September 2003 Famous Quotes of the Month - People are in greater need of your praise when they try and fail than when they try and succeed. (Bob Mowad) - Misers aren't fun to live with, but they make wonderful ancestors. (David Brenner) - The weak can never forgive. Forgiveness is an attribute of the strong. (Mahatma Ghandi) - Some have been thought to be brave because they were afraid to run away. (Thomas Fuller) - A wise man knows everything; a shrewd one, everybody. (Anonymous) BASF To Reorganize North American Operations BASF will restructure its North American operations to achieve annual savings of $250 million. The company will cut 1000 service function jobs by the end of 2003 to reduce costs by $100 million per year. A second phase of restructuring involving the consolidation of North American production and the elimination of poorly performing product lines will bring an additional $150 million in annual savings by 2006. Eastman Looking To Improve Selected Businesses Eastman Chemical Company is considering several options including restructuring, divestiture and consolidation to improve the performance of its coatings, adhesives, specialty polymers and inks businesses. The company plans to improve the unit's earnings by $50 million in 2004 with a future annual earnings increase of $75 million to $100 million. J.P. Morgan has been hired to evaluate alternative actions, and some steps are expected to be implemented before the end of 2003. GenTek's Reorganization Plan Opposed by Honeywell According to an objection filed by Honeywell, Gentek's bankruptcy plan does not include necessary information on how general unsecured claims will be handled. Honeywell holds such unsecured claims against the General Chemical Group, a subsidiary of GenTek. The claims revolve around environmental liabilities at several General Chemical sites previously owned by Honeywell. In a separate action, both Honeywell and Sunoco filed objections regarding the proposed closure of a GenTek sulfuric acid plant at Claymont, DE. The two companies state that the closure would result in a breach of their contracts with GenTek. PCB Cases Settled Solutia, Inc., Monsanto and Pfizer agreed to pay the Abernathy and Tolbert plaintiffs in Alabama $600 million in cash to settle claims against the three companies regarding polychlorinated biphenyls (PCBs). Monsanto, which spun off Solutia in 1997, will be responsible for contributing $390 million, and Solutia will pay $50 million over 10 years. Commercial insurance from Solutia, Monsanto and Pfizer will provide another $160 million. Pfizer will also initiate community health projects for low income residents of Anniston and Calhoun Counties in Alabama. Pfizer is involved because of its recent acquisition of Pharmacia Corp., which purchased pharmaceutical assets from Monsanto in 2000. Solutia will be able to reorganize its finances and avoid bankruptcy now that this deal has been reached. Chairman of SK Global Resigns But Remains on Board of SK Corp Son Kil-seung has resigned as chairman of SK Global in order to allow for the appointment of a new board of directors for the company. Son and nine other SK Global board members were convicted of accounting irregularities. Son has not indicated that he will resign from the board of directors of SK Corp., South Korea's major refiner and petrochemical manufacturer. The largest shareholder of SK Corp. has demanded the resignation of Son, SK Corp. chairman Chey Tae-won and SK Corp. president Kim Chang-keun from the board of directors. Minority shareholders have filed a legal challenge to prevent SK Corp's involvement in the bailout of SK Global following the scandals. French Chemical Industry to Receive Compensation for Limiting Power Use Very hot weather in France this summer limited the availability of cooling water for the country's nuclear power plants. The French chemical industry, and others, voluntarily cut back power consumption to reduce any possible environmental damage and to allow for greater consumer usage of air conditioning. The national energy group Electricite de France (EdF) provides compensation to companies for loss in production caused by reduced availability of power. Most chemical companies cut back power consumption 20 to 25 percent this summer German Chemical Industry Association VCI Sees Brighter End to 2003 According to the German chemical industry association VCI, the recession in the German chemical industry appears to have reached bottom in May. VCI credits increasing consumer confidence in the U.S. and continued economic growth in Asia for the turnaround. Potential growth in central and Eastern Europe could add to the positive upswing for the German chemical industry. The European Union economy remains soft however, and this fact, combined with increasing crude oil prices, has kept VCI from modifying its forecast of 0.5% production growth for the full year 2003. Imports to European Union Rise in First Five Months While Exports Remain Flat According to a report released by the European Union's statistical office Eurostat, EU chemical exports remained flat at Euro64.2 billion ($72.3 billion) in the first five months of 2003 compared with the same period last year. Chemical imports were up 2 percent at Euro34.8 billion, and the trade balance fell to Euro29.3 billion from Euro30.2 billion. Online Chemical Sales On the Increase The American Chemistry Council reports that online sales grow 42 percent from $16 billion in 2001 to $23 billion in 2002. Basic chemicals accounted for 48 percent of e-business transactions. According to AMR Research, ChemConnect is the leading online chemical industry exchange, followed by industry consortium Elemica. Many companies also conduct e-business through their own private portals. South Korea Deals With Strike Demanding a 30 percent rise in cargo fees for cement bulk trailers and containers and an exemption from having to pay toll fees, approximately 30,000 truckers went on strike at South Korean ports in late August. Major chemical companies felt they could withstand several days of a strike before feeling a strong impact. According to the Ministry of Maritime Affairs and Fisheries (Momaf), many truckers returned to work after one week despite the continued strike, and the two major ports of Busan and Gwangyang were operating close to normal capacity. US Chemical Industry Faced With High Gas Prices Gas industry officials are warning the chemical industry that this winter will bring shortages and high prices for natural gas. The Natural Gas Supply Association has requested that Congress streamline the permit process for exploration and drilling on Federal lands in the Rocky Mountains, but sees no immediate correction of the situation. FDA Approves Bayer's Gamunex The FDA approved Bayer Biological Products' Gamunex for the treatment of hereditary immune disorders. Gamunex will replace Gamimune, one of the top five drugs marketed by Bayer. Gamimune has experienced declining sales due to competition from Baxter International's Gammagard. Gamunex is expected to be available within the next two months, and Bayer has indicated it will eventually phase out all Gamimune production once Gamunex has received approval worldwide. FDA Approves CRESTOR The FDA approved AstraZeneca's cholesterol lowering drug CRESTOR (rosuvastatin calcium) for the treatment of lipid disorders. A member of the new statin (HMG-CoA reductase inhibitors) class of drugs, CRESTOR has been shown to lower LDL (low-density lipoprotein)-cholesterol by up to 63 percent while increasing HDL (high-density lipoprotein) significantly. The value of the worldwide statin market has been valued at $20 billion with an annual growth rate of approximately 13 percent. FDA Approves Levitra for Treatment of Impotence The FDA approved the new drug Levitra for treatment of erectile dysfunction. Levitra, marketed by Bayer and GlaxoSmithKline, is an oral PDE-5 inhibitor and competes directly with Pfizer's Viagra. The new drug has the potential to be a blockbuster, with sales predicted to surpass $1.13 billion (Euro1 billion). Drug Companies Invest Heavily in Pharmaceutical Market Research Average spending by pharma companies totals bout $7.1 million for market research that supports a developing drug, and some go as high as $26 million per candidate, according to a recent report from Cutting Edge Information. Only 28 percent of spending is during the pre-launch phase. The report suggests that companies who invest more in early market research can strategically position their products and grow the market before the drug is even launched. Novartis Introduces Generic Prilosec to U.S. Market Novartis has launched through its generics subsidiary Sandoz a generic version of AstraZeneca's ulcer drug Prilosec (omeprazole) in the U.S. AstraZeneca is responding with legal action to protect its patent position. Novartis has stated that it is not infringing on any existing patents. AstraZeneca recently sued Mylan Laboratories for selling a generic version of Prilosec in the U.S., and has successfully blocked the marketing of omeprazole in the U.S. by three other companies. Sales of Prilosec in the U.S. reached $2.85 billion (Euro2.53 billion) in 2002 and approximately $607 million in the first six months of 2003. WTO Reached Accord On Generics Developing nations that cannot manufacture critical drugs for the treatment of Aids, malaria and tuberculosis will be able to get cheaper generic versions of these drugs as the result of an agreement reached by the World Trade Organization (WTO). Certain patent rights held by Western drug manufacturers will be waived so that generic drug companies can export cheaper versions of the drugs to poor countries that are fighting epidemics of these diseases. The U.S. trade association Pharmaceutical Research and Manufacturers of America (PhRMA) praised the agreement, indicating that patent rights for developing medicines will be protected while the needs of poor countries will be met. Relief organizations disagree and suggest that the agreement still sets up many legal, economic and political barriers for getting medicines to developing nations. China Textile Industry Booming But Still Has Issues China is currently estimated to handle 25 percent of global fiber processing and be responsible for one seventh of global textile and apparel exports. These numbers are expected to grow after 2005, when textile quotas are removed as part of the free trade promised to China when it joined the World Trade Organization (WTO). Industry experts predict China will quickly gain 65 to 75 percent of the U.S. apparel market alone. The Chinese industry is currently dealing with modernization of a highly fragmented industry, overcapacity that is driving prices downward, a shortage of raw materials and the need to produce high-end products rather than just lower quality goods. In addition, many countries including the U.S., may take action to limit imports of Chinese products despite the country's status as a member of the WTO. Implementation of safeguard actions, requirement of higher standards, and/or stressing qualification of suppliers (to eliminate companies that employ child labor or provide unhealthy working environments) are all possible courses of action. Custom Manufacturing Market for Pharma Undergoing Transition Arthur D. Little reports that the pharma custom manufacturing market remains sluggish and has experienced significant declines in both earnings and profitability. In addition, the slight recovery initially anticipated for 2003 is unlikely to occur. Current market conditions include overcapacity, decreasing demand and increasing price competition, and it appears that the pharma custom synthesis market has become more of a commodity business. Many companies are responding by streamlining their cost structures (reducing headcount and shutting down excess and antiquated capacity), reducing capital expenditures (focusing on upgrading existing equipment rather than expanding) and looking for new customers in other fine and specialty chemicals sectors. Growth in Surfactants Driven by Increasing Applications in Household Products The North American market for surfactants used in consumer products reached a value of $3.6 billion dollars and a volume of 4.375 billion pounds (lb) in 2002 and will grow at 3 percent per year through 2001 2010, according to Colin A. Houston & Associates (CAHA). Increasing demand for "ultra" laundry detergents, which have much higher concentrations of surfactants, will drive the growth. Surfactant use in personal care is declining as consumers switch from traditional soap bars to other alternatives. (Photo courtesy of Procter & Gamble) Holding Company Buys Hickson & Welch from Arch Chemicals The U.K. based private equity firm Dunedin Capital Partners Ltd. has purchased fine chemicals and custom manufacturer Hickson & Welch Ltd. from Arch Chemicals for $18 million (£11 million). With the sale Arch completes its plan to divest all non-strategic assets gained in its acquisition of Hickson International PLC in 2000. Hickson & Welch posted 2002 sales of $64 million (£40 million) in 2002. Honeywell Attempt to Block Electronics Deal Between Air Products and Ashland Denied The Delaware State Chancery Court denied Honeywell's request for an injunction to stop Air Product's acquisition of Ashland's electronic chemicals business. Air Products expected to complete the $300 million (Euro272 million) acquisition by the end of August. Honeywell responded by reaffirming that Air Products must comply with the requirements of its strategic alliance with Honeywell and indicated that the judge wants a trial to be held in the near future on the merits of Honeywell's lawsuit. Honeywell claims that the strategic alliance prohibits Air Products from selling Ashland's products instead of Honeywell's. Nanomaterials Market Poised for Growth The U.S. nanotechnology market is currently valued at $385 million and is predicted to reach $3.5 billion by 2008 and $20 billion by 2013, according to Consulting Resources Corporation (CRC). Most activity in nanotechnology is taking place within smaller companies, many of whom have formed alliances with major chemical firms such as Honeywell, DuPont, BASF, GE, Bayer, Rohm and Haas, DSM and Mitsubishi. Some companies like Degussa have their own active programs. Metal oxides, nanoclays and carbon nanotubes are the leading classes of nanomaterials already commercialized or in advanced development. Applications for nanomaterials include sunscreens, electrically conducting coatings and plastic composites. Future markets include electronics, food packaging, industrial processing and others, reports CRC. Outsourcing of Pharma Dosage Manufacturing and Packaging Remains Robust While contract manufacturing of active pharma ingredients and intermediates has declined, the secondary contract manufacturing market continues to expand. Increased demand for sterile manufacturing services is driving the double-digit growth. According to PharmaSource Information Services Inc., the phama outsourcing market was valued at $30 billion in 2002, and secondary manufacturing services, including dosage manufacturing and packaging, accounted for 28 percent. Leading players include Abbott Laboratories, Baxter Pharmaceutical Products, Ben Venue, Cardinal Health, DSM and Patheon. (Photo courtesy of Akzo Nobel) Vaccine Against West Nile Virus to be Developed UK drug firm Acambis and Canadian biotech company Cangene will collaborate to develop a vaccine for the prevention and treatment of West Nile virus. The vaccine is a hyperimmune globulin which is a highly purified antibody produced from human plasma. Acambis will provide its ChimeriVax-West Nile vaccine to Cangene, who will generate the hyperimmune globulin by inoculating its plasma donors.