The New Season
The business of manufacturing and supplying active pharmaceutical ingredients (APIs) is very much a world onto itself. Batch processing, hazardous chemistry, dealing with big pharma—these things and more set API suppliers off from the rest of the chemical enterprise. If the risk of doing business in the sector isn’t any higher than it is in specialty and commodity chemicals, the risk profile is certainly unique. There are few other market where vendors vie for contracts to supply minuscule amounts of material for a product candidate that, if eventually approved by regulators, will not go commercial for nearly a decade.
Customer relations also set the API maker apart, largely because of the maverick ways of the customer base in pharmaceuticals. And that customer base has been going through big changes lately. With the downsizing of both manufacturing and R&D in the drug industry over the last four years, contract API producers are increasingly filling the gap in both areas. Thus they are beefing up R&D and formulation services.
Going into this year’s conference and exhibition season (which kicks off in September with ChemOutsourcing in Long Branch, NJ, and swings through Frankfurt for CPhI in October, making stops in December for the SOCMA Dinner in New York and Informex in Miami in January before grinding to a halt at the DCAT dinner at New York’s Waldor Astoria in March, with myriad smaller events along the way) players are wondering if things are about to settle down. Perhaps the post-recession, post-pharma-efficiency-drive market will be cemented in place, clarifying the way forward for API and fine chemical suppliers.
The consensus is probably not. But the picture is beginning to clear somewhat. “I don’t think we’re there yet,” says James Bruno, president of Princeton, NJ-based consulting firm Chemical & Pharmaceutical Solutions. “It’s one of those proverbial moving targets. But people are starting to recognize that a lot of the new projects and products are coming from emerging pharma, not necessarily big pharma.”
He and others note that while drug companies are acting to limit their API supplier lists, looking for long-term partnerships that will likely be with U.S. and European chemical firms, there is growing opportunity in chemical intermediates. Bruno suggests that the non-active drug ingredients are increasingly being treated like APIs by drug firms looking for special technological expertise and key suppliers.
Guy Villax, CEO of Hovione in Lisbon, agrees. “The most significant change in activity is that pharma companies that used to move opportunistically now have strategic outsourcing programs. I don’t think one should generalize about outsourcing, but there are probably only a handful of companies that are really candidates [for key API supply contracts].” And there are only a handful of major APIs coming though big pharma pipelines, he adds.
While this suggests a very tight market, Villax sees a lot of opportunity evolving through specialization. Different suppliers will be involved at different stages of product development, he says. “Every step of the way is really a specialist’s job." Early stage supply, finished dosage formulation—there are many areas on which to focus.
But when industry watchers bring up the perennial topic of process design, developing continuous flow processing, for example, Villax shrugs. “Like other things, it’s horses for courses. Continuous flow will more likely have application in the generics area than in the innovator area, because innovators want things to go very fast, and they don’t care how good the process is.” Designing continuous flow processes, for these customers, “goes against the grain.”
The conference agenda for ChemOutsourcing is a useful window on the discussions ahead. Sessions will cover supply chain security and dealing with the competitive threat of China. They will also touch on newer topics, such as data management and risk sharing between drug makers and suppliers. There will be a session on “crowdsourcing,” for anyone who still doesn’t know what that is.
Villax suggests another topic for discussion—mathematics. Seeing how pharma R&D departments have become so thoroughly inundated with data over the last few years, such that drug firms are starting to hire statisticians and teach them science on the job, Villax anticipates a higher level of statistical analysis will need to be done by contract research organizations. Other sources agree that the math- and statistics-focused discipline of chemical engineering will need to assert itself in fine chemicals as suppliers strive to provide the perfect product and service mix for the few big projects available in APIs.
C&EN’s business department, which this week moved back to New York City after a long stretch in the Garden State, will be a little closer to some of the action. We will have full coverage of the big events and maybe some of the smaller ones as we advance into fine chemical conference and exhibition season. See you on the road, and feel free to stop by and visit the newly-situated Northeast News Bureau on your next trip to lower Manhattan.
C&EN's Northeast News Bureau returns to Lower Manhattan