In light of developments at Fareva-PCG, we consider wider implications for pharmaceutical manufacturing in France, the outsourcing sector in particular.
Surplus production capacity among big pharmaceutical companies continues to preoccupy France's producers. Pfizer is to divest two of its production sites, in Angers (Maine-and-Loire) and in Reuil Valley (Seine-Maritime) to the PCG-Fareva group. The Fareva group specialises in production of finished products for cosmetics and also products for human consumption. These two production sites currently employ 300 (Angers) and 225 (Reuil Valley), people who will be employed by Fareva.
Towards the end of 2004, Pfizer announced its intention to withdraw from both sites, effectively reducing the number of its factories in France to four. Two of these, ie, in Ploërmel (Morbihan) and Colmar (Upper-Rhine), actually belong to Capsugel, Pfizer's subsidiary, specialised in the production of gelatine-based capsule shells. Two others, in Amboise (Cher) and Orleans (Loiret) are dedicated to producing either sterile liquids (not freeze-dried) in Amboise or dry forms in Orleans.
Fareva seems destined to become the leading player for pharmaceutical subcontracting (outsourcing services) in France, as the group moves forward, handling about 15 % of the domestic market. The group has achieved a sales turnover of 250 million Euros, about a third of which is in pharmaceuticals. It already has five sites dedicated to this market, including four in France (Quétigny in Côte-d'Or, St-Quentin-Fallavier in Isere, plus Tournon and Annonay in Ardeche). Fareva, which currently owns Pharma Cosmetic Group (PCG) and FCA, has strengthened its position in pharmaceuticals in recent years, while revitalising production sites from which pharma companies wish to disengage.
This is a strategy that has been adopted by most of the outsourcing players as it's possible to take over operational equipment and staff with excellent experience in the pharmaceutical business. Another important factor is that the parent company divesting its production site will award a supply contract that may last for several months or even years, providing a continuity of work in the factory. This provides a base from which the outsourcing subcontractor can develop the potential of the site, thereby improving its profitability as it progressively wins new contracts.
In early 2004, Roche transformed its site at Fontenay-sous-Bois (Val-de-Marne) into an independent entity, Cenexi, with a long-term aim to become a major player in the outsourcing sector at a European level. Similarly, Famar took over an Aventis site at Saint-Genis-Laval (Rhône). A Schering site, at Lys-les-Lannoy in Northern France, which was identified as a candidate for takeover by a contract services organisation (CSO) has now been acquired by Delpharm.
Altogether about a dozen factories in France have been transferred in the years from 2001 to 2004. While France occupies a place of choice in Europe in outsourced product manufacturing - supported by the growth in the domestic market for generic products, one of the main targets for third-party manufacturers - it seems that its attraction for pharma companies is lost in other ways. Since the beginning of the year, for example, the closure of two R&D centres was announced, Serono's site at Evry, and a Bristol-Myers-Squibb site in Saint-Nazaire, now taken over by Galenix (St Jean d'Illac). Meanwhile US company, Gilead, recently announced it intends to transfer its European operations from Paris to London.
See related information about Fareva-PCG
See related article about Cenexi-Roche
See related article about Galenix
See related article about Delpharm
Details about forthcoming outsourcing event
Keywords : Fareva-PCG France Pfizer M&A Divestment Manufacturing Production Outsourcing Subcontracting Contract Services CSO CMO Sterile Capsule shells Gelatine Capsugel Roche Cenexi Aventis BMS Schering Serono Gilead R&D Generics Pharmaceuticals
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