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Dairy giant Fonterra has taken up residence in your bathroom cabinet as well as your kitchen fridge.
The world's biggest dairy exporter is developing a joint venture with European dairy company Campina to target the pharmaceutical sector.
The joint venture, called DMV-Fonterra Excipients (DFE), was set up in June 2006 and supplies pharmaceutical-grade lactose excipients.
An excipient is an ingredient added to a drug to dilute it or to give it form, colour and consistency.
Forecast revenue for the joint venture is nearly €180 million ($333.3 million) for 2007.
DFE chief executive Herman Ermens said returns from the pharmaceutical sector were more independent of commodity cycles than Fonterra's main business.
"You will take your medication regardless of what the economy does, regardless of what price cycles do," Ermens said.
The pharmaceutical industry is worth US$600 billion ($735.4 billion) and is growing by 7 per cent a year, while the segment of the excipients market the joint venture is targeting is worth up to US$1.5 billion, Ermens said.
DFE already has about a 50 per cent to 60 per cent share of the pharmaceutical lactose market but is targeting the wider solid-dose excipient sector, which includes tablets, capsules and inhalation products.
Ermens has worked for Campina, and now DFE, for 25 years since qualifying in the Netherlands with the equivalent of a bachelors degree in food science.
"In 25 years at the company I hardly ever had a day I thought, 'Oh blimey it's Monday again'."
The production process starts with whey from cheese production or casein which is concentrated to get over-saturation and crystallisation of the lactose.
The crystals are washed and refined to provide a high-purity pharmaceutical lactose which then undergoes processing.
The German-headquartered company employs 120 people, with factories in Germany, the Netherlands and Taranaki, where FDA approval is expected early this year for excipients for use in US inhalation products.
There are also two factories run by each parent that supply products for the joint venture.
"It [Taranaki] still today is the most modern state of the art factory that you can find in the world," Ermens said.
It was difficult to be precise about the impact of FDA approval but the company is talking about more than doubling output from the Taranaki factory.
Inhalation treatment products such as those for asthma all used to be based on spray cans, Ermens says.
"Because of environmental reasons, but also it has some disadvantages like you have to co-ordinate, you have to press it, you have to inhale it and you get a little bit of cold shock, nowadays the dry powder inhalers are becoming more popular." Manufacturing pharmaceutical grade lactose is harder than people think, he said.
"There are many companies that produce lactose but few companies that produce pharmaceutical lactose."
Pharmaceutical companies tended to stick to existing excipients in an industry where developing a new tablet could take 10 years and cost US$1 billion.
"It is also a lot of risk because if you introduce a new medication and you just spent a billion [dollars] on developing it you don't want to run the risk that you get a lot of questions on the excipient use."
Fonterra and Campina already had track records but creating a joint venture provided greater critical mass, dedicated to the sector and prevented the operations from getting lost inside a bigger food company, he said.
DFE was focused on building close, stable relationships with pharmaceutical companies, improving functionality and supplying more than just products, Ermens said.
Excipients are used for disintegration of tablets as well as binding them together and new functionality includes enabling the sustained release of active ingredients.
New drugs cost vast sums of money to develop but the payback can be equally large and pharmaceutical companies are prepared to pay for functionality, plus better understanding of ingredients and formulations.
Developing a "blockbuster medication" could generate sales of US$1 billion a year.
