Posted on Tuesday 23 August 2011 byUlster Business
Symon Ross talks to Almac CEO Alan Armstrong about the firm's continuing expansion
Almac is regularly, and rightly, lauded as one of Northern Ireland's business success stories.
It is the perfect example of the type of innovation-led export company which political and business leaders know the province will need more of if we are to reduce reliance on the public sector and create a knowledge economy.
The company provides a range of services extending from research through pharmaceutical and clinical development to commercialisation of products for more than 600 global clients.
Its history dates back to 1968 when the late Sir Allen McClay founded his original company Galen Ltd, which marketed and sold ethical pharmaceutical products in the UK and Ireland.
Through the years the company formed specialist divisions for Pharmaceutical Development & Manufacturing Services, Clinical Trial Services, Chemical Synthesis Services and Interactive Clinical Technologies Incorporated and a separate company Almac Diagnostics.
During 1997 Galen undertook an IPO to become Galen Holdings Plc. with listings on the London and Irish markets. Sir Allen McClay then made a strategic decision to retire from Galen Holdings Plc in 2001 and personally invest approximately £240m to purchase the four service-based businesses from Galen and incorporated Almac Diagnostics in order to keep the company in Northern Ireland.
PwC last year provided a measure of just how important the company has become to the Craigavon area, calculating that over 20 years Almac will generate sales revenue of £5.3bn for the Northern Ireland economy. Based on its current total of 2,000 employees that figure would now rise to £6.1bn.
And yet, despite continued growth in revenues and profits, there is an understated feel about the company, stemming perhaps from the character of its late founder Sir Allen McClay, who was not one for airs and graces.
Though he passed away in January 2010, there's still a strong sense of Sir Allen McClay's presence around the company. At reception in Craigavon a video charting the company's history shows footage of him receiving his knighthood. And, several times during our interview Chief Executive Alan Armstrong nods towards an empty desk in the office behind him when he refers to 'the auld fella'.
"He had a lot of ideas and philosophies that were woven into the organisation and which remain there. We'll do our best at senior management level to keep them there," says Armstrong, who first joined the company 33 years ago.
Many of Almac's directors and senior management team have been with the company since they were graduates. That has added a stability and loyalty that few other companies of its size are able to claim, and means that McClay's vision to see Craigavon remain the firm's headquarters and engine room has not been altered.
"There's a sense of loyalty and a sense of belonging. Allen McClay used to talk about the Almac family and there is something to that," agrees Armstrong.
He puts the company's continued growth through the recession down to the hard work and professionalism of its employees, as well as having the right products for them to present to clients in the right way. Almac employs a broad range of local graduates, and recruits more specialist roles from around the world.
It also counts all of the world's major pharmaceutical firms and hundreds of biotech companies as clients.
But it is not resting on its laurels. Armstrong says R&D and innovation are the only way it can keep its competitive edge and this requires constant investment.
"The beauty of this organisation is that any surplus cash that's generated, there's no venture capital organisation or shareholders to look after. It's all ploughed back into the business.
It is used to build buildings and buy equipment, all sorts of development work to make the business more sustainable and more profitable," he said.
Earlier this year Almac officially opened its North American headquarters in Souderton, Pennsylvania – a state-of-the-art facility that represented an investment of $120m and which houses more than 800 employees.
The decision to open a new facility came after Almac outgrew its facilities in Audubon and Yeardley. Rather than extending either of those it took the plunge to invest in a new 240,000 sq ft building on the basis that the business was expected to keep growing. With low greenhouse gas emissions and a water reclamation programme, the management feel the building reflects the cutting edge reputation of the company.
"It is a terrific facility, world class, well designed, well built and we're proud of it. It came in on time and on budget," says Armstrong.
"We tried to make it as similar to Craigavon as we could, to get the same look and feel as we have here just so there is some continuity for staff and customers," he adds.
"Everyone knows the North American market is a huge market. You need to be seen to be a real player. We sent a message to our customers and our competitors that we are here and we are here to stay. It is a meaningful landmark."
Almac's divisions distribute products and services around the world, and the company's goal is to add around 15 new customers every year.
It estimates that well over 90 per cent of its business is repeat business – showing, the CEO says, that if you are reliable and have the trust of your clients you don't always have to be the cheapest in the market.
"That's a big indicator of how well we are doing. Because if you're doing a bad job customers won't come back," says Armstrong. Keen perhaps not to blow Almac's own trumpet too much, he adds quickly: "We're doing okay. You're better not to get too big headed, but we're doing alright."
Armstrong believes the firm would do even better should the long discussed powers to lower corporation tax be devolved to Northern Ireland.
Sir Allen McClay was quoted as saying that a lower corporation tax rate in Northern Ireland would help him double the size of his business within 10 years. The company's CEO is still happy to have that statement quoted.
"Lower corporation tax means we have more cash to invest back into the business and that is where it will go. There's a knock on effect in that, if we're employing more people, we require more packaging material, more buildings, more facilities and that all creates wealth in the economy," he explains.
"If there's not a sea change of some sort, the future is not terribly bright for Northern Ireland."
While future growth for Almac seems assured, the CEO won't be drawn into making predictions. He sees further potential in the services areas as more companies in the sector choose to outsource their drug development work to make it happen more quickly and cheaply.
"We don't set goals that say if we've got there, we've succeeded. New things tend to come along all the time and we have to be versatile so we can adjust to the opportunity and go for it. That happens regularly, where a new area needs formulation and development, and so we need to keep fairly flexible so we can move to wherever's required in terms of innovation, capacity and spending cash," he said.
There are no immediate plans to enter into the process of developing drugs from initial compound to market, a process that can cost in the region of $2bn and, even for Almac, is a bridge too far at this stage.
However, Armstrong revealed that the company has "lots of irons in the fire" in the diagnostic space and that it has also been looking at opening an office in Asia.
"If we did it would be to supplement Northern Ireland and even bring more work here because we're a bigger outlet for it. It would be to supplement it rather than take away from it," he adds.
The ideal way ahead is, he says, one of steady and manageable growth.
"If you grow at too quick a pace maybe aspects of your business such as quality begins to slip. We want to grow but take everyone along with us. We're not a public company so there's no big profit or revenue figure we have to meet in order to keep the City happy. We keep ourselves happy."
Perhaps therein lies Almac's secret.