‣ lower , sometimes as low as 10 grams / hectare , especially for herbicides . New chemistries are now published as late as possible or even not patented at all . Sometimes new molecules are branded , which until recently was only known for formulations . There are almost no unmet needs in herbicides any more and the pressure for innovation is much reduced ; this is less so in insecticides and fungicides , because of substitution pressures . As well as rising development costs and regulatory pressures , there are also fewer common building blocks , because new molecular structures are based on unique synthesis routes . Molecular modelling and other technologies to find new actives have led to ever more complex chemistries and demanding technologies . Some formulations have three or more actives . And the focus is increasingly on finding blockbuster (>$ 1 billion / year ) products . “ The consequences have been a shift from dedicated to multi purpose production , less in-house production and earlier outsourcing of risk ,” Helwig said . “ More complex chemistry demands closer interaction with suppliers . Chemical technologies have broadened and will continue to do so to meet the demands of final products .
Many fungicides , however , are still big volume products with common building blocks .”
Consolidating base
The CMO sector has concentrated too , though far less so than its customers , Helwig continued . A core value of these CMOs is their technical versatility , offering technologies that big agro companies are not willing to invest in . These include :
• Low temperature chemistry , down to -90 ° C in some cases
• Fluorination and the ability to handle fluorinated compounds , since almost all new molecules contain fluorine
• Suzuki coupling , especially since the rise of SDHA fungicides
• Hastelloy equipment to handle aggressive reaction conditions , which is all but essential
• Complex ( including high-vacuum ) distillations , because of the growing need for purification , recycling , etc .
• Biotechnology , with the boom in the biopesticides markets , in which fermentation usually needs to be outsourced
• Recycling and waste treatment To address this new world , suppliers must have strategies to deal with volatility . “ Nobody likes this , but everyone has to deal with it ,” Helwig said . Customers outsource their risk to CMOs and they partially outsource it to their own raw materials suppliers , while trying to balance internal capacity with other products . The “ classic dilemma ” for the CMO , he added , is whether to step in to a project early or late . Too early could mean losing money at the R & D stage on projects that might never be commercialised ; too late and they miss out altogether . Due to the complex chemistries involved , customer specific investments “ are almost always required . The partner with the best fit and the smallest investment will get the project .” Any production partner today expects continuous improvement , while every CMO wants a key account relationship with a customer , but should beware that every customer defines that differently . Finally , suppliers must juggle exclusivity against the freedom to operate . “ Every CMO wants to use the newly acquired technologies for other projects . That has to be decided on a case-by-case basis ,” said Helwig . The life-cycle dynamics for a product and the expectations of customers and suppliers vary greatly at different stages ( Figure 3 ).
Customer ( Ag company ) expectation of Supplier ( CMO company )
Supplier ( CMO company ) expectation of customer ( Ag company )
Comment
Launch Phase
Maturity
Generic Phase
Market Downturn
Market Upside
Implement process as fast and as cost effective as possible Reduce price double digit per year due to learning
Get reimbursement for all unforeseen hurdles during implementation Get payback of R & D and investment
curve |
Develop and implement |
Reimburse any additional |
second generation processes |
R & D , handle as a new |
and meet LCC price range |
project |
Fill originally contracted and now idle capacity with ‘ other ’ projects Restart / expand production ASAP
Pay for idle capacity
Stick to lead times
Prime value proposition of Western CMO companies
Intelligent pricing and contracting models secure satisfaction of both industries Latest that is the time when new suppliers are implemented , very often from LCC Matter of negotiation
Matter of negotiation
Figure 3 Supplier & customer lifecycle dynamics in agrochemicals
20 SPECIALITY CHEMICALS MAGAZINE ESTABLISHED 1981