‘Shale gas brings about exceptionally bright outlook for US chemical industry’

LOW-COST FEEDSTOCK:

The past two years have seen a dramatic change in the outlook for US chemical companies. In 2010, the industry seemed well rationalised, but with few opportunities for significant revenue growth and - outside of R&D - little expansionary investment. However, with commercialisation of shale gas in the US, the industry has seen a remarkable turn of fortune, according to a recent KPMG report.

According to KPMG's chemical industry specialists, the outlook for US chemical companies feels overwhelmingly upbeat. With a new and abundant source of low-cost feedstock, the US market has suddenly transformed to become one of the most advantageous markets for chemical production in the world.

Abundant reserves of shale gas in the US has driven down the natural gas price and created a massive competitive advantage for US companies. The cost implications for the US chemical industry have been impressive. Generally, a ratio of 5-1 between crude oil and gas prices is enough to make the US chemical environment 'favourable'. At today's prices, the disparity is more like 9-1, creating lasting advantages for US producers.

Need to cultivate emerging markets

However, according to KPMG, there remain a number of risks on the horizon. The first - and likely most problematic - is that the exponential addition of new capacity in the chemical industry will lead to an oversupply that outstrips demand within the national market, returning the industry to the cyclicality that was such a problem in the past. Tied to this are the growth projections for global chemical sales. While the US economy has returned to growth, overall it remains a mature market, which cannot absorb all of the announced new capacity. Similarly, Europe and Japan have seen somewhat sedate growth, while the emerging markets have boomed ahead with China, India and Latin America in the lead.

"Clearly, US chemical companies will need to place strong focus on developing their supply lines into the new growth economies, and this will require a significant transformation of operating models for US companies who have traditionally been focused on the domestic marketplace," said Mr. Mike Shannon, global and US leader of KPMG's chemicals and performance technologies practice. "The opening up of many emerging markets to import growth can be a slow and complex process, and US chemical companies need to take actions today that will guarantee markets for products to be produced in four or five years time," he added.

PROJECT PROGRESS

Sabic-ExxonMobil jv moves ahead on speciality elastomers project

The 50:50 joint venture of Sabic and ExxonMobil – Al-Jubail Petrochemical Company (Kemya) – is going ahead with the construction of a world-scale speciality elastomers facility at the Jubail complex in Saudi Arabia.

The companies have approved the next stage of project development – engineering, procurement and construction (EPC). The facility will have the capacity to produce up to 400,000-tpa of rubber – including halobutyl, styrene butadiene, polybutadiene and ethylene propylene diene monomer (EPDM) rubbers – thermoplastic speciality polymers, and carbon black to serve local markets, the Middle East and Asia. Kemya has awarded the EPC contract for the elastomers facility to Technip, Tecnicas Reunidas and Daelim. The facility is expected to be completed in 2015.

Sabic and ExxonMobil Chemical have collaborated closely since 1980 when they established the joint venture to produce polyethylene, ethylene and propylene. The new synthetic rubber project represents a significant broadening of this portfolio.

Along with the elastomers facility an High Institute for Elastomer Industries; a vocational training centre in Yanbu; a product application centre in Riyadh; and thermoplastic polyolefin compounding and inventory management facilities in Jubail will also be set up.

DOWNSTREAM DEVELOPMENT

Saudi Arabia to promote plastic park

Saudi Aramco Entrepreneurship Center Company Ltd (Wa'ed) and Sadara Chemical Company have agreed to promote the PlasChem Park in Jubail Industrial City II in the eastern province of Saudi Arabia to local small and medium enterprises. The park is presently a effort between Sadara and the Royal Commission for Jubail and Yanbu to establish an industrial park for chemical and conversion industries in Jubail.

Wa'ed is a newly formed company, wholly-owned by Saudi Aramco, as a major financer and incubator of new businesses in Saudi Arabia. The park will be located next to the Sadara complex in Jubail to enable the establishment of downstream businesses.

CRUDE OIL TRENDS

'Global oil consumption growth slows down in 2011'

Global oil consumption increased by 0.7% in 2011 to reach an all-time high of 88.03-mbpd (million barrels per day), according to new research conducted by the Worldwatch Institute. This rate of increase was considerably slower than in 2010, when oil consumption rose by 3.3% following a decline of 1.3% in 2009 due to the global financial crisis.

China's oil consumption increased by 5.5% in 2011, and China accounted for about 85% of global net growth in oil use. An increase in oil consumption of 5.7% in the former Soviet Union contributed another 37% of net growth. But these increases were offset by declines in the US and European Union, where oil consumption fell by 1.8% and 2.8% respectively, according to Worldwatch Climate and Energy Research Associate, Ms. Shakuntala Makhijani.

The gap in oil consumption between countries in the Organisation for Economic Co-operation and Development (OECD) and all other countries narrowed further in 2011, with the two groups respectively accounting for 51.5% and 48.5% of total oil consumption. Oil remained the largest source of primary energy worldwide in 2011, but its share fell for the twelfth consecutive year to 33%.

Oil production trends

To meet continued growth in demand, global oil production rose for the second year in a row, by 1.3% in 2011, to reach 83.58-mbpd. Most of this increase was driven by higher production in OPEC countries, which overall grew by 3% in 2011. Meanwhile, oil production in non-OPEC countries fell 0.1%. Oil production growth was slow compared with natural gas and coal production, which grew by 3.1% and 6.1%, respectively, in 2011.

Political unrest in the Middle East and North Africa had a significant effect on oil production in certain countries in the region. Output in Libya fell 71% in 2011 – from 1.7-mbpd (2% of global production in 2010) to just 0.479-mbpd (0.6% of global output) due to the disruptions related to the civil war. At the same time, tense political situations and violence in Iran, Syria and Yemen resulted in production declines of 0.6%, 13.7% and 24%, respectively, in 2011. The global impacts of the April 2010 Deepwater Horizon offshore drilling rig blowout and oil spill have been limited thus far, with reviews in most countries finding that existing safety requirements suffice to prevent similar accidents. Despite expanding offshore drilling efforts, the share of offshore oil is expected to remain steady at 30% of global oil production, due declining output from North Sea and Mexican offshore oil wells. Deepwater oil production is expected to constitute a growing portion of this production and is projected to go from 6% of total global oil supply today to 9% by 2016.

"Against the backdrop of fluctuating oil prices and concerns about supply risk, many countries are paying more attention to their dependence on imports and the stability of the countries they purchase oil from," said Ms. Makhijani. "In 2011, the US imported 60% of the oil it needed, Europe imported 90%, and imports accounted for 68% of China's oil consumption."

Leading oil exporters

The Middle East remains the world's largest oil exporter, accounting for 36.2% of exports in 2011 and a growing share of the global market. The Soviet Union and the Asia Pacific region were the second and third largest exporters, with shares of 15.9% and 11.4%, respectively. Oil exports from North Africa fell by 32.8% in 2011 due largely to the disruptions in oil production caused by political instability in the region. Exports from the US grew by 19.4% in 2011, faster than in any other region, but they accounted for only 4.7% of the global market.

PETROLEUM INFRASTRUCTURE

Honeywell bags project to automate Kenyan fuel storage terminal

Honeywell has won a $2.4-mn project to deliver a full automation solution for Petrocity's Greenfield Konza terminal storage facility in Kenya. The project includes comprehensive solutions for the pipeline receipt system, tank farm, truck loading system, and terminal automation, through 'Experion' Process Knowledge System (PKS) and Terminal Manager. It also includes all industrial security, emergency shutdown (ESD) and fire & gas (F&G) systems.

The new terminal facility is situated on the Nairobi-Mombasa highway and will cater for Nairobi's growing demand for fuel, which accounts for more than 50% of the country's oil consumption. It will have a capacity to handle 120-mn litres of gasoline, diesel and kerosene – enough stock to fuel Nairobi for up to two months – with infrastructure for product receipt, storage and distribution.

CLEANUP COSTS

DuPont, Koch's Invista settle environmental case

DuPont Co has settled a $745-mn lawsuit brought by Koch Industries Inc's Invista unit over safety and environmental problems at plants once owned by DuPont. Terms of the settlement were not disclosed.

Invista is a large fibre and polymer producer that once comprised DuPont's textiles and interiors business, and which Koch purchased from DuPont for about $4.4-bn in 2004. Four years later, Invista sued to recover clean-up costs at facilities transferred in that sale, accusing DuPont of misleading it about health and safety conditions there.

DuPont had countered that it was not responsible to cover clean-up costs because Invista had violated contractual terms relating to environmental indemnification. A non-jury trial expected to run eight weeks began on June 4 in the US, but was put on hold as the settlement was being worked out. In April 2009, the US Department of Justice said Invista agreed to pay a $1.7-mn civil fine and spend up to $500-mn to correct environmental problems at plants in seven US states.

Invista had earlier disclosed more than 680 regulatory violations to the US Environmental Protection Agency after auditing 12 facilities it had bought from DuPont. The Justice Department had called the accord the largest under the EPA's audit policy.

Invista has several well-known brands including Lycra fibre and Stainmaster carpet, and also makes nylon, which DuPont had invented in the 1930s.

FLUOROCHEMICALS

Arkema to expand PVDF production in France

French chemicals major, Arkema, is planning to invest around €70-mn to expand production capacity of its 'Kynar' brand of polyvinylidene difluoride (PVDF) at its the Pierre-Bénite site in France.

This capital expenditure plan will help increase by 50% fluoropolymer production capacity in Pierre-Bénite by 2014. It also entails major technological advances such as the implementation of an innovative high purity process, a new effluent treatment plant, and a contribution to investments for the implementation of the site's technological risk prevention plan. The investment will consolidate the production chain around the Pierre-Bénite site, as well as the Saint-Auban site, which produces the monomer for some of the fluorogases.

In addition to European facilities at Pierre-Bénite, Saint-Auban and Zaramillo, Arkema operates world-scale fluorochemicals facilities in China and the US.

COLLABORATION

PPG to license titanium dioxide technology to Chinese firm

US-based paints major, PPG Industries, has signed an agreement with China's Henan Billions Chemicals Co Ltd, by which PPG will license certain chloride-based technologies to Henan Billions for use at the firm's titanium dioxide (TiO₂) refinement facilities in China. PPG has also inked a long-term purchase agreement for titanium dioxide with Henan Billions. Commercial terms of the agreements were not disclosed. PPG intends to use the chloride-based TiO₂ manufactured by Henan Billions for various end-use applications, including paints and other coatings. The TiO₂ also would be available for sale to third parties, a PPG release said.

"This agreement with Henan Billions provides further evidence of PPG's commitment to utilise our existing expertise to expand and secure additional global supply of titanium dioxide," said Mr. Charles Kahle II, PPG Chief Technology Officer and Vice President, coatings R&D. PPG previously manufactured titanium dioxide using the chloride process at its chemicals facility in Natrium, USA, and sold titanium dioxide pigment for coatings and other end-use applications.

Sabic inks pact with German research organisation

Saudi Basic Industries Corporation (Sabic) and Fraunhofer-Gesellschaft, a leading German organisation for applied research, have recently signed a multi-year agreement in the Netherlands to jointly develop advanced technologies in areas such as light-weight construction and renewable energy.

Sabic is especially keen on research cooperation in fields such as light-weighting products, including polymeric materials and composites, and solar energy technology.

GREENER OPTIONS

Wacker eliminates boron-containing additives from silicone lubricant pastes

Wacker has launched novel silicone lubricant pastes for the fitting of cable accessories for the transmission and distribution (T&D) industry. The pastes are free of boron-containing additives and therefore particularly environmentally- and user-friendly. Silicone pastes are used in many applications including as anti-friction and release agents, lubricants and sealants, as heat-sink media and for damping and insulating electrical components.

In the past, small amounts of trimethyl borate were added in the production of silicone pastes. This improved the stability and shelf-life of the products. However, the additive can release boric acid, which has been listed as a hazardous substance by the EU since 2009 and classified as a 'Substance of Very High Concern' by the European Chemicals Agency (ECHA) since 2010.

Wacker said that it had stopped using this additive and instead started employing pyrogenic silicas and other additives that are not subject to mandatory labelling. "By modifying the formulation in this way, Wacker is now the first company to offer a completely boric-acid-free range of silicone pastes," a company release said.

SPECIALITY CHEMICALS

Forbo drops plans to sell construction-adhesives unit

Forbo Holding AG, the Swiss maker of floor coverings, has abandoned a sale of the remnants of its adhesives business after talks with potential suitors ended.

Forbo evaluated the strategic options and pursued talks with interested parties in the business, which has annual sales of CHF100.4-mn ($105-mn), the company said. It plans to keep construction-adhesives within the group over the long term.

The company's Chief Executive Officer has largely dismantled the bonding division, selling an industrial-adhesives unit to H.B. Fuller in March for CHF370-mn. The CEO now considers having construction-glues sitting within the related flooring business as the best way forward, though the situation could still be revisited at a later date.

Adhesive makers are consolidating to build scale and expand their operations globally, with Henkel AG recently agreeing to buy an adhesives operation from Cytec Industries Inc for $105-mn. An additional litmus test to gauge investor interest in construction chemicals will be Wendel SA's possible sales of aluminates and admixtures units, valued at a potential €1-bn.

Forbo's construction adhesives unit has 270 employees and its main markets are the Benelux region, Germany, Russia, and Eastern Europe. Production facilities are located in the Netherlands, Germany and Russia, Forbo said.

BETTER SERVICE

PolyOne expands innovation centre in China

PolyOne Corporation has opening its expanded customer-focused innovation centre in Shanghai, China. The centre has doubled in size and added new capabilities that will enable the company to better collaborate and develop customer-centred innovations, a company note said.

"The Shanghai Innovation Center expansion underscores our commitment to collaborating with customers on specialised solutions that improve their profitability and speed to market," said Mr. John Van Hulle, President of PolyOne Global Color, Additives and Inks.

In addition to the Shanghai centre in Asia, PolyOne also has innovation centres in Suzhou and Singapore and R&D facilities in Shenzhen, Tianjin, Dongguan and Thailand.

DKSH acquires Australian speciality cables distributor

Swiss firm DKSH has acquired ElectCables Pty Ltd, one of Australia's largest independent distributors of flexible cables and related equipment. ElectCables specialises in supplying cables to major industrial sectors including electrical, data, contracting, mining, and manufacturing.

ElectCables will be integrated in DKSH's technology business unit.

REGULATORY APPROVAL

Wacker gets EU approval for using cyclodextrin as food ingredient

Germany's Wacker has said it has received approval from the European Commission for the use of gamma-cyclodextrin as a food ingredient for foodstuffs and beverages in the European Union (EU).

Cyclodextrins are ring-shaped sugar molecules, which Wacker bioengineers from plant-based raw materials such as corn or potatoes. In food applications, cyclodextrins can mask an unpleasant taste, stabilise sensitive food ingredients such as vitamins or increase the bioavailability of certain active agents. EU approval of gamma-cyclodextrin thus opens up a series of new applications in the European food industry for Wacker.

Wacker highlighted scientific studies, which showed that gamma-cyclodextrin is an ideal source of glucose that has a low impact on blood sugar and blood insulin levels. As it is tolerated well even when taken in large quantities, gamma-cyclodextrin is an ideal ingredient for foodstuffs whose purpose is delayed glucose release. Furthermore, cyclodextrins can also mask odour and taste, for instance the bitter taste of green-tea products and ginseng preparations, without diminishing the benefits of the bitter substances. Moreover, the bioavailability of functional ingredients, such as curcumin or coenzyme Q10, can be increased with the aid of cyclodextrins, the company said.

GREEN PROCESS

Oleon opens glycerine -based propylene glycol plant in Belgium

Belgian oleochemical firm, Oleon, has started up a new manufacturing plant for producing 'bio' propylene glycol (PG) from glycerine in Ertvelde, Belgium. The plant is the first of its type worldwide, leveraging a highly sustainable production process developed and licensed by BASF and jointly realised with Oleon.

Historically, PG has been produced by means of hydrolysis from propylene oxide, which is obtained from crude oil. The starting material employed at the Ertvelde site is glycerine, primarily obtained from fats and oils generated as by-products of oleochemical production. As an additional benefit, the glycerine-based process used at the Ertvelde site requires fewer production steps than hydrolysis, increasing the efficiency of Oleon's 'bio' PG production.

BASF not only researched the glycerine-based production technology it realised with Oleon, but also supplies the chemical catalysts that are key enablers for the advanced bio PG production process.

PROJECT UPDATE

Solazyme commissions integrated algal oil bio-refinery in US

US-based renewable oil and bioproducts company, Solazyme Inc, has commissioned its first fully integrated bio-refinery (IBR) in Peoria, Illinois (USA), to produce algal oil.

Solazyme has been running routine fermentations at commercial scale since 2007 and began running fermentation operations at the Peoria facility in Q4 2011. With the successful production of algal oil from the integrated facility in June, Solazyme has met its start-up goals for the facility on schedule.

The IBR was partially funded with a federal grant that Solazyme received from the US Department of Energy (DOE) in December 2009 to demonstrate integrated commercial-scale production of renewable algal-based fuels. The demonstration/commercial-scale plant will have a nameplate capacity of two million litres of oil annually.

To maximise capital efficiency, Solazyme bought the existing Peoria fermentation facility in May 2011 and began retrofitting the former PMP Fermentation Products plant into an integrated demonstration/commercial-scale facility that will produce renewable tailored triglyceride. Solazyme has been operating at semi-commercial scale through contract manufacturers since 2007.

Solazyme and Bunge break ground on oils production facility in Brazil

Solazyme and Bunge Global Innovation, a wholly-owned subsidiary of Bunge have broken ground on a 100,000-tpa renewable oil production facility adjacent to Bunge's Moema sugarcane mill in Brazil. The plant is targeted to be operational in the fourth quarter of 2013.

LONG TERM CONTRACT

Praxair to supply gases to Chinese coal-to-chemicals project

Praxair China has signed a long-term supply contract with Yankuang Guohong Chemical Co Ltd and Yankuang Group to supply industrial gases to its coal gasification process for the production of methanol and downstream chemicals at its chemical park in Zoucheng city, in northern China.

Praxair will construct a large air separation facility with a capacity of 3,000-tpd (tonnes per day) of oxygen and purchase Yankuang Guohong's existing air separation units. The new plant is scheduled to start up in late 2014 and will replace Yankuang Guohong's existing air separation units. The liquid oxygen, nitrogen and argon produced from the existing air separation plants and the new facilities will be integrated with Praxair China's liquid production and distribution network in the region.

This will be the fourth large capacity air separation plant of 3,000-tpd or greater that Praxair has won in China. Two of these plants, of similar capacity, have been built and are currently operating in Zhenjiang, Jiangsu province and Wuwei, Anhui province, to supply customers in the coal based chemical industry. All of these plants are under long-term sale-of-gas contracts.

Cole-Parmer presents range of fluid handling & lab equipment at ACHEMA

Cole-Parmer, a leading player in fluid handling, life science, general laboratory products, instrumentation, and equipment, presented a wide range of fluid handling and lab equipment at the global chemical engineering expo, ACHEMA 2012, held during 18-22 June in Germany.

The company showcased its 'Masterflex' high-performance peristaltic pumps that serve the biotechnology, chemical, industrial, research and development, manufacturing, and pharmaceutical industries, among others. In addition to the 'Masterflex C/L' (compact/low flow), L/S (laboratory/standard), and I/P (industrial/process) pumps, various tubing styles and pump heads were on show to demonstrate application-based pumping systems.

Lab equipment featured at the stand included rotational viscometer, which offers greater chemical resistance and the ability to withstand chemically corrosive materials. Other highlights included the 'StableTemp' modular block heaters that provide flexibility to heat different sizes of microtubes, centrifuge tubes, vials, microplates, and PCR strips or tubes; the 'Stir-Pak' high-speed, low-torque overhead stirrer system that allows users to customise components to suit their mixing application and 'Oakton' thermometers.

ENERGY EFFICIENCY

AkzoNobel to employ unique caustic soda evaporation system

AkzoNobel Industrial Chemicals will apply a unique caustic soda evaporation system to its new membrane electrolysis plant at the Industry Park Höchst in Frankfurt, Germany. The system will enable 20% energy savings and will be supplied by Alfa Laval.

The evaporation system will concentrate caustic soda from 32 wt% solution to 50 wt% solution based on evaporation and condensation heat exchangers. By combining the advantages of different types of heat exchangers it is, for the first time, feasible to concentrate caustic soda in a four-effect evaporation system. This unique Alfa Laval design will enable energy savings of 20% compared to the best traditional designs. The installation will be built at AkzoNobel's new membrane plant in Frankfurt, which will have a capacity of 275,000-tpa of caustic soda.

Germany's PCC planning DME production in Russia

PCC SE of Germany and JSC Shchekinoazot of Russia have formed a joint venture for manufacturing aerosol quality dimethyl ether (DME) in Russia. DME is primarily used in the cosmetics industry as a blowing agent for hairsprays as well as for the manufacture of insulating foams (one-component PU foam).

The production plant with a capacity of 20,000-tpa will come up at the site of JSC Shchekinoazot, which will also supply the key raw material – methanol – from its facility. Production start is slated to begin in 2014.

FORECAST

HIV generics set to dominate the antivirals market

Generics are predicted to take over the antiviral drugs market, especially in the case of HIV medication, as a series of patent expiries will open opportunities for ambitious companies to seize huge revenue, according to a new report by healthcare experts, GBI Research. The report states that an increase in the patient population and reforms in government policies will work together to encourage the rise of generic pharmaceutical powers.

While it is estimated that, in 2010, generics accounted for 18.9% of the market share in the global antivirals market, this market share is forecast to grow to reach 29.2% by 2018. This is largely due to a series of patent expiries expected to hit the antiviral market, which will act to raise the value of generic antiviral drugs to over $9-bn by 2018, the report revealed.

Major patent expiries

Generics in the HIV market, in particular, accounted for an estimated majority market share of 46% in the total generic antivirals market during 2010. HIV generics are expected to create a boom in the market, due to a loss of patent exclusivity for key antiviral drugs. The generic market is currently dominated by products such as zidovudine, didanosine, stavudine and lamivudine. However, many major patent expiries are expected during the period till 2018, including Sustiva (efavirenz) and Kaletra (lopinavir + ritonavir) in 2013, Prezista (darunavir ethanolate) in 2014, and major Nucleoside Reverse Transcriptase Inhibitors (NRTIs) such as Trizivir (abacavir sulphate/lamivudine/zidovudine), Epzicom (lamivudine and abacavir) and Emtriva (emtricitabine) in 2016. "By 2018, billions of dollars' worth of industry revenue will be lost from the expiry of these brand name products, and the race will be on for generics manufacturers to create new superstar drugs to make the most of this unmet need in the market," the report said. Generics within the antiviral market are forecast to grow at a CAGR of 10.5% during 2010-2018.

In December 2011, Teva launched generic Combivir in the US market as a combination tablet containing lamivudine and zidovudine, indicated in combination with other antiretroviral agents for the treatment of HIV-1 infection. Combivir had annual sales of approximately $556-mn in 2010.

MEGA DEAL

Bristol-Myers Squibb teams up AstraZeneca in $7-bn deal for Amylin

Bristol-Myers Squibb has agreed to buy Amylin Pharmaceuticals, the maker of a promising new diabetes drug, in a complicated deal that is valued at about $7-bn. To help finance the transaction, Bristol-Myers is teaming up with AstraZeneca, which will pay about $3.4-bn in cash and will share in the profits from Amylin's sales.

It is the latest deal by major drug companies to refill their product pipelines with new treatments, especially as older successful products lose their patent exclusivity.

Under the terms of the deal, Bristol-Myers will pay $31 a share in cash for Amylin, which is a 10% premium to the company's closing share price on June 29. It is also 51% higher than Bristol-Myers's original bid in February, which Amylin rejected but used as the basis for an auction of itself.

As part of the deal, Bristol-Myers will assume debt and will make a payment to buy out Amylin's former partner, Eli Lilly & Company.

Bristol-Myers has been seeking new products to replace revenue from its top seller, the blood thinner 'Plavix', which began facing generic competition in May after generating $7.1-bn in sales last year.

Besides Bristol-Myers and AstraZeneca, others that reportedly made bids for Amylin included Novartis, Merck and Sanofi-Aventis. Drawing these companies' attention is Bydureon, a treatment for Type 2 diabetes that is injected once a week. It is a refinement of Byetta, which was introduced in 2005 and requires twice-daily injections. Both are derived from a hormone in the saliva of the Gila monster, a poisonous lizard found in the Southwestern United States and in Mexico. The two drugs are in the class known as GLP-1 receptor agonists, which mimic the effect of glucagon-like peptide, a hormone that increases insulin production when blood sugar is high.

Albemarle expands API production at US facility

US-based speciality chemicals firm, Albemarle Corporation, has announced that its FDA-registered South Haven, Michigan site has expanded and upgraded its multi-product cGMP active pharmaceutical ingredient (API) manufacturing facility. This expansion is the latest in a series of projects at the South Haven site to increase capabilities and production throughput. In the past two years, the number of custom API projects has more than doubled at the South Haven site. 

BRIGHT OUTLOOK

New report forecasts impressive growth for Russian pharma industry

The Russian pharmaceutical industry will continue to expand due to government initiatives and increased healthcare spending, predicts a new report by healthcare business specialists, GlobalData. The report states that Russia's efforts to boost its pharmaceutical sector have been rewarded with strong and steady growth and the increased implementation of domestically produced treatments.

The country's pharmaceutical market soared from a 2005 valuation of $6.6-bn to almost three times that in 2010, when it was worth approximately $18.7-bn, climbing at a remarkable Compound Annual Growth Rate (CAGR) of 23%. GlobalData expects this growth to continue at a less staggering, yet still impressive, CAGR of 9.5% to reach $46.4-bn by the end of 2020. This surge in value is attributed to the introduction of national programmes such as Health in 2006, and PharmMed 2020, which made its debut in 2009. As part of the latter, Russia has significantly increased R&D spending in the field of drugs innovation and created opportunities for the development of the healthcare industry. The Russian government has laid out goals to increase the domestic share of the pharmaceutical market to 50% by 2020, and the share of domestic innovative drugs to 60% by the same year.

Barriers to growth

The report also highlighted the challenges facing the industry in Russia, including lack of clarity in regulatory systems and language barrier that results in foreign multinational corporations (MNCs) facing problems when attempting to register drugs and medical devices.

On average, it takes 24 months to register a new drug in an application process that must be carried out in Russian. This often proves restrictive for MNCs who want to progress without seeking legal advice from local distributors or consultants. Furthermore, according to a new law that came into effect in 2010, foreign manufacturers must also conduct clinical trials in Russia prior to registration, and the results of international trials will only be accepted if they were conducted with the participation of Russian patients.

Entries called for CPhI Pharma awards

Event organiser UBM Live has invited exhibiting companies at the forthcoming CPhI Worldwide expo and concurrent events to participate in the annual 'CPhI Pharma Awards'.

The awards will honour companies and organisations breaking new ground in formulation, drug delivery systems, medical devices, packaging, chemical and bio manufacturing. The 'Best Innovation in Pharma' category will have a gold, silver and bronze winner. Additionally, there will be one winner each for the inaugural 'Best Sustainable Pharmaceutical Packaging Award' and the 'Best Sustainable Stand Design Award'.

The CPhI Worldwide expo runs from October 9 to 11 at the Feria de Madrid in Spain and winners of the CPhI Pharma Awards will be announced on October 9. The call for the awards is open till 27 July 2012.

"The CPhI Pharma Awards offer a unique and dedicated platform for companies to showcase groundbreaking innovations in front of a global audience. They exist to encourage and celebrate the spirit of continued innovation and advancement in the pharma industry and we are pleased that they have had such positive feedback over the last nine years," noeted Mr. Greg Kerwin, Pharma Portfolio Director.

2011 award winners

Last year in Frankfurt, Glycotope won the gold award for the 'GlycoExpress' platform technology designed to optimise the glycosylation of antibodies and other glycosylated therapeutics. Acuros took silver for its novel disposable device for the continuous delivery of small volume parenteral drugs, which uses an osmotic actuation and needs no power supply. The bronze went to Johnson Matthey Catalysts for its 'Colour-Tag-Protein' technology that is used as a direct marker for protein expression, speeding up the development of new bioprocesses.

PRICE MOVEMENT

Lanxess announces price hikes

German speciality chemicals company, Lanxess, has announced global price increases for ion exchange resins and inorganic pigments, effective from July 1, 2012. The inorganic pigment prices are being increased by a minimum of Euro 100 per metric ton. At the same time, Lanxess' wholly owned subsidiary Saltigo GmbH will increase its prices worldwide for its active ingredient 'Saltidin', used in insect repellents, by up to 15% because of the rise in raw material costs.

Packaging technology, anti-counterfeiting & labelling: unequivocal identification protects products and customers

INDUSTRY TRENDS:

Copies, fakes and imitations pose a problem for nearly every segment of industry including electronics, automotive products, apparel, music, food and investment goods. Counterfeiting is booming. Goods that used to be sold at bazars or under the counter are now available on the Internet to anyone anywhere. Imitations are not just a problem for consumers sitting in front of their PCs. Wholesalers and retailers, as well, are often victimized by sophisticated organized crime networks, which produce and distribute counterfeit products.

The cross-industry, pluri-lateral Anti-Counterfeiting Trade Agreement (ACTA), which was introduced in 2011, establishes an international legal framework for international cooperation, enforcement practices and exploitation of intellectual property rights.

Pharmaceutical industry closes ranks to combat product counterfeiting

A few industries have already set up organizations to combat product counterfeiting. The pharmaceutical industry is one of them. Few counterfeit products can have such serious consequences for consumers as imitation pharmaceuticals. Quite apart from the financial losses incurred by the companies involved, counterfeit drugs represent a danger to consumer health. The list of risks includes inefficacy, harmful substances and over- or under-dosage of the active ingredients. A few years ago in Africa, anti-freeze instead of glycerine was added to cough medicine, causing the deaths of several hundred people.

The World Health Organization (WHO) has created the International Medical Products Anti-Counterfeiting Taskforce (IMPACT), which is attempting to bring nations together in an effort to stop the production, trade and sales of imitation pharmaceuticals. IMPACT is sponsored by international organizations, NGOs, law enforcement agencies, pharmaceutical trade associations, drug agencies and regulatory bodies. The list includes the Food and Drug Administration (FDA), WTO, the World Customs Organization (WCO), the World Intellectual Property Organization (WIPO), the European Commission and OECD. Taskforce Working Groups are addressing the legal framework, implementation and enforcement of regulations and anti-counterfeiting and traceability technology for pharmaceutical products, but no standardized worldwide solution is currently in place. One Working Group is looking specifically at international standardization of product marking. Until uniform worldwide standards are in place, marking technology suppliers are being asked to come up with anti-counterfeiting strategies.

Existing identification techniques

As is the case with any other commercial item, identification features on pharmaceuticals are used for product authentication and to deter counterfeiters. Identification methods, which are difficult to reproduce, create enormous difficulties for imitators, and the costs involved in making copies are considerable.

There is a wide range of identification techniques to choose from, ranging from very simple to high-tech. Identification features can be added in different places including various parts of the packaging or on the product itself.

Anti-counterfeit identification technology is divided into three main categories:

1.Overt (open/visible) technologies;

2.Covert (hidden) technologies; and

3.Forensic techniques.

Overt marking provides basic product identification information for consumers, knowledgeable professionals and customs agents. It is generally highly visible on the product. In the case of pharmaceuticals, the marking is applied to the vial or folding carton, and imitating it is difficult and costly. Examples include holograms, which may contain customer-specific designs. Optional hidden features, which are admissible as evidence in court, provide added counterfeit protection.

Colour shift ink, as well as security ink and foil that change colour depending on the viewing angle belong in this category. The ink and pigments are only available from certain manufacturers, which is an additional security aspect.

Marking on the product itself, for example a tablet, is an overt technique. It provides a certain level of security, because imitating tablet dies is costly and time consuming. In addition, colour shift ink can be applied directly to products such as coated tablets to produce changing colours. This provides protection against product substitution later on. Slanted corners or similar features can be added to the packaging to differentiate it from standard versions.

Security graphics created by printing fine lines, micro text or images similar to what you see on banknotes combine overt and covert design features such as guilloches, grids and line embossing. Printed using standard offset lithography, they may be used as a background or placed in a less conspicuous location. Overt features only provide protection, however, if dealers or consumers are aware of their significance.

Partially hidden markings straddle the boundary between overt and covert technologies. Examples include thermo-reactive printing, which changes colour as a function of temperature. Pressing a finger on the colour field is sufficient for immediate authentication.

Knowing where – hidden product validation identification

Hidden markers are used among other things to enable brand owners to identify counterfeit products and remove them from circulation. Only the manufacturer should actually know the exact details of the markings. Consumers either do not notice them or are unable to verify their authenticity.

This marking category includes such things as printing with invisible ink, which can be applied to virtually any product or packaging. The printing is visible under UV or infrared light and may fluoresce at different wavelengths and in different colours. Invisible images, which only appear when a special filter is used, can also be produced. Other options include the use of special fluorescent fibres, watermarks, metal threads, scents or chemical reagents in the product packaging.

The printing can also be designed in such a way that it cannot be copied. Background patterns made of very fine lines look like plain colour surfaces, but an image that was not previously visible appears when the patterns are copied or scanned.

Application of digital watermarks is one of the more complex methods. To verify authenticity, readers and special software are used to recover data, which is digitally encoded in the watermarks. Laser coding is also complex and cost intensive, but that is precisely what makes it a very secure type of anti-counterfeit identification.

High-tech methods provide almost total security

Strictly speaking, forensic identification belongs to the covert category. Special equipment is needed to detect the markers, which are not visible to the naked eye and cannot be found using simple analysis techniques.

This category includes various types of taggants. Chemical taggants and marking with isotopes in defined ratios, which can only be detected with highly specialized reaction and analysis techniques, are one example. Biological and DNA taggants are another possibility. Minute amounts added to the product formulation or packaging are sufficient for identification. Highly sophisticated analysis equipment is needed to detect these substances. Forensic markers such as micro taggants made of microscopic particles or threads, which contain encoded information require an equal amount of effort to detect.

These markers are very effective, but they are also very expensive and consumers are not aware of them. They are primarily intended for extremely expensive pharmaceuticals and high-end products which counterfeiters often target. When imitators are at work, an effective method is needed to remove imitations from circulation.

Rather than relying on just one type of identification, a combination of different overt and covert technologies is often used. To make life as difficult as possible for counterfeiters, manufacturers do not reveal which methods they are using.

Traceability at any point in the supply chain

Track & trace techniques have been used for years to mark and/or serialize products to ensure authenticity and provide traceability of batches and packages as they pass through the distribution channel.

Despite, or perhaps because of, the fact that these methods have been in use for so long, there is as yet no standardized worldwide approach to documentation. One simple solution is autonomous recording of product movements at each point in the supply chain. Electronic pedigree systems are another option. Serial numbers are passed along the supply chain, creating a distributed database containing electronic proof of origin. When complete end-to-end verification is implemented, each segment of the supply chain has an obligation to forward the product codes to a central server. The location of every product can then be determined no matter where it is, and the movement of goods can be traced after the fact using information that is available at a central location.

Whatever the method, every product must have a unique identifier, e.g. product name, batch number and possibly the expiration date. Additional product details, for example the distribution channel, can be included when the encoding is more complex. Making the coding or serialization more specific (e.g. pallets, cartons or individual packages) enhances the security of product authentication.

A number of identification techniques are available, which provide varying degrees of anti-counterfeiting protection:

1.Barcodes;

2.2D codes; and

3.RFID tags.

Linear barcodes have a proven track record, and they have been in use worldwide for many years. However, they can store only a limited amount of information, and they are hardly suitable for product individualization. As a general rule, they should have a certain minimum height. A number of different printing techniques are available for applying them to the product or packaging. Manufacturers are free to define their own barcodes, but ISO/IEC 15420 defines commercial barcodes such as European Article Number (EAN) and Universal Product Code (UPC), which ensure unique product identification worldwide. There are other forms of barcoding besides commercial barcodes such as Code 39, which is commonly used in industry, and 2/5 Interleaved, which packs a large number of digits into a small space to increase information density.

The information density of 2D codes is even higher. Information is encoded in stacked barcodes, a rectangular matrix made up of individual pixels (e.g. QR codes), or circular barcodes (e.g. ShotCodes). Matrix codes, in particular, are used worldwide, and they can be scanned with CCD cameras. Nevertheless, matrix codes are not standardized either. Quick-response (QR) codes are very popular in Japan, whereas data matrix codes as defined in ISO/IEC 16022 are more widely used in Europe and the US. Other manufacturer-specific versions, such as the UPS MaxiCode, are also not uncommon. However, there are fewer matrix code versions compared to barcodes. For that reason and also because of the higher information density, matrix codes are more suitable for international product identification, which is standardized, unique and traceable. As an added security feature, any type of barcode or 2D code can be printed in invisible ink on the product or packaging.

RFID (radio-frequency identification) works with transponders. Special readers extract the information and may write data back depending on the version. Printing techniques, which are now available for producing the transponders, make them much less expensive than they were just a few years ago. Nevertheless, they are still relatively expensive compared to barcodes and 2D codes. The equipment needed to read out the information is also generally more expensive than barcode scanners, etc.

The tags consist of a microchip, an antenna and a substrate or enclosure. They may also require a power source depending on the design. State-of-the-art RFID tags can send encrypted data to the reader as an added security feature. In contrast to barcodes and 2D codes, visual contact is not necessary to read the data. The tags can be located inside sealed packaging for added product protection. However, RFID tags are not standardized worldwide and operating frequencies may vary.

In addition to the traceability aspect, track & trace also helps to identify weaknesses in the logistics chain. Cost can be eliminated by increasing the efficiency of the distribution channel.

No agreed method for identifying pharmaceuticals

The FDA already recommends the use of RFID tags, at least for identification of pharmaceuticals. The experts at IMPACT also see considerable potential in RFID technology. However, until the technology has reached a sufficient stage of maturity, they currently favour 2D codes, which have a proven track record.

The European Union is currently working on standardized identification for pharmaceuticals. Directive 2011/62/EU of the European Parliament and the Council defines the information which must appear on the outer packaging of pharmaceuticals, which in the future will have to have certain security features that allow verification of the product's authenticity and prevent manipulation of the packaging. 2D codes are regarded as the most likely method of identification. Information such as a unique, randomized serial number, batch identifier, expiration date and Pharmacy Product Number (PPN) could be stored in the code.

Following the test phase for technical implementation of product serialization, which has been underway since December 2010, mandatory security features will be introduced in 2015. Matrix codes and a central database will provide the foundation for end-to-end verification. The extent to which consumers will be involved in the verification process is not yet clear. In any case, state-of-the-art communication devices such as smart phones give consumers new ways of detecting counterfeit products.

Packaging as an additional security factor

Apart from specific identification techniques, there are other ways of making secure packaging. Besides the methods discussed above, the list of options includes sealing labels and adhesive strips, which prevent tampering or provide evidence that the packaging has been opened. These items can also be used as warranty seals, security labels or asset labels.

Labels can also help prevent counterfeiting. The adhesive, for example, can contain micro particles and fragrances, which are detectable after the label is opened. This, however, requires special equipment, and as a result these techniques are not very widespread.

Void labels are much more common. They are made so that lettering such as the word "Void" appears on the label and also on the product when the safety label is removed, and the label will no longer adhere. The text can be customized to include the batch number or expiration date. It is readily apparent when packaging has already been opened. Polyester security film is based on the same principle. A pattern appears when the film is removed, and the film will no longer adhere. Any tampering becomes obvious when the film is removed.

"Destructible" foil can also be used to provide evidence that the packaging has been opened. The foil cannot be totally removed. Security perforation is based on a similar principle. The label tears along the perforation when any attempt is made to remove it.

Numbered labels provide enhanced trace & track functionality. Each label has an individual number, which can be used for detailed traceability and also to verify authenticity. The overt, covert and forensic identification techniques discussed above can of course also be used for labels.

Summary

Intelligent brand protection systems can deter counterfeiters if imitation of the identification/marking is made impossible or very costly. These technologies can also help clarify what is happening in the distribution and logistics chain and contribute to supply chain optimization.