Informex '03: Fine chem execs see major restructuring ahead

27 February 2003 14:11  [Source: ICIS news]

NEW ORLEANS,  Louisiana (CNI)--Fine chemicals producers expect considerable restructuring of the sector over the next two years, according to participants in this year’s Synthetic Organic Chemicals Manufacturers Association (Socma) Informex meeting here.

One leading industry vice-president commented that the pharma and fine chemicals industry would look significantly different in two years time. His view was supported by many other executives at Informex. Dow Chemicals’ performance chemicals business head Andrew Liveris predicted that many of today’s middle rank players would not survive in coming years.

Peter Jackson, pharmaceuticals business vice president for the UK company Avecia, said reasons for the impending transformation of the industry include the reduction in late phase drug development opportunities, spare capacity within big pharmaceutical firms and the more demanding regulatory environment. He forecast that the next couple of years will see "a shake out with restructuring, consolidation and mergers taking place".

Indeed, many leading players have already begun to restructure their fine chemicals sectors. French specialty chemicals company Rhodia recently created its pharma solutions business unit, Germany's Bayer has pooled all its chemicals activities and US group Honeywell recently formed its research and life science solutions business unit.

Despite 2002 being a difficult year for players in the sector, some areas drove growth. Jackson said that Avecia’s pharma business saw sales growth and double digit earnings growth at the earnings before interest, tax, depreciation and amortisation (EBITDA) level, driven by large scale chiral products, early phase chemical development and early phase manufacturing services.

Bayer also saw good growth in its fine chemicals business with sales up 17% in 2002.

The German group said it had implemented cost savings worth Euro50m ($54m) per year and has built a new GMP (good manufacturing practice) kilolab in its central organics pilot plant, added new chiral technologies and chiral separation capacity and brought a high potency production unit for cytotoxic products on stream. However, fine chemicals business head Rudolph Hanko warned that 2003 would probably be tough as insourcing continues and Asian competition grows.

By: John Baker
+44 20 8652 3214

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