Johnson Matthey, which was founded in London in 1817, is celebrating its 200^th anniversary this year. Through the constant application of new ideas and new processes, the company has built an organisation that has sustained two centuries of growth and managed to adapt well to changing markets. JM is involved in a diverse array of science, from catalysts that enable cleaner air to pharmaceutical ingredients that improve health, and its work is unified by a common theme – to enhance quality of life. JM’s pharma offering provides pharmaceutical customers around the globe with a range of services and solutions, including active ingredients, custom development services, catalysts and chiral technologies. CHEManager asked Antoine Bordet, JM’s Health Sector Managing Director, Europe, about his business outlook for fine chemicals and pharma manufacturing, the benefits digitalization could have for the industry, and the trends that will affect the fine chemicals industry in the future.

CHEManager: How do you think the business outlook has changed for fine chemicals and pharma manufacturing, over the last few years?

A. Bordet: We have a broad-based business that encompasses supply of controlled substances, other generic APIs and catalyst technologies, as well as providing custom pharma services to innovators. With such a broad participation in pharma materials and services we see a variety of outlooks depending upon which segment we consider. The overall outlook is, however, very positive. With strong market trends to outsource various elements of the pharma value chain, we are optimistic that this will translate in market growth over and above the wider economy.

What recent trends have you observed for fine chemicals and pharma manufacturing, in terms of your customer needs and challenges?

A. Bordet: The need for our customers to innovate and develop effective medication is greater than ever. With the decline of the traditional large-volume blockbusters, customers are increasingly focusing on smaller indications, sub-segments of disease populations and generally striving hard to find effective treatments for un-met needs. This is bringing an array of technical challenges as therapies become more complex and challenging to synthesize. Consequently, the speed with which products need to be driven through clinical development is increasing. The other major trend is for quality, which is often taken for granted in the industry, but no longer seems to be standard given that many high-profile issues are emerging. Product and service providers need to excel in all these areas to meet customer needs effectively.

What do you think has been driving these trends?

A. Bordet: There is a movement towards providing better solutions to smaller patient populations, through orphan therapies, precision medicine, companion diagnostics and ultimately the personalization of treatments. This has resulted in innovations that require more refined and advanced technical solutions and the emergence of much more complex small molecules. Product volumes are decreasing as products become more potent and the once clear boundaries between primary manufacture, pre-formulation and secondary manufacture have become increasingly blurred.

Quality is also a critical factor; 10 to 15 years ago there was a belief that outsourcing could be achieved at a much lower cost without compromising on quality, but this has not turned out to be sustainable. Our industry works hard to deliver the best value we can for customers, but this can never be done whilst compromising product quality and ultimately patient safety.

Recent research by PWC suggests that chemical companies plan to invest 5 percent of annual revenue on digitalization over the next 5 years. What benefits do you think digitalization could have for the industry and more specifically for JM?

A. Bordet: Certainly, we envisage data and digitalization playing an increasing role in our industry. The way this has transformed chemical process development through techniques such as design of experiments (DoE) is a good illustration. Future innovations such as continuous processing will be heavily dependent upon digitalization, and collecting and processing information in real time to manage quality and productivity. These advances will over time begin to impact areas such as logistics, customer management and most likely every aspect of operations.

Brexit could cloud the economic outlook in the UK. Does JM anticipate any specific effects of it on the company?

A. Bordet: Brexit will obviously affect our business to some extent and we are monitoring the process very carefully. With that said, JM is a global company with fine chemical operations in the UK, US, China and India, and we are confident in being able to manage such changes when they occur. We are celebrating our 200^th anniversary this year and have seen many developments over the past two centuries, where we have managed to adapt well to changing markets.

Do you think acquisitions/mergers are a crucial success factor for fine chemical companies? What other factors do you think are important?

A. Bordet: At JM, we do not consider M&A as an activity in its own right, rather as a means to an end. We consider customer needs and attractive markets and then look at how best we can address these needs. For example, we can acquire capable companies that enable our customers’ progress and complement our strategic vision, as we have done on several occasions in recent years such as the Pharmorphix solid state business. To summarize, we look for M&A with sound strategic rationale.

How is your pharma offering able to address the needs and challenges that you have been discussing?

A. Bordet: We continue to develop broad offerings to fully engage across the small molecule process development and commercialization value chain. These offerings are underpinned through differentiating technologies and capabilities, and are supported by our global assets base. Overall we remain geographically and technically aligned to our customers and are focused on helping them to get their complex therapies to market effectively and then providing reliable commercial supplies.

JM is celebrating its 200th anniversary this year. What does that mean for the pharma offering?

A. Bordet: Two hundred years is a fantastic milestone for any company. Within our pharma offering we can celebrate some amazing achievements. For example, one of our businesses produced the active ingredient that was used in the first ever pharmaceutical administered by injection, in 1854. Today our customers still benefit from our advanced technical expertise and commitments to quality and manufacturing.

Do you have any predictions on what trends will affect the fine chemicals industry in the future?

A. Bordet: We believe that outsourcing will continue to increase over the coming years with pharma companies focusing their efforts on new drug innovations and marketing. This bodes well for contract manufacturing. However, as the trend continues this requires service providers to consider the breadth and scope of their offerings. With such a highly fragmented industry we are likely to see further consolidation.

New pharmaceuticals being developed are becoming more complex and more potent, which will continue to present new challenges to the types of facility and technologies that are needed to support customers. There will also be continued pressures to make healthcare more affordable and accessible both in established and emerging markets.

Overall these are very positive trends for the continued development of new and effective medication, and for the fine chemicals industry’s role in supporting pharmaceutical companies by providing value-adding products and services that enable cost-effective healthcare.