Blogs

It's time for companies’ first-quarter results, and it’s interesting to see that many companies have reported quite strong performances given the recent troubles faced by all players in the life sciences sector.

The past two or three weeks have seen the publication of companies’ fourth-quarter and annual results and the news from AstraZeneca was pretty dramatic, with the company saying it is to cut 8,000 jobs, representing about 12 per cent of its workforce, following “disappointing” fourth-quarter and annual earnings. The cuts will be made across all geographic regions and all divisions of the company. Following the news AstraZeneca’s share price plummeted, despite efforts by the company to prop it up through a $1 billion share buyback.

In my Editor’s page in the last issue of sp2 (November/December 2009), under the heading ‘Fluctuation fortunes’, I commented on how the pharmaceutical industry’s performance can best be described as ‘mixed’, noting that progression of drug candidates through clinical trials was continuing with some notable successes for new types of drugs in Phase 1 and Phase 2, but that the downward trend in the introduction of real, commercial products was also continuing.

I also remarked on the effects of the current economic climate, referring to Pfizer’s closure of several R&D facilities in the USA and UK, and its consolidation of its research activities into just a few main centres, as well as to other companies making significant cuts in their operations, including UCB’s restructuring and fine chemical company CARBOGEN AMCIS consolidating its early-phase services into one site and rationalising the activities of another, with consequent job losses.

Well there’s been more news of this kind recently, with one of the largest custom fine chemical companies, Lonza AG, reacting to the economic pressures of the past 18 months and the cost reduction efforts of the pharmaceutical industry by strengthening its platform in Asia and announcing its intention to close its sites at Conshohocken (Riverside), Pennsylvania, USA; Shawinigan, Canada; and Wokingham, UK later this year. The company says this complements its existing platform in Nansha, China and is its “response to customer needs for mature regulated products at competitive conditions in a new market segment”.

It isn’t just fine chemicals that are affected: as part of a modernisation and streamlining initiative within Lonza’s Bioscience supply chain, the offices and warehouse in Wokingham, UK will be closed and these activities transferred to Verviers, Belgium.

Another disturbing announcement was the recent statement by Charles River Laboratories that the company will suspend operations at its Preclinical Services facility in Shrewsbury, Massachusetts, USA by the middle of this year when ongoing in-life studies will have been completed. The company said it intends to resume operations when global preclinical market conditions improve and it requires additional capacity. It said suspension of operations would likely result in some loss of revenue in 2010, but that it would retain the majority of the business and provide its services at other PCS sites.

So it isn’t just the pharmaceutical companies that are feeling the pinch: these two major suppliers to the pharmaceutical industry, one a fine chemical and biotech custom manufacturer, the other a leading provider of preclinical research services, have felt the need to close some operations in the West and concentrate these activities in Asia. I expect that, unfortunately, we’re going to see more developments of this kind throughout the pharmaceutical and biotech industry materials and services supply chain as well as in the pharmaceutical and biopharmaceutical manufacturing sectors. sp2 will continue to bring you news of these developments as they occur.

The Chemical Industries Association has just released the results of a survey in which it found that a staggering 87 per cent of business leaders in the chemical and pharmaceutical sectors feel that politicians do not understand the significance of manufacture.

This is an amazing statistic and gives major cause for concern. It wasn’t just the politicians that were seen to be ignorant of industry’s needs - both the banks and the education system were seen to be “failing the manufacturing sector”.

You may have already seen the news item in sp2 News about the revised code of conduct released by the UK’s Chemical Industries Association and Chemical Business Association, which have jointly prepared guidance for safe sale of chemicals.

The code of conduct is designed to ensure that products are sold only to customers that have been vetted for legitimate and correct use of chemicals. It’s highly encouraging to see that the associations have endeavoured to produce guidelines that go beyond legal minimum requirements to guarantee the safe use of chemicals, and that chemicals are not available to individuals that are likely to misuse them. It’s also interesting to see that the guidelines include new security advice on the sale of explosive precursor chemicals.

Safety and security

Meanwhile in the USA, SOCMA continues its tussle with Congress over what the appropriate legislative and regulatory approaches should be with respect to safety and security in the chemical manufacturing industry. In its latest statement on the issue, SOCMA has called on Congress to update the now very out-of-date Toxic Substances Control Act (TSCA) for chemical management without enacting a complete overhaul. The association has emphasised the need to build on the existing regulatory framework, and supports development of the new Chemicals Assessment and Management Program (ChAMP).

The REACH experience

This reminds me of the time Cefic, the European Chemical Industry Council, was at loggerheads with the European Commission over just what the REACH regulations were meant to achieve, how they were going to achieve their objectives, and how they wouldn’t (but, in fact, did!), replicate or overlap with existing regulations. Also at issue were the types of chemicals to which they would apply. I remember the chemical industry arguing very strongly that chemical intermediates need not be subject to REACH, as they never left the plant during manufacture, many being produced in situ and being consumed during the chemical process (of course intermediates are traded, and there should be legislation covering this, which is the point of the CIA and CBA code of conduct).

SOCMA quite rightly points out that the USA can benefit from ‘the REACH experience’ not just in terms of enacting appropriate legislation, but also through the use of the registered data and the avoidance of repeating work already completed in Europe. SOCMA says that most professional toxicologists believe the risks posed by most chemicals in commerce are overstated by environmentalists and the media, both of which are pushing for the replacement of TSCA with ‘much more onerous’ regulation.

So who decides what legislation is appropriate? Industry bodies like CIA and CBA with their ‘beyond legal minimum requirements’ approach, and SOCMA, with its professional toxicology opinion, or the environmentalists and the media, which may have a broader point of view? I’d be interested to hear readers’ views on this.

It’s important to remember that the life sciences sector is comprised of a wide variety of businesses, ranging from small niche service providers to global-scale pharmaceutical companies employing tens if not hundreds of thousands of people.

It is not surprising, therefore, that various governmental regulations enacted in different jurisdictions can have very widely different effects on companies in the sector. Recently, US chemical trade association SOCMA has expressed a number of concerns with respect to the impact of proposed American legislation on smaller companies. It submitted its comments to the House of Representatives Ways and Means Committee expressing its support for the Trade Advisory Committee System, which consists of industry representatives who advise the Office of the US Trade Representative and the Department of Commerce on technical issues.

SOCMA welcomed the opportunity for smaller companies to have their say on trade issues, particularly in light of the fact that most large companies already have the resources to present their interests effectively to government. SOCMA stated that the ITAC system appropriately allows smaller companies to give their input to government officials.

Chemical site security

Another issue of concern to SOCMA, and again affecting the interests of smaller companies, is that of the US government’s approach to chemical site security regulations. SOCMA has expressed its concern over the impact of the Chemical Facility Anti-Terrorism Act of 2009 on batch chemical manufacturers and small businesses. In particular, it is concerned about the operation of the inherently safer technology (IST) mandate, which it says could allow individuals to sue facilities for non-compliance. It supports making permanent the original chemical site security regulation, which is still in the early stages of implementation. SOCMA says an environmental approach (IST) is not appropriate in addressing a security issue and that the provision could have severe economic consequences for companies, especially for smaller ones.

And in Europe?

It’s good to see that a trade association has the integrity and willpower to stand up for the interests of its small-company members in the face of inappropriate, and possibly threatening, legislation. In Europe, we haven’t seen the likes of this since the furore over the propsed EU chemicals registration legislation REACH, and in the end the European Commission got most of what it wanted in this regard. It will be interesting to see just how successful SOCMA will be in its efforts to defend the interests of its small-company members, and whether there might be something in SOCMA’s approach that other trade associations can learn from. I’m not saying European trade associations don’t do their best to represent the interests of their members, but as I said at the beginning, there are a wide variety of companies in the life sciences sector and we need to ensure that the needs of all are catered for.

My blog last week discussed how the UK government was looking at new ways of supporting the country’s biotech industry and the attitudes of attendees at a meeting held in Cambridge, one of the leading biotech centres in the world, to the proposals.