Degussa Taps A Chinese Partner

Degussa and Lynchem have formed a custom-manufacturing joint venture in which Degussa will take a 51% stake in the Chinese pharmaceutical chemicals manufacturer, based in Dalian.

Degussa says the new venture, Degussa Lynchem, will combine its strength in technology development for active pharmaceutical ingredients (APIs) and current Good Manufacturing Practice-approved intermediates with Lynchem's manufacturing assets in China. Financial details were not disclosed.

The new Chinese venture will manufacture patented intermediates and APIs, as well as off-patent APIs, according to Degussa. The German firm announced a similar partnership with Hikal, a pharmaceutical fine chemicals manufacturer based in Mumbai earlier this year, though Degussa did not take a stake in the Indian firm.

Degussa says the partnerships form the basis for the Asian strategy of its exclusive synthesis and catalysts business unit. The firm has dubbed the approach "horizontal integration," which distinguishes the partnerships from the more traditional approach of building or acquiring manufacturing assets in Asia.

"Customers have been waiting for the opportunity to get the best of both regions from a single supplier," says Rudolf Hanko, head of exclusive synthesis at Degussa. "In forming the joint venture with Lynchem, we are combining with a leading force in the Chinese custom-manufacturing industry."

Lynchem, which was established in 1995, has reactor capacity of about 800 m³. The firm says it had sales of $45 million in 2005, 95% of which were exports to pharmaceutical and agricultural chemical manufacturers in Europe, North America, and Japan. Degussa Lynchem will be integrated into Degussa's production and marketing infrastructures but will continue to work with its existing customers.

The sale of shares in Lynchem to Degussa is expected to be completed this year.