Report from: Europe - Pharmaceutical Technology

Latest Issue

Latest Issue
PharmTech Europe

Report from: Europe
Although industry is tightening its belt, contract manufacturers across Europe are actually making out quite well by taking on additional projects and new roles.

Pharmaceutical Technology
Volume 33, Issue 4, pp. 18-23

Contract manufacturers in Europe are benefiting from the pharmaceutical industry's acceleration of production reorganization. In an effort to streamline active pharmaceutical ingredient (API) and finished-product manufacturing, large multinational pharmaceutical players are closing down redundant plants and, in many cases, selling facilities to growing contract manufacturers. The contractors, in turn, are establishing themselves as a new class of specialized producers of APIs and dosage-form drugs, working in close partnership with both big and small pharmaceutical companies.

"The pharmaceutical industry is increasingly outsourcing its API business to custom manufacturers in order to cut costs," says Wolfgang Schmitz, chief executive of Saltigo, the fine chemicals unit of Lanxess in Leverkusen, Germany. "We can win new customers as well as increase capacities for existing companies by offering innovative product mixes and the latest technologies, as well as ensuring high quality and safety standards."

Among the main drivers behind plant closures and divestments by pharmaceutical companies is a hike in the number of drugs coming off patent. In the British Isles, for example, GlaxoSmithKline (GSK, London) is closing capacity in England for its epilepsy drug "Lamictal" (lamotrigine ) and herpes treatment "Valtrex" (valacyclovir), both of which have recently or are about to come off patent. In addition, there is a desire among global firms to have a stronger presence in the emerging markets of Asia, Latin America, and Eastern Europe.

"We're number 2 worldwide with a 6% share of the global pharma market, but in the emerging markets of Brazil, Russia, India, and China (BRIC), we have only 1.4%," said David Jones, GSK's senior vice-president for human resources, global manufacturing and supply, at an early March press briefing. "We have to change the whole dynamics of our business. We'll have to produce more outside Europe and North America in Asia and elsewhere where manufacturing is less expensive."

One-third of GSK's 30,000-plus workforce operates out of the United Kingdom. In the second half of 2008, the company announced the closure of two plants in southeast England, affecting more than 1000 employees. The company's expenditure on outsourcing of APIs, intermediates, finished products, and packaging now amounts to 55% of the 3.6 billion ($5.1 billion) spent on manufacturing annually.

AstraZeneca (London), the UK's second largest pharmaceutical company behind GSK, is focusing on formulation and packaging after announcing in 2007 that it intends increase outsourcing of its APIs.

"We will continue to do formulations and packaging because they are areas close to the patient," says a spokesperson for AstraZeneca, which in January revealed that by 2013, it would be cutting approximately 20% of its global workforce or 15,000 jobs, many of them in manufacturing. "In fact, in packaging in Europe, we are bringing some activities back in house as part of a regionalization process."

The company has forged close ties and even partnerships with several contract manufacturers across Europe. One of these is the fast-growing Recipharm (Basel), which now has nine plants in Europe, all of them purchased from pharmaceutical companies, four from AstraZeneca.

"We've been following the classic model of acquiring plants and then doing a contract manufacturing deal with the vendor for the existing output while using the facility to gain other business from elsewhere," explains Mark Quick, Recipharm's vice-president of corporate development. "We see potential this year for acquisitions from our leveraged competitors in contract manufacturing because we have cash in the bank."


blog comments powered by Disqus
LCGC E-mail Newsletters

Subscribe: Click to learn more about the newsletter
| Weekly
| Monthly
| Weekly

What role should the US government play in the current Ebola outbreak?
Finance development of drugs to treat/prevent disease.
Oversee medical treatment of patients in the US.
Provide treatment for patients globally.
All of the above.
No government involvement in patient treatment or drug development.
Finance development of drugs to treat/prevent disease.
Oversee medical treatment of patients in the US.
Provide treatment for patients globally.
All of the above.
No government involvement in patient treatment or drug development.
Jim Miller Outsourcing Outlook Jim MillerOutside Looking In
Cynthia Challener, PhD Ingredients Insider Cynthia ChallenerAdvances in Large-Scale Heterocyclic Synthesis
Jill Wechsler Regulatory Watch Jill Wechsler New Era for Generic Drugs
Sean Milmo European Regulatory WatchSean MilmoTackling Drug Shortages
New Congress to Tackle Health Reform, Biomedical Innovation, Tax Policy
Combination Products Challenge Biopharma Manufacturers
Seven Steps to Solving Tabletting and Tooling ProblemsStep 1: Clean
Legislators Urge Added Incentives for Ebola Drug Development
FDA Reorganization to Promote Drug Quality
Source: Pharmaceutical Technology,
Click here