Companies must take action to meet future challenges, warns Dow's Liveris

With the chemical industry facing some of the worst economic conditions since the 1970s and 1980s, companies must act if profitability and growth in the sector are to be restored.

'Leadership - by every company across our industry - is needed,' Andrew Liveris, president of Dow Chemical Company's Performance Chemicals Group, told Informex exhibitors and visitors. 'We must change.'

In particular, he called for a continuous improvement in productivity and cost reduction, a moratorium on new capacity until supply/demand balances improve, and further consolidation. 'Our industry still has too many players and too many non-competitive assets,' he warned.

Many of the growth opportunities lie at the boundary where the chemical industry and the pharmaceutical industry overlap, Liveris said, and the market discontinuities that lie in this space are the drivers behind growth in pharmaceutical outsourcing, as well as growth in biotechnology as a new enabling science. The concept of outsourcing what others can do faster, better and more economically still has tremendous merit, and could help both the chemical and pharmaceutical industries get out of the ruts in which they find themselves. For example, if companies can shut down non-competitive manufacturing assets by using more contract manufacturing, this could help alleviate some of the supply/demand imbalance and improve operating rates, he suggested. Outsourcing can also allow companies to spend their resources on innovation, rather than on manufacturing infrastructure that already exists elsewhere.

The small molecule side of the pharma industry is reaching maturity, and to revitalise growth in a mature industry, you must innovate, Liveris stated. This applies to the outsourcing field in a number of ways. To continue to grow, a company will need to make constant, targeted investment in new technologies. The winners in pharma outsourcing will be those with financial resources and flexibility, excellent regulatory capabilities and track records; those who collaborate and effectively find the best solution to their customers' needs; those with breadth and depth of capabilities; and those who are chosen for the short list of suppliers by the ever-consolidating pharma companies.

Small, niche players will be at a disadvantage, but some will survive and even thrive by specialising or collaborating. 'There have been too many entrants into small molecule pharma segment, and that sector is now rapidly maturing,' he stressed. 'Riding out the storm is not enough. We must change our strategies.'