In a move that has both provided a vote of confidence for an emerging market’s manufacturing capabilities and underlined Western pharma’s increasing reliance on lower cost production alternatives, Nycomed’s plan to relocate its entire Pantrazole API production from two plants in Europe to India recently reached fruition with the inauguration of their extended facility at Navi Mumbai.
The facility is operated by Zydus Nycomed, a joint venture between the Swiss drugmaker and the Indian firm Zydus Cadila, which dates back to 1998 when the then incarnation of Nycomed, Byk Gulden, engaged Cadila to manufacture key starting materials for its best-selling gastrointestinal treatment Pantoprazole. Byk Gulden later became Altana Pharma and in 2007 Altana Pharma was acquired by Nycomed. The JV survived — and thrived — and two years ago Nycomed took the decision to transfer the most of the chemical production of Pantoprazole and other branded generic APIs from its facilities in Linz (Austria) and Singen (Germany) to the Mumbai plant, which has now been extended to encompass a third production building.
With the decision resulting in the loss of 200 jobs at the Linz and Singen facilities (and an increase in the Mumbai workforce of 120), it would seem that the drive to cut costs is so vital now that European firms are prepared to go take off-shoring a step further and undertake a fundamental shift in their manufacturing base. The move comes partly as a result of Pantoprazole’s patent expiry in a number of key markets (it expires in the US next year), although the drug still generates sales of up to 30% of the $7–$8 billion PPI market.
But Barthold Piening, Nycomed’s Executive Vice President, Operations, told Pharm Exec Europe that it’s not all about money. “For chemical/API processing, particularly, it has become more difficult to stay competitive in Europe in terms of cost and available resources, so we were looking for further cost optimization,” he admits. “But we’re not only in India because we want to save on costs. It’s a good location for manufacturing, and there are well-trained, experienced people there.”
Piening maintains the relocation mirrors the shift from west to east in manufacturing efficiency and expertise. Europe, he says, “has to face the reality that India and China has the manufacturing know-how that ten or twenty years ago was more the domain of Europe and the US.”
He adds though that there are areas in which Europe remains more competitive, for example, biologics, and in sophisticated manufacturing processes such as lyophilization. And it’s important to note that Nycomed’s Linz and Singen plants will still be responsible for the production of key Nycomed products such as, for example, roflumilast, the API for Daxas, its new (patented) COPD drug.
Does this suggest that India still has a way to go before European companies can put complete faith in its manufacturing capabilities? I ask Piening whether Nycomed had any supply safety concerns in sourcing its APIs outside Europe. “It’s certainly a topic for consideration,” he says. “We don’t want to be at risk of sourcing only from only one country. In terms of technical risk, though, I am fully convinced it’s safe. But it’s important to minimize our risk exposure, to have a fallback position.”
His faith in his Indian partners, however, is unshakeable. “Even though they are fully professional in the Lean Sigma thinking, they are always looking for process improvement,” Piening says. The Zydus Nycomed plant at Navi Mumbai has yet to receive US and European regulatory approval, but this is not likely to present a problem as Zydus Cadila’s six other Indian plants have received FDA clearance. Nycomed is currently in the last stage of its technical, product and analytical transfers to the Indian plant and full scale manufacturing is likely to commence at the end of this year. “I would say that by spring next year the site will be fully operational and we will be ready to declare our readiness for the FDA audit, with the European audit coming earlier.”
Big in emerging markets
The shift to India is just part of Nycomed’s highly ambitious programme of emerging market expansion, which was outlined to Pharm Exec Europe by Executive Vice President, Commercial Operations, Guido Oelkers, earlier this year. “Basically we want to become Big Pharma in the emerging markets,” Oelkers said. “Over the next five years,” he added, “my hope is that we have a very powerful franchise that places us in the top 15 in China, the top 10 in Mexico, and the top 20 in MENA.”
Since then Nycomed has made its move in China, announcing at the beginning of November a major expansion there with the acquisition of 51.34% of Guangdong Techpool Bio-Pharma Co., Ltd. (Techpool). The Guangdong -based company has built a strong intellectual property position, with 35 patents filed, 17 of which have already been granted.
Are there any plans for a similar manufacturing shift to China, I ask Piening. “There will be more manufacturing activities from Nycomed in the emerging markets,” he confirms. “I’d like to see more activities in India, just as I would in China, as is happening in Brazil.” But, he adds, these “certainly won’t be driven by cost considerations only.”