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Custom Chemicals

Fine chemicals companies grapple with the intricacies of supplying chemicals and services to the pharmaceutical industry

by A. Maureen Rouhi
January 19, 2004 | A version of this story appeared in Volume 82, Issue 3

The recession is over; the unemployment rate is falling; the stock market is rallying. These positive economic indicators bode well for many industries, but they are scarcely relevant to suppliers of advanced intermediates, active ingredients, and custom services for drug development and production.

The fortunes of custom chemistry companies in 2004 again will be mixed. Manufacturers of bulk active pharmaceutical ingredients (APIs) expect the poor market conditions to continue because drug companies are launching few new chemical entities. As custom manufacturers scramble to fill idle reactors, APIs for generic drugs are gaining more attention. Suppliers of compounds and services for drug development have brighter prospects, because the pharmaceutical industry's future growth depends on this activity.

Hovione production engineers supervise production of a batch of an active pharmaceutical ingredient from the main control room of an automated API manufacturing plant, where operations and process variables are computer controlled.
Hovione production engineers supervise production of a batch of an active pharmaceutical ingredient from the main control room of an automated API manufacturing plant, where operations and process variables are computer controlled.

The good news is that supplying the pharmaceutical industry is fundamentally a sound business. Drug companies still provide one of the highest returns on investments, and they can be expected to outsource chemistry, manufacturing, and other activities to further improve their financial positions.

In the U.S. market alone, pharmaceutical sales in 2003 are expected to exceed $211 billion, according to an analysis by IMS Health, a company that collects and analyzes global pharmaceutical information. Although growth in sales from 2002 to 2003 is expected to be modest compared with the 1990s high of 19%, reached in 1999, it should still be a robust 11%, according to Douglas Long, vice president for industry relations.

According to Long, 2003 was a defensive period for branded pharmaceuticals as many drugs lost patent protection, but it was a banner year for generic, over-the-counter (OTC), and biopharmaceutical products.

Generic drugs gained acceptability as more generic equivalents of brand-name products became available. Long says about 50% of prescriptions in 2003 were filled with generics. The availability of generic drugs also was boosted by Food & Drug Administration regulations favoring generic drug companies.

OTC drugs gained attention through the conversion of certain widely prescribed drugs to OTC status--including Schering-Plough's antiallergy medication loratadine (Claritin) and AstraZeneca's acid reflux drug omeprazole (Prilosec). More recently, FDA has been considering allowing the sale of the emergency contraceptive called Plan B without prescription. New regulations qualifying OTC purchases for flexible-health-spending reimbursements also are encouraging consumers to reach for OTC medications.

Biopharmaceuticals also had a very good year, with the approvals of the anticancer drugs gefitinib (Iressa) from AstraZeneca and bortezomib (Velcade) from Millennium Pharmaceuticals.

Most custom manufacturers, however, are focused on brand-name small-molecule pharmaceuticals because of the high cost pressures, and therefore low margins, on APIs for generics and OTC drugs. Only a few companies are in the biopharmaceutical arena, because of the high cost of entry.

WITH FEW new drugs launched in 2003, the year ahead will again be challenging for pharmaceutical custom manufacturers. But they can take comfort in a study showing the basic validity of pharmaceutical outsourcing through its impact on shareholder price. The study was done by Siegfried, a Swiss chemical and service provider to pharmaceutical companies. The company's chief executive officer, Douglas C. Günthardt, mentioned the findings at a panel discussion organized by Swiss fine chemicals consultant Peter Pollak at the 2003 Convention on Pharmaceutical Ingredients (CPhI) meeting.

The study analyzes how much of a company's valuation is based on current earnings and how much on future growth expectations. It shows that about 70% of the share price of pharmaceutical companies is based on future growth expectations--essentially their pipelines. Only about 30% is based on current earnings. By contrast, about 75% of the share price of fine chemicals companies is based on current earnings, which are determined by what they are doing with physical assets. Only about 25% is based on future growth expectations. Therefore, a pharmaceutical company that invests in a manufacturing plant is betting on the wrong horse, Günthardt tells C&EN, because even in the best scenario a physical asset cannot achieve the growth that a drug product pipeline can deliver.

Although the findings provide a strong case for outsourcing, established pharmaceutical companies already have manufacturing facilities. "Hearing this argument after the horses have bolted the barn doesn't help very much," Günthardt admits. But with emerging pharmaceutical companies that are still considering whether to invest in manufacturing assets, "the decisionmakers are open to different arguments." For this reason, emerging pharmaceutical companies continue to be a growth opportunity for custom manufacturers.

Ian Shott, a longtime engineering and business executive in the fine chemicals industry, also believes that outsourcing by pharmaceutical companies is inescapable. Shott recently left Rhodia to create Ian Shott Associates, his own management consultancy and pharmaceutical services business, based in the U.K.

"Most of the top pharma companies are promising double-digit growth in earnings, but their revenues are growing only in single digits," Shott says. "So they have to cut costs. It won't be from marketing, because that's what has given them growth in the past 15 years. It won't be from R&D because that's the promise of the future. And it won't be from profits. What's left is production. So in the long term, in-house manufacturing of pharmaceuticals inevitably will decline."

At present, however, custom manufacturers are paying for the irrational exuberance of the late 1990s. Analysts forecasting annual growth rates of up to 17% in exclusive API synthesis--and signals from the pharmaceutical industry that it was ready to shift from a tactical to a strategic approach to outsourcing--drove a frenzy of mergers and acquisitions among fine chemicals companies.

According to Shott, some pharmaceutical companies were stating in the early 1990s that manufacturing was not a core competence for them and that they were prepared to get out. Shott was a member of Lonza's executive management team from 1993 to 1998. And in 1994, he signed a strategic alliance between Lonza, the Switzerland-based pioneer of pharmaceutical custom manufacturing, and what was then SmithKlineBeecham. At about the same time, Pharmacia and Glaxo also were talking of reducing their manufacturing activities, he adds.

But with the pharmaceutical mergers in the late 1990s, many companies that were prepared to change course found themselves saddled with more capacity at the same time that pipelines were fizzling. They reacted tactically--stopping outsourcing and even resuming manufacture of products that had been outsourced before--to get the best out of their assets, Shott says.

Now, the new players in pharmaceutical custom manufacturing not only are hurting as they struggle with the realities of the market, they also are driving down prices to unsustainable levels, according to Guy Villax, CEO of Hovione. Hovione is a fine chemicals company specializing in APIs and advanced pharmaceutical intermediates based in Loures, Portugal.

"Huge price-cutting is taking place just to get the business, and pharmaceutical purchasers are taking advantage of the ridiculous pricing," Villax tells C&EN. However, companies that price too low are not going to be reliable long-term players, because they can't make enough money to keep facilities in regulatory compliance, he maintains. "My sense is that purchasers will take advantage of low prices for spot deals, but the real business that has continuity--and that is too important to hand over to anyone but the most reliable players--will still go to the usual, focused, well-known companies."

MEANWHILE, several of the big new players have downsized and restructured. Facilities have been closed; people have been laid off. Clariant and Degussa each have written off hundreds of millions of dollars of goodwill from recent acquisitions. Some people believe Rhodia might be the next to take a write-off, but as of December, the firm had not done so. Business leaders hope the changes are enough to improve profitability in 2004. Some observers, though, say the changes are cosmetic, like rearranging the deck chairs on the sinking Titanic.

"We did our homework," says Norbert Dieterich, head of Clariant's pharmaceutical business unit. "We now have a plan based on realistic expectations, not the hype of the late 1990s. To grow at 17% is heaven, but it was a dream. Now we have woken up."

Clariant has closed plants, concentrated production in the most efficient plants, and installed high-demand technologies, Dieterich explains. It is reexamining processes and training people to look for opportunities to be more efficient. It is also extending pharmaceutical services to early-stage drug development--through so-called molecule synthesis centers--to get a foot in the door of new projects.

Clariant stunned the market in 2000 when it paid $1.78 billion in cash for the British fine chemicals company BTP. Like many others, Clariant was caught up in the herd mentality of the late 1990s that brought so many new, inexperienced players into pharmaceutical custom manufacturing.

Clariant recognized the value of a broad technology armory, which BTP had, but overlooked the importance of concentrating the armory at a few sites, contends Gerhart Schreiner, the former head of exclusive synthesis at Lonza.

BTP was a conglomerate of companies, and its assets were spread in 32 locations, Schreiner says. Such widely dispersed assets are very difficult to manage, he explains. It requires a lot of work and investment in quality assurance measures for both the fixed assets and the people. For that reason, Lonza was never interested in BTP even though it was rumored to be so, he adds.

Degussa and Rhodia also recently rationalized their pharmaceutical business units and are cautiously optimistic about prospects for 2004.

"I'd say 2004 will allow steady progress," says Nick Green, president of Rhodia Pharma Solutions. The business unit has reduced its U.K. workforce by 25%, mothballed one of its U.K. plants, consolidated manufacturing to only the best assets, and assimilated Rhodia's building-block chemicals business, he adds. "We are now well positioned for any market recovery that takes place."

At Degussa, activities in fine chemicals that were previously together in one business unit have been split into the exclusive synthesis and catalysts business, headed by Peter Nagler, and the building-blocks business, headed by Joachim Semel. The change is a natural development after the integration of Hüls, SKW, and Laporte, companies that Degussa acquired and that contributed assets to its fine chemicals business, Nagler explains.

THE SPLIT reflects the difference between the project- and customer relation-driven business of exclusive synthesis and catalyst development and the cost-driven, catalog business of building blocks. Separating them into two business units will intensify the focus on each activity, Nagler says. "We have learned that exclusive synthesis is not a product business; it is a service business," he adds. "That's the driver for the recent changes."

Nagler says Degussa did not achieve its sales and profit goals in custom manufacturing for 2003. And he expects business to be flat in 2004. But he is optimistic that by the end of 2005 the pharmaceutical pipeline will deliver more new products. "When that happens, we want to be there," he says.

Meanwhile, investors support Degussa's participation in the pharmaceutical market, Nagler maintains. "We have explained that the mergers and acquisitions have enabled Degussa to achieve a leading role in this market, that we are addressing structural problems, and that we will be a player. We have increased our capabilities and optimized efficiencies. We have restructured, cut costs, closed plants, and unfortunately let some people go. Our shareholders realize that drug development takes time."

Industry insiders believe that many new players underestimated the barriers to entry in pharmaceutical custom manufacturing. Coming from chemical manufacturing, many newcomers learned, painfully, that bringing pharmaceuticals to market is complicated.

"People disregarded the fact that clinical trials are complex, that product launches can be delayed or canceled, and that pharma companies also must show good returns to shareholders and will put pressure on their outsourcing partners," Günthardt says. "Those who have been in the business for years understand these dynamics and could deal with the vicissitudes of the market."

The newcomers neglected to factor in time, Villax says. "You can't expect to make a quick buck in APIs. Hovione's sales of APIs grew fantastically in fiscal 2002, at 18%, and in fiscal 2003 we still expect growth of more than 12%. That happens not by expecting Phase III compounds to fall from the sky. We start with Phase I with people we have worked with for many years. Having several hundred cubic meters of capacity won't get you in automatically." It takes years from starting a project to launching the product, he adds. Only then does the custom manufacturer make serious money. That's a discombobulating position for any company rated on quarterly results.


Villax also believes that newcomers are just now understanding that "any project kicks off exclusively as a service, and it is only much later that manufacturing becomes relevant." It's about producing what customers want when they want it--delivering miracles and saving the skins of purchasing managers when their jobs are on the line because of weak planning, he says.

Pharmaceutical companies aren't good at forecasting demand, Villax explains. "For a while they place no orders, and then suddenly they want everything yesterday. So we rearrange our schedules, make capacity available, and manufacture their product. When you allow miracles to happen so often, customers come back." Such flexibility can be difficult to achieve in huge organizations but not in midsized companies like Hovione, he claims.

New players also missed the importance of reputation, Schreiner suggests. "You cannot just come from manufacturing dye intermediates and then invest in a fine chemicals plant and expect pharma houses to simply hand you their business," he says.

In Schreiner's view, some of the acquisition targets did not have established reputations in, or were not a good fit for, pharmaceutical fine chemicals. Laporte, the British specialty chemicals company acquired by Degussa for more than $1 billion, and Chirex, the Stamford, Conn.-based custom chemicals producer acquired by Rhodia for $545 million, were not major competitors of Lonza's for pharmaceutical business, he says. And the pharmaceuticals business of Mountain View, Calif.-based Catalytica Pharmaceuticals, which was acquired by DSM for $800 million, was focused on drug formulation, not organic synthesis. Lonza also looked at Catalytica and concluded that it would not have been a good fit, he adds.

With the Catalytica deal, DSM gained chemical production facilities in Greenville, N.C., and South Haven, Mich., as well as capabilities in pharmaceutical dosage formulation. The Greenville facility was mothballed recently.

Lonza did not participate in the mergers-and-acquisitions frenzy of the late 1990s. Schreiner says the company decided to stick to its existing assets in Switzerland and in the U.S. when it saw that too many companies were jumping on the bandwagon. "Most important of all is that we were carefully following the pipeline of the pharma companies. We understood that, at best, some launches will be delayed. We thought that with all our competitors investing in organic chemistry capacity; it would be a mistake for us to do so as well."

Pollak, who was senior vice president and general manager for fine chemicals at Lonza from 1995 until 1999, adds, "Our thinking was focused on internal growth, relying heavily on the fully integrated plant we had built in Visp, Switzerland." That plant was built in the 1980s, and it was filled gradually. As demand increased, new reaction lines were added, he says.

An exception to the internal-growth strategy was the acquisition of U.S. facilities in Los Angeles and Riverside, Pa., near Philadelphia. The two sites gave Lonza a foothold in the U.S., the most important market for fine chemicals, Schreiner says. "The Riverside facility has been expanded to a major cGMP [current Good Manufacturing Practices] plant. The L.A. site, however, had to be closed down as a consequence of the business situation for custom chemicals," he adds.

The other exception is Lonza's acquisition of the biologics business of Celltech, a drug discovery company based in the U.K. Shott, who helped negotiate that acquisition, says the move was strategic, taking Lonza into a completely new field: biopharmaceutical manufacturing.

"Companies like Clariant, Degussa, Rhodia, and to a certain extent DSM were trying to buy their way in," Shott says. "I would never say don't buy your way in, but pay the right price."

Lonza paid about $80 million, a relatively modest price, for Celltech's biologics business. With Lonza's know-how in chemical synthesis and microbial transformation technology, that strategic piece allowed Lonza to achieve a full house of technologies, Shott says.

Similarly, the acquisition of Torcan, a pharmaceutical development company based in Aurora, Ontario, by Avecia, cost just over $40 million. For that modest amount, the U.K.-based specialty chemicals company got a presence in North America, a development service capability, and high-quality pharmaceutical assets in North America, Shott explains. "Those were smart deals, I think," he says.

But even companies that didn't make expensive acquisitions are feeling the industry's woes. Lonza has been hit hard by the loss of major contracts due to failures of drug candidates in clinical trials and the sudden drop in demand at the end of the 1990s. To cut costs, it not only closed its California facility but also reduced head count across the board.

LAST SUMMER, it reorganized its custom manufacturing operations. What previously were three separate businesses--Lonza Biologics, Lonza Biotec, and Lonza Exclusive Synthesis--have been combined into one organization called Lonza Custom Manufacturing. According to Steven Johnson, vice president for sales and business development at Lonza Custom Manufacturing USA, the change will enable the company to take better advantage of synergies in the market. "Pharma companies are looking for drugs of all types--small molecules and large molecules," he explains. "With one organization, we bring to them an all-encompassing picture of our custom manufacturing capabilities."

Johnson says Lonza also created a marketing organization not only to increase the company's visibility in the marketplace but also to gather market intelligence more efficiently. "With their help, we can be more proactive, we can go in with more knowledge about our customers and competitors, and we will be able to react to market changes more quickly," he explains.

These changes notwithstanding, Lonza is prepared for another very difficult year in 2004, Johnson says. "Competition has not lessened. If anything, the heat keeps being turned up."

The industry's capacity shutdowns so far have not been enough to restore profitability, Pollak observes. With capacity underutilized, talk of manufacturing APIs for generic drugs as a way to fill empty vessels abounds. "The topic is on the priority list of management teams of fine chemicals companies," he says.

According to IMS Health's Long, the aging population, the increasing number of generic opportunities as blockbuster drugs lose patent protection, the innovation drought that big pharma is now experiencing, the rising cost of patient copayments, and the general political and economic climate in the U.S. all contribute to the attractiveness of generics. Analysts, Long says, predict strong growth in generic drugs, especially in 2006, when several blockbusters come off patent.

Clariant wants to take advantage of the growing generics market, Dieterich says. "The topic is a bit touchy," he adds, because of the perception that conflicts of interest may arise when a custom manufacturer serves both brand-name and generic drug houses. But in fact, he says, if the subject of APIs for the generics market is discussed openly, "most of the time, the originators have nothing against it."

Two routes are possible, Dieterich says. One is to take an API that Clariant already is making exclusively for an innovator and, with the innovator's agreement, offer it to others when the innovator's patents expire. The other is to look at patent-vulnerable APIs that Clariant is not making but for which it could develop a better process. With new process patents, Clariant then can manufacture the API and offer it to generic houses.

APIs for generics already make up 30% of Clariant's pharmaceutical sales, Dieterich points out. But until now, the company has pursued that segment only opportunistically. Generics now will be targeted strategically to help cushion against the ups and downs of exclusive synthesis, he explains. This model has been successful with other companies, including Hovione and Siegfried, both midsized fine chemicals companies.

"People should realize that the generic API business is fundamentally different from exclusive synthesis," Hovione's Villax says. "Everyone could get overexcited, thinking that APIs for generics might be a quick fix. But it's not just about selling kilograms of product. You need a very good understanding of process chemistry and patents.

"You need to start very early, five to seven years before patent expiry, which means that you'll have five to seven years of zero sales because nobody pays you to develop a generic API. You don't get a single dollar until the first commercial quantities are delivered. The risk is all yours."

To mitigate the risk, Hovione develops only compounds requiring complex chemistries that fit with its know-how, Villax says. That strategy gives the company a head start and ensures a high barrier for entry of competitors.

Siegfried's Günthardt also points out that the laws in most European countries forbid development of APIs for generics until patents expire. The situation is unlike that in the U.S., where development can proceed even when patents still are in effect. "If you don't have a facility in a non-patent-encumbered region of the world, you can't be a contender in the generics market," he says.


Another thing to recognize, says Günthardt, is that a significant number of patents are expiring between 2003 and 2006. Given the seven-year head start needed for process development, a company seeking new generics today should be looking at 2010. But by 2010, not many new products will be off patent. "That not many new chemical entities are being launched now will affect generics players 15 years down the road," he adds. "Then they will be dealing with the woes that custom manufacturers have today."

Entering the generics market is not a short-term solution to the unused capacity in big fine chemicals companies like Degussa, DSM, and Lonza, Pollak says. They would have to go after blockbusters to justify investing in process development, he explains. But so is everyone else, including Asian manufacturers. For this reason, the price erosion that typically occurs when a drug loses patent protection is particularly drastic with APIs for blockbusters. The big Western companies will be clobbered in the competition, he explains.

Other ways out of the custom manufacturing depression are supplying emerging pharmaceutical companies, reducing dependence on the pharmaceutical market by finding other products in other markets, and moving into niche areas, observers say. Among these options, only the first offers real opportunities, according to Pollak. Because emerging pharmaceutical companies typically do not have manufacturing capacity, they might be convinced by arguments such as those brought out by the Siegfried study to not invest heavily in physical assets and to maximize outsourcing instead.

With few options available, "I have difficulty giving advice to clients," Pollak says. "Sometimes I'm no longer a consultant but someone who tries to calm frayed nerves."

At Sigma-Aldrich's plant in Buchs, Switzerland, a chemist adjusts flow to a 20-L flask reactor during production under cGMP conditions of a blue dye for a diagnostic company.
At Sigma-Aldrich's plant in Buchs, Switzerland, a chemist adjusts flow to a 20-L flask reactor during production under cGMP conditions of a blue dye for a diagnostic company.

Although all custom manufacturers have been hit by the poor business climate, not everyone is hurting badly. Midsized companies like Hovione and Siegfried have been buffered somewhat by other parts of their fine chemicals business. Small companies specializing in small-scale custom synthesis for early-phase drug development have "enough work," says Peter van Tilburg, director of new business development at ChemShop, a contract R&D company based in Weert, the Netherlands.

Sigma-Aldrich, best known for its catalog business, is expanding its custom synthesis business at a rate of 9–10% per year, according to Frank Wicks, president of Sigma-Aldrich Fine Chemicals. What's helping, he explains, is the catalog business, which opens doors to exclusive synthesis projects.

"Our catalogs offer about 85,000 compounds, many of which are used in drug discovery," says Lourdes Weltzien, who until the end of 2003 was vice president for fine chemicals in Europe and is now leading the Houston-based Sigma-Aldrich business Sigma-Genosys. "Drug discovery people are already using our products. After discovery, they don't have to switch suppliers because we offer to help them with the next steps requiring larger and larger quantities of material," she says.

As a relatively new player in custom synthesis, Sigma-Aldrich has been concentrating on projects for preclinical or early clinical development, according to Andreas Weiler, business manager for custom synthesis in Europe. "We are now building relationships and trust through small projects, especially with emerging pharmaceutical companies," he says.

According to Weltzien, Sigma-Aldrich has doubled its roster of exclusive synthesis customers this past year. The difficult business climate "is not a problem," she adds. "We are not immune to it, but we're not getting hit as hard as other companies, because we have the research business to back us up."

Weiler emphasizes flexibility as an edge. "We will never have only a custom synthesis business. We will always have a balance between normal bulk production and custom synthesis" he says. "If you occupy your plants only with custom synthesis projects, you are somewhat inflexible. Because if one of your best customers has an urgent need, you cannot offer the product. With the mix that we have, if a customer urgently needs a product, we can stop bulk production and make the custom product."

This new kilo lab enables Peakdale Molecular to produce some of its key products at up to 10 times faster than in a conventional lab.
This new kilo lab enables Peakdale Molecular to produce some of its key products at up to 10 times faster than in a conventional lab.

"Companies that acquired assets mainly for cGMP manufacturing are disappointed because there's nothing to go into those assets," Weltzien notes. In fact, Weiler adds, two years ago Sigma-Aldrich had plans to build a huge cGMP facility but did not proceed when it realized that an overcapacity was looming. "Instead we invested more in better equipment, organization, processes, and flexibility," he says.

COMPANIES supporting drug discovery also are not hurting too badly. The low productivity of pharmaceutical R&D "does not affect us to a great extent because pharmaceutical companies have to keep their research machines turning all the time," comments Gareth Jenkins, business development manager at Peakdale Molecular, a U.K.-based supplier of drug discovery compounds. "However, for companies that are going through a down cycle, cash becomes king again, and they are more likely to place projects at a lower cost" than usual.

Capacity at Peakdale is fully utilized. More than half of its business is custom synthesis of gram quantities for pharmaceutical customers, and for the foreseeable future, the company will focus on the drug discovery market. After two years of rapid expansion, the company is taking a breather to let things settle before it considers where to grow next, Jenkins says. Prospects for 2004 are "pretty good," he adds. As of October 2003, he explains, "we already knew where at least one-third of our business for 2004 is coming from."

Companies providing custom chemistry services that support innovation in the pharmaceutical industry also are not hurting badly. A case in point is Avantium, a contract research organization providing services in process development, scale-up, and product optimization. "We are not affected too much by the low number of new chemical entities in the market because the driver for our business is innovation," says Lieven de Smedt, chief business officer. "The top 20 pharma and biotech companies cannot stop being innovative, and we see a lot of need for supporting services to help them innovate faster."

Avantium's primary offering is high-throughput experimentation in conjunction with rational design of experiments, statistical analysis, and software for converting experimental data into an understanding of how different parameters are affecting a process or product. The company recently installed a facility for handling highly potent compounds for experimentation with cytotoxic compounds.

Avantium's services are generating a lot of interest among companies with mature products that are seeking product line extensions, says Alan Lahaise, senior vice president for life sciences. Avantium's polymorph screening service, for example, can help extend the patent-protected period of APIs through discovery of new polymorphs with therapeutic advantage, Lahaise says. Conversely, in the drug discovery phase, polymorph screening can quickly identify chemical entities that lead to a dead end. "What we offer is relevant to our customers' business growth, and there is evidence from our customers that it works," he adds.

Another company that provides enabling technology is Johnson Matthey. Recently, the company consolidated many of its services for the pharmaceutical and fine chemicals markets in a business unit called Catalysis & Chiral Technologies. As cost pressures are being brought to bear on the market, these industries are looking at catalysis more aggressively than before, says Martin T. Durney, head of the business unit. And whether the need is for chiral or achiral catalysis, Johnson Matthey is convinced that "we've done a good job of selecting the right catalysts and applying them faster than any of our competitors," he adds.

The proof of the success of Johnson Matthey's choices in catalysis technologies is in its project slate, Durney says. "I can say at this early stage that we are very happy with the number of projects we're working on. Our pipeline is good, and projects are demonstrating early success."

Custom chemistry on a commercial scale is where the industry is really hurting. Prudence and moderation may be the lessons of the recent boom and bust in pharmaceutical custom manufacturing. "Think about the road less traveled, and be thoughtful about what your contribution will be," is Günthardt's admonition to the industry.

"The road less traveled is not about what is fashionable today but about understanding one's capabilities and positioning one's self accordingly," Günthardt explains. "It's about thinking in an incremental mode, experimenting. Does this work? If it does, build on it.

"Napoleon was known for saying, 'We charge ahead and then we see.' He got far, but he was stopped at Waterloo. Do you want to keep on going, or do you want to be stopped? That's everyone's choice."



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