"Our research shows that 2004 will be another difficult year; recovery is not foreseeable until mid-2005," said Edwin Bailey, managing director, Urch Publishing. "Although things are looking up, it is unclear how significant the improvement will be."
The report says that companies will be forced to make difficult decisions in the next three years with industry-wide rationalisation and consolidation appearing to be inevitable as companies struggle to deal with overcapacity, competition from emerging markets and regulatory burdens.
However, there is some positive news on new drug approval, it says, which means the subsequent outsourcing of fine chemical intermediates and active pharmaceutical ingredients will pick up, though the market is unlikely to recover to previous levels. The $10-$12 billion (€8-€10bn) market for pharma fine chemicals could achieve growth of 5 per cent a year or more, creating at least $500 million a year of additional sales.
Overcapacity of between 25 and 40 per cent remains a problem, and will continue to affect the market for intermediates and active pharmaceutical ingredients (APIs) due to the substantial new capacity brought on-stream over the past five years, notes the report. The excess capacity caused by fewer new drug approvals and the resulting in-sourcing by big pharma are other contributory factors, it adds.
Fine chemical overcapacity has led to two or more years of declining profitability, resulting in plant closures and goodwill write-offs; but there is a general consensus that the bottom has finally been reached. However, pressure on price will continue, particularly given the increasing acceptance of products from Indian and Chinese suppliers, according to Urch.
For more details on the report, which costs £895 for a print version and £925 as a PDF, visit Urch Publishing's website.