Several key manufacturers of active pharmaceutical ingredients (API) and pharmaceutical intermediates interviewed by CW at the CPhI show in Frankfurt today say that the market is buoyant and they are continuing to grow their businesses. The heads of Sigma Aldrich Fine Chemicals (SAFC) and Carbogen-Amis warn, however, that with billions of dollars of sales of innovator pharmaceuticals about to come off patent in 2012 the contract manufacturing sector could be about to face a period of consolidation.

BASF custom synthesis business has been unaffected by the global economic uncertainty. “In general we see this as a growing market,” says Folker Ruchatz, v.p./global business management custom synthesis at BASF. The company is experiencing “steady growth” in activities relating to generic APIs, with “stronger growth” for excipients, especially in high-performance and innovative products. The company also is experiencing “strong demand” in custom synthesis, where Ruchatz predicts BASF “will grow faster than the market. We have a positive outlook for 2012,” he says. Although BASF doesn’t split out the financial performance of its pharmaceutical fine chemicals activities the business is among the top-10 players in the world, Ruchatz says.

Codexis (Redwood City, CA), an enzymes technology firm, since 2010 has increased its pharma customers from about 15 to about 50. In part this growth has come about because the company has changed its patent position by allowing its customers to patent processes using Codexis’s insights. The growth is also down to a greater acceptance across the pharma industry of using biocatalysis, says Peter Seufer-Wasserthal, v.p. and managing director/pharma services for Codexis. “Financials are good, the order book is on the full side,” Seufer-Wasserthal says.

Halocarbon (River Edge, NJ),a fluorochemicals pure play, also is experiencing year-on-year growth and is optimistic about its prospects for 2012. Quality is pinpointed by the company as a factor that is contributing to its growth. An illustration of its quality management is the company decision to appoint a dedicated inspector of labels on products. The company photographs every shipment of a product so that it knows that the product is going out in good order. “This [kind of] a detail we feel is being recognized,” says Ron Epstein, director/sales for Halocarbon. Halocarbon is optimistic about its prospects for the year ahead with potential growth of products across a range of fronts, including pharmaceuticals and electronics.

“It’s a very strong year for us,” says Roger Viney, global sales director for Hovione (Loures, Portugal), a mid-size, privately owned, pharma fine chemicals group. The company has a “strong order book.” Sales for this year are about 15% up on the past year, Viney says. The company’s business is split evenly between generic and original brand drug activies. Hovione is gaining customers that previously would have been sourcing product in Asia but now consider quality to be a high priority, Viney says.

Meanwhile, Mark Griffiths, CEO of Codexis, warns that the contract fine chemicals sector could be about to see a period of consolidation. “It’s tough out there,” he says. In particular venture capital money for biotech start-ups is now harder to secure and this is having a knock-on effect across the pharma contract manufacturing sector, Griffiths said.

Griffiths rejoined Carbogen in recent months after a few years away from the company and has immediately implemented a restructure to reduce the company’s cost base, improving efficiency across the business and refocusing the company’s activities so that it can better deliver for its customers. To further reduce costs, Carbogen-Amcis will work more closely with its parent company Dishman Group (Ahmedabad, India) in areas such as sourcing of raw materials and early phase intermediates, Griffiths says. Carbogen-Amcis is looking further down the value chain for areas where it can make acquisitions or collaborations, he says.

Carbogen-Amcis has an extensive offering in areas such as high potency active pharma (HPAPI) production as well as in chromatography. The company is set to become more reactive to customer needs and more entrepreneurial in its approach as a result of its recent restructure, Griffiths says. Carbogen-Amcis has a goal of making a profit this year andl then to secure double-digit percentage sales growth during 2012.

“I am surprised that there has not been any consolidation. I am surprised that there are so many [companies] working in the CMO [contract manufacturing organization] space,” Griffiths says. “It’s good to have competition but I am not sure how long this industry can be sustained.”

Gilles Cottier SAFC’s president also senses a period of consolidation, in part because between 2012 and 2016 original patented drugs with sales in the order of $120 billion will come off patent. “That’s a huge volume of revenue [for our customers] that is going to evaporate. This is why it’s going to be different,” Cottier says. “I don’t think we’ll see the market will grow significantly in the next five years. This will signal the end for a number of assets because not everyone will be able to survive,” Cottier says. SAFC, which operates predominantly in niche activities such as HPAPI production, predicts that it will secure high single-digit percentage sale growth for this year.

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