PART I THE INDUSTRY COPYRIGHTED MATERIAL

PART I THE INDUSTRY COPYRIGHTED MATERIAL

CHAPTER 1 What Fine Chemicals Are 1.1 DEFINITION The basic principle for definition of the term fine chemicals is a three-tier segmentation of the universe of chemicals into commodities, fine chemicals, and specialty chemicals (see Figure 1.1). Fine chemicals account for the smallest part, about 4 5% of the total $1.8 trillion turnover of the chemical industry (see Section 9.1). Commodities are large-volume, low-price, homogeneous, and standardized chemicals produced in dedicated plants and used for a large variety of applications. Prices are cyclic and fully transparent. Petrochemicals, basic chemicals, heavy organic and inorganic chemicals (large-volume) monomers, commodity fibers, and plastics are all part of commodities. Typical examples of single products are ethylene, propylene, caprolactame, methanol, BTX (benzene, toluene, xylenes), phthalic anhydride, poly (vinyl chloride) soda, and sulfuric acid, Fine chemicals are complex, single, pure chemical substances. They are produced in limited quantities (<1000 metric tons per year) in multipurpose plants by multistep batch chemical or biotech(nological) processes. They are sold for more than $10 per kilogram, based on exacting specifications, for further processing within the chemical industry. The category is further subdivided on the basis of either the added value (building blocks, advanced intermediates, or active ingredients) or the type of business transaction (standard or exclusive products). As the term indicates, exclusive products are made exclusively by one manufacturer for one customer, which typically uses them for the manufacture of a patented specialty chemical, primarily a drug or agrochemical. Typical examples of single products are β-lactames, imidazoles, pyrazoles, triazoles, tetrazoles, pyridine, pyrimidines, and other N-heterocyclic compounds (see Section 3.1). A third way of differentiation is the regulatory status, which governs the manufacture. Active pharmaceutical ingredients and advanced intermediates thereof have to be produced under Fine Chemicals: The Industry and the Business, by Peter Pollak Copyright 2007 by John Wiley & Sons, Inc. 3

4 WHAT FINE CHEMICALS ARE commodities fine chemicals specialities single pure chem. substances... produced in dedicated plants high volume / low price many applications single pure chem. substances produced in multipurpose plants low volume (<1000 mt) high price (>$ 10/kg) few applications mixtures formulated undifferentiated undifferentiated sold on specifications sold on specifications what they are sold on performance what they can do Figure 1.1 Definitions. 2004 current Good Manufacturing Practice (cgmp) regulations. They are established by the (US) Food and Drug Administration (FDA) in order to guarantee the highest possible safety of the drugs made thereof. All advanced intermediates and APIs destined for drugs and other specialty chemicals destined for human consumption on the US market have to be produced according to cgmp rules, regardless of the location of the plant. The regulations apply to all manufacturing processes, such as chemical synthesis, biotechnology, extraction, and recovery from natural sources. All in all, the majority of fine chemicals have to be manufactured according to the cgmp regime. A precise distinction between commodities and fine chemicals is not feasible. In very broad terms, commodities are made by chemical engineers and fine chemicals by chemists. Both commodities and fine chemicals are identified according to specifications. Both are sold within the chemical industry, and customers know how to use them better than do suppliers. In terms of volume, the dividing line comes at about 1000 tons/year; in terms of unit sales prices, this is set at about $10 /kg. Both numbers are somewhat arbitrary and controversial. Many large chemical companies include larger-volume/lower-unit-price products, so they can claim to have a large fine chemicals business (which is more appealing than commodities!). The threshold numbers also cut sometimes right into otherwise consistent product groups. This is, for instance, the case for active pharmaceutical ingredients, amino acids, and vitamins. In all three cases the two largest-volume products, namely, acetyl salicylic acid and paracetamol;

POSITIONING ON THE VALUE-ADDED CHAIN 5 L-lysine and D,L-methionine, and ascorbic acid and niacin, respectively, are produced in quantities exceeding 10,000 tons/year, and sold at prices below the $10 /kg level. Specialty chemicals are formulations of chemicals containing one or more fine chemicals as active ingredients. They are identified according to performance properties. Customers are trades outside the chemical industry and the public. Specialty chemicals are usually sold under brand names. Suppliers have to provide product information. Subcategories are adhesives, agrochemicals, biocides, catalysts, dyestuffs and pigments, enzymes, electronic chemicals, flavors and fragrances, food and feed additives, pharmaceuticals, and specialty polymers (see Chapter 11). The distinction between fine and specialty chemicals is net. The former are sold on the basis of what they are ; the latter, on what they can do. In the life science industry, the active ingredients of drugs are fine chemicals, the formulated drugs specialties (see next chapter). Electronic chemicals (see Section 11.4) provide another illustrative example of the difference between fine and specialty chemicals: Merck KGaA produces a range of individual fine chemicals as active substances for liquid crystals in a modern multipurpose plant in Darmstadt, Germany. An example is (trans,trans)-4- [difluoromethoxy)-3,5-difluorophenyl]-4 -propyl-1,1 -bicyclohexyl. Merck ships the active ingredients to its secondary plants in Japan, South Korea, and Taiwan, where they are compounded into liquid crystal formulations. These specialties have to comply with stringent use-related specifications (electrical and color properties, etc.) of the Asian producers of consumer electronics such as cellular phones, DVD players, and flat-screen TV sets. Commoditized specialty chemicals contain commodities as active ingredients and are interchangeable. Thus, ethylene glycol 99% is a commodity. If it is diluted with water, enhanced with a colorant, and sold as superantifreeze in a retail shop, it becomes a commoditized specialty. Note: Sometimes fine chemicals are considered as a subcategory of specialty chemicals. On the basis of the definitions given above this classification should be avoided.) 1.2 POSITIONING ON THE VALUE-ADDED CHAIN An example of the value-added chain extending from commodities through fine chemicals to a pharmaceutical specialty is shown in Table 1.1. The product chosen is Pfizer s anticholesterol drug Lipitor (atorvastatin), the world s top-selling drug with sales of $12 billion in 2004. The value-added chain extends from a C 1 molecule, methanol (left side of the table) all the way to a C 33 molecule, atorvastatin. The structure of compound III in Table 1.1 is as follows:

Table 1.1 Example for the Value-Added Chain in the Chemical Industry: Lipitor (Atorvastatin) Fine Chemicals Parameter Commodities Intermediates API Specialty Example Methanol Acetic acid (I) (II) (III) Lipitor Molecular formula CH 4 O C 2H4O2 C7H11NO3 C14H30NO4 C33H35FN2O5 N/A Molecular weight 32.04 60.05 157.17 269.34 558.65 N/A Applications >100 >50 10 1 1 N/A Price indication ($/kg) 0.2 1.00 100 200 2,000 80,000 Production (metric tons/year) 32 10 6 8 10 6 200 300 400 400 Producers 100 25 10 5 1 a 1 a Customers 100 50 1 1 1 a Millions Plant type b D, C D, C M, B M, B M, B F&P Manufacturing steps 1 2 5 15 20 +2 a Active pharmaceutical ingredient (API). b Patentholder; several generic producers preparing for launch. Note: Figures are indicative only. Key: B, batch; C, continuous; D, dedicated; M, multipurpose. Also: (I) Ethyl(R)-4-cyano-3-hydroxy butanoate, hydroxynitrile (II) tert-butyl(4r,6r)-2-[6-(2-aminoethyl)-2.2-dimethyl-1.3-dioxan-4-yl]acetate (III) 2-(4-Fluorophenyl)-β,δ-dihydroxy-5-(1-methylethyl)-3-phenyl-4-[(phenylamino)carbonyl]-1H-pyrrole-heptanoic acid. 6

POSITIONING ON THE VALUE-ADDED CHAIN 7 O N H N OH OH O O Ca 2+ (III) F 2 Methanol and acetic acid are typical commodities, namely, low-price/multiusage products manufactured in large quantities by many companies. Under the heading fine chemicals, three examples of fine chemicals used for the manufacture of atorvastatin are listed, namely, the advanced intermediates ethyl 4-chloro-3-hydroxy butanoate and tert-butyl (4R,6R)-2-[6-(2- aminoethyl)-2.2-dimethyl-1.3-dioxan-4-yl] acetate, respectively, and the API, atorvastatin, itself. As long as the latter, 2-(4-fluorophenyl)-β,δ-dihydroxy-5- (1-methylethyl)-3-phenyl-4-[(phenylamino)-carbonyl]-1H-pyrrole-heptanoic acid, is sold according to specifications, it is a fine chemical. In the pharmaceutical industry, the chemical synthesis of an API is also referred to as primary manufacturing. The secondary manufacturing comprises the formulation of the API into the final delivery form. The API is compounded with excipients that confer bulkiness, stability, color, and taste. Once atarvastatin is tableted, packed, and sold as the anticholesterol prescription drug Lipitor, it becomes a specialty. The price difference between the API and the package sold in the drugstore is very substantial: Lipitor s retail sales price is more than $80,000 per kilogram.