Fragmentation, chemical markets

Furthermore, the chemical industry stands apart from other commodity industries in that a wide gap separates the top and bottom performers. In November 2004, for example, the top quartile of chemical companies had a market-to-book ratio 3.1 times the bottom quartile s - a far wider spread than that of other asset-heavy industries, such as automotive (1.9), pulp and paper (1.8), and steel (1.6). Companies in those industries operate in more transparent and global commodity markets with fewer strategic options at the corporate level. By contrast, the far more complex chemical markets are fragmented into thousands of submarkets... 

While the United States represents the biggest fine chemicals market, for historic reasons the leading producers (Degussa, Lonza, DSM, etc.) are based in Europe. The merchant fine chemicals market is still a highly fragmented one with the top ten producers having a combined market share of less than 20% [17],... 

Annual growth rate of Chinese fine chemicals market 10% Low entry barriers for new emerging competitors due to low investment, low-cost and often low-tech production Dramatic overcapacity and fierce price competition Highly fragmented industry... 

Fragments should be composed of drug-like chemical matter because substantial parts of a fragment hit will end up in the final lead candidate for in vivo assays. Therefore, we selected our NMR screening library from commercially available compound repositories that have a proven track record in lead discovery (e.g. by many years of use in HTS) and also as they include structures and substructures that occur in known marketed drugs, as well as in clinical and preclinical candidates. This ensures that the fragment library is built on several decades of experience in drug discovery. 

As mentioned above, one interesting aspect of the chemical sector is that the industry as a whole is highly fragmented. The top ten companies in chemicals (excluding pharmaceuticals) account for only 18 percent of the total market, well below comparable values in other industries, such as automobiles, where the top ten firms account for 85 percent of sales, or pharmaceuticals, where the top firms account for more than half of all sales (Fig. 1.6). While the overall consolidation level is low, several product segments have already consolidated. The top ten manufacturers of acrylic acid, for instance, account for 85 percent of their market. The top ten manufacturers of crop protection products account for 87 percent of their market, and the top ten in paints and coatings for 42 percent. 

Enter new parts of the value chain, typically downstream elements closer to the end consumer. Downstream players often add significant value to the product just before it gets to the end consumer. If specialty chemical companies can enter these parts of the value chain by leveraging their existing business models and core capabilities, they can capture a piece of this additional value. However, this proposition may prove difficult, since the downstream markets are often very different from chemical ones. They are, for example, extremely fragmented, and they have to cope with frequently changing consumer tastes. 

Today, we understand many aspects of the behavior of the cell and many fragments of the network, but not how it all fits together. We particularly do not understand the stability of life and of the networks that compose it. Our experience with other very complicated networks (e.g. the global climate, air-traffic-control systems, the stock market) is that they are puzzlingly unstable and idiosyncratic. But unlike these and other such networks, life is stable - it is able to withstand, or adapt to, remarkably severe external jolts and shocks and its stability is even more puzzling than the instability of the climate. We have a hard enough time understanding even simple sets of coupled chemical reactions. And we have, at this time, no idea how to understand (and certainly not how to construct) the network of reactions that make up the simplest cell. 

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