He says contractors produce 30 percent to 60 percent of new drugs being introduced to the market now. He adds, We are definitely entering at the right time.


Hollister-Stiers current contract-manufacturing customers and those it is still in negotiations with are located across the country and around the world. International attention is coming from a Canadian company that is looking for an FDA-approved facility to make its product for the U.S. market, and from an Israeli company that hopes having an American manufacturer for a product that already is approved for use in Europe will help speed regulatory approval for the products use in the U.S.


Moore says Hollister-Stiers contract-manufacturing projects focus on producing injectable liquid products, as its facility isnt equipped to produce pills. Nonetheless, the Spokane company is under contract to produce what he describes as a raw material that another company will use to make a tablet for an allergy treatment.


Hollister-Stier also is under contract to make products for a large East Coast company that sells generic versions of antibiotics and heart-disease and hypertension medications. As well, Hollister-Stier also continues to make an antibiotic and sterile water for injections for Bayer.


Projects under negotiation include a solution that a Colorado drug company would use to dilute its primary product, enzymes for the clinical trials of a new enzyme-replacement therapy, and products for a veterinary-medicine manufacturer.


Moore says that if the veterinary contract is landed, it will allow Hollister-Stier to venture into high-volume manufacturing. The company currently can produce up to 100,000 tiny vials a day of an injectable medicine, but a typical batch rarely exceeds 1,000 liters in volume. Products for the treatment of large animals would be made in batches of 3,000 to 5,000 liters, and would be packaged in bottles of between 500 milliliters and a liter in size. Such larger volumes would require Hollister-Stier to add a new sterile manufacturing area to handle them, he says.


Other projects


Hollister-Stier this month started a four-phase, $1.4 million project to remodel part of its facility where items are prepared to be taken into the sterile manufacturing areas, Moore says. The project also involves installing new equipment, some of which will be used for contract manufacturing, he says.


He says the remodeling project will improve the speed and efficiency with which items can be readied for use in the plants sterile areas. Air-handling systems that ensure outside air cant enter the sterile area also will be upgraded.


Among the new pieces of equipment that will be installed are incubators that will be used in tests called stability studies, which determine how long a medicine remains safe and effective in storage. The test results are used to set the expiration date that is stamped on medication packaging, Moore says. By increasing its capacity to do such testing, Hollister-Stier will be able to offer additional services to its contract-manufacturing clients, he says.


Hollister-Stier also is broadening its own product offerings. CEO Tony Bonanzino says the company has introduced a new version of its Quintest, an allergy-testing product that doctors use to apply five allergenic extracts to a patients skin and lightly scratch the skin to see which extracts provoke an allergic reaction in the patient. In the third quarter of this year, the company expects to introduce the Quintip, a variation on that product that will apply a single extract.


In addition, the company is seeking FDA approval of a process it calls Protio Image, which it developed and wants to use to help it and its customers monitor the consistency of its allergenic extracts. In that process, the proteins in a standardized extract are separated by weight and stained to produce a pattern of bands. The pattern then can be compared between batches to ensure each batch includes the same proteins. Hollister-Stier hopes this extra proof of consistent standardized quality will set it apart from other manufacturers of allergenic extracts, Moore says.


He says the process has undergone its first review by FDA officials, and the company now is answering the questions that arose after the regulatory agencys first look. He says approval is expected in six to nine months. A marketing campaign targeting physicians to tell them about the new monitoring process has started.


Separately, the company has signed a marketing agreement with the maker of a needle-free injector that will allow Hollister-Stier to begin selling the device throughout North America within the next month.