Groupe SNPE Stays the Fine Chemicals Course

18 June 2001 00:00  [Source: ICB Americas]

After several months of delays, Groupe SNPE's phosgene derivatives plant at La Porte, Tex., is finally up and running. The $20 million plant, located at The Dow Chemical Company site, is owned by Groupe SNPE and represents a key element of the French government-owned company's push into foreign markets, especially into the US. It is an extension of Groupe SNPE's aggressive growth strategy, designed to position the company as a major global player in the fine chemicals arena. Long-term plans call for total revenues of the SNPE business in the US to reach roughly $100 million.

La Porte's annual production capacity stands at 10,000 metric tons of phosgene derivatives. The plant is designed for two production lines--one for chloroformates and carbonates, and the other for acid chlorides.

SNPE divides its core expertise into two areas: energetic materials, consisting primarily of explosives and propellants, and fine chemicals, built on the company's phosgenation core expertise. Both sectors claim roughly equal halves of the Groupe's total annual sales of over á820 million.

To reach its goal of becoming a preferred supplier to the life sciences industry, SNPE says its needs to a reach critical mass of annual sales of $500 million. To this end, the company is developing new processes for complex synthesis and is fortifying its global reach, with particular emphasis on an expanded North American presence.

Initially announced in 1999, the growth initiative involves total capital investments of roughly $200 million, with about $80 million earmarked for US-related activities.

Prior to La Porte, SNPE bought Lockport, N.Y.-based phosgene producer VanDeMark Chemical, its first US production base for pharmaceutical phosgene derivatives. Concurrently, SNPE's pharmaceutical subsidiary Isochem has moved into the US following the purchase of solid-phase peptide specialist Multiple Peptide Systems Inc.(MPS), based in San Diego, Calif.

The La Porte delay, primarily related to additional safety procedures and precautions, contributed to SNPE's weaker 2000 financial performance. After three years of growth, in 2000 the Groupe posted a 2.6 percent decline in sales to á822 million ($699 million).

Overall, weather-related problems and eroding margins, exacerbated by increasing raw material and energy costs, took their toll. In addition, notes Michel Arque, SNPE's strategy vice-president for fine chemicals, declines in the pharmaceutical industry's anti-protease and anti-obesity markets pinched Isochem's custom manufacturing business.

However, Mr. Arque remains optimistic and projects stabilization and recovery of the unit's financial performance. Overall Groupe turnover for 2001 is projected to climb into the á900 million range.

SNPE plans to stay the course outlined in 1999 and focus on consolidating and integrating its investments, Mr. Arque notes. "The recent investments of the group enable us to seize new opportunities and join the ranks of preferred suppliers to a growing number of global agrochemical and pharmaceutical companies."

The company runs its business units with sales margins comparable to its competitors. Still, government ownership tends to give SNPE somewhat more financial flexibility than its competitors, who frequently need to make decisions with an eye to their company's stock market performance.

Some fine-tuning is underway, however. Earlier this year, SNPE fine chemicals separated its intermediate and agrochemical activities. Effective January of this year, an operational unit called SNPE Chimie started handling all intermediates markets, while a new SNPE Agro operational unit is solely focused on agrochemistry.

"We wanted to be able to better serve the needs of the crop protection market," Mr. Arque explains, adding that SNPE Agro is expected to benefit from a number of collaborative projects currently under study with major agrochemical producers, boosting its sales by around 10 percent.

Annual sales levels for both units had reached critical levels considered sufficient for independent operation. The intermediates business posted sales of FF 1 billion ($130 million), while annual revenues for the agrochemicals unit are pegged at roughly 700 million francs. Both entities are based on the same basic technologies, (nitration, hydrogenation and phosgenation) and consequently will still share a common R&D source.

Following the reorganization, SNPE's fine chemicals business now consists of four market-based business units: intermediates, agrochemicals, pharmaceuticals and nitrocellulose.

The company also streamlined its nitrocellulose activities as of April of this year. Its six worldwide production and distribution centers are now part of newly formed nail polish department which is part of SNPE's France-based nitrocellulose business unit in Bergerac. Its US-based unit is Tecvo Inc.

Whereas both the intermediates and the agrochemicals units specialize in technologies based on nitration, hydrogenation and phosgenation, the pharmaceuticals unit, Isochem, offers core expertise in complex organic synthesis and peptide technologies. In 1999, Isochem sales grew by 15 percent.

Last year, Isochem opened a cGMP facility in Toulouse, France. The new plant provides Isochem with a platform for larger-scale production of intermediates and active ingredients for the pharmaceutical industry. It represents an investment of $20 million and can be further expanded. Aside from phosgenation, the site can also perform nitrogenation, hydrogenation and multistep synthesis.

Toulouse is conceived to work in tandem with Isochem's three other French R&D and productions sites. At Gennevilliers most new projects are started; Pithiviers is a new platform with hydrogenation and butylithium capabilities; Vert-le-Petit can perform phosgenation, high-pressure and high-temperature reactions, as well as protected amino acids and peptide synthesis.

Initially, the reactors at Toulouse where filled with contract work for the first year. One of the first products was formyl leucine, an intermediate in the production of orlistat,. Hoffmann-La Roche's weight control product. However, sales of orlistat have not been doing as well as projected, in turn, negatively impacting its custom manufacturer Isochem.

On the plus side, Isochem recently landed a several hundred million franc, five-year partnership with Germany-based pharmaceuticals maker Byk Gulden, for the production of the active ingredient of Byk Gulden's flagship product pantoprazol, which is used for the treatment of stomach ulcers. The alliance follows a long-standing collaboration between the companies, starting for SNPE with the production of two pantoprazol intermediates. The current contract involves the construction of a dedicated pantoprazol production unit at the Groupe's Pithiviers site. Representing a FF 100 million ($12 million) investment, the site will be inaugurated in October of this year.

Byk Gulden claims annual sales of about á1 billion, with a core expertise for OTC and prescription products for gastrointestinal, cardiovascular and respiratory drugs.

Isochem is also playing up its peptide production expertise. The process of synthesizing new peptides involves temporarily protecting amino acids during linkage in order to correctly sequence them. Overall, the peptide chemicals market consists of actual peptides, protected amino acids and protective agents. SNPE is well positioned as a player in these markets because of its expertise in phosgene production, which is the basis of most amino acid protection and linkage techniques.

The three SNPE entities--Isochem, and its two subsidiaries, MPS and Neosystem--offer a complete range of amino acid derivatives, generating roughly á40 million. SNPE acquired San Diego, Calif.-based MPS in 1999 as part of its global expansion. The Strasbourg, France-based Neosystem sells catalogue and custom-made peptide products, whereas MPS only turns out custom peptides but can distribute Neosystem catalogue products throughout the US. Isochem, on the other hand, as part of its complex synthesis expertise, offers amino acids, and it has the capacity to manufacture large peptide quantities.

SNPE continues to strengthen its international phosgene and derivatives position. It took over from Rhone-Poulenc a plant at Pont de Claix, which uses phosgenation for the manufacture of agrochemical intermediates and active ingredients. Last year, it bought its Hungarian partner BorsodChem's 40 percent stake in its 60/40 joint venture Framochem. There are also plans to upgrade its Shanghai, China, phosgene derivatives production site.

ICIS Copyright © Reed Business Information 2009

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