Fine Chemicals: Cautious Optimism Washes Over Sector | Chemical & Engineering News
Volume 90 Issue 2 | p. 19
Issue Date: January 9, 2012 | Web Date: January 12, 2012

Cover Stories: World Chemical Outlook 2012

Fine Chemicals: Cautious Optimism Washes Over Sector

Department: Business
Keywords: fine chemicals, pharmaceuticals, outsourcing, contract manufacturing
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THE VIEW
A technician at Axyntis monitors a reaction at the company’s manufacturing facility in France.
Credit: Axyntis
A technician at Axyntis monitors a reaction at the company’s manufacturing facility in France.
 
THE VIEW
A technician at Axyntis monitors a reaction at the company’s manufacturing facility in France.
Credit: Axyntis

The fine chemicals sector was strong in 2011, with many companies claiming to have rebounded from losses incurred in 2009 and 2010. Producers remain optimistic about 2012 but mix, as usual, a good dose of caution with that optimism in a market that historically experiences sudden ups and downs.

Companies that in the past two years invested in new technologies—ranging from high-potency active pharmaceutical ingredient (API) manufacturing to finished-dose drug formulation—are counting on their investments to kick in as growth engines in 2012. Others are looking to build on rebounding nonpharmaceutical businesses. For example, Lonza acquired Arch Chemicals last year in an effort to take the top position in microbial control.

Michael Reinhard, Lonza’s head of key accounts management for North America, reports that the fine chemicals business is picking up in the U.S. “It’s mostly in the early stage,” he says, referring to the small quantities of APIs needed at the start of the drug development process. Likewise, David Ager, principal scientist at DSM, says he sees increased activity in pharmaceutical company R&D pipelines.

At Cambrex, CEO Steven M. Klosk expects the company to report 5–7% growth in 2011. “There is a strong backlog for our generic APIs,” Klosk says. Business is slower on the branded-drug side. Klosk says he is enthusiastic about Cambrex’ finished-dosage facility in Hyderabad, India, where the company is producing the API and finished product for a nicotine replacement drug.

The exit of major drug companies from manufacturing continues to drive business for fine chemicals makers. But Aslam Malik, president of Ampac Fine Chemicals, cautions that a rise in outsourced production of established or generic drugs may not mean increased business for Western API suppliers, since much of that production will go to China.

A more solid upside, Malik says, lies in the uptick in drug approvals by FDA in 2011. The active ingredients in newer products are generally potent and complex, meaning lower volumes but more specialized manufacturing technology.

More rigorous supply chain management on the part of pharmaceutical companies should benefit Western API makers, with drug companies instituting policies of establishing a Western backup to any key product manufactured in Asia. Some fine chemicals companies say business is coming back from China, in particular, because of quality concerns and Asia’s eroding cost advantage.

 
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