PRINT THIS PAGE Production restructuring in pharmaceutical companies to propel fine chemicals market in North America
02/08/2006. Source:Frost & Sullivan .
The increasing focus of pharmaceutical companies on research and development as well as their reduced emphasis on captive manufacturing are driving the fine chemicals market in North America. Fine chemicals suppliers offer products at lower costs, reduce marketing time, as well as enable pharma companies to focus on their core competencies and employ beneficial reorganization processes. Frost & Sullivan finds that the North American Fine Chemicals Market - Investment Analysis and Growth Opportunities earned revenue of $21.29 billion in 2005 and estimates them to reach $28.62 billion in 2011.
"The growing number of suppliers from Asia, which offer goods at lesser prices than their North American counterparts and are compliant with current good manufacturing practices (cGMP) as well as intellectual property rights (IPR), are increasingly catering to multinational pharma enterprises," states Frost & Sullivan Research Analyst Shrikanth Srinivasan.
India, for instance, has over 70 cGMP-compliant factories -- the second largest in the world after the United States -- and the prices offered by manufacturers in India and China are 50.0 percent of those provided by companies in North America. This could be mainly due to the lower fixed, labor and maintenance costs prevalent in Asia that translates to 10.0 percent of the expenditure incurred by North American manufacturing plants.
In addition to the intense competition from Asian fine chemicals suppliers, the slump in the rate of new chemical entity (NCE) approvals curtail the profitability of fine chemicals companies.
"To stay competitive in this scenario, participants in the North American fine chemicals market are opting for restructuring, the outcome of which is likely to depend largely on production restructuring in pharmaceutical companies," notes Srinivasan. "The quicker the measures taken by pharma companies, the greater will be the reduction of overcapacity in the fine chemicals markets."
Encouragingly, the contract biopharma segment is set to witness strong growth as biopharmaceuticals are attracting greater venture capital (VC) funding. Also, the currently undervalued pure play pharmaceutical intermediaries and active pharmaceutical ingredients (API) businesses present the best opportunities for private equity participants to enter the market.
Overall, fine chemicals manufacturers supplying to North America must concentrate on niche technologies such as high potency active pharmaceutical ingredients (HPAPI) to gain ground in the long run. These units should emphasize maintaining confidentiality, building a top-notch reputation, as well as providing documentation and superior product quality to gain advantage over their Asian rivals.
Frost & Sullivan, a global growth consulting company, serves clients around the world in all aspects of financial analysis, market research and monitoring, due diligence, idea generation, opportunity analysis, investment valuation and other proprietary research. Frost & Sullivan's clientele includes Global 1000 companies, emerging companies, and the investment community.
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