To CAP it all…
CAP Intelligence is launching a new kind of audit service for the industry. Andrew Warmington spoke with CEO Dr Rainer Steinbach
After the Italian APIs firm Euticals acquired Archimica last year, almost all of the senior management were made redundant. Former managing director Dr Rainer Steinbach took the chance to start a new venture, CAP Intelligence, which seeks to bring a whole new concept of auditing services in the sector. He was confident enough in the need for this concept to sink his redundancy payment into starting the firm.
Steinbach, a PhD chemist by background, has been in the fine chemicals industry since 1984, variously working for Rütgers Organics in Germany and the US, then the former Novartis Crop Protection, which later became Syngenta, from 1994 to 2002, where he took charge of key supplier management. For the following nine years, he worked for Clariant and Archimica, as the Pharmaceutical Fine Chemicals business of Clariant became, heading up sourcing and rising to become managing director of the latter.
CAP - the acronym stands for Chemicals Agro Pharma and the company has already done audits in all three fields - was founded in November 2011. It comprises Steinbach himself and marketing director Dr Eberhard Deutscher, both in Germany, plus director of technologies Randall Wilterdink and director of marketing Dr John Wetzel in the US. All are industry veterans who worked for Rütgers Organics and WeylChem for large chunks of their careers.
There is also a Shanghai office called Cinobiz Shanghai which is headed by Zhu Tiezhong, formerly with Swiss Dolder Shanghai. The setting up of a Mumbai office, Steinbach admits, was "bumpy" and the difficulties were underestimated. CAP Intelligence is now looking for a new partner in India.. The majority of the auditing the company does and expects to do will be in China and India, though it already has an audit scheduled in the US and hopes to be working in Europe as well in time.
Auditing of suppliers was a major part of Steinbach's duties at Clariant and Archimica; he audited over 100 suppliers, mostly in India and China. In this role, he came to learn that there is a recurrent problem in the process. This stems from producers' reluctance to share their strengths and weaknesses openly with customers, which can ultimately lead to costly misunderstandings, budget overruns, delays and stretched resources.
Dr John Wetzel (left), Dr Rainer Steinbach (centre) and Randall Wilterdink (right) are three of the core team at CAP Intelligence
"Auditing is generally seen as being about finance or QA," Steinbach says. "CAP Intelligence instead offers a full-scale analysis of the chemical provider, starting with the structure and management and going from QC to QA, from research to production and EHS, all over the financials and other important factors, including sourcing, marketing, training, social responsibility and IP protection."
CAP Intelligence's proposition is that companies pay to audit them. The process follows five steps. First, a CDA and contact are signed between the producer and CAP, then a pre-audit questionnaire is sent. CAP experts then carry out an on-site company analysis and audit over the course of several days. After cross-checking and verification of information, the final report is written. This "broad spectrum of information", CAP Intelligence claims, "distinguishes us from other service companies".
During the audit, CAP Intelligence may recommend changes to improve processes based on their experience and the company will have four weeks to make changes before the final report is issued; it has two weeks to correct factual mistakes in the draft report but cannot otherwise make changes or reject it. Similarly all sites belonging to the company must be audited, in order to ensure the integrity of the process.
The audit report typically runs to 100 pages and comprises 22 sections, plus an executive summary. These are: company/organisation, management/employees, site(s), equipment, chemical expertise, QC, compliance, safety, green chemistry, ethics & social responsibility, IP protection, sales & marketing, purchasing & sourcing, financials, company's self-assessment, others, management interview, markets, country information, exchange rates, contacts and additional pictures.
With written permission from the producer, CAP Intelligence will sell the report to potential customers. This ensures that they have control over who has access to the report, so that confidential information is kept out of the hands of competitors. It also advertises the company by having the report on its website and showing the company logo at its stand at trade shows.
Part of CAP's offer is to display their logos at a minimum of four shows each year. The company was present at CPhI Worldwide in Frankfurt last year and again at Informex in New Orleans in February, DCAT week in New York in March and all three Chemspec shows in Q2. It will also be at PharmaChem Outsourcing in New Jersey in September and at CPhI Worldwide in Madrid in October.
"The buyers of reports are generally the top pharmaceutical and agrochemical companies," says Steinbach. "They have a presence in India and China there and hundreds of suppliers, plus a few in Europe and the US." He adds that the number of companies active in the field in China could fall by over 50% in the coming years, making it ever more important to have up to date information on what they are all making.
"There are some big companies who want to do their own audits or work with others, but many more have told us they are running out of audit capacity. We are currently working, as it happens, with one chemicals company, one agrochemicals company and one pharmaceuticals company who may want us to do all their auditing for them. It usually takes about six months to get this kind of thing going."
Steinbach - Auditing should be about much more than QA and finance
Audits can be done on a one-to-one basis, when a single customer is targeted and no wider publicity is being sought, or one-to-multiple, a means via which the producer company is essentially using the audit as a means of publicising its fitness for purpose. There is, Steinbach says, a constant fluctuation between which type is more in demand at any given time.
CAP Intelligence does not, for obvious reasons, disclose the number of one-to-one audits it has done. There have been three one-to-multiple audits, all of which are now available for viewing via the company website. These cover Asian firms active in APIs, late stage pharmaceutical intermediates and other intermediates.
The three audited companies are Zhejiang Qiming Pharmaceutical in Shangyu and Zhejiang Hisoar Pharmaceutical in Taizhou, both in China's Zhejiang province, and ZCL Chemicals of Ankleshwar, India. A report on the US-based company FutureFuel is expected to be available in early September. Steinbach expects to have done ten audits by the end of the year.
CAP Intelligence stresses to producers that any potential customers will contact them directly to pursue business. To customers, it likewise stresses that its website offers products and technologies from audited producers but is not an endorsement of the producer. To both it adds that it is not part of a product supply agreement or paid by commission.
"I identified a need for transparent interaction between supplies and customers that could best be done by a third party," says Steinbach. "CAP will not be part of the supply chain between producer and customer. The rationale is creating a level of trust between producers and customers as quickly and as broadly as possible."
For producers, CAP Intelligence claims that the key advantages are the ability to market their strengths in a reliable forum, provide select proprietary information in a secure environment to trusted customers and to avoid common supply chain mistakes via good communication. Customers, it says, can streamline the process and costs of supplier selection through an appropriate amount of detail and information, avoiding some of the pitfalls often found in the industry.
CAP Intelligence also offers industry reports, variously covering the top 20 and top 50 pharma companies, the 250 'most important' pharma companies, the top 20 generic pharma companies and the top ten and top 20 agrochemical companies, largely based on public domain information. These broadly consistent of extended company profiles in terms of history, strategy, business model, development, products in clinical phases, main products and key financial details.
This activity, Steinbach adds, is mostly being done to bring in cash flow until the auditing gets off the background, a process that he expects to take a couple of years. "The problem is getting visibility. We are selling a new concept here and it will take time but we are confident that there is a real need here," he says.
From Online Issue: August 2012