Жұқа химиялық заттар: өндіріс, түрлері және қолданылуы

Pure chemical substances produced by and for the chemical industry

In chemistry, fine chemicals are complex, single, pure chemical substances, produced in limited quantities in multipurpose plants by multistep batch chemical or biotechnological processes. They are described by exacting specifications, used for further processing within the chemical industry and sold for more than $10/kg (see the comparison of fine chemicals, commodities and specialties). The class of fine chemicals is subdivided either on the basis of the added value (building blocks, advanced intermediates or active ingredients), or the type of business transaction, namely standard or exclusive products. Fine chemicals are produced in limited volumes (< 1000 tons/year) and at relatively high prices (> $10/kg) according to exacting specifications, mainly by traditional organic synthesis in multipurpose chemical plants. Biotechnical processes are gaining ground. Fine chemicals are used as starting materials for specialty chemicals, particularly pharmaceuticals, biopharmaceuticals and agrochemicals. Custom manufacturing for the life science industry plays a big role; however, a significant portion of the fine chemicals total production volume is manufactured in house by large users. The industry is fragmented and extends from small, privately owned companies to divisions of big, diversified chemical enterprises. The term "fine chemicals" is used in distinction to "heavy chemicals", which are produced and handled in large lots and are often in a crude state. Since the late 1970s, fine chemicals have become an important part of the chemical industry. Their global total production value of $85 billion is split about 60 40 between in house production in the life science industry—the products' main consumers—and companies producing them for sale. The latter pursue both a "supply push" strategy, whereby standard products are developed in house and offered ubiquitously, and a "demand pull" strategy, whereby products or services determined by the customer are provided exclusively on a "one customer / one supplier" basis. The products are mainly used as building blocks for proprietary products. The hardware of the top tier fine chemical companies has become almost identical. The design, lay out and equipment of the plants and laboratories have become practically the same globally. Most chemical reactions performed go back to the days of the dyestuff industry. Numerous regulations determine the way labs and plants must be operated, thereby contributing to the uniformity.

The term "fine chemicals" was in use as early as 1908. The emergence of the fine chemical industry as a distinct entity dates to the late 1970s, when the overwhelming success of the histamine H2 receptor antagonists Tagamet (cimetidine) and Zantac (ranitidine hydrochloride) created a strong demand for advanced organic chemicals used in their manufacture. As the in house production capacities of the originators, the pharmaceutical companies Smith, Kline, & French and Glaxo, could not keep pace with the rapidly increasing requirements, both companies (now merged as GlaxoSmithKline) outsourced part of the manufacturing to chemical companies experienced in producing relatively sophisticated organic molecules. Lonza, Switzerland, which already had supplied an early intermediate, methyl acetoacetate, during drug development, soon became the main supplier of more and more advanced precursors. The signature of a first, simple supply contract is generally acknowledged as the historical document marking the beginning of the fine chemical industry. In subsequent years, the business developed and Lonza was the first fine chemical company entering in a strategic partnership with SKF. In a similar way, Fine Organics, UK became the supplier of the thioethyl N' methyl 2 nitro 1,1 ethenediamine moiety of ranitidine, the second H2 receptor antagonist, marketed as Zantac by Glaxo. Other pharmaceutical and agrochemical companies gradually followed suit and started outsourcing the procurement of fine chemicals. An example in case is F. I. S., Italy, which partnered with Roche, Switzerland for custom manufacturing precursors of the benzodiazepine class of tranquilizers, such as Librium (chlordiazepoxide HCl) and Valium (diazepam). The growing complexity and potency of new pharmaceuticals and agrochemicals requiring production in multipurpose, instead of dedicated plants and, more recently, the advent of biopharmaceuticals had a major impact on the demand for fine chemicals and the evolution of the fine chemical industry as a distinct entity. For many years, the life science industry continued considering captive production of the active ingredients of their drugs and agrochemicals as a core competency. Outsourcing was used only in exceptional cases, such as capacity shortfalls, processes requiring hazardous chemistry or new products, where uncertainties existed about the chance of a successful launch.

In terms of molecular structure, one distinguishes first between low molecular weight (LMW) and high molecular weight (HMW) products. The generally accepted threshold between LMW and HMW is a molecular weight of about 700. LMW fine chemicals, also designated as small molecules, are produced by traditional chemical synthesis, by microorganisms (fermentation or biotransformation), or by extraction from plants and animals. In the production of modern life science products, total synthesis from petrochemicals prevails. The HMW products, respectively large molecules, are obtained mainly through biotechnology processes. Within LMWs, the N heterocyclic compounds are the most important category; within HMWs they are the peptides and proteins.

As aromatic compounds have been exhausted to a large extent as building blocks for life science products, N heterocyclic structures prevail nowadays. They are found in many natural products, such as chlorophyll, hemoglobin, and the vitamins biotin, folic acid, niacin (PP), pyridoxine (vitamin B6), riboflavin (vitamin B2), and thiamine (vitamin B1). In synthetic life science products, N heterocyclic moieties are widely used in both pharmaceuticals and agrochemicals. Thus, β lactams are structural elements of penicillin and cephalosporin antibiotics, imidazoles are found both in modern herbicides, e. g. Arsenal (imazapyr) and pharmaceuticals, e. g. the antiulcerants Tagamet (cimetidine. see above) and Nexium (omeprazole), the antimycotics Daktarin (miconazole), Fungarest (ketoconazole) and Travogen (isoconazole). Tetrazoles and tetrazolidines are pivotal parts of the "sartan" class of hypertensives, e. g. Candesartan cilexetil (candesartan), Avapro (irbesartan), Cozaar (losartan) and Diovan (valsartan). A vast array of pharmaceuticals and agrochemicals are based on pyrimidines, such as Vitamin B1 (thiamine), the sulfonamide antibiotics, e. g. Madribon (sulfadimethoxime) and –half a century later– the sulfonyl urea herbicides, e. g. Eagle (amidosulfuron) and Londax (bensulfuron methyl). Benzodiazepine derivatives are the pivotal structural elements of breakthrough CNS Drugs, such as Librium (chlordiazepoxide) and Valium (diazepam). Pyridine derivatives are found in both well known Diquat and Chlorpyrifos herbicides, and in modern nicotinoid insecticides, such as Imidacloprid. Even modern pigments, such as diphenylpyrazolopyrazoles, quinacridones, and engineering plastics, such as polybenzimidazoles, polyimides, and triazine resins, exhibit an N heterocyclic structure.

Big molecules, also called high molecular weight (HMW) molecules, are mostly oligomers or polymers of small molecules or chains of amino acids. Thus, within pharmaceutical sciences, peptides, proteins and oligonucleotides constitute the major categories. Peptides and proteins are oligomers or polycondensates of amino acids linked together by a carboxamide group. The threshold between the two is as at about 50 amino acids. Because of their unique biological functions, a significant and growing part of new drug discovery and development is focused on this class of biomolecules. Their biological functions are determined by the exact arrangement or sequence of different amino acids in their makeup. For the synthesis of peptides, four categories of fine chemicals, commonly referred to as peptide building blocks (PBBs), are key, namely amino acids (=starting materials), protected amino acids, peptide fragments and peptides themselves. Along the way, the molecular weights increase from about 102 up to 104 and the unit prices from about $100 up to $105 per kilogram. However, only a small part of the total amino acid production is used for peptide synthesis. In fact, L glutamic acid, D, L methionine, L aspartic acid and L phenylalanine are used in large quantities as food and feed additives. About 50 peptide drugs are commercialized. The number of amino acids that make up a specific peptide varies widely. At the low end are the dipeptides. The most important drugs with a dipeptide (L alanyl L proline) moiety are the " pril" cardiovascular drugs, such as Alapril (lisinopril), Captoril (captopril), Novolac (imidapril) and Renitec (enalapril). Also the artificial sweetener Aspartame (N L α Aspartyl L phenylalanine 1 methyl ester) is a dipeptide. At the high end there is the anticoagulant hirudin, MW ≈ 7000, which is composed of 65 amino acids. Apart from pharmaceuticals, peptides are also used for diagnostics and vaccines. The total production volume (excl. Aspartame) of chemically synthesized, pure peptides is about 1500 kilograms and sales approach $500 million on the active pharmaceutical (API) level and $10 billion on the finished drug level, respectively. The bulk of the production of peptide drugs, which comprise also the first generation anti AIDS drugs, the " navirs", is outsourced to a few specialized contract manufacturers, such as Bachem, Switzerland; Chengu GT Biochem, China; Chinese Peptide Company, China; Lonza, Switzerland, and Polypeptide, Denmark. Proteins are "very high molecular weight" (MW > 100,000) organic compounds, consisting of amino acid sequences linked by peptide bonds. They are essential to the structure and function of all living cells and viruses and are among the most actively studied molecules in biochemistry. They can be made only by advanced biotechnological processes; primarily mammalian cell cultures. Monoclonal antibodies (mAb) prevail among human made proteins. About a dozen of them are approved as pharmaceuticals. Important modern products are EPO (Binocrit, NeoRecormon, erythropoietin), Enbrel (etanercerpt), Remicade (infliximab); MabThera/Rituxin (rituximab), and Herceptin (trastuzumab). PEGylation is a big step forward regarding administration of peptide and protein drugs. The method offers the two fold advantage of substituting injection by oral administration and reducing the dosage, and therefore the cost of the treatment. The pioneer company in this field is Prolong Pharmaceuticals which has developed a PEGylated erythropoietin (PEG EPO). Oligonucleotides are a third category of big molecules. They are oligomers of nucleotides, which in turn are composed of a five carbon sugar (either ribose or desoxyribose), a nitrogenous base (either a pyrimidine or a purine) and 1–3 phosphate groups. The best known representative of a nucleotide is the coenzyme ATP (=Adenosine triphosphate), MW 507.2. Oligonucleotides are chemically synthesized from protected phosphoramidites of natural or chemically modified nucleosides. The oligonucleotide chain assembly proceeds in the direction from 3' to 5' terminus by following a procedure referred to as a "synthetic cycle". Completion of a single synthetic cycle results in the addition of one nucleotide residue to the growing chain. The maximum length of synthetic oligonucleotides hardly exceeds 200 nucleotide components. From its current range of applications in basic research as well as in drug target validation, drug discovery, and therapeutic development, the potential use of oligonucleotides is foreseen in gene therapy (antisense drugs), disease prevention and agriculture. Antibody drug conjugates (ADC) constitute a combination between small and big molecules. The small molecule parts, up to four different APIs, are highly potent cytotoxic drugs. They are linked with a monoclonal antibody, a big molecule which is of little or no therapeutic value in itself, but extremely discriminating for its targets, the cancer cells. The first commercialized ADCs were Isis's Fomivirsen and, more recently, Pfizer's (formerly Wyeth) Mylotarg (gemtuzumab ozogamicin). Examples of ADCs in phase III of development are Abbott's / Isis's Alicaforsen and Eli Lilly's Aprinocarsen.

A large toolbox of chemical reactions is available for each step of the synthesis of a fine chemical. The reactions have been developed on laboratory scale by academia over the last two centuries and subsequently adapted to industrial scale, for instance for the manufacture of dyestuffs & pigments. The most comprehensive handbooks describing organic synthetic methods is Methods of Molecular Transformations. About 10% of the 26,000 synthetic methods described therein are currently used on an industrial scale for fine chemicals production. Amination, condensation, esterification, Friedel–Crafts, Grignard, halogenation (esp. chlorination), and hydrogenation, respectively reduction (both catalytic and chemical) are most frequently mentioned on the websites of individual companies. Optically active cyanohydrins, cyclopolymerization, ionic liquids, nitrones, oligonucletides, peptide (both liquid and solid phase), electrochemical reactions (e. g., perfluorination) and steroid synthesis are promoted by only a limited number of companies. With the exception of some stereospecific reactions, particularly biotechnology, mastering these technologies does not represent a distinct competitive advantage. Most reactions can be carried out in standard multipurpose plants. The very versatile organometallic reactions (e. g., conversions with lithium aluminum hydride, boronic acids) may require temperatures as low as 100 °C, which can be achieved only in special cryogenic reaction units, either by using liquefied nitrogen as coolant or by installing a low temperature unit. Other reaction specific equipment, such as filters for the separation of catalysts, ozone or phosgene generators, can be purchased in many different sizes. The installation of special equipment generally is not a critical path on the overall project for developing an industrial scale process of a new molecule. Since the mid 1990s the commercial importance of single enantiomer fine chemicals has increased steadily. They constitute about half of both existing and developmental drug APIs. In this context, the ability to synthesize chiral molecules has become an important competency. Two types of processes are used, namely the physical separation of the enantiomers and the stereo specific synthesis, using chiral catalysts. Among the latter, enzymes and synthetic BINAP (2,2'–Bis(diphenylphosphino)–1,1'–binaphthyl) types are used most frequently. Large volume (> 103 mtpa) processes using chiral catalysts include the manufacture of the perfume ingredient l Menthol and Syngenta's Dual (metolachlor) as well as BASF's Outlook (dimethenamid P) herbicides. Examples of originator drugs, which apply asymmetric technology, are AstraZeneca's Nexium (esomeprazole) and Merck & Co's Januvia (sitagliptin). The physical separation of chiral mixtures and purification of the desired enantiomer can be achieved either by classical fractional crystallization (having a "low tech" image but still widely used), carried out in standard multipurpose equipment or by various types of chromatographical separation, such as standard column, simulated moving bed (SMB) or supercritical fluid (SCF) techniques. For peptides three main types of methods are used, namely chemical synthesis, extraction from natural substances, and biosynthesis. Chemical synthesis is used for smaller peptides made of up to 30–40 amino acids. One distinguishes between "liquid phase" and "solid phase" synthesis. In the latter, reagents are incorporated in a resin that is contained in a reactor or column. The synthesis sequence starts by attaching the first amino acid to the reactive group of the resin and then adding the remaining amino acids one after the other. In order to ascertain a full selectivity, the amino groups have to be protected in advance. Most developmental peptides are synthesized by this method, which lends itself to automation. As the intermediate products resulting from individual synthetic steps cannot be purified, a selectivity of effectively 100% is essential for the synthesis of larger peptide molecules. Even at a selectivity of 99% per reaction step, the purity will drop to less than 75% for a dekapeptide (30 steps). Therefore, for industrial quantities of peptides not more than 10–15 amino acid peptides can be made using the solid phase method. For laboratory quantities, up to 40 are possible. To prepare larger peptides, individual fragments are first produced, purified, and then combined to the final molecule by liquid phase synthesis. Thus, for the production of Roche's anti AIDS drug Fuzeon (enfuvirtide), three fragments of 10–12 amino acids are first made by solid phase synthesis and then linked together by liquid phase synthesis. The preparation of the whole 35 amino acid peptide requires more than 130 individual steps. Microreactor Technology (MRT), making part of "process intensification", is a relatively new tool that is being developed at several universities, as well as leading fine chemical companies, such as Bayer Technology Services, Germany; Clariant, Switzerland; Evonik Degussa, Germany; DSM, The Netherlands; Lonza, Switzerland; PCAS, France, and Sigma Aldrich, US. The latter company produces about 50 fine chemicals up to multi kilogram quantities in microreactors. From a technological point of view, MRT, a. k. a. continuous flow reactors, represents the first breakthrough development in reactor design since the introduction of the stirred tank reactor, which was used by Perkin & Sons, when they established a factory on the banks of what was then the Grand Junction Canal in London in 1857 to produce mauveïne, the first ever synthetic purple dye. For a comprehensive coverage of the subject see Micro Process Engineering. Examples for reactions that have worked in microreactors include aromatics oxidations, diazomethane conversions, Grignards, halogenations, hydrogenations, nitrations, and Suzuki couplings. According to experts in the field, 70% of all chemical reactions could be done in microreactors, however only 10 15% are economically justified. With the exception of some stereospecific reactions, particularly biotechnology, mastering these technologies does not represent a distinct competitive advantage. Most reactions can be carried out in standard multipurpose plants. Reaction specific equipment, such as ozone or phosgene generators, is readily available. The installation generally is not a critical path on the overall project for developing an industrial scale process of a new molecule. Whereas the overall demand for outsourced pharmaceutical fine chemicals is expected to increase moderately (see Chapter 8), the estimated annual growth rates for the above mentioned niche technologies are much higher. Microreactors and the SMB separation technology are expected to grow at a rate of even 50–100% per year. The total size of the accessible market typically does not exceed a few hundred tons per year at best.

Within the chemical universe, the fine chemical industry is positioned between the commodity, their suppliers, and specialty chemical industries, their customers. Depending on the services offered, there are two types of fine chemical companies. The Fine Chemical Companies are active in industrial scale production, both of standard and exclusive products. If the latter prevails, they are referred to as Fine Chemical / Custom Manufacturing Organizations (CMOs). The main assets of the Contract Research Organizations (CROs) are their research laboratories. CRAMS; Contract Research and Manufacturing Organizations are hybrids (see section 4.2).

The overall emphasis of fine chemical R&D is more on development than on research. The main tasks are (1) designing, respectively duplicating and adapting in case of custom manufacture, and developing laboratory procedures for new products or processes; (2) transferring the processes from the laboratory via pilot plant to the industrial scale (the scale up factor from a 10g sample to a 1 ton batch is 100,000); and (3) to optimize existing processes. At all times during this course of action it has to be ensured that the four critical constraints, namely, economics, timing, safety, ecology and sustainability are observed R&D expenditures in the fine chemical industry are higher than in the commodities industry. They represent around 5–10% versus 2–5% of sales. On the business side, product innovation must proceed at a more rapid pace, because life cycles of fine chemicals are shorter than those of commodities. Therefore, there is an ongoing need for substitution of obsolete products. On the technical side, the higher complexity of the products and the more stringent regulatory requirements absorb more resources. Many economic and technical parameters have been proposed to enable a meaningful assessment of single projects and project portfolios. Examples are attractiveness, strategic fit, innovation, gross/net present value, expected profits, R&D expenditures, development stage, probability of success, technology fit, potential conflicts with other activities of the company and realization time. Most of these parameters cannot be determined quantitatively, at least during the early phases of a project. The best way to take advantage of a project portfolio is to develop and use it in an iterative way. By comparing the entries at regular intervals, for instance, every 3 months, the directions that the projects take can be visualized. If a negative trend persists with one particular project, the project should be put on the watch list.

There are two main sources of new research projects, namely ideas originating from the researchers themselves ("supply push") and those coming from customers ("demand pull"). Ideas for new processes typically originate from researchers, ideas for new products from customers, respectively customer contacts. Particularly in custom manufacturing, "demand pull" prevails industrial reality. The "new product committee" is the body of choice for evaluating new and monitoring ongoing research activities. It has the assignment to evaluate all new product ideas. It decides whether a new product idea should be taken up in research, reassesses a project at regular intervals and, last but not least decides also about the abandonment of a project, once it becomes evident that the objectives cannot be reached. In a typical project the overall responsibility for the economic and technical success lies with the project champion. He is assisted by the project manager, who is responsible for the technical success. In custom manufacturing, a typical project starts with the acceptance of the product idea, which originates mainly from business development, by the new product committee, followed by the preparation of a laboratory process, and ends with the successful completion of demonstration runs on industrial scale and the signature of a multiyear supply contract, respectively. The input from the customer is contained in the "technology package". Its main constituents are (1) reaction scheme, (2) target of project & deliverables (product, quantity, required dates, specifications), (3) list of analytical methods, (4) process development opportunities (stepwise assessment), (5) list of required reports, (6) Safety, Health and Environment (SHE) issues, (7) materials to be supplied by customer and (8) packaging & shipping information The technical part of a project usually determines its duration. Depending on the quality of the information contained in the "technology package" received from the customer and the complexity of the project as such, particularly the number of steps that have to be performed; it can be any time between 12 and 24 months. Depending on the number of researches involved, the total budget easily amounts to several million US dollars.

Fine chemicals are used as starting materials for specialty chemicals. The latter are obtained either by direct formulation or after chemical/biochemical transformation of intermediates to active substances. Life sciences, primarily pharmaceutical, agrochemical and food and feed industries are the main consumers of fine chemicals.

Fine chemicals account for about 4% of the universe of chemicals. The latter, valued at $2,500 billion, is dominated mainly by oil , gas , and mineral derived commodities (~40%) on one hand and a large variety of specialty chemicals at the interface between industry and the public on the other hand (~55%). The global production value of fine chemicals is estimated at $85 billion, of which about 2/3, or $55 billion are produced captively and $30 billion represent the global revenues of the fine chemical industry. The corresponding figures for the major user, the pharmaceutical industry, are $32 billion and $23 billion, respectively. For a number of reasons, such as the lack of statistical data and the somewhat equivocal definition it is not possible to exactly determine the size of the fine chemical market. + Table 5: Breakdown of Fine Chemicals Market by Major Applications Size ($ billion) total A. I. captive merchant Life sciences Pharmaceuticals 55 32 23 Agrochemicals 15 11 4Various specialty chemicals 15 10 5 Total fine chemical industry 85 53 32

In Table 5, the approximately $85 billion fine chemical market is subdivided into major applications according to their relevance, namely, fine chemicals for pharmaceuticals, agrochemicals and specialty chemicals outside life sciences. Furthermore, a distinction is made between captive (in house) production and merchant market. Pharmaceutical fine chemicals (PFCs) account for two thirds of the total. Out of the PFC value of $55 billion, about $23 billion (~40%) are traded, and $32 billion (~60%) are the production value of the pharma industry's in house production. Within life science products, fine chemicals for agro, and —at a distance— for veterinary drugs follow in importance. The production value for fine chemicals used for specialty chemicals other than pharmaceuticals and agrochemicals is estimated at $15 billion. As the leading specialty chemical companies, Akzo Nobel, Dow, DuPont, Evonik, Chemtura and Mitsubishi are backward integrated, the share of in house production is estimated at 75%, leaving a merchant market of approximately $5 billion.

Agrochemical companies are the second largest users of fine chemicals. Most products have a "pharmaceutical heritage". As a consequence of an intensive M&A activity (Mergers and Acquisitions) over the past 10–20 years, the industry now is more consolidated than the pharmaceutical industry. The top 10 companies, led by Syngenta, Switzerland; Bayer Cropsciences, Germany: Monsanto, USA; BASF Crop Protection, Germany, and Dow Agrosciences, USA have a share of almost 95% of the total 2,000,000 tons / $48.5 billion pesticide output in 2010. Since the 1990s the R&D effort is focused mainly on gene modified (GM) seeds. At both Monsanto and DuPont's seed subsidiary, Pioneer Hi Bred, GM seed businesses already account for more than 50% of total sales. 100 new LMW agrochemicals have been launched in the period 2000–2009. However, only 8 products achieved sales in excess of $100 million per year. Generics play a bigger role in the agro than in the pharma industry. They represent some 70% of the global market. China National Chemical Corp, a. k. a. ChemChina Group, is the world's largest supplier of generic farm chemicals. Mahkteshim Agan, Israel, and Cheminova, Denmark follow on the ranks 2 and 3. Apart from these multibillion dollar companies, there are hundreds of smaller firms with sales of less than $50 million per year, mainly in India and China. The incidence of the cost of the active ingredient is about 33%; i. e., much higher than in drugs. Depending on the climatic conditions affecting crop yields, consumption and prices of agrochemicals are subject to wide fluctuations from year to year, impacting also the suppliers. The molecular structures of modern agrochemicals are much more complex than in older products, but lower than of their pharma counterparts. The average molecular weight of the top 10 is 330, as compared with 477 for the top 10. In comparison to reagents used in pharmaceutical fine chemical syntheses, hazardous chemicals, e. g. sodium azide, halogens, methyl sulfide, phosgene, phosphorus chlorides, are more frequently used. Agrochemical companies sometimes outsource just these steps, which require specialized equipment, on toll conversion deals. With exception of the pyrethroids, which are photostable modifications of naturally occurring pyrethrums, active ingredients of agrochemicals rarely are chiral. Examples within herbicides are the world's longstanding top selling product, Monsanto's round up (glyphosate). Syngenta's cyclohexadione type mesotrione and paraquat dichloride. Within insecticides, the traditional organophosphates, like malathion, and pyrethroids such as γ cyhalotrin are being substituted for by neonicotinoids, like Bayer's imidacloprid and Syngenta's thiamethoxam and pyrazoles, such as BASF's fipronil. Chloranthaniliprole is the most important representative of Du Pont's award winning anthranilic diamide family of broad spectrum insecticides. Within fungicides, the strobilurins, a new class, are growing rapidly and already have captured more than 30% of the $10 billion global fungicide market. Syngenta's azoxystrobin was the first product launched. Also BASF's F 500 Series, a. o. pyraclostrobin and kresoxim methyl, Bayer CropScience, and Monsanto are developing new compounds in this class. Combination pesticides, such as Monsanto's Genuity and SmartStax are more and more frequently used.

Global sales of proprietary drugs are estimated $735 billion in 2010, or almost 90% of the total pharma market. Global sales of generics are about $100 billion, or just over 10% of the total pharma market. Due to the much lower unit price, their market share will be close to 30% on an API volume/volume basis.

The products and services offered by the fine chemical industry fall into two broad categories: (1) "Exclusives", a. k. a. custom manufacturing (CM) and (2) "standard" or "catalogue" products. "Exclusives", provided mostly under contract research or custom manufacturing arrangements, prevail in business with life science companies; "standards" prevail in other target markets. Service intense custom manufacturing (CM) constitutes the most prominent activity of the fine chemical industry. CM is the antonym of outsourcing. In custom manufacturing, a specialty chemicals company outsources the process development, pilot plant, and, finally, industrial scale production of an active ingredient, or a predecessor thereof, to one, or a few, fine chemical companies. The intellectual property of the product, and generally also the manufacturing process, stay with the customer. The customer supplier relationship is governed by an exclusive supply agreement. At the beginning of cooperation, the customer provides a "tech package", which in its simplest version, includes a laboratory synthesis description and SHE recommendations. In this case, the whole scale up, which comprises a factor of about one million (10 gram → 10 ton quantities), is done by the fine chemical company.

Non exclusives, "standard" or "catalogue products" constitute the second most important outlet for fine chemicals after custom manufacturing. API for Generics are the most important sub category. Because of patent expiries, over 60 of the top 200 drugs alone, representing aggregated sales of over $150 billion, have fallen into the public domain within the past decade. This, along with government backed incentives, are causing global sales of generics to rapidly increase. Asian companies currently dominate the API for Generics business. They have multiple advantages of their low cost basis, their large home markets, and significant previous manufacturing experience compared to western manufacturers in producing for their domestic and other non regulated markets.

The raw material consumption and the conversion cost are the two elements that establish the manufacturing cost for a particular fine chemical. The former is determined primarily by the unit consumption and the purchasing cost of the materials used; the latter, by the throughput in kilograms per day in a given production bay. A precise calculation of the conversion cost is a demanding task. Different products with widely differing throughputs are produced in campaigns in multipurpose plants, occupying the equipment to different extents. Therefore, both the production capacity and the equipment utilization for a specific fine chemical are difficult to determine. Moreover, cost elements such as labor, capital, utilities, maintenance, waste disposal, and quality control cannot be allocated unambiguously. An approximative calculation can be done by an experienced process development or pilot plant chemist on the basis of (1) the laboratory synthesis procedure and (2) by breaking down the process into unit operations, the standard costs of which have been determined previously Controlling has to be involved for a more in depth costing The problems it has to address are how to fairly allocate costs for production capacity, which is not used. This can be due to the fact that part of a production bay is idle, because of lack of demand or because, e. g., a reactor is not required for a particular process. Manufacturing costs usually are reported on a per kilogram product basis. For the purpose of benchmarking (both internal and external), the volume x time / output (VTO), as mentioned above, is a useful aid. + Table 10: Indicative Cost Structure of a Fine Chemical Company Cost elements DetailsShareraw materialsinclusive solvents 30 % conversion cost plant specific utilities and energy electric power, steam, brine 4–5 % plant labor shift and daytime work 10–15 % capital cost depreciation and interest on capital 15 % plant overhead QC, maintenance, waste disposal, etc. 10 % research & development inclusive pilot plant 8 % marketing & sales inclusive promotion 5 % general overhead administrative services 15 %

An indicative cost structure for a fine chemical company is shown in Table 10. Nowadays, a full 7 day/week operation, consisting of four or five shift teams, each working 8h per day, has become the standard. In terms of production costs, this is the most advantageous scheme. Higher salaries for night work are more than offset by better fixed cost absorption. As part of the budgeting process, standard costs for a production campaign of a particular fine chemical are determined on the basis of past experience. The actual results of the campaign are then compared with the standard. The capability of a fine chemical company to make dependable manufacturing cost forecasts is a distinct competitive advantage.

The fine chemical industry has undergone several boom and bust phases during its almost 30 years of existence. The biggest boom took place in the late 1990s, when high dosage, high volume anti AIDS drugs and COX 2 inhibitors gave a big boost to custom manufacturing. After the end of the "irrational exuberance" in 2000, the industry suffered a first bust in 2003, as a result of capacity expansions, the advent of Asian competitors and a ruinous M&A activity, several billion dollars of shareholder value were destroyed. The most recent –minor boom is associated with stockpiling of GlaxoSmithKline's Relenza (zanamivir) and Roche's Tamiflu (oseltamivir phosphate) by many countries in order to prepare for a possible avian flu epidemic. Surprisingly, the main cause for the 2009 slump had not been the general recession, but slow downs of the growth and, even more so, inventory adjustments by the pharma industry. They resulted in postponements or cancellations of orders. The unfavorable development was in sharp contrast to the very optimistic growth forecasts, which many fine chemical companies, had announced. They had been based on equally promising sector reports from investment banks, which in turn had evolved from forward projections of the preceding boom period. In most cases, these projections have been missed by a large margin. At the end of the "irrational exuberance" at the turn of the millennium and again in 2009 almost half of the industry achieved a return on sales (ROS) of more than 10%, and less than 10% an ROS below 5%. In the worst years, 2003 and 2009, almost half of the companies suffered from an ROS of less than 5%. Whereas during the period under review, 2000–2009. the average EBITDA / sales and EBIT / sales ratios of representative companies, resp. divisions were 15% and 71/2%, respectively, in the period 2000–2009, the numbers were 20% and 10–13% in the boom, and 10% and 5% in the bust phases. The factor 2 between the high and low numbers reflects the volatility of the industry's profitability. All in all, the average Western fine chemical firms have been making a return below the cost of capital, i. e. they are not reinvestment grade.

Two main trends impinge on the industry. On the supply side, biotechnology is rapidly gaining importance. In the synthesis of small molecule fine chemicals, the use of biocatalysts and microbial fermentation enable both a more sustainable and economic production than conventional organic chemistry. In the synthesis of big molecules, such as biopharmaceuticals, it is the method of choice. Biopharmaceuticals are expected to grow 15% per year, three times as fast as small molecule drugs. Five of the top ten drugs were biopharmaceuticals in 2010 (see table 6), and this is expected to grow to eight by 2016 (see table 2). On the demand side, the main customer base for fine chemicals, the pharmaceutical industry, is faced with slower growth of demand, patent expirations of many lucrative blockbuster drugs and stalling new product launches. In order to restrain these challenges, the leading companies are implementing restructuring programs. They comprise a reduction of in house chemical manufacturing and plant eliminations. Outsourcing is moving up from a purely opportunistic to a strategic approach. It is difficult to make a judgment, whether the positive or negative effects of these initiatives will prevail. In a worst case scenario, a condition could develop, whereby even top tier mid sized, family owned fine chemical companies with state of the art plants and processes could be relegated to producing small quantities of fine chemicals for new life science products in late stage of development. In agro fine chemicals, the active ingredients become more sophisticated and performing. Therefore, they require multipurpose instead of dedicated plants prevailing in the industry so far. At the same token, outsourcing is gaining ground. Globalization results in a shift of fine chemical production from the industrialized to developing countries. The latter benefit not only from a "low cost / high skill" advantage, but also from a rapidly rising domestic demand for Western medicine. Despite the mantras of Western industry leaders, the cost advantage of the Asian producers is going to persist. As the pharmemerging countries mainly use generics, their market share continues to grow to the detriment of originator pharmaceuticals and agrochemicals. This is also the case for biosimilars, the generic versions of biopharmaceuticals. As a consequence of the harsh business climate, many Western fine chemical companies or divisions created during the "irrational exuberance" at the end of the 20th century already have exited from the sector. Others will follow suit or will be acquired by private equity firms. Survival strategies include implementation of lean production principles originally developed by the automotive industry and extending the business model to include also contract research at the beginning and active drug formulation towards the end of the added value chain. This latter strategy, however, is not finding unanimous approval by industry experts. Although the demand for fine chemicals on the merchant market has not grown to the extent originally anticipated, fine chemicals still provide attractive opportunities for well run companies, which are fostering the critical success factors, namely running fine chemicals as a core business, pursuing niche technologies—primarily biotechnology—and taking advantage of the opportunities offered by the Asian market.