Fine Chemicals: Why High-Tech Manufacturing Really is the Place to Be
5:25 AM MDT | March 23, 2012 | By ALEX SCOTT
Many Western pharmaceutical companies – and indeed pharma fine chemical contract manufacturers - have a tough road to tread. As Aslam Malik, president of Ampac Fine Chemicals (Rancho Cordova, CA), in an exclusive interview this week tells CW, there is an ever tighter squeeze on pharma from low cost competition in India and other emerging countries, while at the same time a raft of drugs, which AFC and other technology-rich contract manufacturers make, may be about to go off patent.
Malik’s strategy in the face of both challenges is to focus on the high-technology end of the market; an area where AFC has competitive advantage through its long term experience in handling energetic or complex chemistry and key purification technologies such as simulated moving bed (SMB) chiral separation. While the capital cost of building a new manufacturing plant in the west may be much higher than if the same building were erected in India or China, Malik says that the difference between a high-tech facility in the west and a standard technology facility in the west is minimal – if anything. So if you can do the chemistry the high-tech option would appear to be the ideal one.
The reasoning behind Malik’s approach is mirrored in pharma industry developments taking place this week in the U.K. where GlaxoSmithKline has announced that it will build a new biologics facility at a cost of £350 million at Ulverston, U.K. and invest a further £150 million. GSK plans to start construction of the facility in 2014-15.
Contrastingly, the standard pharma manufacturing facilities for small molecule drugs without patent protection for some companies are too expensive to operate in the U.K.: Sanofi announced in the past few days that at about the same time GSK is expected to finish building its biologic drugs facility, it plans to close its Newcastle, U.K. facility. The Newcastle plant makes Plavix, a treatment to prevent blood clotting, and other branded drugs as well as non-patented drugs including paracetamol. Sanofi has cited the loss of patent protection as a key factor in its decision to close the plant.
“The product portfolio manufactured there is very fragile. The problem is there is now too much generic competition and not enough demand for the products,” Sanofi says.
Workers union Unite has pledged to fight the Sanofi plant closure which would lead to the loss of 450 staff, describing Sanofi’s decision as “unacceptable.” However, you have to question whether Unite will be able to hold back the tide.
Malik’s assertion that moving to high-tech manufacturing is the sustainable business option appears to ring true in the narrow examples of Sanofi and GSK cited above. The other key benefit that Malik doesn’t mention regarding AFC’s strategy is that it also presents greater opportunities for working closely - from a geographical and technological perspective - with the pharma companies developing the most advanced molecules. After all, big pharma companies are not about to build any new plants in the West with anything but the latest technologies.