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What's New in Fermentation and Biotechnology

May/June 2004

Enzymes to the Rescue and How about Antibiotics

There is little to cheer about when reviewing basic fermentation products such as citric acid, vitamin C, penicillins and other antibiotics. In former years these products were 'cash cows' governed by economic criteria - predictable cost of raw material costs, reasonable manufacturing cost below selling price, hence acceptable return on investment. All this has taken a tumble because of continuous declining sales prices. Who is responsible for this chaos? The simple answer is too many players and especially Chinese who don't play this game by any established rules so that nowadays selling prices have dipped below manufacturing costs.

Fortunately there is less Chinese competition in the enzyme business and as a result this sector continues to grow at a healthy 6-7% annual rate with stable prices. Over 20 enzymes hich are termed 'industrial' with applications in a wide range of industries including detergents, starch, dairy, baking, brewing, fruit juice, animal feed, textile, pulp and paper. In each of these sectors enzymes play a different role: in cheese they act as coagulants for milk, in starch they hydrolyse the starch polymer to glucose, in baking they degrade the starch network thereby inhibiting staling, in brewing they replace malt in the mashing process, in animal feed they degrade phytin in cereals to generate phosphorus, in textiles, they hydrolyse denim fibre to give a 'washed' appearance.

There are only three significant players in the enzyme business: Novozymes with 46% market share, Genencor with 20% and DSM with 7%. Smaller players include AB Enzyme, part Of Associated British Foods [who have just acquired the Burns Philp yeast business], Amano, Japan as well as several producers for captive usage such as ADM and Henkel. The health of the enzyme business is underlined by increasing fermentation capacity installed by the major players all over the world.

So where are the Chinese? Yes they are present in enzymes but somewhat shakled by joint ventures which have been established with Novozymes and Genencor, limiting the damage they can inflict in the West by arbitrary price cutting.

We have recently completed the latest survey of L. Hepner & Associates Ltd.: 'Industrial Enzymes for Starch, Dairy, Detergents, Baking, Textiles, Foods - Current Status and Outlook by 2010' with the objectives of:

  • Estimating the current market for every category of industrial enzymes and the projected market by 2010
  • Profiling enzyme producers, listing their range, fermentation plants and novel products
  • Determining the manufacturing cost of major enzymes and how they compare with sales prices
The antibiotics industry has evolved from small beginnings in the years immediately after the second world war to one of the most important sectors of the pharmaceutical industry. Antibiotics can be marketed either as bulk or speciality products. Bulk antibiotics, including intermediates and semi-synthetic derivatives are produced by many companies, Western as well as Chinese. Speciality [generally patented] antibiotics have been developed by various Western pharmaceutical companies and produced by these companies or licensees. Most producers are involved either in bulk or speciality antibiotics.

During the past decade significant changes have occurred in the antibiotics industry, due to the following factors:

  • patent expiry of many antibiotics leading to generic competition and price erosion;
  • low margins forcing smaller and less efficient producers out of the market;
  • the view amongst major pharmaceutical companies that generic, low-margin antibiotics are not sufficiently profitable for their overall business;
Following liberalisation of economies in former Communist countries, many antibiotics companies in Central and Eastern Europe were taken over by Western pharmaceutical groups and their facilities revamped and modernised [i.e. Lonza's acquisition of Kourim, Czech Rep., Teva's acquisition of Biogal, Hungary]. Many pharmaceutical groups have amalgamated, to bring about economies of scale. Notable mergers include GlaxoWelcome and SmithKline Beecham into GlaxoSmithKline, Pharmacia with Pfizer and the divestiture of Pfizer=s animal feed additives business to Phibro and more recently the amalgamation of Aventis with Sanofi-Synthelabo into Aventis- Synthelabo.

The establishment of fermentation facilities in China and India producing bulk antibiotics for sale in Western markets has been a direct cause in the decline of bulk antibiotics notably penicillins, cephalosporins by Western countries. At present there are around 50 Chinese antibiotics producers, many small but the largest [North China Pharmaceutical] have similar capacity as their Western counterparts. Major Western producers have successfully increased yields of penicillin G and V, cephalosporin C and erythromycin. Smaller producers who do not invest in R & D are left behind and find they cannot compete on a price basis with the large research-intensive companies.

One of the most critical problems affecting antibiotics is the development of novel antibiotics which effective in treating hospital infections generally due to methicillin-resistant Staphylococcus Aureus [MRSA]. In former years vancomycin proved an effective antibiotic to combat such infections but the occurrence of vancomycin-resistance has underlined the importance of research in this area. One new antibiotic product linezolid [Pfizer] has already appeared and is proving useful. Other novel products are in the pipeline.

The antibiotics industry for bulk and speciality products has a bright future provided Western companies establish peaceful coexistence with Chinese companies and the latter attempt to price products in normally-accepted means. The introduction of a new generation of antibiotics effective against MRSA life-threatening diseases is provides an important challenge to microbiologists and biotechnologists. There is little doubt that the next years will witness the launch of new products for these applications. For further information see our survey: 'The Antibiotics Industry - Current Status and Outlook by 2010'

L. Hepner & Associates
Address: Tavistock House North, Tavistock Square, London WC1H 9HX, UK
Phone: [44] 207 387 2295
Fax: [44] 207 388 2977
Email: lhepner@probio.com


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