REGIONS & LOCATIONS GUIDE

1/ 2018 I N

Business Conditions Reports & Analyses Investment Opportunities Economic Facts, Location Criteria, Global Competitiveness Report, MENA Pharmaceutical Industry, Brexit Withdrawal Agreement, Integrated Pharma Manufacturing, Emerging Specialty Chemicals China´s Belt & Road Initiative, Europe’s Chemical Sector, Markets, Custom Manufacturing Chemical Raw Materials Indian Pharma Industry in China, Global Investment News Looking for a new location? Welcome to CHEMPARK! Use our new online investor tool and find out how good a fit we are.

www.investors.chempark.com

7027086_CHE_GES_Investoren_ANZ_02_2017_ENG_240x330_SSP_Update_2018.indd 1 22.11.18 10:55 C o n t e n t

©sebra - stock.adobe.com ©montebelli - stock.adobe.com ©Louis Renaud - stock.adobe.com

World Cautious Welcome for Brexit Deal 12 A New Way of Thinking 22 Draft Brexit Withdrawal Agreement Bolsters Integrated Pharma Manufacturing Group ACG Global Competitiveness Index 4 Hopes but many Uncertainties Still Lie Ahead Creates a Single New Identity Productivity in the Fourth Industrial Revolution Sean Milmo, CHEManager Interview with Peter Neve, ACG World Economic Forum Investment Location Germany Sees Brexit Effect 13 Indian Pharmaceutical Industry Attracting FDI 23 Global Prioritization Matrix 6 India Brand Equity Foundation (IBEF) The First Step to Finding the Right Emerging Start-ups Accelerate Innovation 14 Markets for Growth An Overview of the European Chemical Start-up Scene Tobias Lewe, Otto Schulz and Robert Renard, A.T. Kearney Tobias Kirchhoff and Holger Bengs, BCNP Consultants MENA

USA: A Major Destination for Chemical Investment 9 MENA Pharmaceutical Landscape 24 Asia Opportunities for Foreign Companies in a Rapidly Growing Market Opportunities for Western CDMOs in China 16 Cara Turner, UBM Europe Siegfried’s View on the Evolution of the Chinese Pharmaceutical Environment Driving Innovation with Petrochemicals 10 Luca Parlanti, Siegfried Events Europe´s Chemical Industry Has a Secure Raw Material Basis One Belt, One Road 20 Index/Imprint 26 Dorothee Arns, CEFIC The Impact of China´s Belt and Road Initiative on the Chemical Industry Kai Pflug, Management Consulting – Chemicals

FEEL THE CHEMISTRY

With its unique position at the heart of the European oil and chemical industry, the port of Antwerp offers continuity and sustainable innovation in a world of constant change. World-class logistics and storage facilities react with unsurpassed operational excellence and customer focus. A chemistry you can really feel.

Challenge us at [email protected] Follow us at www.portofantwerp.com/en/feelthechemistry

CHEManager | Regions & Locations Guide 3 W o r l d

©Sean K - stock.adobe.com Global Competitiveness Index Productivity in the Fourth Industrial Revolution

Although global economic growth has been robust over the past mains fragile as multiple econo- over international cooperation and two years, it remains fragile in the current changing economic and mic and geopolitical factors could trade is dampening 2018’s growth jeopardize growth. Some of these outlook. political context, according to the Global Competitiveness Report risks include a rise of trade protec- Germany emerges as the stron- 2018. The annual report — issued by the World Economic Forum tionism in the United States; a spill- gest European performer in this over of Venezuela’s economic and year’s competitiveness rankings and (WEF) — this year covers 140 economies and finds that amidst the humanitarian crisis; policy uncer- the third-strongest globally (over- transformations and disruptions brought about by the Fourth Indus- tainty emerging from elections in all score: 82.8). It also tops the in- the region’s largest economies, Bra- novation rankings in this year’s GCI. trial Revolution (4IR), adaptability and agility of all stakeholders — zil and Mexico; and disruptions from Switzerland ranks 4 (82.6) globally individuals, governments and businesses — will be key features in natural disasters threatening Carib- and second in Europe. The Nether- successful economies. bean economies still recovering from lands is the third-most competitive the devastating impacts of the fall European economy and the sixth- 2017 hurricanes. best globally (82.4). The United Chile ranks 33 overall with a score Kingdom is the fourth-most compe- According to the report’s Global With a score of 85.6 out of 100, the of 70.3. The country is the most com- titive economy in Europe and 8 glo- Competitiveness Index (GCI), the Uni- United States tops the 2018 rankings petitive in Latin America, followed bally (82.0). Sweden ranks 9 globally ted States is the closest economy to of the GCI 4.0, confirming its status by Mexico, which ranks 46 globally in this year’s index and 5 within Eu- the frontier, the ideal state, where of most competitive economy in the (64.6). Brazil (72, 59,5) is down three rope (81.7). Denmark, one of the a country would obtain the perfect world. Canada ranks 12 overall with places from its 2017 score. Argentina smallest markets in Europe, ranks score of 100 on every component of a score of 79.9, behind three Scan- ranks 81 with an overall competitive- 10 globally (80.6). France secures a the index. With a competitiveness dinavian countries: Sweden (9), Den- ness score of 57.5. place among the top twenty econo- score of 85.6, it is 14 points away mark (10) and Finland (11). Canada’s mies globally (17, 78.0). Italy ranks from the frontier mark of 100, im- performance across the 12 pillars is 31 overall and 17 in Europe. The plying that even the top-ranked eco- generally strong. Its labor market is Europe country’s GDP is growing at 1.5%, nomy among the 140 has room for characterized by high flexibility, com- the fastest rate since the 2008’s fi- improvement. It is followed by Sin- bined with very strong workers’ pro- Real gross domestic product (GDP) nancial crisis. Turkey positioned 61 gapore (83.5) and Germany (82.8). tections and gender parity for labor growth was up for the majority of on the overall GCI. Switzerland (82.6) comes in at place force participation. The country is European countries in 2017, with 4, followed by Japan (82.5), Nether- fairly innovative, but not yet an inno- current growth forecasts for the sub- lands (82.4), Hong Kong SAR (82.3). vation powerhouse. set of euro area countries above 2% Eurasia The United Kingdom (82.0), Sweden Economic growth in Latin Ame- for 2018. While this looks like a con- (81.7) and Denmark (80.6) round out rica picked up modestly in 2017. tinuation of the recovery, the situa- Eurasia is growing at a moderate the top ten. The region’s economic recovery re- tion remains fragile, as uncertainty pace (slightly above 2%) and is expec-

4 CHEManager | Regions & Locations Guide W o r l d

ted to continue on this trend for the South Asia East and North Africa with a score of 4IR: Opportunities next few years. The Russian Federa- 76.6 (20). The country has grown to and Challenges tion, the largest economy in the re- South Asia continues to show strong become one of the world’s innovation gion, is expected to grow at 1.7% in economic growth and an improved hubs thanks to a very strong innova- With the Fourth Industrial Revolu- 2018, and China is strengthening its macroeconomic outlook on the back of tion ecosystem. Ranked 27 globally tion, humanity has entered a new position as a key commercial partner reforms in some of the world’s largest with a score of 73.4, the United Arab phase. The 4IR has become the lived for the region. countries. GDP growth is expected to Emirates is next in the region in terms reality for millions of people around Eurasia has attained a moderate pick up in 2018, reaching an average of competitiveness.­ Saudi Arabia­ the world, and is creating new op- competitiveness performance (58.4 of 7.1%, confirming the region as one ranks 39 overall with a score of 67.5 portunities for business, government out of 100). Most countries in the re- of the world’s fastest-­growing. India, and can rely on a conducive macro­ and individuals. Yet it also threatens gion achieve a GCI score between 52 which ranks 58 (62.0), remains the economic environment. a new divergence and polarization and 65, and all share strong perfor- region’s main driving force. within and between economies and mances on health, education and In spite of growing internatio- societies. skills and infrastructure. Yet, to se- nal flows, South Asia remains the Sub-Saharan Africa For the second half of the 20th cen- cure a stronger competitiveness po- region with the lowest trade penet- tury, the pathway to development sition, Eurasian countries should di- ration in the world. While some coun- The economic prospects of Sub-Sa- seemed relatively clear: lower-in- versify their economies and work tries in the region have managed to haran Africa are at a crossing point. come economies would be expected to build upon these strengths to in­ localize segments of global indust- The average GDP growth of the re- to develop through progressive indus- crease their presence in higher seg- ries — in terms of both services and gion has fallen below 5% since 2015 trialization by leveraging low-skilled ments of the value chain. manufactured goods — all will need and is expected to grow at 3.4% in labor. In the context of the 4IR the se- The best performer in Eurasia, the to increase their innovation capacity 2018. After having benefitted from a quence has become less clear, parti- Russian Federation ranks 43 overall and technological readiness in order period of fast growth driven by strong cularly as the cost of technology and with a score of 65.6. This is a slight to move towards higher value-added foreign demand and high commodity capital are lower than ever but their increase from 2017. Its competitive- processes and productions. prices, economies in the region need successful use relies on a number of ness performance reflects better other factors. growth prospects; the country is gro- The results of the GCI reveal the wing at 1.7% in 2018, the highest in sobering conclusion that most econo- over five years. mies are far from the competitiven- ess “frontier” — the aggregate ideal across all factors of competitiven- East Asia ess. In fact, the global average score and Pacific of 60 suggests that many economies have yet to implement the measures The region’s seven advanced eco- that would enhance their long-term nomies all feature in the top 20 of growth and resilience and broaden the GCI rankings and three of the opportunities for their populations. In world’s seven most competitive eco- addition, it turned out that countries nomies — Singapore (2, 83.5), Ja- have a mixed performance across the pan (5, 82.5) and Hong Kong SAR (7, twelve pillars of the index and that 82.3) — stem from the region. Most long-standing developmental issues boast world-class physical and di- — such as the lack of well-functio- gital infrastructure and connecti- ning institutions — continue to be a vity, macroeconomic stability, strong source of friction for competitiveness. human capital and well-developed Yet there are bright spots — in ­financial systems. However, perfor- the form of economies that outper- mance on the innovation ecosystem form their peers and present valuable is uneven. case studies for learning more about Among the region’s emerging mar- methods to implement the factors of kets, the picture is more diverse. Ma- competitiveness. laysia (25, 74.4) and China (28, 72.6) are less than 30 points to the compe- World Economic Forum titiveness frontier (the highest score Thierry Geiger on the GCI) and on par with many Head, Research and Benchmarking Practice advanced economies. The largest Geneva, Switzerland ASEAN economies — Indonesia, the [email protected] Philippines, Vietnam and Thailand — Middle East and North Africa to strengthen their fundamentals to www.weforum.org as well as Brunei Darussalam are 40 become more resilient to commodity points or less to the frontier. Finally, After a slowdown in 2017, growth price shocks and to compete success- Mongolia (99, 52.7), Cambodia (110, in the MENA region is expected to fully in the technology-driven global 50.2) and Lao PDR (112, 49.3) are bounce back this year. After facing economy. only halfway to the frontier, reflecting the peak of financial turmoil, oil-ex- Kenya, the most competitive eco- major weaknesses that threaten sus- porting countries are continuing to nomy in East Africa (93, 53.7), is de- tained growth. reduce fiscal imbalances. This is ex- veloping into one of the region’s Australia ranks 14 overall (78.9), pected to improve domestic demand strongest innovation hubs. Mauritius up one spot from 2017, four places and economic activity in non-oil in- ranks 49 globally (63.7) and achie- This article is based on the Global ahead of New Zealand (18, 77.5). The dustries, while future trends for the ves the best performance in Sub-Sa- Competitiveness Report 2018, issued Republic of Korea ranks 15 overall oil sector remain unsure due to haran Africa, in line with 2017. South by the World Economic Forum (WEF). (78.8), Indonesia positioned 45 over- uncertainty on both prices and pro- Africa ranks 67 (60.8) and attains the The complete report is available at all (64.9). duction levels. Israel leads the Middle ­second spot in Sub-Saharan Africa. bit.ly/GCR-2018.

CHEManager | Regions & Locations Guide 5 W o r l d

Global Prioritization Matrix The First Step to Finding the Right Emerging Markets for Growth

In the past, much of the attrac- tive growth for specialty che- micals companies came from China and the rebound of the US economy. In the future, com- panies need to consider a port- folio of emerging markets even more, despite the risk of mar- ket instability and the difficulty of projecting short-term growth in those markets. We suggest a pragmatic approach that ex- plores the economic attractive­ ness, ease of access and strate- gic market size of potential new markets and allows companies to quickly create a shortlist for investment opportunities that ©kikkerdirk - stock.adobe.com fits their risk profile.

Specialty chemicals companies in Eu- chemicals in Thailand, construction rope and other established markets chemicals in the Middle East or textile face difficulties growing in home mar- chemicals in Turkey. Value chains will kets, beyond what can be achieved likely continue to move eastward, and through GDP growth and small gains their control points will increasingly in market share. Overall, the specialty become local in these countries. But chemicals market is set to grow 3.5% finding the right approach for the next per year, but the higher growth will steps is often a challenge, because it is likely come from emerging economies, difficult to compare opportunities and where traditional western players risks in markets like India, Brazil and Tobias Lewe, Otto Schulz, Robert Renard, may not have strong footprints. Some selected southeast Asian or southeas- A.T. Kearney A.T. Kearney A.T. Kearney companies will find growth opportuni- tern European countries. ties from the manufacturing rebound No matter which corner of the in the United States, and most com- globe your company is tackling, we clude increasing administrative and Finding a Pragmatic panies have developed a strategy and urge you to start early with a prag- environmental regulation, digitiza- Approach to Investing in channels for operating in China. matic approach to finding the right tion of value chains, the electrifica- Emerging Markets strategy. Companies should expect tion of automotive, and recent M&A. challenges getting that strategy in There’s also pressure to create solu- Before getting started, it’s critical to place, given the diversity and com- tions that go beyond products, as well understand that companies eventu- „There is a long list of plexity of these markets. But the first as uncertainty from China-US trade ally need their own assessments of emerging markets that step — creating a shortlist of targets tensions, to name a few points. the local industry and their own va- — can be a relatively simple exercise. A.T. Kearney’s 2018 Foreign Direct lue propositions for target countries. offer potentially attractive We realize that in many cases, in- Investment Confidence Index indica- But there is a long list of emer- opportunities.“ ternational expansion takes a back- tes that investors are uncertain about ging markets that offer potentially seat to other management priorities, where to invest — beyond the largest, attractive opportunities and scree- and this is one reason a simple but most obvious locations with the lowest ning them is time and resource con- data-driven approach is useful in the perceived risks — even as they plan suming. So, a methodology is needed However, to take advantage of more first step. to increase their level of FDI. Howe- that reduces the long list in a prag- substantial growth, many companies It can help busy executives set pri- ver, companies in developed markets matic way. As we like to say, just be- will choose to expand more in emer- orities with confidence and act more can achieve attractive revenue growth cause a country’s economy is gro- ging economies. Some recent examp- quickly in the face of disruptive chan- over the mid-term in specific countries wing, that doesn’t make it a good les are opportunities to sell electronics ges in traditional markets. These in- outside their home turf (see info box). place to invest.

6 CHEManager | Regions & Locations Guide W o r l d

This idea — that GDP growth The ability to get goods into the In the end, companies need to un- driven model. In short, companies doesn’t tell the whole story — is an country and revenue out of the derstand the data that drive results looking to build up a chemicals value integral part of our approach to eva- country are equally important fac- in the model. Not all data points will chain in a new market need a quick, luating emerging market opportuni- tors to consider about a target mar- exist for all countries. In many cases, accurate and data-driven way to nar- ties and creating heat maps. ket. This is impacted by infrastruc- country-level data is combined under row the list down to those countries We have worked to make our ture, the effectiveness of public the category “Rest of World.” But it is that offer a strategic fit and growth ­approach objective, data-driven and administration, and integration of possible to use available data to sig- potential that is built on solid footing. transparent. It measures economic at- the economy into the global finan- nificantly reduce the scope for a de- tractiveness, ease of access and stra- cial system. tailed strategic analysis in a data-­ Continued Page 8  tegic market size, through short and medium-term indicators. For instance, for economic attractiveness, we re- commend looking at the size of the na- tional economy, growth projections, and stability of the economic environ- ment. For ease of access, we look at: transparency, political stability, logi- stics infrastructure, accessibility and trade performance. For strategic mar- ket size, we calculate a figure that is a “proxy” for local chemical consump- tion, given the possibility of inconsis- tent data from heterogeneous and complex specialty chemicals markets.

“Just because a country’s economy is growing, that doesn’t make it a good place to invest.” Your Future Location Pharmapark Siegfried When thinking about the starting point for the strategy, it is the mix of One of the world’s most significant life-science You benefit from country-specific and company-spe- clusters is located in Northwestern Switzerland. – Siegfried’s cGMP laboratories and a well- cific questions that matters. With a Make Siegfried Pharmapark in Zofingen your proven cGMP compliance system approved by structured approach, we can define future site for the development and production the authorities in the United States, Europe a robust starting point for discussions with business leaders. of APIs and finished dosage forms. Siegfried and Switzerland Questions to ask include: Which Pharmapark provides a comprehensive range of – IT and HR services tailored to your needs of your products and services fit best services and the necessary space for your activities. – Siegfried as your outsourcing partner for the with local value chains, which compe- Zofingen disposes of sufficient land reserves, development and production of active phar- titive or complementary industry exists is centrally located and well connected to national maceutical ingredients and finished dosage locally, and what is your company’s and international transportation infrastructure. forms own capacity for growth? Also, what is – Proven pharmaceutical service providers such the local, country- or hub-specific sup- as Bilfinger Industrial Services for maintenance ply and demand in the industry — e.g. and SHE requirements, and EBM AG for supply where would additional volume help, of Pharmapark tenants and where would it create unneces- – Business-friendly Swiss legislation, liberal labor sary trade-offs with existing business? market, modest tax burden and excellent Country-specific questions include infrastructure the size of an economy and its growth For further information please contact: – International business environment Peter Gehler, Head of Pharmapark Siegfried, rates, but also how relevant and sus- – Northwestern Switzerland provides skilled Chief Communications Officer, Siegfried AG, tainable is the GDP for your business Untere Brühlstrasse 4, 4800 Zofingen, Switzerland labor that is professionally qualified for the life intent? T +41 62 746 11 48, [email protected] science industry For instance, does GDP per capita indicate sufficient wealth in the coun- try for a relevant share of the popu- lation to buy processed products on a regular basis — everything from fer- tilizers to consumer-packaged goods and durable household equipment? Are the government’s investments in industrialization and human capital www.siegfried.ch sufficient? How will demographics impact the opportunity?

CHEManager | Regions & Locations Guide 7 W o r l d

Fig. 1: Global trends in the chemicals industry Fig. 2: A.T. Kearney’s market relevance model

reduce a long list of potential markets del for the opportunities. Companies to six countries. The process confirmed may also answer questions like what some of the “obvious” candidates but are the right channels, or where can some countries on the shortlist might ­additional demand be found in the not have been considered with the global network? same intensity without the analysis. By examining these questions, Amidst all the changes going on companies can reap additional be- in the chemicals industry, and the nefits besides prioritization. For ex- ample, they may learn more about when a group of emerging countries could be served from one hub, or “Value chains will likely how synergy with an existing part- continue to move eastward, ner could lead to a local joint ven- and their control points ture. A robust model also gives an in- will increasingly become itial idea of the size of the opportu- local in these countries.” nity. We have seen that this focused starting point, together with ha- Fig. 3: A.T. Kearney’s prioritization matrix ving a target to reach, helps get the growth strategy onto the manage- risk of competitors gaining increased ment agenda. How One Company red the size and development of the market share or key partnerships in Approached Its Analysis agricultural­ sector in target coun- your target countries, a data-driven, Tobias Lewe, partner, A.T. Kearney, tries and the consumption of spe- objective analysis to quickly find op- Düsseldorf, Germany For one client, we examined their cialty meats. portunities for growth in emerging Otto Schulz, partner, A.T. Kearney, portfolio and mapped it to the pro- We created a footprint for the markets can give you confidence that Düsseldorf, Germany ducing industries in target coun- client’s business and for the target no opportunities have been over- Robert Renard, director, A.T. Kear- tries. For its business producing countries, and then saw where they looked. ney, Frankfurt, Germany food and animal feed, we conside- overlapped. In the end, we were able to It will also help you be prepared for discussions within your own orga- nization with business units that are Foreign Direct Investment Confidence Index ready and waiting to argue why their A.T. Kearney’s 2018 Foreign Direct Investment (FDI) Confidence Index illustra- current region-focused investment tes three trends: Trend 1: The United States has topped the list of FDI recipi- plan is the right one. ents for six years and many European countries continue to attract significant investment. Executives are clearly focused on established markets, and com- panies must continue to consider where their competitors and customers are. With Priorities Set, Trend 2: Companies need more localization due to the increasing complexities What Is Next? of delivering customer-centric solutions locally, with a global supply and deli- very network. At the same time, 80% of investors expect FDI to impact their We acknowledge that this methodo- profitability and competitiveness substantially. Trend 3: We see only four emer- ging economies in the list of top 25 FDI destinations: China, India, Mexico and logy delivers the starting point to cap- Brazil. This is fewer than ever before in the index. The data shows limited ac- turing additional growth opportuni- tion of companies to expand their local activities in many attractive markets. ties and not the complete strategy. [email protected] Nonetheless, 44% of respondents reported they are seeking to increase their But it gives the right focus for defi- [email protected] investments in emerging markets. ning the next steps, including building [email protected] a commercial and supply chain mo- www.atkearney.com

8 CHEManager | Regions & Locations Guide W o r l d

USA: A Major Destination for Chemical Investment The US is the second largest chemi- pore, and Thailand are other large cal producing nation, after China, and destinations for American investment. the nation’s chemical industry is ex- Because investment positions are pected to continue to grow substanti- measured by book value, investments ally over the next decade as abundant made by foreign companies in the Uni- energy resources in the United States ted States tend to be more recent, and have tilted the competitive advantage as a result, the position is higher than in many types of chemical production US investment overseas. In terms of re- toward producers in the U.S. placement value, however, US invest- A world leader with $526 billion ment overseas is higher. As its compe- in chemicals shipments, the industry titiveness improves, the US chemical is making huge investments to capi- sector is in demand across the world talize on its advantages. Nearly $200 with exports of nearly $130 billion. In billion of investments in new shale- fact, the industry produces a large and advantaged capacity have been an- US Foreign Direct Investment Statistic 2008-2016 (billion $). growing trade surplus, reaching close nounced since 2010, with half of that to $33 billion in 2017. These positive investment either already comple- contributions to trade contribute to the ted or under construction, according Foreign direct investment (FDI) is American companies have long es- broader US economy. “Our continued to the 2018 Elements of the Business the funnel through which exports flow. tablished a presence in overseas mar- economic growth and job creation is of Chemistry report published by the In conjunction with growing exports, kets, with many “going global” in the heavily dependent as access to global American Chemistry Council (ACC). since the early 1980s, the US chemical 1950s and 1960s. This presence has markets. Free trade and open markets As the US has become a major desti- industry has become increasingly glo- continued. Western Europe accounts are essential to maintaining our pro- nation for chemical investment, two- bal in scope, with growing US invest- for more than half of the overseas in- growth, pro-competitiveness agenda”, thirds of the announced investment ment abroad and increasing foreign vestment by American companies. Ca- states Cal Dooley, the ACC’s President represents foreign direct investment. investments in the United States. nada, Brazil, China, Australia, Singa- and CEO. (mr) GAMECHANGER IN THE PRINTING INDUSTRY

WITHOUT MODIFICATIONS – The switch to Propyls is easy and pays off START SAVING IMMEDIATELY for numerous reasons. Flexography or Rotogravure – Explore the Less solvent Propyls solvent for more economical and Less base ink sustainable printing. Less/no retardants Improved quality More stable process www.propyls.com Optimal ink transfer www.oxea-chemicals.com Less scrap Follow us on twitter propyls_by_oxea (@by_oxea) Less retained solvents

CHEManager | Regions & Locations Guide 9 E u r o p e

Driving Innovation with Petrochemicals Europe´s Chemical Industry Has a Secure Raw Material Basis

Petrochemicals make things happen. This is not only the tagline Petrochemicals in the EU of the European petrochemical producers’ association Petrochem­ In the current structure of Europe´s icals Europe, this is a fact: 95% of all manufactured goods such chemical industry petrochemicals as electronics, furniture, appliances, textiles and many more are contribute approximately 27% of the total EU sales and are, hence, a very based on petrochemicals. With 300,000 people directly employed important industry segment. Since in highly qualified jobs and in total 1.2 million along the entire chem­ at the same time they mark the Dorothee Arns, ­starting point of almost all chemi- CEFIC ical value chain as well as an average annual contribution of €155 cal value chains, they also provide a billion to the overall European GDP, petrochemicals represent an secure raw material basis to all the important economic factor. subsequent segments such as spe- breakthroughs, which are not yet at cialties, fine chemicals or polymers, the horizon despite ongoing research, the more so as the majority of chem­ and huge investments in new infra- ical plants in Europe is backwards structure, which will come at a cer- Additionally, they are also an ena- in terms of clean water, food, energy, integrated. tain societal cost. bler industry for many sustainable housing, mobility and communica- In this context it should be noted solutions such as insulation material tion. The answer lies in smart solu- that currently Europe´s chemical in- to save energy, durable and resistant tions — another aspect underlining dustry requires 80 million t of feed- Bio-based = Sustainable? composites for light-weight smart- the crucial role of petrochemicals in stock each year, 75% of which origi- phones and tablet PCs, sophistica- driving innovation projects in close nate from refined (= fossil) sources; Another aspect to consider when ted fuel additives to save emissions cooperation with their downstream renewables make up for 10%. This comparing these two raw material from transportation, or renewable value chain partners, universities and is a dimension which makes it ex­ options is, that “bio-based/renewa- energy devices like windmill blades research laboratories. tremely challenging to be substi- ble” is not necessarily always synony- and solar panels for a low-carbon From that perspective it seems tuted by renewables or bio-based mous to sustainable and “oil-based/ economy. only logical for chemical markets to raw materials without running into fossil” by default automatically un- grow steadily, and in fact, the global a competition for arable land for sustainable — in contrast to what pu- market volume is expected to in­crease food, which is urgently needed to blic discussions usually suggest these Smart Solutions for by 3–4% each year to roundabout feed a strongly growing population days. Full-life-cycle analysis results Big Tasks €6.3 trillion by 2030 from the 2013 on earth. have shown that products and pro- level of roughly €3.2 trillion. Unfor- Moreover, the competitive advan- cesses can well be beneficial in one In the future these benefits will be tunately, most of this growth will take tage in Europe lies in a high level of specific environmental aspect (e.g. needed even more than in the past place outside of Europe, with China integration and a tailor-made infra- greenhouse gas emission reductions), to meet the upcoming societal mega alone being forecasted to account for structure, e.g. zero-emission pipeline but at the same time be suboptimal challenges. In 2050, more than 9 bil- 44% of the chemical markets by 2030. systems to transport raw materials; in other environmental aspects, e.g. lion people will live on earth. With no In contrast, the EU share is likely to both aspects are very closely linked energy-efficiency or water use. This is major changes, mankind will need further decline from 17% in 2013 to to the current raw material basis. one of the reasons why the issue is so the resources of 3 planets to meet the 12% by 2030 due to mature markets The pre-requisites for changing the complex and a one-size-fits-all solu- demands of this growing population and an ageing population. existing system are big technological tion rather unlikely.

Raw materials used in the Fig. 1 Total greenhouse gas emissions of the Fig. 2 European chemical Industry (2015) EU chemical industry (1990 – 2015)

10% EU chemical GHG* emissions Mineral Oil 1% 350 Natural Gas Coal 300 Renewables 325 320 15% -61% 250 equivalent) 2 200 240 Total: 78.7 212 million t 150 148 Millions of tonnes (CO 100 128

50 74% 0 1990 1995 2000 2005 2010 2015

*GHG = Greenhouse gas Source: VCI, CEFIC © CHEManager Source: European Environment Agency (EEA), CEFIC Facts & Figures © CHEManager

10 CHEManager | Regions & Locations Guide E u r o p e

To bring the previously mentioned tic markets with strong customer in- deliberations to a conclusion: from Legislation cost in the EU Fig. 3 dustry clusters nearby, and increased today´s point of view it seems rather during the period 2004–2014 feedstock flexibility. likely that oil and gas will continue Additionally, a huge part of entering the value chains of the che- Transport legislation Emissions and industrial processes legislation Europe’s cracker output is based on Customs and trade legislation Energy legislation mical industry for the foreseeable fu- Chemicals speci c product legislation Chemicals legislation olefins other than ethylene, such as ture. At the same time the current Workers safety legislation propylene, benzene and C4 streams, raw material basis might well further which is an essential element of diversify with renewables/bio-based 2.5 Europe’s broad chemical diversifica- feedstock and some other alternati- 2.0 tion. This wider portfolio range, to- ves finding their way into more spe- gether with the traditionally strong cialty chemicals’ applications or new 1.5 innovation efforts, are good prerequi- materials. sites to generate new growth clusters 1.0 and to solve the upcoming societal mega challenges, like energy-efficient 0.5 Environmental Responsibility uses or new materials. 0.0 It should be stressed that petro- 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 chemical producers in Europe take Source: EU Commissions Report, “Cumulative Cost Assessment (CCA) Dorothee Arns, executive director their environmental responsibility for the Chemical Industry” (11 July 2016) © CHEManager Petrochemicals Programme, CEFIC, very seriously, which implies wor- Brussels, Belgium king on further reducing GHG emis- sions wherever possible and enhan- price from 2014 onwards the overall structure, strategic restructuring cing circularity wherever feasible. conditions for petrochemical produ- measures to flexibly respond to ever- The track record of the past 3 de- cers in Europe have been easing up; changing global market conditions cades shows that Europe´s (petro-) especially the oil/gas ration has im- — which were already mentioned [email protected] chemical industry has substanti- proved, and margins opened up for beforehand — it has also a skilled, www.cefic.org ally improved its own environmen- European cracker operators. Addi- motivated workforce, large domes­ www.petrochemistry.eu tal profile: from 1990 to 2015 — a tionally, the demand has increased, period which saw an 85% increase based on renewed growth in the re- in production — it succeeded to gion. reduce its GHG emissions and its energy consumption by roundabout 60% respectively, while at the same Overcoming Structural time providing the products enab- Challenges ling its downstream users to signi- ficantly reduce their own environ- Some structural challenges have, ne- mental footprint. As regards the vertheless, remained for European latter, several independent studies petrochemical producers, especially have showcased that, e.g. for every European energy prices, which are unit of greenhouse gases emitted di- still amongst the highest in the world, GREEN CHEMISTRY PORT rectly and indirectly by the chemi- and the regulatory burden. When re- cal industry, more than two units ferring to the latter, it is not about lo- of emission savings are enabled via wering environmental standards or products and technologies provided eliminating regulation; all European to other industry and consumers. producers are fully committed to comply with the legislation. The ques- tion is only whether the same targets New EU Petrochemical could be reached in a more cost-ef- Projects ficient way so that European produ- cers can compete successfully on the Based on the above-mentioned as- world markets. At the same time, pects it is evident that European pro- it should be acknowledged that the ducers have a significant role to play current European Commission has also in the future. After many years, raised several initiatives to tackle in which new investments in petro- both issues. These are promising first chemicals went almost exclusively steps, which are hopefully followed to other regions — above all to the up further in the near future to main- US and the Middle East — the recent tain Europe´s traditionally strong in- announcements of new European dustrial backbone, fully recognizing projects came as good news for Eu- that it is very complex and quite a rope. Most of the petrochemical pro- long journey to find optimal solutions jects announced address company- which all EU member countries can specific balance adjustments within fully support. specific integrated value-chains and To balance off the above-men­ are actually linked to non-crude raw tioned disadvantages European pro- materials (ethane, propane). How­ ducers can fortunately benefit from www.hafen-straubing.de ever, they certainly also reflect to a a series of strengths: apart from the certain extent that with the lower oil high level of integration, a good infra­

CHEManager | Regions & Locations Guide 11 E u r o p e

Cautious Welcome for Brexit Deal Draft Brexit Withdrawal Agreement Bolsters Hopes but many Uncertainties Still Lie Ahead

The UK chemical industry was quick to support a draft UK-Euro- Possible Outcomes have majority backing in the UK Par- pean Union Brexit withdrawal agreement when it was published in liament. The withdrawal agreement allows The UK chemicals industry has mid-November. “We have given it a cautious welcome,” said Steve for the transition period to be ex- been becoming increasingly alar- Elliott, chief executive of the UK Chemical Industries Association tended, particularly to try to ensure med about the prospect of a no-deal, there is a deal on the status of the which could result from a vote in the (CIA). “The priorities we set out soon after the Brexit referendum only land border between the UK UK parliament against the draft with- over two years ago—frictionless trade with the EU, regulatory con- and the EU — that between ­North­ern drawal agreement. “It seems that the Ireland in the UK and Ireland, an real option is between the deal now sistency and access to skills—are all covered in the deal.” EU member. But there are two other on the table and no deal which would possible outcomes — no deal at all be disastrous for the UK economy,” or a second referendum on Bre- Tom Crotty, CIA president and group The agreement was also welcomed a year and half of negotiations, there xit which, according to recent polls, director of Ineos, told the meeting. by Marco Mensink, director gene- were still plenty of uncertainties He urged the industry to be more ral of the European Chemical Indus- about the future of the deal. UK Prime outspoken about the dangers of a no try Council (CEFIC). But he stressed Minister Theresa May was soon faced deal. “The industry needs to stand up that it was only a divorce arrange- with ministerial resignations and the “It seems that the real option and voice its views about the way the ment, which opened the way to ne- prospect of a no-confidence motion politicians are not taking into account gotiations on a post-Brexit EU-UK by unhappy Brexit supporters among is between the deal now on the needs of the whole country,” said free trade agreement (FTA). CEFIC Members of Parliament (MPs) of her the table and no deal, Crotty who is also chair of the Ma- and the CIA both wanted this FTA ruling Conservative Party. which would be disastrous nufacturing Council of the Confede- to disrupt EU-UK current chemicals Then it has to be approved by the ration of British Industry (CBI), the trade as little as possible. He and El- governments of the remaining 27 for the UK economy,” main UK employers group. No deal liott were both speaking at a Lon- EU member states before being sub- Tom Crotty, CIA president and would mean that the country would don conference on Brexit, arranged ject to a vote by both the UK and Eu- group director of Ineos crash out of the EU after 45 years of by the CIA months ago, which took ropean Parliament. If it got past all membership without any agreement, place a day after the text of the deal those hurdles, the UK would formally especially on a future trading rela­ was released by the European Com- leave the EU on the scheduled date tionship between the EU and the 27 mission. of Mar. 29, 2019, to enter a transition would result in a vote to stay in the EU member states. Even though the chemical industry period lasting until the end of 2020 EU. Another referendum is strongly An electronic poll of 150 attendees was relieved to see an agreed docu- during which an EU-UK FTA would opposed by the UK government and, at the conference, representing a ment at last on the table after almost be negotiated. up to mid-November at least, did not cross-section of the industry, showed

©Alexander Limbach - stock.adobe.com

12 CHEManager | Regions & Locations Guide E u r o p e

that after Brexit 46% wanted free tion from the safety dossiers of each ECHA activities. A UK government plan New Strategy trade with the EU and 36% regula- chem­ical registered with the agency. to “copy and paste” all ECHA registra- tory “consistency” or an UK-EU align- Access to the database is seen tion data for use by an equivalent UK Total investment by the industry will ment in regulations similar to that as crucial to the ability of the UK in REACh agency “is not credible and rai- be £4.3 billion this year — at around present. This vote was not surprising maintaining frictionless EU trade in ses serious legal concerns, including the annual average for the last few since currently 60% of the country’s chemicals and their downstream pro- over copyright and data protection”, years. According to the results of the chemicals exports go to the rest of the ducts. Without the data, UK compa- said the report published by the EU poll of conference attendees, 52% re- EU and 75% of imports come from nies would have difficulties avoiding committee of the House of Lords. vealed that the Brexit turmoil was EU countries. “We are the UK’s big- duplicate registrations of their pro- REACh registration data is owned having no effect on their capital ex- gest exports earner (in goods),” said ducts with ECHA and a UK equivalent by the chemical producers and not penditure but much of the rest were Crotty. body, while the UK authorities would the agency so that the only recourse holding back on investment decisions have problems assessing the risks of for the UK could be a data access deal until there was more certainty. hazardous substances being imported covering all the REACh registrants, In the longer term, a new strategy Complex Supply Chains into the country from the EU. The UK said a legal expert at the meeting. by the UK Chemistry Council, a joint government wants a post-Brexit EU- From the industry’s viewpoint, data government-industry body, whose A lot of chemicals go in and out of the UK system of single registrations with access is a key issue to be sorted out publication coincided with the con- country within complex supply chains during the transition period negotia- ference, sets 2030 targets of a 50% in which substances cross borders se- tions. “At the end of the transition pe- increase in production, a 68% ave- veral times before the final produc- riod the United Kingdom shall cease rage rise in turnover, exports and an- tion step. An industry objective in “In the EU legislation to be entitled to access any network, nual investment and a 35% increase the negotiations on the EU-UK trade governing ECHA there any information system and any da- in jobs. The strategy has three plat- agree­ment, backed by the CEFIC and is no such thing as tabase established on the basis of forms of accelerating innovation, par- the CIA, is that a trading deal should associate membership.” Union law (unless otherwise agreed),” ticularly in digitalisation, new supply not, as far as possible, undermine says the draft withdrawal agreement. chains and growth in the regions and these supply chains. CIA and CEFIC Marco Mensink, There are even doubts about a deal in infrastructure. aim to continue to maintain a united director general, CEFIC on associate membership of ECHA “We are well placed in having approach to the trade negotiations, if which might open up the agency’s four chemicals clusters — in Scot- they take place. “We have very good database to the UK. “At the moment land, and the North West, North co-ordination with CEFIC,” said Tom we are far from there (an associate East and Yorkshire and Humber- Crotty. “You could not get a cigarette ECHA to avoid the costly necessity for membership agreement),” said Men- side areas in England — which we paper between us.” duplications, Susannah Storey, direc- sink. “In the EU legislation governing can use to get our innovation pro- CEFIC is, for example, backing the tor-general of the UK Department for ECHA there is no such thing as asso- jects off the ground,“ Steve Foots, CIA’s demand for post-Brexit associ- Exiting the European Union (DExEU), ciate membership.” chief executive of Croda Internatio- ate membership of the Helsinki-based told the conference. Currently the UK chemicals in- nal and joint chairman of the Chem­ European Chemicals Agency (ECHA), dustry is performing well with good istry Council, told the meeting. But which is responsible for the adminis- short-term prospects. “The latest a lot will depend on whether there tration of the REACh legislation. As- Data Ownership Issues business survey showed 86% of CIA is a smooth Brexit which assures the sociate membership, which is also an members report sales maintaining UK of a continued close partnership aim of the UK government, would al- A UK parliament report on post-Brexit­ current levels or increasing,” said with the EU. low the country to continue to parti- chemical regulation, issued on Nov. 7 Elliott. “Looking to the future, 61% cipate in the agency’s activities and, (2018) and cited at the conference, of companies see expanding export more significantly, might gain ac- pointed out that the REACh legislation markets as key opportunities for their cess to ECHA’s database of informa- limited the use of registration data to business in the next 12 months.” Sean Milmo, CHEManager Investment Location Germany Experiences Brexit Effect

A potential ‘Brexit effect’ has made a larger trend, which has seen Bri- further 1,925 investments were and expansion projects in Germany in itself apparent in Germany’s 2017 tish FDI across Europe increase by made in Germany by means of mer- 2017 were the United States with 276 foreign direct investment (FDI) figu- 33%. Financial services and ICT gers, acquisitions & shareholdings. projects. China registered 218, Swit- res, with the number of UK invest- are the main recipient industries of zerland 204, the UK 152, the Nether- ment projects jumping by 21%, ac- the investments, but the sharehol- US Investments Top the List lands 124 and France 95 projects. cording to the economic development ding acquisition of British compa- The most important investor zone in agency of the Federal Republic of nies and investors in German com- Germany remains the EU, from whose Sales and Marketing Followed by Germany, Germany Trade & Invest panies has also increased sharply, member states 41% of all invest- Production and R&D (GTAI). Currently, the large share of which adds to the impression that ment projects originate. Almost every The most popular activity remains these projects involves service offices this is a strategy to deal with Brexit.” fourth project comes from Asia. The the opening of sales and marketing opening, but it will be interesting to country setting up the most greenfield offices (39%). 19% of the companies see if production facilities are subse- Germany Accounts for 18% of all use Germany as a production or R&D quently set up. Also notable: the UK British FDI in Europe location, while process services ac- was the largest source of merger, ac- Germany is, with 18% of all Bri- count for 18% of all investment pro- quisition & shareholding investment. tish FDI in Europe, the most po- jects. As in years past, corporate and “We are convinced that this in- pular investment destination. Al- financial services are the main sec- crease in British FDI activity is a di- together, Germany‘s federal states tors for investment. They represent rect consequence of the Brexit decis- registered 1,910 settlement pro- about 20% of all new projects, ahead ion,” said Thomas Bozoyan, Manager jects (greenfields, expansions, re- of ICT & software with 16% and con- of Research at GTAI. “It’s a part of locations, not M&A) in 2017. A ©cbies - stock.adobe.com sumer goods industry at 10%. (mr)

CHEManager | Regions & Locations Guide 13 E u r o p e

Start-ups Accelerate Innovation An Overview of the European Chemical Start-up Scene

Virtually all areas of our lives would be inconceivable without pro- Markus Steilemann, CEO at Covestro, ducts that come directly or indirectly in contact with chemical pro- also knows: „We need start-ups. No company today has the potential to duction: It affects the modern office environment, our private lives solve everything alone.“ and thus our well-being and life fulfillment including health, leisure Many large chemical companies also run so-called corporate venture and personal protection. units to finance start-ups. Neverthe­ less, a vibrant and broad venture ca- pital scene is yet to develop. The busi- According to James Clark, professor All About Start-ups ness models of chemical start-ups do Tobias Kirchhoff, Holger Bengs, at the University of York speaking at not always fit into the portfolio think­ BCNP BCNP the Green & Sustainable Chemistry Nowadays talking about innovation ing of investors. One reason might be a Consultants Consultants Congress, around 97% of the pro- means talking about start-ups. This service-based business model which li- ducts around us derive from chemi- applies generally, but now also in mits the investor’s opportunities to sell ketplaces are needed where the com- cal production or contain at least one chemistry.­ Start-ups are flexible, can its shares. Another reason might be the munity can learn together and build chemical process step in their manu- act faster and — this is maybe the most high capital expenditures for plants. up trust, to increase the probability of facture. important aspect — they can think out For sure not every start-up will make meeting the right people with the right of the box on a daily basis. They can it at the end, there will be an economi- problem at the right point of time. develop visionary projects, away from cally driven attrition rate. However, to Meeting points can be events of Sus- Sustainable Development the constraints of stock market prices. deliver the best chances vibrant mar- Chem, the European Technology Plat- Goals as Innovation Driver

To create more sustainable products and services as well as to establish a circular economy we need innovative solutions. The UN has defined 17 Sus- tainable Development Goals (SDG). The associated goals will need new chemical solutions to become reality. For example, the goals related to af- fordable and clean Energy or respon- sible production and consumption. The road leads to higher efficiency, increa- sed sustainability and more environ- mentally friendly products with more efficient production methods. The as- sociated goals can only be achieved in an interchange across regional, cul- tural, systemic and cross-disciplinary boundaries in shared cooperation.

Market Push Drives Innovation

Chemistry has to be innovative to meet the ambitious goals of its customers. Ikea, one of the world’s leading furni- ture retailers from Sweden, has an on- going project to eliminate virgin fos- sil-based raw materials in its plastic products. The goal is to use only plastic products from renewables or recycled materials by 2030. The same goes for Lego, a big Danish toy manufacturer, which has started to use sugar cane for its world-famous bricks. Both exam­ ples show that chemistry has to conti- nuously innovate. The value chains in chemical production will change dra- matically over the next decades. Fig.: Innovative chemical companies in Europe

14 CHEManager | Regions & Locations Guide E u r o p e

form for Sustainable Chemistry, and of fields of application. Most che- Relatively smaller countries are in vestments in demonstration and in- International Sustainable Chemistry mistry start-ups develop new or the following places: Netherlands dustrial plants. The EIB will make up Collaborative Center (ISC3), an inter- nanomater­ials. This group accounts and Switzerland. While Switzerland to €250 million available to chemical national institution that promotes and for almost a third (32%) of the start- has generally presented itself as a and biotech start-ups to scale up their develops sustainable chemistry solu- ups. About a quarter (26%) of the strong research nation, the Nether- technologies. At the same time, start- tions worldwide, or of course, the Eu- start-ups produce fine and specialty lands focusses its innovation on the ups worldwide can benefit from the ropean Chemistry Partnering. chemicals. Following in third place bio-economy. The Universities of services of the ISC3 in Bonn and their are start-ups developing new tech- Delft and Groningen are two univer- international network with and for nologies and hardware (21%). About start-ups developing business models High Founding Figures a tenth of all start-ups focus on re- in the field of sustainable chemistry. since 2007 search R&D and services. Niche ap- In addition, international events such plications for chemical­ start-ups in- „We need start-ups. as the European Chemistry Partne- The increasing significance of start- clude analytics (4%) and catalysis No company today ring, the unique speed dating for the ups for the chemical industry is also and enzymes (4%). A relatively new has the potential to solve chemical industry, which brings to- reflected in the trend towards higher field for chemistry start-ups rela- everything alone.“ gether chemical start-ups with indus- start-up figures. Since 2013 BCNP Con- tes to digitization issues. Meanwhile,­ try representatives and investors, are sultants has continuously researched these application accounts for 3% of Markus Steilemann, CEO, Covestro establishing themselves. the situation of innovative chemical foundations. The trend is clearly ri- start-ups and start-ups that influence sing. the chemical value chain in Europe. Problem: Price Competitive- Influencing the chemical value chain sities with high spin-off numbers re- ness and Capital is not just about classical chemistry, Big Economies sulting in chemical incubators such but it is also about an enzyme produ- are Ahead — Still? as the Brightlands Innovation Fac- Many good ideas find their way from cer helping to avoid heating and re- tory which help to make start-ups the research institutes into start-ups. fluxing or a digital start-up helping to The study on which the data is based successful in the long term. But the big breakthrough is missing. extract the better processing parame- initially focused on Germany. There- Price competitiveness with fossil- ters out of the data available. Statistics fore, most of the companies included based products is mostly challenging. show that since 1990 there were two in the database of Europe’s Com- Promotion is an Large-scale plants, which generate growth steps. The first step was star- pass to innovative chemical compa- International Question economies of scale and therefore ting in 1997 when the yearly number nies are German based. Since initia- would increase price competitive­ of foundations raised from single-di- tion the expansion of the database is The promotion of sustainable and ness, are expensive. The EIB fund al- git to double-­digit numbers. Beginning an accompanying project. More and green chemistry is becoming a top ready goes in the right direction as a with 2007 the yearly number of found- more non-German based start-ups priority. While general Start-up pro- catalyst for more private investment ations increased again from around 15 have been added. But the research motion usually takes place at the in large-scale plants. More initiatives to over 20 to 30 foundations a year. In is certainly not exhausted. Non-exis- country level, in the chemical indus- like this are needed. the last years the statistic shows a de- tent English-language homepages try where global value chains are crease in the number of foundations. complicate the assessment even if crucial, international promotion in­ Tobias Kirchhoff, senior consultant, At least for the years 2017 and 2018 foreign companies fit the innova- struments are developing. BCNP Consultants GmbH, Cologne, this will probably change because of tion criteria. Therefore, the number SusChem was launched in 2004 Germany companies that are still ­under radar of start-ups outside Germany is not as a European Commission suppor- or not founded yet (n.f.y.). that high yet. ted initiative to revitalize and inspire Holger Bengs, CEO, BCNP Consult- Excluding Germany, especially Euro­pean chemistry and industrial ants GmbH, Frankfurt, Germany Great Britain and France have biotechnology research, development New Materials as start-ups along the chemical va- and innovation in a sustainable way. Main Application lue chain. In addition to the hub of The European Investment Bank (EIB) London and the elite universities of is going to launch a European in- [email protected] Thematically, chemical start-ups Oxford and Cambridge, Great Bri- vestment fund for the bio-based and [email protected] concentrate in particular on three tain scores with Scottish companies. circular economy, especially for in- www.bcnp.com

Foundations of innovative companies of the Fig. 1 Distribution of European chemical start-ups Fig. 2 chemical value chain by founding year by application 3% 35 4% new materials & nanomaterials 4% 30 Founded 30 30 ne & specialty chemicals technology & hardware In Foundation 11% 26 26 contract R&D, service 32% 25 25 analytics 22 22 catalysis & enzymes 20 20 digitalization 19 16 16 16 15 15 15 15 14 14 14 14 # of foundations 13 14 10 9 7 21% 6 5 4 4 3 2 2 6 0 ‘90 ‘92 ‘94 ‘96 ‘98 ‘00 ‘02 ‘04 ‘06 ‘08 ‘10 ‘12 ‘14 ‘16 ‘18 26% year of foundation Source: BCMP Consultants © CHEManager Source: www.chemistry-compass.eu © CHEManager

CHEManager | Regions & Locations Guide 15 A s i a

Opportunities for Western CDMOs in China Siegfried’s View on the Evolution of the Chinese Pharmaceutical Environment

As part of its journey toward being a full-fledged advanced economy, the role and pre- sence of China within the phar- maceutical industry has rapidly evolved throughout the recent years driven by targeted and developing policies. Over the last few decades, thanks to its investment-led model and le- veraging its record-breaking urbanization and industrializa- tion rate, China has risen to a leading position as a manufac- turer in all major industries, in-

cluding pharma. © Siegfried

However, some of the key growth ling, while low cost competition is in- more on R&D/innovation on one end ­drivers behind it are now slowing creasing. and sales/service on the other. down as urbanization rate decrea- To address this, China now needs Such context has contributed to ge- ses and labor rates increase. Recent to move beyond being the world’s nerating new government initiatives data show that the model is running greatest source of low-cost manu- as China Manufacturing 2025, aimed out of steam as capital producti- facturing capacity and “climb up” to at steering the economy towards the vity and corporate returns are fal- a higher added value tier by focusing new targets through policies specifi- cally looking at emerging and innova- Luca Parlanti, tive industries such as bio/pharma. Siegfried This may in our view provide op- portunities (along with challenges) within our industry and in particular The internationally available drug for CDMOs. licensing system can be divided into two categories: the first category sepa- rates drug market licensing and pro- Growth-Driving Policies duction license management, which can be observed in the European and Within the Chinese pharma environ- North American pharmaceutical sys- ment, over the last three decades, one tems. The second category, which is of the key growth-driving policies has used in China, is a merger of the two been the Healthcare Reform led by different licenses into one. the China Food and Drug Adminis­ Since November 2015, ten Chinese tration (CFDA), which has increas­ provinces joined a 3-year marketing ingly looked to international models authorization holder (MAH) system to best organize its processes and in- pilot program ending by the end of stitutions, until June 2017, when it of- 2018. The concept is quite similar to ficially joined the International Coun- pre-existing systems in the rest of the cil for Harmonization of Technical world and provides to Chinese phar- Requirements for Pharmaceuticals maceutical research and develop- for Human Use (ICH). ment institutes, as well as individuals, An important step in this path to- the option to apply for a drug product wards adopting “western models” in license independent from the manu- healthcare management has been facturing license. Recently, the Chi- China’s establishment of a pilot mar- nese authorities have expanded the

© Deloitte keting authorization holder (MAH) program’s scope to include interna- Fig. 1: Patented Drug Sales in China system. tional applicants and license holders.

16 CHEManager | Regions & Locations Guide A s i a

China’s Pharma Market has been to consider this evolution network with a site offering comple- only the typical lower cost back integ- of the Chinese pharmaceutical envi- mentary benefits and significant syn- ration option for manufacturing inter- Fueled by the above reform initiative ronment as an attractive opportunity ergies vs. the pre-existing facilities in mediates, but also a lifecycle manage- the Chinese pharma market has un- for horizontal and vertical integra- Europe and North America. Located ment opportunity for our client’s API dergone a sharp growth over the last tion of its value proposition. Through in a state-of-the-art industrial park as well as an option for Chinese mar- decade with a CAGR of 25.9% bet- the establishment of our site in Nan- (NETDA) and easily accessible from ket entry. In line with the observed ween 2007 and 2010 and of 15.5% tong in 2012, Siegfried completed the Shanghai or the nearby YangZi river thereafter to an estimated value of build-up of its global manufacturing port, the Nantong facility offers not Continued Page 18  $ 107 billion by 2016. An increasing share of the market has been taken by patented drugs, growing from an 8% in 2007 to a 16% share in 2016, encouraging data indi- cating that in the future novel bran- ded therapies will gain further mar- ket presence. These trends combined with Chinese consumers’ traditional confidence in “Western Products” will likely help foreign pharma access to the local market. If, in addition, im- proved IP protection will actually be perceived by international innova- tors, then we could expect an increas­ ing draw for global Pharma and its innovative products. In fact, some of the top 20 global pharmaceutical companies have al- ready expanded their R&D footprint in China (e.g. Pfizer, GSK, Novo Nor- disk and BMS) also motivated by the requirement of carrying out domestic clinical trials in order to obtain regu- latory/marketing approvals (although multi-regional clinical trial data are accepted to support market entry with certain conditions for preferen- tial approval and examination for rare diseases). The Behringwerke Along with all these supporting policies, the government has on the industrial park other end recently implemented a number of enforcing initiatives aimed­ at aligning the industries to the in Marburg nation’s new standards and expecta- Good for research and progress. tions. In particular, in the last 2 years the Chinese authorities have renewed Good for pharmaceuticals and biotechnology. their commitment to addressing the Good for the region. growing issue of air pollution through a campaign of strict enforcement of environmental regulations. As a re- sult, since April 2017, approximately 149,000 plants nationwide across all industries were forced to shut-down, while temporary interruptions affec- ted an estimated 40% of Chinese fac- (SVJH[PVU^P[OTHU`ILULÄ[Z tories. The pharmaceutical industry Pharmaserv GmbH The focus is clear: everything at the Behringwerke industrial park revolves was not immune to this wave with Emil-von-Behring-Straße 76 around pharmaceuticals and biotechnology. It has become home to numerous thousands of manufacturing sites af- D-35041 Marburg (Germany) companies with a total of approximately 5,500 employees. The location is fected and consequent supply chain Phone: +49 (0)6421 39-14 attractive for start-ups and established companies alike. Pharmaserv uses disruptions worldwide, which are www.pharmaserv.de professional site management to operate the Behringwerke industrial park continuing to these days. and ensures that it has an excellent infrastructure. The bundled expertise and VHUYLFHRULHQWHGHQYLURQPHQWFUHDWHV\QHUJ\HσHFWVòDQGDORFDWLRQZLWKD promising future. Siegfried’s Site in China

www.behringwerke.com Since the very first steps of its growth Space for your ideas strategy and driven by the intent of becoming a fully integrated CDMO on a global level, Siegfried’s vision

CHEManager | Regions & Locations Guide 17 A s i a

for a presence in China and represent Swiss Drug Contract an attractive opportunity for a CDMO Manufacturer with global reach like Siegfried Siegfried is a global fully integrated CDMO providing API and drug product development and manu- Outlook facturing to the pharmaceutical in- dustry. With its 145 years history In conclusion, although some signifi- and 750 million CHF revenue (as of cant challenges still remain with re- 2017) the company offers industry spect to actual approval timelines, leading reliability and a proven changing regulatory requirements, track record in pharmaceutical ma- price pressure, labor efficiency and nufacturing. Its network includes 9 sites located in the US, Europe IP protection (e.g. recent US Trade and China, presenting diverse and Representative (USTR) complaint at customized options to each client. WTO on Chinese patent regulations) The headquarters are established we believe that the Chinese and glo- in Zofingen, Switzerland. bal pharmaceutical industry will de- velop an increasing demand for local evolution of the Chinese economy, we higher value services (e.g. manufac-

designed the site to be a full-fledged © Visiongain turing of innovative/patented drugs), GMP API manufacturing plant in line Fig. 2: Local Demand for Custom Manufacturing in China. while the higher standards enforce- with the most current western stan- ment is increasing Western CMOs dards, from an engineering, regula- From the early days of our pre- and the consequent rise of the living competitiveness and attractiveness. tory and environmental standpoint, sence in China, our view has been standards. ready to operate in full compliance to position ourselves within the In that sense we have built local Luca Parlanti, head of Sales and with the higher standards and more world’s fastest growing economy (and R&D and pilot capabilities to support Business Development, Drug Sub- restrictive regulations of nowadays pharma market) and to contribute to introduction of new projects and pro- stance Exclusives, Siegfried AG, China. Examples of such context and its development by bringing, together cess development/optimization. Zofingen, Switzerland vision are the establishment in Nan- with our clients, high value added Figure 2 shows how the domestic tong of our own waste water treat- and innovative products, rather than demand for custom manufacturing [email protected] ment and solvent recovery facilities, just leveraging the low cost opportu- has developed over the course of the www.siegfried.ch allowing us to minimize the dis­ nity, which is not surprisingly show- last years and, more importantly, how charge to the shared industrial park ing to be a very transient benefit gi- it is expected to grow in the future. References to this article are available system. ven the rapid economic development Clearly, these figures make the case from the author.

Praxair Expands in China, South Korea Sirio Pharma Opens Gummy Plant in China

Praxair, now part of the new Linde in 2015 invested in the construction of Sirio Pharma, a global nutraceuti- as sugar free and low-sugar options. group, is to build, own and ope- a new 900 t/d air separation unit and cal contract development and manu- Rui Yang, CSO of Sirio Pharma said rate three new air separation units an integrated liquefier at the Chinese facturing organization (CDMO), has the advantage of operating an inte­ for Shanghai Huayi’s new complex chemical site. ­opened a gummy production plant at grated site is that it can develop in Qinzhou, China, which will pro- Separately, Praxair will build a its new development and manufactu- much more custom tailored pro- duce methanol, acetic acid and other fifth plant in Hwaseong, South Korea, ring facility in Ma’anshan, China, ex- ducts while also expediting develop- chem­icals to meet the country’s gro- to supply ultra-high purity nitrogen panding output to 2.4 billion gum- ment timelines and market share for wing demand. to Samsung’s semiconductor facility. mies annually. contract services. Management ex- The plants, in which Praxair ex- The facility is due to start up in late The new facility is being built in pects “exponential growth” for the pects to invest its largest sum in China 2019. Praxair will also install multiple several phases and will form a cen- gummy lines in 2019, and with the so far, will supply up to 7,500 t/d of purifiers and a new pipeline system to ter of excellence covering an area of new capacity Yang said it can sup- oxygen and 5,000 t/d of nitrogen. support the project. 240,000 m3. ply “even the largest of nutraceuti- Start-up is scheduled for the second BS Sung, president of Praxair Ko- The recently completed first cal brands”. half of 2020. rea, said the project increases its pre- phase of the expansion comprises a In the US and Europe, the com- “This new project will further de- sence in the region and positions it for 26,000 m3 production space and ad- pany said it sees “significant growth monstrate our strengths in supporting future expansion. junct building designed to accelerate potential” in gummy formulations, major chemical industry projects and In April this year, Praxair an- development and manufacturing of as they represent a more consumer allows us to build density in south nounced two other long-term agree­ gummy formulations for global cus- friendly dosage form. China — a region positioned for fu- ments with Samsung affiliates in tomers. Founded in 1993, SIRIO regards ture growth,” said Praxair China’s South Korea. One was to supply a With the plant extension, Sirio said itself as the leading global nutraceu- president, Will Li. semiconductor plant in Pyeongtaek it will have more capacity to make tical CDMO specialized in developing Shanghai Huayi already has a with ultra high-purity industrial ga- innovative products such as liquid and manufacturing quality products strong presence in the eastern part of ses and the other was to supply nitro- filled, center-filled, swirled and multi- including softgel, capsule, tablet, the country and the Qinzhou complex gen to a multi-layer ceramic capaci- colored gummies. powder, gummy, oral liquid, probio­ will extend its footprint into the south. tors plant in Busan. The company also produces stan- tics and other dosage forms. Praxair operates a joint venture Under the deals, Praxair will build, dard gummy formulation options to The company has multiple ma- with French partner Air Liquide, the own and operate several new plants, be sold in the US and EU. Some of nufacturing sites in China, as well Shanghai Chemical Industry Park In- which are due to go into operation in them have vegetarian options inclu- as plants in Europe and marketing dustrial Gases Company (SCIPIG), that 2019. (eb, rk) ding carrageen and pectin, as well teams in the US. (dw, rk)

18 CHEManager | Regions & Locations Guide 4chiral: The Chemistry Cluster in Central Germany

Already in 2006, the cluster 4chiral Together, nearly every request re- ¨¨Arevipharma: ¨¨IBZ-Salzchemie: was founded in Bitterfeld-Wolfen — a garding the development of new syn- GMP, PR, g to tons cR&D, C, PR, nano particles town in Central Germany’s chemistry­ theses or the manufacturing of fine ¨¨c-LEcta: enzymes, BIO, PR, <50 kg ¨¨Laborchemie Apolda: triangle. Starting with only seven lo- chemicals can be addressed. These ¨¨Chiracon: GMP, PR, <50 kg GMP, PR, >50 kg to tons cally established SMEs, today, this ho- activities comprise everything from ¨¨ChiroBlock: ¨¨Merseburger Spezialchemikalien: rizontal network comprises 30 compa- consulting, research, computational cR&D, PD, C, mg-50 kg organometalics, PD, PR, nies and about 10 research partners of modelling to enzymes and GMP or ¨¨CreativeQuantum: quantum me- mg to >50 kg public institutes and universities. The ton scale production as the following chanics, computer simulations, C ¨¨Miltitz-Aromatics: common subject is “(bio)chemical syn- compilation shows. ¨¨Emp Biotech: fragrances, PR, >50 kg to tons thesis” — or in other words: “To create BIO, PR, bio-chromatography ¨¨Minascent: GMP, PR, mg to tons value by transforming matter”. The Abbreviations: GMP=GMP synthe- ¨¨Enzymicals: ¨¨Organica: PD, PR, >50 kg to tons companies of 4chiral not only share ses; cR&D=contract research & deve- BIO, PD, PR, enzymes ¨¨Orgentis: PD, PR, mg to 100 kg the same activity fields, but — as inde- lopment; BIO=bio- and enzyme tech- ¨¨EW-Biotech: BIO, PD, kg to tons ¨¨Synthon Chemicals: pendent, mainly staff-owned SMEs — nology; PD=process development; ¨¨FEW-Chemicals: dyes, PD, PR, PD, PR, g to <50 kg also a comparable culture, flexibility C=consulting; PR=non-exclusive pro- g to tons ¨¨TGZ Bitterfeld-Wolfen: and customer focused approach. ducts ¨¨Hapila: GMP, mg to <50 kg C, support, labs

Our Core Competence is fi ne organic synthesis

Finest Chemistry & Biotechnology from the Central German chemistry triangle. Your innovative and reliable partner with superior expertise in the fi eld of sophisticated syntheses and compounds.

Germany, 06766 Bitterfeld-Wolfen Phone: +49 3494 638323 Web: www.4chiral.de Andresenstraße 1a Fax: +49 3494 638324 Email: [email protected]

CHEManager | Regions & Locations Guide 19 A s i a

One Belt, One Road The Impact of China´s Belt and Road Initiative on the Chemical Industry

The Belt and Road Initiative (BRI), also called the One Belt, One either in China or Eurasia may to Road policy (OBOR), is an initiative launched by the Chinese some extent benefit from BRI. Another differentiator will be government in 2013. The core idea is to improve infrastructure, co- whether companies are Chinese or operation and trade between China and countries in Asia, Africa foreign-owned. According to the Eco- nomist, 86% of BRI projects have Chi- Kai Pflug, and Europe. This is to happen along two major corridors — one nese contractors. So Chinese chemi- Management on land which essentially follows old silk trading routes (the “Belt”), cal companies are likely to benefit Consulting — more than foreign ones. Chemicals and one across the sea following old Chinese maritime trading rou- Different chemical segments will tes (the “Road”, in a somewhat confusing term). be affected to a different extent. Seg- ments such as basic commodity chem­ related projects, most of them in the icals and chemicals required for con- area of petrochemicals and commo- struction are likely to benefit more dity plastics. As with any such initiative, the first per than air freight and much faster from the BRI than specialty chemicals. question to ask may be whether it is than shipping, allowing more inten- The initiative may lead to increa- just a slogan or has some real rele- sive long-distance cooperation. sed cooperation between petroche- vance. So far, the massive investment mical companies in China and in the “China’s Belt and Road of China into the BRI (about $150 bil- Middle East. Involvement of Western lion per year over a five-year period) Effects and Implications chemical companies may be reduced Initiative may shift patterns and the high emphasis placed on the as their traditional role as providers of chemical trade.” initiative in China´s policy indicate Next, the question is what impact BRI of knowledge and innovation matters that BRI is indeed an initiative with a may have for the chemical industry: less for commoditized petrochemicals. substantial impact on the real world. The initiative may shift patterns The massively increased rail links of chemical trade, increasing trade In 2017, Sinopec and SABIC ag- between China and Europe — with among those countries included in BRI-related Projects reed on studying joint projects in new connections started almost every the infrastructure corridors. As a con- Saudi Arabia and China. Such a co- month — point in the same direction. sequence, chemical companies based Several major Chinese chemical com- operation may include a joint venture Train transportation is much chea- panies are already working on BRI- with Chinese investment in Saudi

©Maxim Pavlov - stock.adobe.com

20 CHEManager | Regions & Locations Guide A s i a

Arabia, strengthening cooperation tes that while improving infrastructu- that point the plant was aligned with trains. Covestro also benefits from the within the area covered by the BRI. ral ties with Asia are a major objec- another­ government policy, the “Go improved transportation links that PetroChina has indicated a simi­ tive of the BRI, the final objective of West” policy which promoted invest- are a part of the BRI. Using rail trans- lar preference for investment in the initiative may be to strengthen co- ment in China´s central and Western portation and temperature-controlled areas covered by the BRI initiative. operation between China and Europe. provinces. It is obvious that the BRI is containers, the company has mana- In March 2018, PetroChina chairman both a continuation and an expansion ged to reduce the transportation time Wang Yilin stated „We will focus more of this earlier policy. of their cold-sensitive materials from on acquisition opportunities in na- Dow is also anticipating a pro- 2 – 3 months to 20 days. tions covered by the initiative as part “The BRI may not be a duction shift towards inland China This overview shows that indeed of our globalization strategy“, and in- very exciting business and has therefore built a new coa- the BRI seems relevant for many che- deed PetroChina has just won a bid tings plant in Chengdu. The company mical companies, though many of the for 10% stakes in two projects off the opportunity for foreign seems quite positive about the BRI in- projects described would have made coast of Abu Dhabi, an investment of chemical companies.” itiative, as indicated by a statement economic sense in any case. However, more than $1 billion. of Jim McIlvenny, president of Dow it is certainly easier to execute such Sinochem also intends to leverage Asia-Pacific (to China Daily): „Belt projects in the favorable political en- the BRI in its pursuit of internationali­ and Road is extremely exciting. It will vironment created by the BRI. zation. In a statement to the South However, ChemChina has also made open up new markets… And I think China Morning Post, chairman Ning investments in numerous other coun- it will bring tremendous innovation, Gaoning stated that „In the future, tries in the BRI area, e. g., in Vietnam, tremendous growth to the western The Bottom Line we will stick to internationalization Israel, Bangladesh, Singapore, Saudi part of China.“ and strive to become a multinational Arabia and Russia. In pursuing BRI opportunities, What can chemical companies with company which is competitive in the Honeywell formed a dedicated team activities in China do to maximize the world market, taking advantage of called “East to Rest” that manages sa- benefit derived from BRI? For local the Belt and Road Initiative“. In fact, Impact on Chemical les and marketing to Chinese firms companies, ensuring good informa- Sinochem claims a leading role in the Production within China expanding abroad. Honeywell formed tion on current projects covered by BRI, stating on their website that the the initiative may be sufficient. For- Sinochem rubber business makes the The BRI may also lead to a shift of eign companies may have to partner company the pioneer in the BRI of the chemical production within China. with local players for a meaningful central government. At the 2018 Chinaplas, there was “Segments such as basic participation in BRI projects as they Wanhua also started expansion discussion of polymer resin produc- commodity and construction are not likely to be the main contrac- towards Europe early, acquiring the tion moving from eastern China to chemicals are likely to tors in major projects. Hungarian chemical company Bor- inland provinces. China´s largest Overall, the BRI may not be a very sod in 2011. The development of this plastics compounder Kingfa has an- benefit more from the BRI exciting business opportunity for for- plant is partly financed by a multi- nounced plans to build a new plant than specialty chemicals.” eign chemical companies as the Chi- million dollar credit line provided by in Chengdu, Sichuan while competi- nese project leadership and the focus China Development Bank, indicating tor China XD already has a plant in on infrastructure and construction government support. However, cur- Nanchong, Sichuan. Both companies projects limit the chances of multi- rently the company seems to focus its have invested in BRI areas outside of a partnership with a leading domestic nationals. Still, the initiative indica- investment more on the US — with China, e. g., in Dubai (China XD) and chemical service provider, Wison En- tes that China is supportive of global an MDI plant planned in Louisiana in India (Kingfa). gineering. The aim of the JV is to par- trade at a point in time when the US — than on the BRI area, indicating Multinational chemical companies ticularly target customers in regions takes a step in a different direction. that internationalization in general also see opportunities in projects re- covered by the BRI initiative. may be the main motive, rather than lated to the BRI. Covestro sees great potential for Kai Pflug, CEO, Management a specific promotion of the BRI area. BASF invested in a major MDI pro- its materials in the planned infra- Consulting — Chemicals, Shanghai, ChemChina has pursued a policy duction plant in Chongqing, Sichuan. structure projects, giving the example China of buying companies particularly in Admittedly, approval for this plant of working with Chinese companies Europe, culminating in the massive was already given in 2011, long before on waterborne polyurethane coatings [email protected] acquisition of Syngenta. This indica- the BRI was announced. How­ever, at solutions for urban rail and freight www.mc-chemicals.com

BASF and Sinopec to Build Second China Cracker Encouraging Talent Flow into GCC Chemical Sector BASF and Sinopec have signed a Me- nership between Sinopec and BASF The chemical industry makes up the in collaboration with its members. At morandum of Understanding (MoU) and the commitment to our custo- second largest manufacturing sector the 13th Annual GPCA Forum in Du- to expand their existing joint venture mers in China,” said BASF chairman in the Arabian Gulf region, producing bai, GPCA hosted the 9th edition of and build a second steam cracker in Martin Brudermüller. over $108 billion worth of products Leaders of Tomorrow, an initiative Nanjing, China. BASF-YPC’s existing cracker at per year with over 166,000 employ­ that provides university students en- The companies said the basic Nanjing has a capacity of 740,000 t/y ees in the Gulf Cooperation Council gaged in science, technology, engi- chem­icals provided by the additional ethylene with the site producing (GCC). The chemical sector is poised neering and mathematics (STEM) an cracker, which will have an ethylene around 3 million t/y of chemicals and for even more growth. To sustain this opportunity to learn about the sector capacity of 1 million t/y, will enable polymers for the Chinese market. growth and meet the challenges of and encourage them to start a career them to expand capacity at BASF- The jv posted sales of around 21 bil- the future, the industry needs to de- in chemistry and allied industries. YPC, their existing joint integrated lion yuan ($3 billion) in 2017 velop the right human resources with According to a recent GPCA re- “Verbund” site in Nanjing. BASF and Sinopec are also explo- new and more highly developed skills. port, the number of science gradua- “This additional investment into ring new business opportunities in The Gulf Petrochemicals and Che- tes, including chemistry graduates, a new steam cracker and the expan- battery materials due to the rising im- micals Association (GPCA) is taking reached more than 20,000 between sion of our BASF-YPC joint venture portance of alternative energy, espe- a lead role in the development of lo- 2007 – 2017, which accounts for 7% in Nanjing underline the strong part- cially in the automotive sector. (eb) cal talent in the Arabian Gulf region of all university graduates. (mr)

CHEManager | Regions & Locations Guide 21 A s i a

A New Way of Thinking Integrated Pharma Manufacturing Group ACG Creates a Single New Identity

Founded as Associated Capsules Group in 1964 by brothers Ajit and which would consolidate and reflect and Inspection divisions. Once we Jasjit Singh, Mumbai, India-based ACG today delivers end-to-end the group’s unified purpose through- had done this, it didn’t take long for out its diverse operations and enti- the whole organization to align itself manufacturing solutions for the pharmaceutical industry across con- ties. In doing this, we are also making to this segmentation. We ran a num- tinents. In five decades the company has expanded its global foot- it easier for the industry to under- ber of internal marketing and com- stand the full range of products and munication campaigns and believe print to over 100 countries. Its scope has grown from empty hard services we provide. the rebrand has been well received. capsule manufacturing to include equipment production, packaging, inspection, testing, research and development. In mid-October 2018, Which considerations and require- ACG claims to be the only supplier the integrated pharma manufacturing group announced the conso- ments led to ACG’s new structure? in the world offering integrated ma- lidation of its multiple businesses and regional brands into a single Was it a company-driven — inside- nufacturing solutions for the phar- out — or a market-driven — out- maceutical industry. How do you new ACG identity and its portfolio into four businesses: Capsules, side-in — approach? explain and justify this claim? Films & Foils, Engineering, and Inspection. CHEManager discussed P. Neve: The new structure came out P. Neve: The majority of suppliers only this strategic move with the company’s chief marketing officer, ­Peter of a marketing exercise to simplify supply into one or — at most — two of Neve, who has been leading the brand identity overhaul project. how we talk about our product range the four main segments which we op- — based on both internal and cus- erate in, so we are confident in mak- tomer inputs. We wanted to make it ing such a claim. We offer many inte- as easy as possible for customers, as grated solutions: consumables and CHEManager: Mr. Neve, what initia- Peter Neve: ACG had a large number well as potential customers, to under- equipment for the entire capsules ted the ACG brand identity overhaul of individual businesses, each with stand our full product range. This is manufacturing value chain and the project, why did you think a new their own identity. We felt the time how we ended up segmenting into same for tablets. We can offer special identity was needed? had come to create a new identity, Capsules, Films & Foils, Engineering incentives to customers buying a

“We are continuing to increase our global footprint.”

Peter Neve, chief marketing officer, ACG

22 CHEManager | Regions & Locations Guide A s i a

combination of products from us. We the benefit of our customers. Having The strapline reinforces the feedback remely proud of — and an indication have so many ways to help our cus- one supplier across the board creates we get from our customers that we of a hugely successful B2B marketing tomers get the most out of working a win-win solution for us and our cus- provide excellent, worldwide support campaign. with ACG. The huge range of skills tomers. For the customers, they bene- services. We are proud of our agile and technologies already encom- and responsive approach — ensuring passed by the team offers endless op- that their every need is met. Following the change of the com- portunities for our business. We also use the strapline as an im- pany structure, what will be the “We are dedicated to portant part of our internal commu- next strategic moves to expand creating an organization to nication. Today, it is the main focus of ACG’s market presence, technology Could you briefly summarize the core exploit synergies wherever our internal processes, development expertise and manufacturing and competencies in terms of skills and and growth programs. supply capabilities? Any invest- technologies of the four businesses? possible, to the benefit of ments in human, technology or dis- our customers.” tribution resources planned? P. Neve: In our Capsules division we ACG has a global footprint with loca- supply everything needed to fulfill a di- tions in over 100 countries. How sa- P. Neve: Over the next five years, ACG verse range of capsule requirements. tisfied are you with your presence­ in has plans for much of its talent to be In Films & Foils we are covering all re- fit from integrated support and service the different geographical pharma based outside of India. In line with quirements for reliable pharma pack- teams, which helps them to maximize markets from a brand awareness­ or this plan, we are continuing to in- aging solutions. The Engineering divi- manufacturing performance and effi- name recognition point of view? crease our global footprint for both sion provides everything needed to ciency. On our side, at ACG, we sell a our manufacturing facilities and local achieve superior manufacturing per- wider range of products to each cus- P. Neve: We are working hard to in- sales and support teams. This allows formance. And in the Inspection divi- tomer and can use our experience and crease the awareness of ACG in both us to provide improved services and sion ACG is covering all global pharma technologies to help customers bring the pharmaceutical and nutraceutical responsiveness to our customers on a serialization and inspection demands. better products to the market, faster. industries, especially in our key growth global basis. You will be seeing many markets. We are doing this through a more announcements about this over combination of targeted marketing the next year or so. It is an exciting Do you also see opportunities to lev­ Along with the consolidation into and PR campaigns for ACG overall, and time at ACG, and it is very satisfying erage synergies arising from your four key businesses ACG has intro- for each of our business segments. to be part of the team that is deliver- newly consolidated structure? duced a new strapline: Absolutely As an example, we recently crea- ing so much change, both within the Committed. What is ACG absolutely ted a very short corporate video to organization and to our customers P. Neve: We have massive synergies in committed to? explain our four main business seg- throughout the world. ACG overall — we are dedicated to ments and the scale of ACG in each creating an organization to exploit P. Neve: That is simple; we are abso- of these. This has already had over these synergies wherever possible, to lutely committed to our customers. one million views, which we are ext- www.acg-world.com

Indian Pharmaceutical Industry Attracting FDI

India enjoys an important position in Foreign Direct Investment (FDI) po- vestments of $396 million. In 2017, spending, rapid urbanization, and the global pharmaceuticals sector. The licy in the pharmaceutical sector in the sector witnessed 46 M&A deals rising healthcare insurance, among country is the largest provider of ge- order to allow FDI up to 100% under worth $1.47 billion. It is expected others. neric drugs globally. The Indian phar- the automatic route for manufactu- that the exports of the Indian phar- Going forward, better growth in maceutical industry supplies over 50% ring of medical devices subject to cer- maceutical industry to the US will domestic sales would also depend on of the global demand for various vac- tain conditions. get a boost, as branded drugs worth the ability of companies to align their cines, 40% of generic demand in the The drugs and pharmaceuticals $55 billion go off-patent between product portfolio towards chronic US and 25% of all medicine in the UK. sector attracted cumulative FDI in- 2017 and 2019. therapies for diseases such as such flows worth $15.83 billion between as cardiovascular, anti-diabetes, anti- April 2000 and June 2018, accor- depressants and anti-cancers that Market Size ding to data released by the Depart- Road Ahead are on the rise. ment of Industrial Policy and Promo- The Indian government has taken India’s pharmaceutical sector was va- tion (DIPP). Medicine spending in India is expec- initiatives to promote the pharma­ lued at $33 billion in 2017 and is ex- Between April and June 2018, the ted to increase at 9 – 12% CAGR bet- ceutical sector and has taken many pected to reach $55 billion by 2020. pharma sector in India witnessed pri- ween 2018 and 2022 to $26 – 30 bil- steps to reduce costs and bring down The country’s pharmaceutical exports vate equity and venture capital in- lion, driven by increasing consumer healthcare expenses. Speedy intro­ stood at $17.27 billion in 2017 – 18. In duction of generic drugs into the mar- 2018 – 19 these exports are expected ket has remained in focus and is ex- to cross $19 billion, according to a re- ©alexlmx - stock.adobe.com pected to benefit the Indian pharma port published recently by the India companies. In addition, the thrust Brand Equity Foundation (IBEF). on rural health programs, lifesaving drugs and preventive vaccines also augurs well for the pharmaceutical Investments companies. (mr)

The Union Cabinet has given its nod for the amendment of the existing

CHEManager | Regions & Locations Guide 23 MENA

©boule1301 - stock.adobe.com MENA Pharmaceutical Landscape Opportunities for Foreign Companies in a Rapidly Growing Market

The MENA (Middle East and North Africa) region is a largely untap- Government policy is also encoura- ped, yet potentially hugely fruitful part of the world for the pharma­ ging local manufacturing of drugs, as imports currently outweigh exports. ceutical industry, both as a sales region and for the establishment of However, the rise of non-communi- manufacturing facilities. cable diseases, and rising healthcare costs are likely to attract foreign in- vestment into the continent, as well as the further development of domestic Cara Turner, However, it is by no means a simple These include rapidly changing popu- manufacturing capabilities. UBM task for international firms to enter lation dynamics, where populations In Sub-Saharan Africa, the largest this market. This is due to a variety of are expanding, but also ageing. Addi- pharmaceutical manufacturing mar- factors, such as vastly differing spen- tionally, lifestyle changes have led to ket is found in South Africa, which ween foreign and North African firms ding powers amongst its constitu- higher incidences of non-contagious is currently worth $2.8 billion. In re- that have strong manufacturing and ent nations, the lack of a centralized chronic diseases and conditions — cent years South Africa has turned in­ distribution networks. pharmaceutical regulator, and vary- most notably cardiovascular diseases, creasingly to generic drugs, providing Governments are central to the ing preferences for branded products obesity and type-2 diabetes. a great opportunity for both domestic pharmaceutical industry in the MENA vs generics. and foreign manufacturers, with the region, with their Ministries of Health generics market forecast to grow by a regulating the industry and pro- Pharmaceutical Usage and robust 12% compound annual growth duct prices. In an attempt to cut their Market Share and Growth Government Policy rate (CAGR) during 2017–2022. healthcare spending and diversify their Another promising pharmaceu- economy, the Saudi government is ac- Consisting of approximately 22 coun- The current pharmaceutical markets tical industry is in Nigeria, with its tively trying to increase generic con- tries and with over 350 million in- in the MENA region vary greatly­ bet- compound growth rate projected to sumption through regulating imported habitants, the MENA pharmaceuti- ween different nations. For example, be around 9%, hitting $3.6 billion by branded drugs and promoting local ge- cal market was worth $36 billion in a high spending power and a cultu- 2026. Its population is also set to be- nerics production. This has seen some 2016, which represented 2% of the ral preference for expensive foreign come the third largest in the world by notable recent investment from foreign global market. This relatively low brands in Saudi Arabia has resul- the year 2050. firms into the country, including part- start­ing base is now seeing projec- ted in 85% of pharmaceuticals in the Countries in North Africa that nerships with domestic manufacturers, ted growth of 10%, vastly outstrip- country being imported, whereas in have managed to establish phar- as well as the building of new facilities. ping the current global growth rate Egypt, 90% of consumption is domes­ maceutical manufacturing industries The European excipient certifica- of 4 – 6% — even surpassing the tra- tically produced with a much greater­ in recent years include Morocco, Tu- tion organization, EXCiPACT, has now ditional “pharmemerging” economies market share for generics. nisia and Algeria. In 2015, the indus- issued certificates in Saudi Arabia, such as Brazil and China. Africa as a whole has grown its try in Morocco was able to cater for indicating not only the development pharmaceutical industry well over the 65% of the demand in the country of the manufacturing industry in the past decade, with an expected value (compared to 49% in Tunisia and 30% country, but also its ability to meet Demographics of around $40 billion by 2020. This is in Algeria). Pharmaceuticals produ- high quality standards. being driven significantly by urbani- ced in Morocco were also exported to These developments could repre- The growth of the pharmaceutical zation, with more economically deve- Europe, other parts of Africa, and the sent new trends developing over com­ market in the MENA region is driven loped cities meaning that more people Middle East. These capabilities could ing years for foreign pharmaceutical by a number of demographic factors. have the means to access medicines. lead to partnerships being made bet- firms. On one hand, these firms could

24 CHEManager | Regions & Locations Guide MENA

provide foreign direct investment could result in the implementation of facturing and export facilities across in any given cancer. One way in which (FDI) into the MENA region in order compulsory healthcare insurance po- Israel, North America and Europe. foreign firms could benefit countries to penetrate the market through local licies in order to reduce the burden However, there has been talk in re- facing an increased cancer incidence manufacturing. Another trend could on governments and pass costs onto cent months about Teva transitioning is through education and encouraging be the partnering with other dome- private hands. This, in combination away from generic drugs in the fu- the population to take diagnostic tests stic manufacturers or CMOs to li- with a potential free trade agreement ture, to focus more on branded drugs to address diseases earlier on. cense their products and bring them with India, could provide great op- and the development of new specialty There are also some difficulties to the region that way. portunity for branded generics ma- pharmaceuticals, in the wake of gro- faced when foreign companies attempt One of the crucial aspects of the nufacturers. Due to insurance provi- wing competition from manufactur- to introduce generics to the market in MENA pharma market is the exist­ ders pushing for cheaper drugs to be ers based out of countries with chea- the MENA region. Stringent registra- ence of the Gulf Cooperation Coun- used, plus a consumer preference for per labor costs. tion processes of a generic product cil (GCC). The GCC is a multinational a recognizable brand, locally produ- This could present an opportunity and even its packaging, means a lot of partnership consisting of Bahrain, ced branded generics, perhaps using for foreign businesses if Teva closes or effort is required to introduce a gene- Oman, Saudi Arabia, Kuwait, the UAE APIs from India,­ could thrive in co- sells some of their generics operations ric into a country. A lack of a centra- and Qatar, who came together in 2014 ming years. in the country, as they made $9.85 bil- lized regulator means that these pro- to establish a drug price harmoniza- Egypt has a strong manufactu- lion in generics revenue in 2016. tocols will also differ from country to tion strategy in order to standard­ize ring industry; it is the largest pro- country, resulting in a reluctance for drug prices within the region. ducer and second largest consumer some foreign businesses to attempt to Although there was a growing (after Saudi Arabia) of pharmaceuti- Future Trends enter the generics market. awareness in many populations in cals in the whole of the Middle East the region for personal health and and Africa. Prices of both OTC and The healthcare agendas of countries the benefits of over the counter phar- prescription drugs are controlled by in the MENA region are more heavily Conclusion maceuticals, domestic regulations the government. shaped by the government’s economic previously inhibited growth of some Another part of the Middle East development agenda than those in Eu- The diverse economic, political, cultu- markets. The introduction of the GCC region that has a strong established rope. For example, Saudi Arabia is try- ral, and public health profiles in the could see many of these regulatory pharmaceutical market at the mo- ing to move away from being a purely MENA region are mirrored by a highly barriers reduced, with an excellent ment is Israel. The market has been oil-based economy, and so growing varied market environment for the example being the free trade agree- projected to grow to $2.12 billion by their healthcare sector is a good way pharmaceutical industry. In general, ment between the GCC and India that 2020, at a compound annual growth of diversifying. However, this invest- prospects look good for both foreign will likely result in further generic rate of 3.9%, according to a study by ment is also, in part, out of necessity and domestic firms, with growing po- penetration into the Middle East mar- GlobalData. — 25% of Saudis now have diabetes, pulations and longer life expectancies ket. It may be the case that final pro- Israel already has a strong network as compared to just 10% of Americans. producing a much greater demand for ducts are imported into the region of academic and research institutes, This may not only be due to increasing pharmaceuticals in the Middle East from Indian generics manufacturers. R&D facilities and advanced medical Westernized and sedentary lifestyles, and North Africa, with huge growth in However, due to a high average spen- facilities. Advancing biotech will likely but also to genetic predispositions, the market projected over the coming ding power and a cultural distrust of be a driver of the market in future. and so encouraging innovative drug years. Local generic manufacturers, cheaper foreign made products, it is This contrasts to the other markets in discovery is very much in the country’s and potentially foreign generic firms perhaps more likely that APIs will be the region, many of which are emer- interest. This is a problem that is also from countries such as India, who imported, with local manufacturers ging and are only just starting to build facing Africa as well, as Western fast could set up manufacturing bases in providing the final product. up this infrastructure to support their food grows in popularity and more the region and export from there, are Another aspect to the Middle East pharmaceutical industries. people lead inactive lifestyles. likely to have good prospects. pharmaceutical region that could be Israel’s generics market, which ac- Another disease area that is incre- However, this may not be the case conducive for the growth of bran- counts for around 20% of the mar- asing in incidence is the rising onco- for all international firms looking to ded generics manufacturing is the in­ ket sales, is underpinned by Teva, logical concerns in the MENA region. enter the region; there is a current creasing pressure on governments to the world’s leading generics manu- This is linked to increasing life expec- preference amongst several MENA cut healthcare budgets. This pressure facturer, which owns several manu- tancy, as age is the largest risk factor countries to reduce imports of foreign branded drugs and increase both do- mestic production and consumption of generics. Nevertheless, foreign firms producing branded products have re- cently begun to enter the region with direct investment in manufacturing facilities, such as Sanofi in Saudi Ara- bia, and this may be one of the optimal ways to enter this potentially highly lucrative market.

Cara Turner, brand director, UBM, London, UK

[email protected] www.ubm.com

This article is based on the CPhI Pharma Insights report “MENA Phar- maceutical Industry: Background and Future Projections. The original publica- tion including references is available at bit.ly/MENA-Pharma.

CHEManager | Regions & Locations Guide 25 E v e n t s

European Chemistry Partnering (ECP) BIO International Convention 2018 The ECP is Europe’s leading in- The 3rd European Chemistry Part- The BIO International Convention, nations. The event, which in 2019 dustry speed dating for the chemi- nering will take place in Frankfurt hosted by the Biotechnology Innova- takes place in Philadelphia, PA/USA, cal industry and its diverse user in- on Feb. 26, 2019. The organizers ex- tion Organization (BIO), represents June 3 – 6, is known for its networking dustries. The event brings together pect more than 1,000 participants more than 1,100 biotechnology com- opportunities with 16,000+ attendees chemical start-ups and SMEs with from more than 30 countries all panies, centers, institutions and rela- and as a platform for initial business industry representatives and inves- over the world. ted organizations across the United­ and investment contact. tors as well as other stakeholders. www.ecp2019.com States and in more than 30 other http://convention.bio.org/2019

InformEx 2019 Chemspec Europe 2019 InformEx, the specialty chemical fo- InformEx is a marketplace designed The 34th edition of Chemspec Europe tion as well as conferences and se- cused zone at CPhI North America, to foster micro-communities where will take place June 26 – 27, 2019 in minars. The two-day event offers to take place April 30 – May 2, 2019, people of like interest can connect, Basel, Switzerland, one of Europe’s manufacturers, suppliers and distri- in Chicago, IL/USA, has a 30-year. learn, inspire, and become plugged major hubs for the fine and speci- butors of fine and specialty chemi- The integration with CPhI North into the centers of both the high- ality chemicals industry. Europe’s cals for a large range of applications America delivers an audience of value chemical and pharma indus- major sourcing and networking a dedicated marketplace to intensify sourcing and procurement professi- tries. event for the fine and specialty che- contacts and meet with buyers. onals from big pharma and beyond. www.informex.com micals industry includes an exhibi- www.chemspeceurope.com

I n d e x I m p r i n t

4chiral 19 Infraserv Höchst 28 Publisher: Wiley Reader Service: Wiley-VCH Verlag GmbH & Co. KGaA 65341 Eltville A.T. Kearney 6 Kingfa 20 A Company of John Wiley & Sons, Inc Tel.: +49 6123 9238 246 ACG 22 Laborchemie Apolda 19 Boschstr. 12, 69469 Weinheim, Germany Fax: +49 6123 9238 244 Air Liquide 18 Linde 18 Tel.: +49 6201 606 0 E-Mail: [email protected]

American Chemistry Council (ACC) 9 Management Consulting – Chemicals 20 Publishing Director Production Managers BASF 20, 21 Manufacturing Council of the Dr. Heiko Baumgartner Joerg Stenger BCNP Consultants 14 Confederation of British Industry (CBI) 12 Melanie Horn (Advertising) Product Management Oliver Haja (Layout) BioCampus Straubing 11 Merseburger Spezialchemikalien 19 + Managing Editor Ramona Kreimes (Litho) Bristol-Myers Squibb 16 Miltitz-Aromatics 19 Dr. Michael Reubold Elli Palzer (Titel) ChemChina 20 Minascent 19 Tel.: +49 6201 606 745 Chiracon 19 [email protected] Original Articles: Novo Nordisk 16 Specially identified contributions are the ChiroBlock 19 Organica 19 Editor-in-Chief ­responsibility of the author. Manuscripts c-Lecta 19 Dr. Ralf Kempf should be addressed to the editorial office. In- Orgentis 19 structions for authors­ may be requested from Tel.: +49 6201 606 755 CreativeQuantum 19 the publishing­ company. We as­sume no liabi- Oxea 9 [email protected] Croda International 12 lity for unsolicited, submitted manuscripts. PetroChina 20 Reproduction, including excerpts, is permit- Currenta 2 Pfizer 16 Media Consultants ted only with the permission of the editorial of- Dow 20 Thorsten Kritzer fice and with citation of the source. The pub­ PharmaServ 17 lishing company is granted the exclusive, Emp Biotech 19 Tel.: +49 6201 606 730 Praxair 18 [email protected] space and content restricted right to arbitra- Enzymicals 19 rily use the unmodified work/editorial contri- SABIC 20 bution for all purposes for itself and for busi- European Chemicals Agency (ECHA) 10, 12 Jan Kaeppler nesses that have an interest in the publishing Shanghai Chemical Industry Park European Chemical Industry Council Tel.: +49 6201 606 522 company as defined by company law as well Industrial Gases Company (SCIPIG) 18 [email protected] as to transfer the right of use to third parties. (CEFIC) 10, 12 This right of use applies to both print and Siegfried 7, 16 EW-Biotech 19 Team Assistant electronic media including the internet and Sinochem 20 data banks/data media of all types. FEW-Chemicals 19 Bettina Wagenhals All names, designation, or signs­ in this issue, Sinopec 20, 21 Tel.: +49 6201 606 764 Germany Trade & Invest (GTAI) 13 whether referred­ to and/or shown, could be [email protected] Sirio Pharma 18 trade names of the respective owner. GlaxoSmithKline 16 Synthon Chemicals 19 Lisa Rausch Gulf Cooperation Council (GCC) 21 Printed by: DSW GmbH, Tel.: +49 6201 606 316 Gulf Petrochemicals and TGZ Bitterfeld-Wolfen 19 Flomersheimer Straße 2–4, [email protected] Chemicals Association (GPCA) 21 UBM 24 67071 Ludwigshafen Printed in Germany Hapila 19 UK Chemical Industries Association (CIA) 12 Beate Zimmermann

Havenbedrijf Antwerpen 3 UK Chemistry Council 12 Tel.: +49 6201 606 316 Title – Copyright [email protected] © Marco2811 - stock.adobe.com Honeywell 20 UK Department for Exiting the IBZ-Salzchemie 19 European Union (DExEU) 12 Freelancer India Brand Equity Foundation (IBEF) 25 Wanhua 20 Dede Williams, Elaine Burridge, Sean Milmo Ineos 12 World Economic Forum 4

26 CHEManager | Regions & Locations Guide BillionPhotos.com - Fotolia.com [email protected] Tel.: +49(0)6201606745 Publishing Manager Dr. MichaelReubold Editorial CHEManager.com FINE & SPECIALTY CHEMICALS APRIL [email protected] Tel.: +49(0)6201606755 Managing Editor Dr. RalfKempf

DISTRIBUTION & LOGISTICS MAY [email protected] Tel.: +49(0)6201606730 Advertising SalesManager Thorsten Kritzer Sales

PHARMA

[email protected] Tel.: +49(0)6201606522 Media Consultant Jan Kaeppler & BIOTECH SEPTEMBER

REGIONS & LOCATIONS GUIDE DECEMBER OUR CORE COMPETENCY: KEEPING THINGS RUNNING.

We are Infraserv Höchst. We’re here for you if you want to develop your site or are looking for comprehensive support for your business. Being leading experts in chemical industry services, we can help you make your organization even more successful or unleash hidden potential. Our job as your partner is to keep everything running. Because that allows you to take your company even farther. More at: www.infraserv.com

Schiffelholz_Englisch_ChemManager_240x330.indd 1 05.11.18 13:14