Strength in diversity
Fine chemicals companies who are active in agrochemicals and other non-pharma markets are the happiest right now. We report from Chemspec Europe 2012
It has been a remarkable turn-around since the early 2000s, when the 'life sciences' concept was just going out of fashion, everyone in the fine chemicals contract manufacturing sector seemed to be pursuing the pot of gold at the end of the pharma rainbow and agrochemicals were seen as a niche that might be in permanent decline thanks to the advent of GM technology.
Now, with high prices for commodity crops like wheat, maize and soya, increasing demand for food from a world population expected to top 9 billion with 2050 and many other indicators pointing in the same direction, crop protection is becoming a lucrative market for those who have stayed the course. This was the near-unanimous verdict of exhibitors at Chemspec Europe 2012 in Barcelona last month.
Pharmaceuticals, of course, still enjoys growth rates that many industries would kill for and not all pharma-focused exhibitors were dissatisfied with the state of business in Barcelona. Moreover, pharma has its own gigantic show in CPhI. Chemspec, meanwhile, has become the de facto exhibition of custom manufacturing for agrochemicals, while also being strong in general fine and speciality chemicals of all kinds in addition to pharma.
Queueing to get in at the start of Chemspec Europe 2012
"Business is very good, most probably because agro is booming. Syngenta in particular is making people happy here," said Dr Andreas Veit, head of the custom manufacturing and new business development business unit at CABB. This growth, he added, was coming from both existing products and new projects.
Even though it could live well of agro, CABB is also seeking growth in other, non-life science fields to manage the ups and downs inherent in agro. "It's good to be diversified," Veit said. The firm has now fully integrated the former KemFine site in Kokkola, Finland, into its custom manufacturing network.
Kokkola has brought in capabilities CABB previously lacked, such as butyl lithium chemistry, Grignards and Suzuki C-C coupling reactions. Just as importantly, the size of the reactors - which average 10 m3 - make it a good fit with those of the Swiss facility in Pratteln, which average 6-8 m3. Plugged into the pilot and scale-up facilities of Pratteln, it will help to build up the company's non-agrochemicals businesses.
WeylChem has also been busy integrating its businesses. Business development director Dr Andrea Missio said that it is in the final stages of consolidating the various operations acquired by ICIG and beefing up the visibility of its international operation, WeylChem International. Being at Chemspec Europe was an important part of this, he noted.
"Agro is extremely important for us," Missio said. "The agro companies still want to be here as visitors and it is also good to have our competitors on the show floor to talk to. We don't buy a lot from each other but it is a useful occasion to discuss the state of the industry."
Much of the interest was coming from outside of the life sciences and markets with shorter cycle times than pharma and agro are clearly of interest. In general, WeylChem has had a strong year, particularly in agro. "Volumes are growing, there is clearly space for all of us and no one group is dominant."
François Baduel and David Simmonet, EVP of sales and marketing and CEO respectively at France's Axyntis Group, agreed that business is currently "very, very good, especially for agro and speciality chemicals", though there is still a fair amount of pharma business too. There has been a major recovery since the difficult years of 2009-10.
Agro and specialities have been strong for Axyntis
Axyntis recently signed a three-year commercial agreement for the supply of photographic couplers to Fujifilm Manufacturing Europe. This will create "a significant amount of work" at the All'Chem site in Montluçon, central France. It is also seeing "the first tangible fruits" from its partnership with the Kiralya group in chemical synthesis and preparative chromatography for the pharmaceuticals, nutraceuticals, cosmetics and veterinary medicines sectors.
"I always said, even in the worst periods, that we would deliver the business and it had just been slow to develop," said Baduel. Axyntis resisted the urge to cut down on its reserves of manpower and capabilities during the rough years, with its private equity owner supporting it in taking the long-term view, and he now feels that this strategy has been vindicated as projects are coming in.
Driven essentially by strong demand in agro - though pharma and fine chemicals are also doing well - the UK's Pentagon Chemicals has enjoyed a record year at its Workington facility. The site, which tends to operate to shorter timelines than the company's other site at Halebank, was almost fully committed for 2012 with very little space capacity at the time of Chemspec Europe and is already taking orders to 2013.
"Most of the new enquiries are related to agro or biofuels, which the Workington site is strong in, said business manager Susan Brench. "We are also seeing a lot of enquiries about phosgenation. There have been a couple of good examples recently."
Saltigo was at the show to "demonstrate its expertise as a premium provider in the field of custom synthesis for the agrochemical and pharmaceutical markets and for fine chemicals". Immediately beforehand, indeed, it had received the Global Sourcing Award of Recognition for Partnership at the annual Syngenta Supplier Conference.
Saltigo always has one of the largest stands on the show floor
Saltigo is satisfied with business levels so far this year and expects to reach its 5% growth target for the year, if business in the southern hemisphere develops as expected in 2H. "We see the basic trends as growing and are relatively optimistic for 2013," CEO Wolfgang Schmitz said. The company sees particularly good prospects in Asia and South America and is positioning itself accordingly.
However, business will not be back to the levels of 2008, which saw an extraordinary spike in agro demand and the supply chain does not always feel the basically positive trend. Much can vary, globally and regionally, with the three key factors of commodity prices, the weather and the state of the supply chain, so Saltigo and companies like it keep in close contact with customers to manage supply and demand.
Multi-customer products - including raw materials and intermediates for polymer finishing, flavours and fragrances, cosmetics, electronics and other industries - are another increasingly important focus. A prime example of this is the insecticide Saltidin, which has rapidly risen to be one of its top ten selling products. Saltigo is now looking to secure the necessary registrations in various Asian countries where the key markets are expected to be found.
Chemspec Europe returned to Barcelona's Gran Via Exhibition Centre
Another company emphasising multi-customer products at Barcelona was Isochem, which extended its range of Vitamin E TPGS derivatives for use in pharmaceutical excipients and nutraceuticals with two fatty acid esters, dl-tocopheryl palmitate and dl-tocopheryl linoleate. These are described as formulating agents used in cosmetics for their specific antioxidant, moisturising and protective properties.
When it comes to pharma, the verdict was definitely more mixed. Schmitz said that Saltigo was doing good basic business in pharma but has decided to concentrate more on the later stages and large molecules, in addition to strengthening its activities in the agrochemical and non-life science markets. However, both Dr Frieder Mitzel, who works in business development for exclusives for Siegfried, and Dr Cengiz Azap, sales manager for catalysts at Evonik Industries, pronounced themselves satisfied with the show and business in general. Siegfried, which enjoyed an excellent 2011, is entirely pharma-driven, as are those parts of Evonik that came to Chemspec Europe.
Dr Michael Stohlmeier, senior product manager at Germany's CU Chemie Uetikon, another pharma-based company, said that he was seeing "the right customers" at Chemspec, mostly from pharmaceuticals and fine chemicals companies. Uetikon's business is growing, albeit slowly. "The last three to four years have been hectic, with a lot of ups and downs, mostly ups," he said.
Likewise Dave DeCuir, director of Albemarle's Fine Chemistry Services division, said that business had been extremely good in both pharmaceuticals and outside, notably electronics. Since Chemspec Europe, Albemarle has announced an expansion of its cGMP API facility in South Haven, Michigan, to meet growing demand for both generic APIs and custom manufacturing services.
Albemarle has recently boosted its contract manufacturing capacity
Electronic chemicals form also a rapid growth area for Albemarle's US compatriot Halocarbon, along with speciality coatings. The life sciences, however, still account for 90% of business and sales manager Ron Epstein said that this was being driven mostly by agro. From a roughly equal balance before, about 60% of business is now in agro, 30% in pharma and 10% in other areas.
Markus Blocher, CEO of Dottikon Exclusive Synthesis, another mainly pharma-focused CMO, commented that business had come out of a trough and was improving slightly. "Pharma companies have come to realise that cost reduction is not a satisfactory way of dealing with falling revenues, so if a product looks promising, they want to push it through to market as quickly as possible," he said.
The fact that the chemistry of APIs is getting ever more complex is good for companies like Dottikon, which has a lot of specialised capabilities at a single site, he added. The company has invested heavily in technology, seeing it as the key to addressing the need for speedy scale-up and development, as well as for creating 'second generation' routes, in other words finding alternative, more cost-effective routes for medicinal chemistry processes with limited potential for true cost breakthroughs.
Dottikon is stressing technologies that can speed up development
Dottikon spends about 10-12% of sales on R&D, both in adding new capabilities and enlarging old ones. At Barcelona, much of its stand publicity was about case studies in the application of its core technologies of low temperature chemistry, hazardous chemistry, high containment and continuous processing in specific areas, such as functionalised pyridines or heterocyclic API building blocks.
Dottikon was not alone in stressing specialised capabilities. WeylChem's Missio mentioned Grignards, halogenation, air-oxidation and more recently spray drying as core competencies that often attract customers in, while Dr Georg Weichselbaumer, formerly with WeylChem and now VP of chemicals and applications at AlzChem, was stressing two unusual capabilities beyond the cyanamide chemistry for which AlzChem is best known.
AlzChem is also strong in Grignards but, where others traditionally carry out the reactions in THF and are now looking at the greener but more expensive alternative of methylTHF, it has recently completed its first project using diethyl ether instead and is now ready to scale this up to 20 m3. It also has unusual capabilities in gas-phase reactions, to which it brings multi-purpose equipment instead of dedicated facilities.
Echoing Missio, who said he would like WeylChem to be seen as "a service provider more than a producer of chemicals", Blocher of Dottikon concluded: "It is about service more than products, which is another advantage we enjoy in having one site of manageable size. Overall, the cake has shrunk and it won't grow again. You need to decide what part you are in and make it grow. It is all about innovation."
From Online Issue: August 2012