Rise Of The Global Post-Patent Supplier
9 December 2008 With several market forces creating changes in the industry structure, a gap was created in ag-chem markets that was quick to be filled by a number of companies which focused not on discovery, but on efficient production and marketing of molecules that were no longer protected by patents. These companies differ greatly, and may guide their businesses by achieving registrations of generic ag-chems in underserved markets, by purchasing rights to products from patent-holders, or by simply manufacturing and selling their products at a lower cost than the original providers. The one similarity that bands these companies together is their business models: unlike the majors’, they do not engage in the discovery of novel chemistries.
While post-patent suppliers are not new, their presence among the top tier of ag-chem companies is. In 2005, three of the Top 10 ag-chem companies by sales (Makhteshim-Agan Industries, Nufarm, and Arysta LifeSciences) all had a large part of their sales stem from post-patent products. A number of other companies, including Cheminova, Sipcam-Oxon, Chemtura, Cerexagri, Gowan Co., and United Phosphorus Ltd. all ranked among the world’s largest ag-chem companies. Beyond them, a large number of smaller manufacturers, formulators, and international traders have established themselves as serious marketing forces. Their presence is now entrenched enough that the multinationals all have formulated strategies for handling competition from post-patent producers.
However, this trend is one that also has caused the industry to confront a new set of questions. For companies that make their margins on efficiency and low-cost production, price erosion is quick and severe. For popular products like glyphosate, nearly all the value can be siphoned off of the product in a matter of just a few years. This leaves the post-patent company with the challenge of finding ways to be a sustainable business. Many have done so; others face difficult struggles.
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