Custom manufacturing companies

Fine-chemical/custom manufacturing companies (discussed in Section 2.1) are active in process scaleup, pilot plant (trial) production, and industrial-scale exclusive and nonexclusive manufacture contract research organizations are discussed in Section 2.2, and laboratory chemical suppliers are discussed in Section 2.3. 

Whereas for the pharmaceutical industry the patient, respectively the daily medical cost, is the driving force for establishing the target price for an API, it is the manufacturing cost for the fine-chemical/custom manufacturing company. 

Toller An outsourced manufacturing company contracted to process materials to another company s specifications. Sometimes called third party service provider, toll processor, supplier of outside services, external contract manufacturer, contract processor, contract manufacturer, custom chemical manufacturer. 

Fine-chemical/custom manufacturing (CM) companies account for the largest share of the industry, followed by contract research organizations (CROs) and laboratory chemical suppliers. 

Fine chemicals are produced either in-house by pharmaceutical or other specialty chemical companies for their captive needs, or as sales products by fine-chemical companies. The latter account for about one-third of the total production value of 75 billion, and obviously for the totality of the trading volume (see Table 9.2). In business transactions, custom manufacturing (CM) prevails over straight trading of standard products. 

Most of today s best-known hne-chemical companies, such as Cambrex, Clariant, Degussa, Dowpharma, DSM, and Rhodia (see Table 2.2), are subject to the abovementioned characteristics. Customers prefer to do business with midsize companies, because communications are easier (they typically deal directly with the decisionmaker)—and they can better leverage their purchasing power. Lonza s custom manufacturing business, apart from biotech, is still mainly concentrated on the original Visp, Switzerland site in terms of production and R D, and therefore has conserved a number of advantages that are typical of midsize companies. 

The business of CROs is usually done through a pay for service arrangement. Contrary to manufacturing companies, invoicing of CROs is not based on unit product price, but on full-time equivalents (FTEs), that is, the cost of a scientist working one year on a given customer assignment. For further details, see Sections 12.5 and 12.6. 

Sigma Aldrich, USA. The company had sales of 1.7 billion in 2005 and serves 60,000 accounts representing over one million individual customers. Apart from offering 100,000 small and big molecules, including cell culture media, it has also 30,000 items of laboratory equipment available. Under the name SAFC Pharma, a 65 million PFC (including HPAI) custom manufacturing business is operated. 

The average return on net operating assets (RONOA) of the sample was 9%. The last two figures exemplify the capital intensity of custom manufacturing (CM)-biased fine-chemical companies. In order to achieve a good return of capital employed, a healthy margin is mandatory. A more standard... 

A manufacturing company can basically be organized according to assets, geographic regions, or businesses. More than in other industries, the destiny of the fine-chemical/custom manufacture industry depends on the individual... 

The dichotomy in the development of offer and demand also has a direct impact on the development of the fine-chemical industry in a global context. Whereas Western companies have suffered from the reduced demand for custom manufacturing services, Asian companies have benefited from the generics boom. The opposite turnover development of selected Indian and European fine-chemical companies is depicted in Figure 10.1. 

Some big and medium pharma companies are hybrids in the sense that they also offer pharmaceutical fine chemicals and custom manufacturing services and therefore compete with their PFC suppliers. 

A limited competition and substantial unmet needs would describe a favorable working environment for business development. For custom manufacturing, neither is the case nowadays. The number of fine-chemical companies and the global GMP fine-chemical production capacity have increased more rapidly than demand since 2000. Also, the reluctance of pharma to outsource has increased (see Chapter 10). 

The products offered by the fine-chemical industry fall into two broad categories (1) exclusives and standard or (2) catalog products. Serviceintensive exclusives , provided mostly through contract research or custom manufacturing arrangements, prevail in business with life science companies standards prevail in other target markets. 

Custom manufacturing (CM) signifies the Konigsdisziplin, that is, the most prominent activity of the fine-chemical industry. Because of their long experience in safeguarding the intellectual property interests of its customers, it is the stronghold of the Western companies. CM is the antonym of outsourcing. 

In order to identify the success factors for custom manufacturing, an antagonistic approach is recommended the selection criteria for outsourcing partners, as established by a major pharmaceutical company, are listed in Appendix A.6. Those fine-chemical companies, which best comply with the 28 criteria, obviously have the best chance to become suppliers. The ranking is typically based on an extensive audit of the prospective supplier. 

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