French third party pharma manufacturing in consolidation phase

The French third party manufacturing industry will definitely enter a consolidation phase between now and 2012, according to a study by Precepta, which specialises in strategic and competitive analysis.

The findings show that this industry has enjoyed sustained growth over the past 10 years but that profits are now falling because of tougher competition.

Between 1996 and 2007, the sector grew considerably through integration of 22 production units issued from the pharmaceutical industry. Sector turnover is currently Euro 1bn. For instance, at the start of the year Recip Pharma took over the AstraZeneca factory at Monts (Indre et Loire); in 2006, Fareva took over the Pfizer units at Val de Reuil (Eure) and Angers (Maine et Loire), and Famar took over the Abbott unit at Saint Remy sur Avre (Eure et Loire).

French third party pharmaceutical manufacturers have also cashed in on the rise in generics. However, intense outsourcing of pharma lab production units has led to excess capacity, which in turn have led to price wars and falling profits.

Precepta considers "natural selection" over the coming years will push companies to differentiate and try to exploit competitive advantages. "Concentration has already begun. The development of groups such as Delpharm, Fareva Holding and Famar hinges on factory takeover and the objective is to reach a critical size in the period leading up to 2012," the report says.

Precepta has identified three relevant growth strategies in this sector: dominance through price; specialisation concentrating on a niche; and differentiation (provision of services).