November 2003 CPhI/ICSE - A Huge Success in Frankfurt CPhI/ICSE was held in Frankfurt last week, approximately 13 years after the first CPhI which was also held in Frankfurt. Thirteen years ago, there were 16 exhibitors and 250 visitors. Last week, there were a record 1,359 exhibiting companies (up from 1,247 last year). While CMP Information, the organizers of CPhI, has not yet released visitor figures for last week's show, the number of visitors by the end of the second day had already surpassed the number of visitors at last year's show. Total attendance of 20,000 is expected this year. Simon Foster, General Manager, CMP, said "You cannot fail to be impressed with the high quality of all the stands and the general presentation of this exhibition." CPhI is "proud to be a partner in the continued growth of the pharmaceutical industry."   Famous Quotes of the Month - The answers aren't important really... What's important is knowing all the questions. (Zilpha Keatley Snyder) - It is less important to redistribute wealth than it is to redistribute opportunity. (Arthur Vandenberg) - Genius begins great works; labor alone finishes them. (Joseph Joubert) - There's a difference between a philosophy and a bumper sticker. (Charles Schulz) - There is only one thing people like that is good for them: a good night's sleep. (Edgar Watson Howe) Why Does Our Voice Change When We Breathe Helium? The pitch of the sound we produce is related to the vibration frequency of our vocal cords; the lower the frequency, the lower the pitch. Helium is less dense than air because it has a molecular wt of 4. Nitrogen, which makes up 78% of the air we breathe, has a molecular wt of 14. Because of the reduced density of helium, our vocal cords vibrate much faster (at a higher frequency) through helium than they do through air producing sound at a higher pitch. Interestingly, patients with breathing problems are often treated with a mixture of helium because their lungs don't have to work as hard to process it. Crompton to Reduce Workforce by 7 Percent Crompton will cut approximately 7 percent (375 employees) of its workforce in order to save $40 million per year. The company will take a $15 million to $18 million charge over the third and fourth quarters. The reductions will eliminate corporate overhead associated with the OSi business that Crompton sold to General Electric. China Investments Planned by BOC In conjunction with several joint venture partners, BOC Group will invest over $100 million in various air separation unit projects in China during the next few years. BOC-Tisco, the joint venture between BOC Gases and Taiyuan Iron and Steel Corp. (Tisco) will spend $82 million on two new air separation units in Shanxi province which are expected to be on-stream by the end of 2005 and will supply 1,400 tons-per-day of oxygen to the Tisco plant. Hong Kong Oxygen (HKO), BOC's joint venture company in southern China, will also build two more air separation units by the end of 2004 to add approximately 400 tons of production to its operations. BOC's wholly owned subsidiaries in Suzhou, China have also initiated a $10 million pipeline construction project. Great Lakes to Reduce its Workforce by 9 Percent Great Lakes Chemical expects to save approximately $30 million over the next year by reducing its workforce by 400 (9 percent) and consolidating its polymer additives facilities. The company will take a $120 million (Euro 101.7 million) charge, of which $30 million will be paid in cash and half will be recognized in the third quarter. The manufacturer of flame retardant chemicals, polymer stabilizers, fire suppression chemicals and performance chemicals is taking these actions to improve parts of the business that face "the greatest economic challenges," according to chairman, president and CEO Mark Bulriss. Merck to Cut 4400 Jobs Despite a 6 percent gain in third quarter income, Merck & Company announced plans to reduce its workforce by 4400 jobs, including 3200 staff and 1200 contractor positions, in order to remain competitive. The company will also implement a new distribution program for US wholesalers, improve its procurement activities and consolidate its transaction processing and services to generate about $275 million in annual savings. PolyOne to Sell Off Businesses PolyOne has placed its elastomers and performance additives (sales of $364 million in 2002), engineered films (sales of $153 million in 2002) and specialty resins (sales of $100 million in 2002) units up for sale in order to improve profitability and reduce debt by $200 million to $300 million. Since its formation in 2000 through the merger of Geon and M.A. Hanna, the company has closed 16 U.S. plants, cut an additional 400 jobs and refinanced its nearly $800 million in long-term debt. Clariant Pharmaceuticals Appoints New Head Norbert Dieterich, previously CEO of intermediates manufacturer SF-Chem (Prateln, Switzerland), has replaced David Maddox as head of Clariant Pharmaceuticals. Maddox left the company. Hercules CEO Resigns to Accept Nalco Position William Joyce, recently chairman and CEO for Hercules, has been appointed as the CEO of Nalco by The Investor Group, which expects to complete the $4.2 billion (Euro 3.5 billion) acquisition of the water treatment company from Suez in the fourth quarter. Bradley Bell, who has accepted the position of chief financial officer (CFO), previously served with Rohm and Haas as its CFO. In response to Joyce's resignation, Hercules appointed Craig Rogerson, president of Hercules' FiberVisions and Pinova divisions and corporate vice president of global procurement, as acting president and chief operating officer. The company has also initiated a CEO search. ICI Gets New Head Lord Trotman, group chairman of ICI, will retire at the end of December and be replaced by Peter Ellwood, who was named as Trotman's successor in June. In a separate announcement, ICI appointed David Hamill, currently with Royal Philips Electronics, as the new chairman and chief executive of its paints business. Hamill replaces ICI chief executive John McAdam, who has been serving as both group chief executive and chairman and chief executive of ICI Paints since succeeding Brendan O'Neill last April. Brazil to Experience Increased Investment by International Chemical Companies Paris-based consulting group Solving International expects investment in the Brazilian chemicals industry by major multinational chemical firms to increase as domestic demand continues to rise. International companies will most likely form strategic alliances with local players or make targeted investments in specific segments of the Brazilian chemical industry such as specialty chemicals. The consulting firm also predicts that consolidation among Brazilian petrochemicals firms will continue. China to Reduce Export Rebates China's well established tax rebate system that gives companies rebates on taxes paid for exported goods will soon be changing. This long-standing rebate system will be modified in order to reduce the significant cost burden on the national government and ease international concerns about China's rising trade surplus and pressure for revaluation of the yuan. The new rates will be effective in 2004, and local governments will have to pay 25 percent of the tax rebates. Steel, organic and inorganic chemicals, plastic and rubber, clothing and textiles, and leather products are some of the goods that will be granted a 13 percent rate, while coal and fertilizer exports will be given an 11 percent rate. The export rebate rate for aluminum, molybdenum, nickel and iron alloy will be 8.0 percent, while that on copper, coking coal and coke will remain 5.0 percent. Rebates on refined ore, crude oil, timber, pulp and cashmere will be cancelled. Fourth Quarter Conditions Remain Challenging As 2004 approaches, the outlook for the chemical industry remains unclear. Despite selected areas of high performance, key factors including high raw material costs and slow demand growth will lead to a difficult fourth quarter and beyond. Leading companies such as Celanese, Rhodia and ICI have all indicated that it is not possible to predict with any certainty the near term conditions for chemicals. Asia has been one area experiencing growth, and executives point to possible recovery in the U.S. as a potentially encouraging sign. To be successful in this environment, all companies are focusing on improving productivity and financial soundness. China Becoming Key Supplier of Fine Chemicals for Pharmaceuticals The market for fine chemicals used in the pharmaceutical industry is estimated to be $60 billion out of a total fine chemicals market valued at $80 to $90 billion. Once dominated by European players, much of the manufacturing of basic intermediates has shifted to Asia. Many Chinese companies have been founded by people educated in the U.S. and with experience in top U.S. drug companies. Initially, companies were located in industrial regions around Beijing, Shanghai and Guangzhou. Today, fine chemical manufacturers are moving to more rural provinces such as Anhui, Jinzhou and Hubei, where wage and production costs are significantly lower. Domestic demand in China has allowed these manufacturers to weather the difficulties facing western markets. GE to Acquire Amersham General Electric (GE) offered $9.5 billion (Euro 8.2 billion) for UK company Amersham, and has plans to combine the diagnostic imaging and life sciences firm with its GE Medical activities to form GE Healthcare Technologies. GE will issue new shares to complete the all share takeover of the company, which Amersham's board has recommended to its shareholders. The deal is subject to approval by U.S. and European authorities. William Castell, currently CEO of Amersham, will become CEO of the new entity, join the GE board and also take on the role of vice chairman of GE. India's Share of ICI India Goes to APIL The Indian government accepted the Rs770.9 million ($17.0 million / Euro 14.6 million) bid of Asian Paints (India) Limited (APIL) for its 9.2% equity stake in ICI India. A total of six bids were offered, including one from ICI PLC, which holds 50.83 percent of ICI India. The sale was to close by October 29th. The acquisition by APIL should not impact existing management since ICI PLC has a clear majority in the Indian firm. Singapore Looks to Fine and Specialty Chemicals Singapore's chemical industry contributed about 25 percent of the country's manufacturing output in 2002, focusing mainly on commodity chemicals. Recently, Singapore has made efforts to increase its production of more value added fine and specialty chemicals. The sector is worth approximately S$4.5 billion ($2.6 billion) and is expected to rise as companies like Akzo Nobel (S$37 million quaternary ammonium surfactants plant) and Faci (S$10 million fatty acid esters plant) invest in new facilities. Both established and start-up companies have research centers and utilize Singapore's services for supporting innovation. The country is taking initiatives to create a reliable and stable supply of qualified personnel and the new $45 million Banyan Logistics Park on Jurong Island is an integrated park designed to serve the needs of the chemical industry. U.S. Cosmetics & Toiletries to Experience Modest Growth According to Impact Marketing Consultants, the U.S. cosmetics and toiletries industry will grow to $34.3 billion by 2007. Those products based on natural ingredients will experience strongest growth. Cosmeceuticals account for 29 percent of the market value, followed by skin care at 26.5 percent. Facial treatments, men's skin care, and hand and body lotions and creams together will grow the fastest, increasing 28 percent. Skin care products will be close behind, experiencing a 25 percent increase. The five major players in the C&T market are Procter & Gamble, L'Oréal, Unilever, Estée Lauder and Avon. (Image courtesy of P&G) U.S. Shines as Largest Suncare Market Valued at $1.15 billion in 2002, the U.S. suncare market is the largest in the world, and is expected to grow 10 percent to $1.26 billion by 2007, according to Datamonitor PLC. On a per capita consumption basis, the U.S. ranks third behind Spain and Switzerland, and is expected to rank fifth behind Finland and Italy by 2007. Consumption of suncare products by tourists leads to the surprising figures. Datamonitor also reports that despite the rising use of suncare protection products in the U.S., the country has the highest incidence of aggressive skin cancer. Bayer Sells Millennium Pharma Stake Bayer sold its 19.8 million shares in Millennium Pharmaceuticals to investment bank CSFB for over $300 million (Euro 254 million). CSFB will resell the shares. Bayer will use the proceeds to reduce its net debt. Bayer initially purchased the shares in 1998 when the two companies established a five year research agreement which has ended. Bayer HealthCare will have extended access to a pool of 280 additional proprietary targets for up to seven years. Dow Corning, Rohm and Haas Form Alliance Dow Corning Corporation and Rohm and Haas Company announced the formation of a strategic alliance to develop innovative materials and services for wound care, transdermal and topical drug delivery and related medical device applications. New products will combine the multifunctional benefits of silicones and the versatility of acrylic technologies. Dow Corning is underscoring its investment and commitment to the healthcare industry with the alliance, while Rohm and Haas gains access to new customers. ICN Pharmaceuticals to Slash Workforce ICN Pharmaceuticals plans to reduce its workforce by 50 percent over the next five years to improve productivity and save $150 million to $200 million (Euro 128.1 million to Euro 170.9 million). The company has not set any deadlines yet for selling 8 manufacturing plants employing 1300 to 1400 people. The company will maintain five manufacturing sites in Mexico, Puerto Rico, Poland, Switzerland and China. Idec Wins Zevalin Judgment A U.S. judge ruled that patents filed by Corixa Corp., GlaxoSmithKline Plc (GSK) and the University of Michigan cannot be used to block sales of Idec's non-Hodgkin's lymphoma Zevalin treatment. The district judge stated that "inequitable conduct and deceit permeated the application process". Corixa and GSK introduced their competitive product Bexxar in late July. Corixa said it will appeal the ruling. Pfizer Wins Patent Suit by Teva The New Jersey district court ruled that Pfizer's claims on its formulations patent for the anti-hypertension drug Accupril, which expires in 2007, are valid and ruled against generic drug manufacturer Teva. Teva was previously awarded a 180-day marketing exclusivity for generic Quinapril HCl tablets because it was the first company to file an abbreviated new drug application (ANDA) with a paragraph IV certification. Teva Acquires Sicor Generic pharmaceutical manufacturer Teva (Israel) successfully offered $3.4 billion (Euro 2.9 billion) for U.S. generics company Sicor. The acquisition adds Sicor's generic injectable business and biogenerics capabilities to Teva's oral dose generic drugs expertise. Sicor's active pharmaceutical ingredients business will also expand Teva's product offerings. The deal is subject to approval by holders of a majority of Sicor's shares and clearance by antitrust authorities in the U.S., Mexico and Lithuania. DuPont Purchases Antec International UK biosecurity company Antec International, which manufactures disinfection and cleaning agents for human and animal health safety in protection against food chain contamination and the spread of disease, was acquired by DuPont for an undisclosed sum. DuPont has supplied Antec with the active ingredient in many of its products for greater than 15 years and plans to integrate the company into its chemical solutions enterprise business. Regulatory Approval Process Needed for Generic Biologics By 2006, biopharmaceuticals raking in approximately $10 billion per year in sales will lose patent protection in the U.S. Generics manufacturers are looking to introduce their versions of these drugs, but the regulatory approval process is anything but clear. In Europe, CPME (Brussels), a standing committee of doctors, has already given Sandoz a "positive opinion" on a generic version of the growth hormone Somatropin. In the U.S. though, the FDA has yet to establish a regulatory approval process. Many countries agree that harmonized regulations are necessary, but there are countries with less stringent intellectual property regulations that are currently allowing the manufacture of generic biologics. Adding to the regulatory difficulties, generics firms will have to deal with patent issues around both the drug and the production process, which will make it more difficult for them to legally introduce their versions of biologic drugs. Vaccine Manufactures Optimizing Production The vaccine market has grown rapidly at an average 12 percent per year since 1993, with growth from 2001 to 2002 actually exceeding 26 percent. Aventis Pasteur estimates the vaccines market was worth $9.4 billion in 2002 and expects it to triple in value by 2012. In addition, the demand for more specialized and more costly vaccines is increasing along with the normal requirements for traditional, lower priced pediatric vaccines. Manufacturers are facing tight capacity as a result and are turning to outsourcing partners and looking to emerging biotechnology processes to meet demand. Vaccine makers are also using acquisitions to boost production efficiencies. Bayer CropScience and Monsanto Resolve Disputes Bayer CropScience and Monsanto signed an agreement resolving several pending lawsuits and patent disputes so that both companies could focus on new product development and meeting customers' needs in a more positive business environment. The agreement includes the cross-licensing of technology for certain herbicide tolerant crops and several non-exclusive, royalty bearing licenses for use of various technologies. Financial details of the agreement were not disclosed Chey Family Increases Control over SK Corp Members of the Chey family and other affiliates of the SK Group have purchased additional shares of SK Corp in order reduce the possibility of losing control of South Korea's major refiner and petrochemical manufacturer. With the new shares, the SK Group and the Chey family now have at least a 16.18 percent voting stake in SK Corp. Chairman Chey was recently released from prison while he appeals a three-year sentence related to the accounting scandal at SK Global. Domestic creditors fear that if the Chey family loses control of SK Corp., the billion-dollar bailout of SK Global will fall through. In addition, foreign investment in SK Corp. has increased dramatically, causing speculation that major foreign investor Sovereign will form a consortium of investors to try remove Chey and his allies from the board. Newly Integrated Hungarian Petrochemicals Company MOL to be Privatized The Hungarian government will sell off its 22.7 percent stake in the oil, gas and petrochemical group MOL through a private placement and a domestic public offering, according to state privatization agency APV. Sale of the first 12.5 percent stake is expected to be completed by December. Separately, MOL will be integrating several businesses with majority-owned Slovakian refiner Slovnaft and anticipates annual savings of $80 million to $90 million (Euro 69 million to Euro 77 million) by late 2005. Slovnaft's chief executive, Vratko Kassovic, will head up the new petrochemicals division. A joint management team will be fully in place by January 1, 2004. India to Become Third Largest Polymer Market By 2010, India will become the world's third largest consumer of polymers behind the U.S. and China, according to Kishor Jhalaria, vice president of business development for Reliance Industries Ltd (RIL). Consumption is expected to experience continued double-digit growth and rise from 3.55 million tonne in 2002 to 2003 to 7.28 million tonne in 2006 to 2007, and nearly double that figure to 14 million tonne by 2011 to 2012. CPChem and Lyondell Will Withdraw from ACC Chevron Phillips Chemical (CPChem) and Lyondell Chemical announced that they will withdraw from the American Chemistry Council (ACC). These announcements follow the withdrawal of Huntsman in August. CPChem indicated that the association must achieve "substantial improvement" in its "operational efficiency and advocacy efforts" before it would consider returning as a member. Lyondell had "concerns and dissatisfaction with ACC's priorities, governance practices and efficiencies." HPLC Market Strong The high performance liquid chromatography (HPLC) market is valued at approximately $3 billion, with an annual growth rate of 8 to 10 percent, according to Tony Magann, CEO of Selerity Technologies. It is estimated that nearly 230,000 HPLC devices are currently in use worldwide, with about 80,000 in Europe. Today HPLC is used for separation, identification, purification, and quantification of compounds, with pharmaceuticals being the biggest end-use market and accounting for 35 percent of all instruments used. According to Magann, typically 30 percent of instruments are replaced each year. Leavitt Approved as EPA Head Utah Governor Michael Leavitt was confirmed as head of the EPA by the U.S. Senate, gaining bipartisan support in an 88 to 8 vote. Leavitt replaces Christie Todd Whitman, who resigned in June. In This Issue Featured Article Famous Quotes Imponderables Companies Personnel Business/Finance Fine & Specialty Chemicals Pharma Biotech Agrochemicals Commodity Chemicals Plastics General Corporate HQ: 9101 LBJ Frwy., Suite 310 Dallas, TX 75243 USA Tel: (214) 349-6200 Fax: (214) 349-6286