Packing for Madrid…
Coming off stories in C&EN on the rise of the one-stop-shop contract research organization (this week’s cover story) and the fortunes of API producers in Europe that have acquired manufacturing plants from pharmaceutical companies (see next week’s Business section), I have been thinking about how basic chemical manufacturing merges with more specialized chemistry services in the contract fine chemical/active pharmaceutical ingredient (API) sector.
There is a distinct trend these days toward increased chemistry services. I saw it in the CRO story in which companies like Aptuit and Covance, big names in research services, actually compete with API producers such as Cambridge Major and Ash Stevens in the manufacturing stretch of the line from drug discovery to commercialization. Lately, the contract API producers are honing their skills and offering their services in formulation. Siegfried, the Swiss contract firm, is a great example, having expanded to provide finished form tablets and injectables. And Hovione’s spray drying service is a major draw for companies looking for value-added manufacturing support. In fact, most of the companies that will be converging on the CPhI exhibition in Madrid the second week on October will be touting “manufacturing plus”.
Of course, what they are selling is chemistry. And there has always been a service component to the business. Stephen Munk, CEO of Ash Stevens, reminded me in my reporting on CRO trends that API manufacturers have long been adjunct process chemistry departments for their customers. This is especially the case where those customers are emerging pharma or biotech firms. Guy Villax, CEO of Hovione, agrees that the service aspect is essential to custom manufacturing. He says Hovione generates about 20% of its revenue from research services. The difference between a Hovione and and Aptuit, he says, is that Hovione keys its services to a manufacturing contract. Spray drying and chemical synthesis feed the other 80% of the firm's business.
Albany Molecular Research Inc (AMRI), a CRO pioneer that has been working on variations of the one-stop-shop since the 1990s, began life as a chemistry services firm. It has evolved a manufacturing business that now competes directly with contract API producers. Tom D’Ambra, CEO, speaks of the importance of project management, the shepherding of customers' molecules from discovery through the manufacturing process. For AMRI, customer relationships often begin with drug discovery chemistry services. Currently, D'Ambra says, the emphasis in contract manufacturing is on late stage, manufacturing-intensive contracts. But a shift back to early stage support is under way with the dropping-off of late stage compounds in big pharma pipelines and the heightened activity in early stage work at emerging pharma companies and biotech firms that are increasingly working in partnership with the big drug companies.
So the chemistry services opportunities are shifting, seemingly in both directions—toward the finished drug product and toward more comprehensive early stage chemistry and process design. And the contract API sector, which has gone through some very tough cycles over the years, seems to be adapting to a rising demand for outsourced pharmaceutical services in such a way that it is shaping up as a more flexible and (dare I say) sustainable chemical enterprise.
There. I said it. But indications are that business is looking up as business models evolve. And the Madrid trip should be especially interesting.