Issue Date: April 12, 2004
No company involved in pharmaceutical fine chemicals has been immune to the sector’s demand and profitability woes. Clariant, however, took its lumps earlier than most and is now cautiously expanding.
Last month, the company announced a 30% expansion of the small-scale facilities at its Springfield, Mo., site. The expansion follows last fall’s opening there of a Molecules Synthesis Centre—Clariant’s name for facilities that offer manufacturing of drug active ingredients and intermediates in the 5- to 200-kg range.
And according to Ralf Pfirmann, Clariant Pharmaceuticals’ global director for pharmaceutical market management, the new investment marks the fourth expansion at Springfield over the past two-and-a-half years.
It was the acquisition of British fine chemicals producer BTP in 2000 that both brought Clariant the Springfield site—a former Roche facility—and introduced it to the ups and downs of the pharmaceutical chemicals market. The Swiss company subsequently admitted paying too much for BTP and was forced to embark on a difficult restructuring. “We had to march through the valley earlier than other companies,” Pfirmann says.
One of those steps occurred a year-and-a-half ago, when Clariant assembled all of its current Good Manufacturing Practices (cGMP) assets into one business unit called Clariant Pharmaceuticals. Now headed by Norbert Dieterich, formerly chief executive of the Swiss firm SF Chem, the pharmaceuticals unit also includes plants in France, Italy, Germany, and the U.K.—most of them acquired by BTP.
In contrast with pharmaceutical chemical companies that strive for consolidation of personnel and capacity at one or two main sites, Clariant Pharmaceuticals operates a fairly decentralized organization. Dieterich heads a management team of only four people based in Frankfurt. Most of the unit’s 800 employees work at the plants or at regional sales and R&D locations that can interact easily with local customers.
“Inside our business unit we have Italians, Americans, French—all with very strong cultures,” Dieterich says. “You can’t lead them with a big centralized chemical company.”
Dieterich maintains that his business is holding its own in difficult times. The Clariant division that it is part of—life sciences and electronic chemicals—saw a 12% decline in sales last year to just under $800 million. Dieterich won’t disclose specifics, but he says sales at Clariant Pharmaceuticals stayed level in 2003; factor in last year’s sharp rise in the value of the Swiss franc against the dollar—the currency of many pharmaceutical customers—and he argues that the business actually achieved decent sales growth.
The executives attribute this performance to successful management of far-flung assets. Since last year, for example, a Clariant plant near Mumbai, India, has been producing commercial quantities of non-cGMP intermediates, including building blocks for statin drug manufacture. Pfirmann claims that Clariant is the only major supplier to the drug industry operating an Indian plant that is integrated with Western cGMP facilities.
Also last year, the firm’s Isso, Italy, facility underwent an audit by the U.S. Food & Drug Administration, allowing it to make drug actives for the U.S. market. With the audit, Pfirmann notes, Clariant increased its FDA-inspected capacity by 25% and, in effect, removed an equal amount of “undifferentiated” capacity from an oversupplied market.
THE NEXT MOVE may be made in Springfield. According to Dieterich, Clariant is studying expansion of pilot-plant or even commercial-scale capacity there. Thanks to its on-site waste incineration facility, he says, Springfield stands out among U.S. pharmaceutical chemical plants in its ability to handle hazardous raw materials such as bromine, ethylene oxide, chloroform, and butyllithium.
Although most of Clariant’s pharmaceutical chemical assets were once owned by big drugmakers like Roche or Bristol-Myers Squibb, Pfirmann and Dieterich note that these assets are increasingly being employed on behalf of small or virtual drug companies—more than 30 such firms at present, they claim.
Pfirmann acknowledges the challenge of insulating virtual companies from the complexity of a large firm like Clariant. “They don’t want to work with a big gorilla,” he says, “but they don’t have any assets, and they need partners that can help with the ramp up—ones with enough research power to overcome difficulties in a project.”
When in New York City recently, Clariant managers met with one such customer, a small U.S.-based biotech company outsourcing what Pfirmann calls a “challenging” chemical synthesis for an antiviral drug.
This customer came to Clariant Pharmaceuticals via Clariant’s U.S.-based sales and marketing team. However, after assessing the customer’s needs, Clariant managers determined that the best home for the project was their Origgio, Italy, site. During work on the project, Pfirmann says, a manufacturing problem arose that was solved by chemists at Clariant’s Frankfurt R&D center.
Pfirmann and Dieterich see Clariant’s diverse mix of plants and cultures as an advantage in the competitive pharmaceutical chemicals business. “We use the strengths of different managements in different countries,” Dieterich says. “You can centralize in one big plant and one big development department and save money. But we think it helps to be close to the customer.”
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