Madrid Expo Hints at Awaited Upturn

Fine Chemicals

Executives at the 2005 CPhI conference in Madrid last week said business in the custom synthesis of active pharmaceutical ingredients (APIs) and advanced intermediates is coming back after a prolonged downturn.

The industry’s landscape is also shifting, with one traditional player exiting the business, another spinning off fine chemicals, and several stalwarts reorganizing and investing. And there is speculation that consolidation in the sector, which has been oversupplied for more than five years, is not over.

SAFC, the fine chemicals business launched by Sigma-Aldrich in 2004, is currently investing $12 million to double capacity at the high-potency API plant in Madison, Wis., that it acquired last year with its purchase of Tetrionics. According to President Frank Wicks, SAFC is also expanding its cytotoxic and bacterial fermentation capability in Jerusalem. Overall, Wicks said, business was up 18% in the first six months of this year, not counting acquisitions.

Clariant, which has reorganized its fine chemicals operations in recent years, is moving forward with a $5 million expansion of its current Good Manufacturing Practices plant in Springfield, Mo., according to Norbert Dieterich, head of fine chemicals. The firm is also expanding sterile API manufacturing in Tonneins, France, and has entered into agreements with Jülich Fine Chemicals and Solvias to expand its offerings in cyanohydrin chemistry and ligand screening, respectively.

Avecia, on the other hand, announced the sale of its pharmaceutical fine chemicals business several days before CPhI. The buyer, Nicholas Piramal, the fourth largest Indian pharmaceutical firm, will spend $16.7 million for the business. Indicative of the fallen stature of the fine chemicals field, Avecia spent $40 million in 2000 to buy Canada’s Torcan Chemical, which is just one component of the business it is now selling.

Meanwhile, Reaxa, the catalyst technology business launched by Avecia and professors at Cambridge University, announced a marketing agreement with Umicore for its encapsulated catalysts and polymer-based scavengers. Umicore will take a 21% stake in Reaxa, while Avecia’s 25% stake in the company will transfer to Nicholas Piramal.

Lanxess, the chemical company that Bayer spun off on Jan. 31, plans to move its fine chemicals into a subsidiary called Saltigo. Axel Westerhaus, head of the business, said the launch of Saltigo in second-quarter 2006 will ring in a new, more service-oriented structure for the business, which had sales last year of about $480 million.

Among the firms that are optimistic about next year is DSM. “Business is picking up again,” commented Herman J. Wories, vice president of sales and marketing. He added, however, that there is still overcapacity in the market. “There is still a lot of room for high-level consolidation,” Wories said. “Too many companies are offering the same thing.”