Specialties Revival

The annual ChemSpec Europe exhibition, sponsored by IBC Life Sciences, has shifted its focus over the years from a broad survey of specialty chemicals to a narrower forum on fine chemicals for pharmaceutical and agricultural applications.

As such, ChemSpec is often viewed as a second-tier pharma chemicals exhibition that takes place between the much larger Informex fine chemicals event, sponsored in the U.S. by the Synthetic Organic Chemical Manufacturers Association, and the Convention on Pharmaceutical Ingredients (CPhI), Europe's largest pharma chemicals exhibition. Each year, the lingering question for chemical companies is whether or not to exhibit at all three.

With the two larger shows falling virtually on top of each other this coming December and January, some exhibitors at ChemSpec in Amsterdam late last month said they may have to choose between the two--raising the relevance of ChemSpec this year. ChemSpec also received a somewhat unexpected boost from a resurgence of interest in nonpharma specialty chemicals.

In their effort to create value, companies exhibiting at ChemSpec said they are revisiting the key "specialty chemical" criteria of product performance. They are going through their portfolios of synthesis capabilities and custom-manufactured chemicals, searching for new applications, products, or businesses based on chemicals they already make.

Those companies strictly targeting pharmaceutical and agricultural fine chemicals said they are continuing to reorganize following the most recent mergers and spin-offs. Executives with these firms claim that value creation is a matter of filling in gaps in services to provide customers everything from preclinical to post-launch custom synthesis support.

Exhibitors also cited an up-tick in business at ChemSpec this year. "We had been considering not coming," said Ewe Brunk, marketing director for custom agchem manufacturing at Bayer. He said, however, that he was glad Bayer chose to exhibit. "Our customers are here, and they are ready to make decisions."

As with other firms in the agchem sector, Bayer has benefited from the spike in demand for fungicides that combat Asian rust fungus in Latin America (C&EN, J une 14, page 20). The economic recovery is also helping, Brunk said, but agricultural chemicals remain a competitive market where pricing pressure can offset gains from increased sales volume. Bayer, he said, is competing on the basis of service and looking to extend service relationships with customers.

"We are well known for helping customers develop and launch products," Brunk said. "It is not as well known that we use the same tools to help customers when their products come off patent." He said Bayer has been successful in recent years in developing efficient processes for off-patent materials--removing synthesis steps or eliminating solvents. "This is not classic custom manufacturing," Brunk said. "It is commodity custom manufacturing, and price plays a big part. Ultimately, the best process will win."

The crop chemicals sector accounts for about half of Bayer's fine chemicals revenue of about $307 million annually. The division is achieving about 7% average annual growth, according to Brunk.

CONTRACT MANUFACTURERS of active pharmaceutical ingredients are similarly acting to stretch their services to cover the pharmaceutical life cycle. At the show, Sigma-Aldrich announced a key step in this direction: the acquisition of Tetrionics, a pharmaceutical chemical firm with expertise in cytotoxic compounds.

Sigma-Aldrich has built a fine chemicals operation out of its laboratory catalog business over the past 10 years, establishing current Good Manufacturing Practices sites in the U.K., Switzerland, and the U.S. Yet it had a gap in drug development services, according to Edward O. Roullard, director of fine chemicals for Europe. The acquisitions of Tetrionics and Ultrafine, which Sigma-Aldrich purchased earlier this year, are attempts at closing that gap, Roullard said.

With the two acquisitions, Sigma-Aldrich "has a new profile," said Duncan Morgan, sales manager for custom synthesis. "We can now offer full service to small and medium-sized pharma companies, plus help big pharma on tactical sourcing at early stages." Next, he said, the company plans to open a manufacturing plant in India in 2005.

PCAS, based near Paris, has also been piecing together a full-service business model through acquisition. In 2001, PCAS bought fine chemicals firm Expansia from Beaufour Ipsen and a fine chemicals plant from a Finnish division of Schering. Recently, the firm signed an agreement with Aventis for joint use of a facility in Villeneuve-la-Garenne, France.

PCAS is seeking to push the full-service model to its limits, according to Michel Follet, scientific director. "We want to go even further than commercial production," he said. "We want to develop the formulation." The company recently purchased two formulation plants for liquid and solid dosage forms. PCAS is also pursuing generic drug manufacturing, Follet said.

The company has grown rapidly, doubling in size in the late 1990s and leaping ahead since then with a further tripling of revenues. Follet said, however, that 2003 was not a good year, with sales down 9% to $230 million, only slightly better than the 10% average drop for contract manufacturers. This year will be another tough one, he added, though things are picking up.

Other fine chemicals companies also talked up new, more comprehensive service offerings. Isochem announced a contract with Altana for commercial-scale production of pantoprazole, the active ingredient in the gastrointestinal drug Pantozol. David Simonnet, head of Isochem's pharma business, said the new contract is the third with Altana--the first two covered clinical trials and scale-up--and that Isochem hopes to follow this template with several other companies.

At Rhodia, the focus is on efficient processes, said Sonia Martin, business development manager. Last September, the firm merged its ChiRex, pharmaceutical ingredients, and life sciences building block operations into a business unit called Pharmaceutical Solutions. The firm sees the recent move of the former ChiRex division to a one-time DuPont site in Deepwater, N.J., as an opportunity to make efficiency improvements, she said. "We want to differentiate ourselves with our processes capability," Martin said, noting that the company does not currently pursue generics or formulation work. ?

Most exhibitors at ChemSpec, having weathered two or three difficult years, are attempting to gain traction as the economy recovers by taking a closer look at their products and their current and prospective markets. "Fine chemicals companies need to differentiate themselves based on their capabilities, not just purely on their capacity," said Neil D. Murray, CEO of Essential Science, a U.K.-based consultancy.

Murray, former sales and marketing director for Solutia's pharmaceutical services business, said collaborative development between customers and suppliers--or between suppliers of different technologies--can lead to unique products that meet specific needs. He maintains that contract manufacturers can no longer sell themselves strictly on the basis of quality and track record. "You can no longer just throw technology over the wall," he said.

SEVERAL COMPANIES at the show say they are building on current expertise to expand product and service offerings. FMC Corp., for example, has been working to add a roster of nonlithium products based on the core technology of its fine chemicals lithium business.

Business Director Gregory R. Hahn explained that FMC has added organic intermediates, aldehydes, piperazines, pyridines, and organophosphines to its product list in recent years. "We used organic lithium chemistry to make these, which gives us a competitive advantage," he said. The company has invested about $6 million to expand production in Bessemer City, N.C., introducing new chemistry on a tolling basis and investing in full-scale production only when commercialization proves feasible.

Hahn said FMC's raw material and technology advantages have been critical in keeping his division above the slump in fine chemicals over the past two years. The fine chemicals lithium business has annual sales of about $35 million today and aims to be a $100 million player in four years, he said.

Just as FMC's ChemSpec booth included a sign reading "More than Lithium," Procter & Gamble Chemicals raised a banner about expanding horizons for its Sefose sucrose ester. The product, launched last year, is now used in cosmetics and food applications, according to Richard Trechman, European sales manager, and the company is promoting it for textile, plastic additive, and paint applications where the biodegradability of the molecule--a sucrose backbone with fatty acid chains--makes it a viable alternative to other chemistries, Trechman said.

One of the unique new applications discussed at the show was the use of cetylpyridinium chloride (CPC), the active ingredient in Scope mouthwash, to kill bacteria on freshly slaughtered chickens. The chemical, manufactured by Rutherford Chemicals, is the key component of Cecure, a bactericide developed by Safe Foods, a company spun out of the University of Arkansas Medical School.

Rutherford, which was divested late last year by Cambrex, wants to open more of its portfolio to new uses, said Per Wahlstrom, sales and marketing director. In the process, he hopes to usher in a new way of doing business. "We had always been a contract manufacturer," Wahlstrom said. "Now, instead of looking at just the customers' specs, we are starting to look at the chemicals' performance capabilities."

For example, the company is investigating new applications for the ethylene maleic anhydride copolymers it supplied to Polaroid for its instant photography film, a market that is drying up in the wake of digital photography. Rutherford has already launched ethylene maleic anhydride as a coupling agent for automotive engineering plastics and is exploring adhesive and paint applications.

Vic Leung, product technology manager at Rutherford, said the firm began looking at increasing the value of its offerings when Cambrex formed Rutherford from various nonpharmaceutical holdings. "We had been a stepchild to the pharmaceutical business at Cambrex," Leung said. "Now these chemicals are our business."

Thanks to the mergers, spin-offs, and reorganizations that occurred during the recent downturn in fine and specialty chemicals, there were many companies using ChemSpec as a venue to communicate new strategies and identities. This is a daunting task, according to Sigma-Aldrich executives Roullard and Morgan. They admit that, despite its years of building a fine chemicals business, Sigma-Aldrich is still widely perceived as a catalog company. Sigma-Aldrich says it will be among the companies returning to both CPhI and Informex.