When economic times get tough, even die-hard optimists like myself can find it difficult to put on rose-colored glasses each morning. The chemical industry and other manufacturing segments have had to weather an economic storm in recent years. However, the sun appears to be peeking through the clouds, offering hope for a prosperous 2003.
According to the American Chemistry Council's recent annual report on the performance and outlook for the business of chemistry, overall shipments in 2002 rose 2 percent to a new record of $463.5 billion. Good news to be sure ," at least for some chemical sectors. But not everyone is ready to break out the champagne.
The pharmaceutical and specialty chemical sectors also are displaying a "wait and see" attitude.
Although the pharmaceutical sector as a whole is expected to do well this year, challenges remain that could significantly impact the way many firms do business. A few years ago, outsourcing was considered the way of the future. Significant capacity was built as a result. Today, however, supply is significantly greater than demand.
Other challenges include a relatively low number of drug approvals, which has led to a slower flow of new products over the course of the last few years. New chemical entity (NCE) approvals also have dropped sharply and could continue to do so over the next few years.
Some key pharma players are crossing their fingers that the current drug development process ," and their businesses ," will improve under the leadership of Mark B. McClellan, M.D., Ph.D., the new commissioner of the U.S. Food and Drug Administration (FDA).
During a presentation in November, McClellan said the FDA "will look at innovative strategies and technologies to help reduce development time for new drug applications and enhance good manufacturing practices in order to get safe, critical products to market more quickly."
McClellan's words could boost industry confidence, which began to decline during a lengthy (20-month) vacancy period at the FDA's top position.
Other potential bright spots in the future include an eventual increase in capacity utilization as more drugs come off patent. However, U.S. manufacturers could be in for a tug of war for generics dollars with India and China in the coming years. These markets are gaining more experience and approval to enter the generics market in the United States and the European Union.
After Bayer Corp.'s November announcement that it will either sell or merge its pharma business in 2003, many industry insiders have come to expect the unexpected in this chemical segment.
Further consolidation within this highly fragmented market could be just around the corner.
Proprietary technologies associated with patent-protected products create a general unwillingness to share information among pharma companies.
Although it makes sense for pharma firms to look out for their own interests and bottom lines, they might be missing out on the opportunity to benefit from an expanded network of knowledge sharing.
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