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UNLOCKING THE VALUE HIDDEN IN YOUR CMO? Glenn Carroll, Global Marketing Manager at Vertellus, explains how looking a little deeper into a CMO’s capabilities may unlock hidden value.

Forms of CMO differentiation Agrochemical companies invest in significant levels of R&D to identify active ingredients (e.g. herbicide, insecticide, fungicide). In general, multistep processes to manufacture those active ingredients are shared with a CMO under confidentiality, and the CMO uses its capabilities to convert technology packages into commercialized processes. There are many CMOs with broad technologies and asset capabilities, making this a difficult way to demonstrate differentiation from their competitors. Obvious differentiation beyond technology and assets would be R&D/engineering resources and pilot plant facilities. Health, safety, and environmental capabilities as well as IP protection are essential. Less obvious – but still potentially important – is that CMOs vary in their business models. Some are focused on commodity generic (off-patent) actives while others on proprietary active ingredients. Company sizes range from small regional players to multidivisional multinational companies. Contract manufacturing may be their only business or it may be a core or a secondary business amongst other business segments. As an example, Vertellus has a unique model, stemming from its history. Its Fine Chemicals Business was formed after the acquisition of Pentagon Chemicals, which altered the company’s approach to the agrochemical industry. Previously, Vertellus was primarily viewed as a pyridine intermediates producer. After the acquisition, Vertellus’ focus and recognition by the industry shifted to a CMO with capabilities beyond pyridine chemistry. Furthermore, while Pentagon had focused on converting customer technology packagse into commercialized processes to produce actives and advanced intermediates (with a focus was on process optimization and improvement), Vertellus had a rich history of developing its own technology packages to scale-up requested molecules. The synergistic blend of these two cultures created a technical community focused on innovation as well as continuous improvement. Furthermore, legacy Pentagon’s processes were usually batch while many of Vertellus’ processes required continuous high volume fixed bed and

56 Speciality Chemicals Magazine 37.03 June 2017

fluidized bed catalyst units as well as high and low volume batch processes. As a mid-sized company, engineers with a variety of core competencies resided in the same locations creating a synergistic environment.

Enhancing sustainability Fine Chemicals is one of several business units within Vertellus focused not only on chemical intermediates and CMO activities but also performance materials. Communication between the technical and business teams is encouraged, and many learnings from the manufacture of the company’s own products are transferable to CMO activities. Waste treatment costs typically make up a major portion of the costs for producing an active ingredient for an agrochemical company. However, processes may be optimized to reduce or recycle the waste. For example, at Vertellus, the distillation unit operation for a key product was modified to enrich a process stream in certain impurities (by-products). The enrichment enabled the isolation and purification of the impurities, thereby converting the by-product into a profitable stream. In another example, an aqueous waste stream required incineration due to the level of organic impurities. The process was optimized and a distillation column was added to remove the respective impurities. The modifications enabled the aqueous waste stream to be processed by a standard water treatment unit. In addition, steam that had been previously vented, was routed to the new distillation column supplying the energy for the process reducing overall energy costs by 85%. Clearly, these solutions have potential to provide added value when they are applied to a customer’s technology package. Efforts such as these contributed to a multi-year effort at Vertellus’ largest integrated facility, where a 42% reduction in energy utilization was seen (Figure 1), resulting in an environmental excellence award from the state where the facility is located.

100% % of baseline (MCF/Mtof production


contract manufacturing organization (CMO) is traditionally viewed as a converter of raw materials into higher value advanced intermediates and active ingredients for companies in the Life Science Industry. Agrochemical companies look for more than just an extension of their own manufacturing assets – they look for disruptive improvements as a way to advance their own competitive position in the value chain. Differentiating value can stem from several less obvious places within a CMO especially if the CMO can leverage their experiences from other areas such as other internal business units and products they sell. To illustrate the types of value that may be obtained, several examples are provided below showing expertise developed from existing process and product improvements, technology platforms, multistep manufacturing processes, sustainability, the development of intellectual property (IP), and a strong R&D organization with an innovative culture.

90% 80% 70% 60% 50% 40% 30% 20% 10% 0%


Year 1

Year 2

Year 3

Year 4

Year 5

Year 6


Figure 1 – Continuous energy reduction over 6 successive years

Speciality Chemicals Magazine June 2017  

Volume 37 Issue 03

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