New Castle firm finds better life through chemistry

The theft of intellectual property. A collapse in the national economy. The death of a visionary founder.

Any one of those crises might spell certain doom for a small company.

But Adesis, a contract research organization near New Castle, managed to endure all three in a single decade and come out the other side with plans to grow larger than ever.

“The reality is, we all have a point of shutdown. It’s just a question of when,” said CEO and chief science officer Ving Lee. “That’s why the most important thing any entrepreneurial company can do is evolve new strategies and stay one or two steps ahead of your competitors.”

Over its 24-year history, the company in the Southgate Center industrial park off Boulden Boulevard has evolved into a developer and manufacturer of specialized chemical compounds that drug makers and others use to achieve their next big breakthroughs.

In the last decade, five biotech companies have won approval from the U.S. Food and Drug Administration or the European Medicines Agency to market advanced compounds that were created with the building blocks supplied by Adesis.

The privately-held company, which boasts annual revenues in the “double-digit tens of millions,” is in the process of adding a dozen new employees to its staff of 45 chemists and researchers as it looks to take advantage of new contracts that could result from pharmaceutical companies expanding their pipelines in the coming years.

While Adesis is now growing to meet that demand, it was only a few years ago that the company appeared to be on the verge of collapse.

Launched in 1991 as CB Research, the company began with a narrow focus on a few types of chemicals, primarily the starting compounds for UV protectants used in intraocular lens implants that founder Chuck Beard had previously worked on at Johnson and Johnson.

But Beard’s ability to anticipate market trends set the company on a new path that it continues to follow today.

“He recognized a decade before anyone else that there was going to be a decentralization of research efforts in the pharma industry,” Lee said. “He moved the company into becoming a true contract research organization and he was one of the godfathers that started this trend way before others jumped on the bandwagon.”

A few years later, however, the company was dealt its first major blow when two former employees stole its catalog of recipes for creating those specialty chemicals. Using those trade secrets, as well as an intimate knowledge of the company’s customer base and pricing structure, the former employees launched their own business, which severely undercut their former employer.

CB Research was forced to lay off more than 30 people – half of its workforce – before spending millions of dollars on a five-year legal battle it won in 2009. Although the Beard family and the firm – which changed its name to Adesis in 2005 – was eventually awarded more than $6 million in damages by the Delaware Court of Chancery, those funds have yet to be paid, Lee said.

While that legal drama was unfolding, Adesis co-owners Beard, Lee and Andrew Cottone, the company’s vice president of chemistry, were running up massive debts just to keep their business alive. Meanwhile, the nation was on the verge of an economic meltdown as a result of the looming banking crisis.

Yet with nearly $590,000 in state financing and their own capital, the owners did the unthinkable by expanding the business with the addition of a 10,000-square-foot lab.

That facility opened Sept. 15, 2008 – the same day Lehman Brothers submitted the largest bankruptcy filing in U.S. history, touching off what would become the Great Recession.

“Most people thought we were fools to build another lab, but as the saying goes, the best time to start a business is when the economy is poor,” Lee said. “We wanted to be ready to regain the business and our confidence, and it turned out to be the best decision we ever made.”

That lab allowed Adesis to expand its research capabilities, which enabled the company to thrive as pharmaceutical companies began outsourcing their technological expertise during the economic downturn.

Today, the research done in that lab allows Adesis to weather the cyclical nature of the business without having to make drastic changes to its personnel.

“If we have a situation where a client comes forward and says ‘I need x number of chemists immediately,’ it gives us a reservoir of personnel that we can pull out of self-funded projects in order to service those programs,” he said.

Those research programs also have allowed Adesis to build up a catalog of more than 1,800 chemical compounds, the majority of which were first created by the company.

The company’s ability to rapidly produce those compounds – which can retail for as much as $800 a gram – is what sets Adesis it apart from the competition, Lee said.

“Most companies wait until they get enough orders for a chemical to produce a certain amount,” he said. “But in research, time is money. You want the answer as soon as possible, not in 12 months.”

Adesis weathered its most recent crisis in 2012 when Beard succumbed to cancer.

Lee, who first met Beard when the two were lab partners at Ohio State University, has since taken over running the company, splitting his time between Adesis and other ventures in San Francisco.

The day-to-day operations are handled by Cottone, who now owns the company along with Lee and Beard’s widow, Caroline. Beard’s son Paul serves as the company’s director of business development.

Adesis has had offers to relocate overseas or elsewhere in the country, including a $17 million inducement to move to Philadelphia.

But Lee said the owners are committed to continuing Beard’s dream in Delaware.

“It’s a recognition in the outside world and internally that his value has not been exploited,” Lee said. “This company also has been through a lot and we consider our employees to be an investment. We’re not only investing in them, they’ve invested in us and we’re staying here with them.”

Contact Scott Goss at (302) 324-2282, sgoss@delawareonline.com or on Twitter @ScottGossDel.