Pharmaceutical intermediates producers are hoping that a recent change in Japan's Pharmaceutical Affairs Law (PAL) legislation will lead to an increase in outsourcing. Until recently, PAL often required the drug licence holder to also be the manufacturer. That made it difficult for pharma companies to outsource intermediates production. However, a recent change in PAL has removed pharma intermediates manufacture from the drug approval process.
Japan is the second-largest pharma market after the US with about 1,400 pharma companies generating combined sales of about $40 billion. Most pharma intermediates production is carried out by domestic companies for captive use, analysts say. But despite the large size of the pharma market and the recent wave of deregulation, industry watchers say market entry into contract manufacture will be tough.
"The priorities for Japanese life science companies regarding outsourcing are; don't outsource; outsource to fine chemical businesses within the group; outsource to third-parry Japanese fine chemical companies; and lastly outsource to overseas fine chemical companies," says Peter Pollak, an independent fine chemical and pharmaceutical analyst. "Deals with overseas fine chemical companies do exist but they take years to develop," Pollak says. It usually only takes place for "demanding multistep syntheses where they are only limited capabilities in Japan," he says.
"The market has been rather closed because large pharma companies [typically have] one or more pharma intermediates subsidiaries in the same group," says Enrico T Polastro, v.p. at AD Little Benelux (Brussels). "Almost all pharma companies [have] a subsidiary that is their preferred service provider," Polastro says.
"The market has been opening up in the past few years, however," he says.
Changes to PAL have also prompted companies including Fujisawa Pharmaceuticals (Osaka), to divest their pharma intermediates subsidiaries or plants," Polastro says.
Japanese pharma companies already outsourcing to the overseas firms include Takeda Chemical Industries (Osaka), Yamanouchi Pharmaceutical (Tokyo) and Tanabe Seiyaku (Osaka). "There are already contracts awarded to mid-size European fine chemical companies, particularly Italian companies, with some Swiss and U.K. companies--and Japanese pharma companies. There is movement there," Polastro says. U.S. companies do not yet have a significant presence in the Japanese market, however, he says. Japanese pharma intermediates players are also likely to defend their market. "It won't be a free lunch," he says. EMS Dottikon (Dottikon, Switzerland) says it is one of the longest serving overseas intermediates players in Japan with marketing activities in the country for the past 20 years. "It takes a long time to enter the market--it will take at least one or two years and you will need to be known well before you will get any business," says Rainer A Hoch, head of marketing. "We had some difficulties in the past because the Japanese pharma companies didn't want to buy from foreign companies," Hoch says.
The company has scored some successes and today has sales of between $10 million-$20 million in Japan, about 15% of group sales. "Mainly we work with the largest Japanese pharma companies, such as Takeda and Fujisawa," says Hoch. There is unlikely to be significant market growth in Japan, however, "because there is overcapacity of outsourcing all over the world [including Japan]," he says.
Dynamic Synthesis, the custom synthesis business of Dynamit Nobel (Troisdorf, Germany) says it has been working with the Japanese pharma market since the late 1990s. Sales from the Japanese market are "a small part" of the company's global sales of [euro]240 million ($257.5 million), although the company says there are good opportunities for growth. It has targeted 5% of group sales from Japan within the next few years, says Thorsten Waloschek, marketing manager/Dynamic Synrhesis.
Avecia says communication lines between Japanese pharma and overseas intermediates players have improved in recent years. "Simple things are changing; people who are running [pharma company] outsourcing departments in Japan have spent some time on secondments in the west [outside] Japan," says Peter Jackson, Avecia v.p./pharmaceutical products. "These people speak english and are more aware of the main players like Lonza, DSM and Avecia," Jackson says. Japanese pharma companies are increasingly forming alliances with overseas companies to market their products. "This is increasing their understanding to the services and dynamics of the industry outside of Japan and they are realizing the opportunities for outsourcing more outside of Japan," he says.
Avecia estimates that the outsourcing market will more than double between 2002 and 2005. Jackson estimates about 5% of outsourced production is contracted to overseas intermediates companies and this could double in the next few years. "There will be significant growth for small molecules and explosive growth for biomolecules," Jackson says. "We see strong demand for chiral technology, chiral synthesis and high-potency substances," Jackson says.
Few US companies have gained commercial-scale contracts to the market in Japan. Dow Chemical's contract manufacturing business Dowpharma already supplies active pharma ingredients to Japanese companies for several years for clinical phase I but has yet to secure its first commercial scale production contract in Japan. Dowpharma recently started a plan to generate sales there, signing an agreement with marketing firm CBC Co. (Tokyo) to be a representative in Japan.
Gwin Bompas, Dowpharma commercial director for Europe and Asia/Japan predicts consolidation in the fragmented Japanese pharma sector, as has happened in the US and Europe, and that this will lead to the sell-off of some capacity or plants and so open up the pharma intermediates for other companies. "We have a wide range of leading edge technologies and this is the trump card that we have to play in the Japanese market," Bompas says.
Sumika Fine Chemical, subsidiary of Sumitomo Chemical, has indicated that it is not about to give up market share and has introduced a series of novel technologies, including chiral catalyst systems, to the market in recent months.
Recent technology offerings at Sumitomo include a process for manufacturing novel chiral path esters from symmetrical di-esters involving enzymatic catalysis based on Sumitomo-designed enzymes. "Every six months we try to introduce a new technology to make chemical synthesis easier and faster for our customers," says Jim Birnie, business manager for custom synthesis/Sumitomo Belgium (Brussels). "We focus strongly on sulfur and nitrogen technology," Birnie says. Sumitomo is also involved heavily in biocatalysis, he says.
- Chemical Week