Shifting Patterns in Sourcing - Pharmaceutical Technology

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Shifting Patterns in Sourcing
The pharmaceutical supply chain lengthens as generic drug manufacturers build production platforms offshore and CMOs position in India and China to meet demand for lower-cost production.

Pharmaceutical Technology

Watson Pharmaceuticals, Inc. (Corona, CA), which acquired Andrx Corporation (Fort Lauderale, FL) in 2006, announced several cost-reduction initiatives to take place in early 2007, including the closure of its Puerto Rico manufacturing facility and the planned divestiture of its Phoenix, Arizona injectable facility.

At the same time, Watson has been building its position in Asia. In 2006, it acquired Sekhsaria Chemicals Ltd. (Mumbai, India) for $29.5 million. Sekhsaria provides process research and development and contract manufacturing services, including the development and manufacture of APIs and related intermediates. Earlier in 2005, Watson acquired a manufacturing facility in Goa, India from Dr. Reddy's Laboratories (Hyderabad, India).

Last year, Watson invested $12 million to increase its equity interest in the CMO ScinoPharm Taiwan, Ltd. (Shan-Hua, Taiwan), according to its recent financial reports. ScinoPharm provides contract process research and development and API manufacturing. Watson has the option to acquire an additional 44% interest in Scinopharm for $80 million by October 2007.

Following its $2.5-billion acquisition of Pliva, dd (Zagreb, Croatia), Barr Laboratories, Inc.(Woodcliff Lake, NJ) plans to move production of select products to Pliva's manufacturing facilities in Croatia. Barr outbid Actavis, which also sought to acquire Pliva.

In late December, Mylan Laboratories, Inc. (Pittsburgh, PA) completed its deal for a controlling interest in Matrix Laboratories (Hyderabad, India), a manufacturer of APIs and solid oral-dosage forms in India.

The efforts by generic drug manufacturers to increase their internal manufacturing capacity offshore comes as India and China continue to raise their share of global API production in comparison with the strongholds of Italy and Spain. China and India supplied roughly 57% of generic APIs to Western Europe and 15–16% of generic APIs to the United States in 2005, according to the Chemical Pharmaceutical Generic Association (CPA, Milan, Italy). By 2010, India and China are expected to serve 66% of the Western European market for generic APIs and 24% of the US market. In 2005, Indian companies sold $130 million of generic APIs to the US market and $434 million to Western Europe. In 2005, Chinese API manufacturers sold $980 million of generic APIs to Western Europe and $365 million to the United States (1).

CMOs expand in Asia

In an effort to meet their customers' demand for lower-cost production, Western CMOs are positioning in China and India as Asian CMOs build their own manufacturing positions in Western markets.

SAFC, the custom-manufacturing and fine-chemicals unit of Sigma-Aldrich Corporation (St. Louis, MO), is seeking to establish a footprint in Asia. The company is eying possible acquisitions in India and China, said Frank Wicks, president of SAFC, at a press briefing in January. The company is looking to gain a CGMP manufacturing facility for API synthesis in India and a large-scale, flexible organics manufacturing facility in China, which could provide raw materials for SAFC businesses.

"For China, we are open to an acquisition or establishing a joint venture, depending on what opportunities become available," said Wicks. "For India, we are seeking commercial-scale CGMP capacity as a means to offer lower-cost production capabilities in our custom-synthesis business."

SAFC's plans in Asia come after a $12-million investment for a new 139,000-ft2 medicinal-chemistry facility in Bangalore, India. SAFC Bangalore has 60,000 ft2 of production and research and development laboratory space, including manufacturing suites for chemical development and production to the 50-L scale, and an onsite warehouse.

The Bangalore operation offers preclinical, process-development and scale-up services and is designed to work in alignment with SAFC's medicinal-chemistry operations in Manchester, United Kingdom.

"The Indian facility works in partnership with our Manchester facility," said Wicks. "It provides our customers with Western communication and business practices with access to Asian economics."


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