Fine Chemicals
Risk: assessment, aversion and denial
Since its foundation the European Fine Chemicals Group (EFCG) has highlighted the risks and
rewards globalisation brings to its members and to pharmaceutical f_i ne chemical industry stakeholders.
Guy Villax discusses the options faced by large pharma and regulators alike to meet the challenges
of a fast changing industry
O
ver the past 20 years, the pharma advantage of growth in emerging economies. from innovative small pharma companies
industry has changed beyond Traditional markets may be where prof_i ts and biotechs. Merck & Co and AstraZeneca
recognition. Certain trends have are made today, but they are experiencing have made their exit from API manufacturing
accelerated, while others have inverted sluggish growth. So what can be done to clear as a strategic option.
4-5
These
180º. Europe, once the cradle of chemistry take advantage of fast-growing Brazil, India, companies have/will sell/close plants, while
and pharmacy, is no longer at the forefront Mexico, India, China and Turkey? These others, such as Roche and Pf_i zer, have gone
of R&D innovation. In 25 years, Europe has
markets may not accept the high prices
the same way because of excess capacity.
gone from the world’s leading producer of
charged in the West, but they do have GDPs
This is precisely what has happened in the
APIs to an also-ran player supplying only
growing at triple the rate of traditional
automotive industry. Car makers today focus
a fraction of the ingredients that make up
markets.
on design and marketing; only occasionally
EU medicines today. Generic medicines, a
Andrew Witty, GlaxoSmithKline’s CEO,
will they actually look into manufacturing or
non-existent industry before the 1980s, now
has spoken about a branded generics plan
technology. Even at Porsche, the assembly
f_i ll the majority of prescriptions across the
for emerging markets – countries where
of the Boxster model is outsourced.
globe. Regulators are continuously elevating
enforcement of regulations is weak, and
Furthermore, it is in industries under severe
the bar and setting standards that just a
where a GSK brand on a generic blister
pressure that one f_i nds best practices and
decade ago would have been inconceivable,
pack may gain a patient’s preference
where managers become the most aggressive
if not impossible to achieve, because the
despite a mark-up.
2
David Brennan, CEO of
at cutting fat and becoming “lean”.
technology was not there.
AstraZeneca, is considering similar options.
3
In relative terms, pharma is still very
Large pharma’s investors are unhappy;
Therefore, convergence of innovators and
prof_i table, so it’s no wonder that 6 Sigma
total shareholder return has been negative
generics, with heavy emphasis on branding,
and lean manufacture are still in their
at –2.4% a year between 2001 and 2007.
1
may well be part of the new pharma model,
infancy in GMP operations. On the other
At the time of writing, performance can be
especially in fast-growing markets.
hand, if we can drive very affordable,
expected to be even worse and the future
reliable, comfortable, good-looking and
outlook no better. Whatever your crystal
lean and mean
high-performance cars, it is because
ball tells you, the inescapable reality is that Many believe the future business model will
globally the automotives industry faced
pharma’s current business model is broken, see big pharma companies retaining their strong competition – pressures that led to
and that its new strategy must, regardless development and marketing/distribution restructuring, consolidation and specialisation,
of its shape, include low-cost manufacture, functions, but shedding both primary and for example in component suppliers. A new
better returns on capital and new ways secondary manufacturing. Eventually, big car model today is f_i rst conceived, then
to create value. The big pharma industry pharma may also shed its R&D, choosing actually put together, by parts suppliers
also needs to re-invent itself if it is to take instead to in-license aggressively compounds under the baton of the car manufacturer. All
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