State's pharmaceutical firm yet to build a plant
- Still a mile away
25 February 2013|
A year after it was unveiled, the state's pharmaceutical firm is yet to commission the construction of its pilot plant.
Ketlaphela, a joint venture between state-owned fluorochemical producer Pelchem - a subsidiary of the SA Nuclear Energy Corp - and Swiss drugs firm Lonza, was set up to manufacture active pharmaceutical ingredients (APIs) for the production of antiretroviral drugs.
It is also meant to boost the local research and development sector.
It's government's attempt to lower the cost of antiretrovirals, and the plant was expected to start delivering the products in 2016. Now officials are talking about 2017 or 2018.
Phil Mjwara, director-general of the department of science & technology, says there were many issues that needed to be clarified first. Those included ensuring that the firm would be able to manufacture the APIs at prices that could compete with Indian and Chinese producers, from which local drug firms source their API material at the moment.
It also had to be ascertained whether Lonza, the technology partner, would be able to provide the green technologies government wants to use to help reduce SA's carbon emissions.
Then there's the issue of funding. The venture is expected to cost between R1,5bn and R2bn. Various state institutions, including the Industrial Development Corp, as well as Lonza were expected to commit resources.
Mjwara says there are also discussions about bringing in private equity partners as funders, though he's mindful that they may be reluctant to do so at this early stage.
APIs are an important element in the formulation of the drugs, accounting for between 50% and 75% of generic antiretrovirals in finished-dosage form.
But no SA firm has ever produced such APIs, despite the country's high burden of HIV/Aids infection.
In fact, the local API industry remains tiny despite several attempts in the past to stimulate it. One of the major constraints is that the country doesn't have a pharmaceutical industry big enough to provide the volumes needed to sustain production. Aspen Pharmacare, through its ownership of Cape Town-based Fine Chemicals Corp, is one of the few players in the market. Fine Chemicals produces narcotic and specialist fine APIs for SA and export, but not the kind used in making antiretrovirals.
"Manufacturing APIs is a sophisticated business. It requires special skills. The set-up costs are very high and there are also environmental issues to consider," says Frost & Sullivan health-care analyst Ryan Lobban. "It's not feasible for local companies [to do on a large scale]. It's something that would have to be driven or supported by government," says Lobban.
He says manufacturing APIs is a niche and low-margin business. Western pharmaceutical multinationals have also been outsourcing their API business to low-cost producers in countries such as India and China.
In an interesting move, Aspen announced this month it was in talks with MSD to acquire an API plant and a portfolio of products in the Netherlands.
The group isn't giving details about the pending deal, but it may not be far-fetched to conclude that it wants to scale up its API production.
Prof David Walwyn, who was commissioned by the department of trade & industry to do the study that informed the setting up of Ketlaphela, says the scale of HIV infection in SA justifies the establishment of an API firm.
The challenge remains, however, of whether Ketlaphela would be competitive enough for local producers of antiretroviral drugs to justify dumping their Asian suppliers.
Mjwara says the company will be partially shielded from high input costs because Pelchem produces flourine, one of the key substances used in the production of APIs.
The pilot project will run for about a year or two, after which commercial production will start.