case study of production efficacy; -...

GCOE Kyushu Univ. Sota Kurita, Jan 10, 2010 1

Case study of production efficacy; Point of view from Custom

manufacturing industry.

Kyushu university, Jan 23, 2010

LANXESS K.K. Saltigo Business unit, Business Line Pharma

Sota Kurita

Sota Kurita, GCOE Kyushu Univ. Jan. 23, 2010 2

Overview

Introduction: What is LANXESS/Saltigo

The Global Outsourcing Market

Pharmaceutical Industry

Commercial Scale Production

Case study

Buchwald coupling

Phosgene reaction

Sota Kurita, GCOE Kyushu Univ. Jan. 23, 2010 3Facts and Figures

LANXESS is one of Germany’s most important providers of polymers and chemicals

Employees worldwide (2007-09-30)

Global orientation

Over 14,600

Around 50 sites21 countries

Performance PolymersAdvanced IntermediatesPerformance Chemicals

Portfolio

EBITDA in the year 2007 EUR 719 mn (10,9 %)

Sales in the year 2007 EUR 6.61 bn

Lanxess Company Profile


Isithebe

Thane

Qingdao

Toyohashi

Brunsbüttel

Leverkusen

Mannheim

Filago

PortJérôme

Uerdingen

DormagenAntwerpenMarl

Chardon/OH

Sarnia/Canada

Newark/OH

Orange/TX

Lerma

Bitterfeld

Porto Feliz

Zaraté

Vilassarde Mar

Rustenburg Sydney

WuxiBaytown/TX

LaWantzenau

Branston

Zwijndrecht

Hamm-Uentrop

Castros

Madurai

Bushy Park/SC

Merebank

Newcastle

Shanghai

Burgettstown

Weifang

Birmingham/NJ

Lanxess Production Sites

Production Sites


13 different business units

Overview: Business Units

Performance PolymersButyl RubberPolybutadiene RubberTechnical Rubber ProductsSemi-Crystalline Products

Advanced IntermediatesBasic ChemicalsSaltigo

Performance ChemicalsFunctional ChemicalsInorganic PigmentsIon Exchange ResinsLeatherMaterial Protection ProductsRhein ChemieRubber Chemicals


Major role

Creation of Saltigo in 2006

Market oriented custom manufacturing service provider

External fine chemicals partner for customers, including Bayer Group

Former Scale-up and process developmentcompetence center within the Bayer Group

Business Unit Fine Chemicals of Bayer Chemicals AG

Until January 2005

Business Unit FineChemicals of LANXESS

From February 2005

From 2nd quarter 2006

Saltigo –service company of LANXESS Group


A globally active custom manufacturing services providerwith three business areas: pharma, agro and specialties


Saltigo at a glance

Employees:total approx. 1,400manufacturing approx. 1,000process development approx. 210

CEO Wolfgang SchmitzSites Langenfeld (HQ),Leverkusen, Dormagen (Germany)

Redmond (USA) Saltigo Division of Lanxess Corporation


Saltigo’s integrated operations at Leverkusen ChemParkProcess Development / Pilotation / Production


Overview





Case study

Buchwald coupling

Phosgene reaction


Structure and size of fine chemicals market

outsourced PFCs$ 25 bn

active subst.(API)prod. vol. / $ 60 bn

finished Agrochem.sales / $ 28 billion

active subst.prod. vol. / 11 bn

outsourced finechem. / $ 2 bn

Pharma

Agrochem

various

finished Pharma

sales / $ 640 billion

Outsourced fine chem.

$ 5 bn

Source: P. Pollak


Innovating pharmaceutical industry outsourced a volume of $ 10-12 bn

Source: ADL

Global Outsourcing Market of Innovative Pharma in 2006

API & Intermed. Production10-12bn $

Other areas~5bn $

Discovery Research0.3-2bn $

Dosage Form5-7bn $

Formula-tion Dev.4bn $

Clinical Dev.5bn $

TOP 20 companiesAccount for ~35%of Relevant Market


10.8Balance = share of Western/Japan

10% = 1.2Thereof % share of Asia

40% = 12 Thereof % outsourcing

30Patented APIs prod. value

2007($ billion)

Source: P. Pollak

Assumptions▬ API market to grow

6%/y over next 10 years

▬ Share of outsourcing to grow from 40% to 70%

▬ Outsourcing to Asia to quadruple from 10 to 40%

Custom manufacturing market expected to grow and shift to Asia

0

5

10

15

20

25

30

35

40

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Asian CMOs Western/Japanese CMOs Outsourcing Market

Bn $ CM market for Outsourced API*

* best case scenario

20%

40%


Outlook

▬ European and Japanese CMOs expected to keep strong market position, US CMOs to play a decreasing role, and other Asian CMOsgaining importance

▬ Indian companies gaining foothold in the Western territories

▬ IP remains a critical issue for product transfers to other Asian CMOs

▬ Increasing competition from other Asian CMOs:

–China for raw & starting materials; India for low-cost intermediates / APIs

–Other Asian companies are improving in technology, competence, quality and reliability

▬ Increasing cost structures in other Asian countries (cost advantage will be reduced mid-term)

Asian CMO´s are gaining importance but European and Japanese CMOs maintain strong market position


Trust, relationships, competence, long term commitment and financial stability are key success factors

▬ Relationship management

- Trust, customer understanding, multilayer networks,

frequent & honest communication

▬ Technology & innovation

- Not a differentiator, it’s a pre-requisite

- High level of chemical and technological competence is key

- Innovation is a crucial success factor

▬ Supplier selections/qualifications are investments

of customers

- Mid to long-term commitment from customers require

suppliers to be sustainable and financially stable


Overview





Case study

Buchwald coupling

Phosgene reaction


Increasing health care spending leads to increasing cost control measures against pharmaceutical industry

US Healthcare costs

0

200

400

600

800

1000

1200

1400

1960 1970 1980 1990 2000

Bn US$

Source: Burrill & Company, Hewitt Health Value Initiative;United States Census; Bureau of Labor Statistics

As share of GDP

13,3%12,0%8,8%7,0%5,1 %

20001990198019701960

CAGR = 10%

CAGR = 3%

Healthcare costs are raising faster than productivity

Revenue vs. healthcare costs per employee

100000,0

120000,0

140000,0

160000,0

180000,0

200000,0

220000,0

1998 1999 2000 2001 2002

US$

3500

4000

4500

5000

5500

6000

US$

Revenue by employeeHealthcare costs per employee


The total pharma market predicted to grow with ~ 6% sales-value over the next years

Global Pharma Market 2006 by customer (~640bn USD)

Global Pharma Market 2006 by region (~640bn USD)

Source: IMS 2007, Ramakers

North America

43%

India1%

China2%

Europe28%

Rest of World11%

Latin America

5%

Japan10%

Pfizer

GlaxoSmithKline

Sanofi-Aventis

Novartis

AstraZeneca

Johnson & Johnson

Merck & Co

Hoffman LaRoche

Eli Lilly

Wyeth

Others


Pharma industry is facing major revenues losses

6%7%

16% 16%

10%11%

21%

28% 28%

18%

0%

5%

10%

15%

20%

25%

30%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Source: Goldman Sachs, Jan 2007

Revenue Threat by Patent Loss for Major Pharmaceutical Companies


Pharmaceutical companies restructure manufacturing

„Project Springboard“, 2005Wyeth(Pfizer)

Eli Lilly

Realignment of w.w. Pharma OperationsAbbott

Merck Supply Strategy for COGS reduction, 20 %Merck/Schering

Plan to exit API prod. within 5-10 yearsAstra Zeneka

„Global Chem. Manuf. Review“, 2001Roche

„Forward“; Job cut of 2500 positionsnoNovartis

Sanofi-Aventis

„Operational Excellence“

API outsourcing: 9 % (01) 41 % (07)108 80

Glaxo

SmithKline

„Adapting to Scale“ Initiative (2005 ) , API outsourcing 15 % 30 %

,95 48

Pfizer

J & J

RemarksPlant

Closures

Job Cuts

Restr.Company

Source: Saltigo Market Intelligence


Life cycle of Pharmaceutical products

Discovery Development Commercial Generic

Pre-Clinical Stage Clinical trials Launch

Typical timelinesPre-clinical Phase I Phase II Phase III New drug sales1-3 years 1-1.5years 2-3 years 3-5 years 7-12 years

Med chem

Enhance applications

NewformulationsMarketing

MultipleCountries

Out-license

Serious competition

Cost Pressure

Me tooproducts

Phase I Phase II Phase III

IND Review30 day safety review

NDA Review1-2years

(2months-7 years)

Patent Expire20 years from

application

IND: Investigational New DrugNDA: New Drug Application

Proof ofConcept

Safetystudy

Confirmefficacy


New Drug Development Timeline

Discovery Development

Average cost for drug development $800 million ($500 million – $1.7 billion) $260 - $500 million is required for clinical trial phase

Med chemHTS→Hit!Lab.study

Animal studyTox study

Phase I Phase II a/b Phase III

First in Human

Source: Nature Review 2004

20-80 healty

volunteers

100-300Patient

volunteers

1,000-3.000Patient

volunteers

PII=6PI=10 PIII=2

Approval for commercial

Lead Compound

4,000 Lead Compounds

Product

1 Product


Early Clinical Development is dominated by NCEs from Emerging Pharma Companies

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Phase I Phase II Phase III Pre-Registration

Large Pharma Mid-Size Pharma Emerging Pharma

Productivity of Big Pharma R&D has decreased dramatically.

Substantial Productivity of Emerging Pharma, predominantly in early Development Phases.

40 – 50% of all NCEs in Phase I-III are derived from Emerging Pharma.

Source: E.T Polastro,(Arthur D. Little), Pharmatech 2003


2135 2277 2547

42505140 5200 5180

482

584

770

890 960 1100

796 801884

980

10301120

1240

324332

324

290

310360

320

500

190

170

160

185

0

1000

2000

3000

4000

5000

6000

7000

8000

2001 2002 2003 2004 2005 2006 2007

pre-clinical Phase I Phase II Phase III Pre-Reg.

Increased R&D spending resulted in growing number of early and mid-stage development projects

Source: Pollak

New Drug Development


Decreasing number of NCEs in last 10 years despite higher R&D spending

0

10

20

30

40

50

60

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

Nu

mb

er

of

Ap

pro

vals

NCE

NBE / BLA

Trend

* Source: FDA

NCE numbers of 30-50 per year are a historic peak, 60 year average is 20-25 NCE/y


More potent drugs change manufacturing demands

0

5

10

15

20

25

30

35

< 10 10-100 100-1000 1000-10000

10000-100000

100000-1000000

>1000000

Annual production (kg)

%

0102030405060708090100

2006

Source: IMS Health, Pollak

0

5

10

15

20

25

30

35

< 10 10-100 100-1000 1000-10000

10000-100000

100000-1000000

>1000000

Annual production (kg)

%

0

1020

30

40

50

6070

80

90

100

2003

Clear trend to smaller volumes

Yearly API production volumes 2003 vs. 2006 (top 200 drugs)


Pharmaceutical industry is moving towards a more virtual model

?

Progressing fragmentation will enable further growth of custom manufacturing market


NDAs going outside Japan as of April 2006

Initial launch outside Japan

Japan only

Initial launch in Japan

74 %

21 %5 %

Almost 75% of new drugs on the Japanese market were initially launched oversees


Japanese pharma companies successfully growing in oversee markets

* Source: Annual reports, all sales figures calculated with 1 US$ = 110 JPY

Foreign Sales

0,00%

10,00%

20,00%

30,00%

40,00%

50,00%

60,00%

Takeda Astellas Daiichi Sankyo

Otsuka Shionogi Tanabe

2005 2007


Overview




Commercial Scale Production of Pharmaceutical products

Case study

Buchwald coupling

Phosgene reaction

case study of production efficacy; -...

Documents