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Intermediates Maven

Porton endeavors to stand out as an innovative and reliable Chinese producer of fine chemicals

by Jean-François Tremblay
November 27, 2006 | A version of this story appeared in Volume 84, Issue 48

Stretching The Dollar
Credit: Jean-François Tremblay/C&EN
Porton built the equivalent of a $100 million production site for $15 million.
Credit: Jean-François Tremblay/C&EN
Porton built the equivalent of a $100 million production site for $15 million.

The best business plans are often the simplest. In Chongqing, China, Porton aims to combine unbeatable Chinese prices with the reliability and product quality that foreign chemical buyers have difficulty finding in the country.

"Our vision is to become a world-class fine chemicals company," says Oliver Ju, president and cofounder of Porton. "Compared with other Chinese firms, we have better people, a clear strategy, and a better understanding of foreign customers." Porton sells nearly all of its products abroad.

Christopher Bluemel, a Mumbai-based entrepreneur who runs the specialty chemicals and intermediates manufacturer i-chess, says Chinese-made intermediates are hugely attractive pricewise. But Chinese chemicals often do not conform to specifications or match the samples provided. Bluemel adds that few companies in China offer really innovative products or production processes.

Porton wants to break this mold. Its three founders are all alumni of foreign companies and provide a different flavor of management than state-owned Chinese firms. Ju and Executive Vice President Heber Zhang were both managers at Akzo Nobel in Chongqing before striking out on their own. The third partner, Richard Tao, worked in finance at a joint-venture company in Chongqing.

The company has invested substantially in R&D. It runs a lab in the urban part of Chongqing that employs 80 scientists hailing from all over China. A second lab in Chengdu, the capital of the southwestern province of Sichuan, employs 40 scientists who develop new production processes.

Most of Porton's customers are from the pharmaceutical industry. In this business, the company has decided to focus on custom-made chiral intermediates. Few Chinese firms compete in the chiral sector, Ju says, and Porton's closest competitors are in Japan.

Yet Porton aims to supply custom-made intermediates to other markets, Ju says, including the agrochemical and the electronics industries. In particular, he notes, Porton offers light emitters, hole-injection materials, and other chemicals used by manufacturers of organic light-emitting diodes.

Although it's mainly a producer of custom-made materials, Porton does offer a portfolio of off-the-shelf chemicals. But Ju insists that his product offering does not and will not include generic drugs. "We won't make generic active pharmaceutical ingredients because that would conflict with our customers' business," he says.

In business since 2002, Porton already employs 620 people. Chongqing, its main base, used to belong to Sichuan province, but it has been carved out to become a special-status city like Beijing and Shanghai. Tianjin is the only other city in China that interacts directly with the central government. Special-status cities tend to enjoy better economic incentives from central authorities.

Whether the labs, plants, or offices, Porton's facilities are impressive. Most striking are the large-scale production facilities. Ju insists that the company spent no more than $15 million to build them in the Chongqing Chemical Industry Park, located in Changshou, one hour by car from downtown Chongqing. "The plant would have cost $100 million in the U.S.," he claims. The site consists of about a dozen buildings containing tens of 130-m3 reaction vessels. Construction costs were kept low by using Chinese equipment almost exclusively.

So far, the company is growing faster than the three founders' expectations. Ju says Porton's 2006 sales will come in at $29.5 million, about the same as last year owing to delayed orders by a major customer. He predicts that sales will grow to $40 million in 2007 and reach $100 million in 2009. The partners aim to take Porton public in 2010 and will offer stock options to some employees before then.

On its website and in company literature, Porton claims that its main manufacturing site adheres to current Good Manufacturing Practices (cGMP), a set of constantly updated U.S. Food & Drug Administration standards that are followed by suppliers of active pharmaceutical ingredients to the U.S. market. Producers of unregulated API intermediates do not have to stick to cGMP standards.

During a tour of the site, however, Ju volunteers that the plant is not strictly cGMP-compliant, but rather is loosely designed like a cGMP facility. Porton will become fully cGMP, he says, when it starts making regulated intermediates and custom-made APIs. At least one industry insider is willing to cut Ju some slack on this issue.

"I really respect Chinese managers who admit their plant does not comply with cGMP," says a European pharmaceutical chemical company manager who regularly buys Chinese intermediates. "When they tell you they don't follow cGMP, it shows they know what cGMP is. The quality is often better than another company that assures you it follows cGMP."

Porton may or may not follow cGMP, but it certainly knows how to wisely spend $15 million.



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