Mr. Theodore Iliopoulus graduated from the University of Athens as a Chemist and has an impressive thirty-year career in pharmaceutical operations. In 2002 After 15 years service with BMS (latest position: VP Manufacturing of America) Theo joined Polpharma as COO. In this role he gained tremendous understanding of the functioning of all aspects of the generic pharmaceutical industry and the health care sector in general in Eastern-Europe. Theo spent 2 years in Patheorn as VP Operations Europe before rejoining Polpharma in 2006 in his previous role.

How do you see the future of the fine chemicals in the US and Europe in responding to the competition from China and India?
I do believe that there is a way to manage the pharmaceutical fine chemicals manufacturing business in Europe and in the US under the current circumstances of the strong competition from the Asian manufacturers and at the same time to get the benefit of the low wage countries like China and India.
We should not forget though that the labor cost has minimum impact to the cost of an API (generally speaking is in the range of 10-15%). This difference is quickly outpaced by the process cost efficiency and in the efficient use of materials. So, the focus is and should be in the level of the operating fixed overheads and the proper utilization of the capacity.

There is no doubt though that development activities, are viewed as critical to the maintenance and expansion of revenues leaving manufacturing and supply chain activities to bear the heat of restructuring efforts to support gross margin expectations at the level of 60 percentage point and above assuming same pressures on pricing for all market players.

Sizing the capacity to the proper level and minimizing the overhead costs is and should be the focus of every manufacturer.

In my view contract manufacturing set up in China and India, using in other words Chinese or Indian low cost capacity for the manufacturing of key intermediates, outsourcing innovation using strategic alliances and partners is key aspects to support the profitability of the business. Such types of partnerships are gaining grounds and companies should consider the rich array of backwards quasi-integration strategies.

The winning strategy is to bring together in a collaborative way, the in house capabilities and the external expertise.

Another fact we should bear in mind when setting up a fine chemicals manufacturing strategy, is that the Generic Pharma is expected to grow from $65bn in 2006 to $100bn in 2010, looking for capacity to make the APIs necessary to sustain this growth.

Access to new API manufacturing for the generic pharmas, through backwards integration will emerge as a differentiator in the ability to outpace competitors and secure exclusive position.

The competition in new APIs however is fierce from India, and the key differentiating factor and the game plan, is the level of technology, intellectual property and process cost efficiency. This is a build to last vision and avoids the set up to fail syndrome.

For further information on the API market click on the interview with Mr. Iliopoulus.

January 2007 in Barcelona