On an industry level, how would you characterise the overall market for fine chemical supply?

The increased trend of outsourcing coupled with a relatively strong economy has seen the fine chemicals market grow at a very high level when compared to historical data. However, many companies and economy experts have already announced that, whilst continued growth in outsourcing is widely anticipated, this growth may not be at the same high levels observed in more recent years. In addition, the distribution in growth will be different, so companies must decide how best to position themselves to maximize future growth opportunities.

The same holds true in the pharmaceutical fine chemicals market; the overall demand in the market has increased. However, the implications of the patent cliff and changes in the funding of health care provision could mean that the highest compound annual growth rate potential is more likely to come from emerging rather than established markets. Despite continued forecasted increases in total product demand, not all companies are well placed to maintain or grow their level of business. This reflects how increasingly fragmented the market has become and the presence of more and more competition, in particular from Asia. Thus, industry experts predict that a consolidation of some of the suppliers may occur in the near future with the landscape of pharmaceutical fine chemical companies changing and evolving further.

One of the key trends that we have identified is the development of true partnerships between sellers and buyers. This goes together with the desire to simplify and consolidate the supply chain in the pharma sector.

Innovation is a key to success. The Drug, Chemical and Associated Technologies Association even devoted the whole Sourcing Summit “Innovation in Sourcing” to that topic. New and creative solutions are needed in this changing market; trends are towards shorter timelines, fewer new molecular entities, continuous price pressure due to health care reforms and blockbusters going off patent.

The pharmaceutical majors have articulated their strategic interest in building their positions in emerging markets. On a supply level, what are the implications for contract manufacturers?

For pharmaceutical companies, emerging markets are a key driver for continued growth; there is definitely an opportunity for fine chemical companies providing generic active pharmaceutical ingredients. Another trend that we’ve picked up on is that, even for new molecular entities and patent protected drugs, pharma companies now want to launch in emerging markets much earlier than in the past. This puts more and more pressure on pharmaceutical organisations because of the necessary procurement and operations to meet cost of goods targets, as well as marketing and sales requirements to successfully launch new chemical entities. As a consequence, they need to work more closely together with their suppliers to come up with innovative solutions much earlier in the drug life cycle to meet the challenging price points, and optimise the rather complex supply chains.