Pharmaceutical buyers have much lower budgets when it comes to buying intermediates than excipients or outsourced services, but their needs remain highly diverse in terms of type of product and chemistry. However basic this segment of the industry may seem at first glance, buyers’ needs are driven first and last by quality. These were some of the main insights of the 2017 Nice Insight Pharmaceutical & Chemical Intermediates Survey.1
As with the other Nice Insight surveys in this series, the respondents, who totaled 545, had a strong global geographic spread with 38% in Asia, 37% in Europe and 25% in North America.
They also came from companies of all sizes. Large pharma companies — those with sales of >$5 billion/year — were the largest single group, accounting for 36% of the total, followed by medium-sized ($500 million-$5 billion/year, 31%), small ($100-500 million/year, 28%) and emerging pharma (<$100 million/year, 5%). However, there were large differences between the sizes of the companies on a regional basis, as a much higher proportion were small or medium-sized in Asia than in North America or Europe.
Small-molecule generics formed the most important molecules by type procured, with 72% of buyer companies making these; 40% made small-molecule new chemical entities and 32% made over-the-counter drugs. Their areas of focus were very diverse, even at the broadest level of therapy category. Between 43% and 22% were active in (in descending order of importance) infectious diseases, metabolic diseases, oncology, endocrine diseases, central nervous system diseases, cardiovascular diseases and respiratory diseases.
The vast majority of the respondents were at an executive level, including 35% in North America, 62% in Europe and 45% in Asia. Overall, 88% of respondents said that their company already engages with fine chemicals and intermediates companies. The rest are likely to within the next 24 months. Their expenditure is generally in the region of $1 million to $10 million/year, with only 14% spending more than this and 3% spending less. Over three-quarters expect this expenditure to rise in the next five years.
This expectation cuts across all of the basic categories of intermediates, at least in the short term. In the next two years, 68% of respondents who buy custom intermediates expect to increase their usage and procurement of them, while 27% of them expect it to stay the same and only 5% expect it to fall. In the drug and chemical intermediates categories, which are more widely sourced at present than custom intermediates, 56% and 57% project an increase in their buying in that time frame, respectively.
Companies’ need for intermediates are typically highest in the earliest stages of development, though the tapering-off effect in the later stages is not even. About half of those surveyed need them at clinical and bench scale and again at pilot scale, while the proportion falls to nearer one-quarter at kilo lab scale and again at commercial scale.
The types of chemicals that intermediate buyers acquire or plan to acquire for their immediate needs are extremely diverse. Acids (cited by 34% of respondents) head the list, ahead of alcohols and glycols (both 30%), amines (28%) and peroxides (27%), though nine other broad categories are being acquired by at least 16% of those surveyed. Geographically, the rankings varied little, though North American companies are more frequent and heavy buyers of the top categories of product.
In every single case, significantly more buyers expect their purchasing to increase than to decrease. This was most marked in the case of olefins and chiral intermediates, where 66% and 57% said that they would increase their purchasing over the next two years. The gulf was smallest with azides, but here too 49% expect an increase, 42% expect this to stay the same and only 10% anticipate a decrease.
Not surprisingly, there was also considerable diversity when it comes to the reactions used to transform intermediates into final API states. Protection/deprotection was the most widely used, but only by 37%. Other widely used reactions were led by hydrogenation (30%), nitration (29%), coupling, methylation/demethylation and enzymatic reactions (all 27%). The main technologies used to this end were crystallization (used by 57%), high temperature (250°C+, 51%), high pressure (37%) and cryogenic chemistry (–80°C, 34%).
There was a more clear-cut answer when it came to the types of specialized service respondents have acquired or plan to acquire. Protein chemistry is in the sights of 54%, ahead of green chemistry (48%), which is a looser term that could be taken to refer to many different techniques.
Most strikingly, perhaps, combinatorial chemistry — which has earned a poor reputation for discovering vastly more molecules without this having much of an effect on the number of final products emerging from the pipeline — is still in the plans of 40% of respondents, ahead of the ‘sexier’ areas of fluorine, chiral and hazardous chemistry.
While companies’ methods of finding outsourcing partners are diverse, it is striking that Internet methods were the least common, with web searches and online directories being used by only 15% and 27%, respectively. Personal contact of one sort or another was considerably more common, with industry research being used by 53% and previous experience by 48%. Referrals/colleagues and trade shows/events each scored 40%: ChemOutsourcing was the single most popular event in this respect, with 48% of those surveyed attending it, though over 30% of respondents attended each of seven others, all in North America or Europe.
Survey respondents were clear on their top priorities as buyers. Quality standards came first, with reliability, minimizing risks, regulatory track records, and affordability rounding out the top five. This fits well with the results of similar questions in other 2017 Nice Insight surveys of buyers’ attitudes to working with contract research organizations and contract development and manufacturing organizations.2,3
Product or service quality is similarly the single factor likely to cause pharma companies dissatisfaction when working with fine chemicals and intermediates companies. Cost overruns came second, suggesting that cost becomes more of a factor only when there is a ‘sting in the tail.’ The other major sources of problems are, in descending order of importance, security and confidentiality, product or service availability, and communication and transparency.
Conceivably, pharma companies are seeing suppliers of fine chemicals and intermediates increasingly as partners rather than simple suppliers of products. The main reason cited for partnering includes being part of a strategic plan. The others, in descending order, are to find a shorter synthetic route to an API, reducing costs, a lack of in-house capabilities, and access to specialized technologies.
No single attribute stood out for pharma companies when evaluating fine chemicals and intermediates companies. In fact, the proportion of respondents rating 17 of 18 listed factors as important only varied between 61% and 66%, with the ability to resolve technical hurdles, quality compliance, experience (operational, methodological or therapeutic) and compliance audits in the top four. This shows that each trait is important; intermediate companies are expected to demonstrate strength across a host of service sectors to be considered.
The only factor that did stand out from the trend did so in a negative sense, albeit only slightly: 55% saw geographic convenience as important. In other words, being in the same region or country as the customer is a definite bonus, but only if all the other factors are right first. This is an increasingly sophisticated industry sector, as well as a thoroughly globalized one, and the rewards will go to those who offer high-quality products and services.
Nice Insight, established in 2010, is the research division of That’s Nice, A Science Agency, providing data and analysis from proprietary annual surveys, custom primary qualitative and quantitative research as well as extensive secondary research. Current annual surveys include The Nice Insight Contract Development & Manufacturing (CDMO/CMO), Survey The Nice Insight Contract Research - Preclinical and Clinical (CRO) Survey, The Nice Insight Pharmaceutical Equipment Survey, and The Nice Insight Pharmaceutical Excipients Survey.