Howth, County Dublin

© Istockphoto.com / Chris Schmidt

From the lakeside town of Loughrea in the west of Ireland, the Chanelle Group supplies a range of contract services to pharmaceutical companies in 80 countries. The company was founded in 1981 by a veterinarian, Michael H. Burke, who set out to develop and manufacture his own range of veterinary products.

"During the mid-1980's I saw a niche in the market," says Burke, who is the company's managing director as well as its founder. "I noticed that few other pharmaceutical companies were tendering for business in the Middle East, so it was there that Chanelle began its exporting of services and products."

Today, Chanelle provides the animal health market and human pharmaceutical market with services that include research and development, registration and sale of generic dossiers, contract manufacturing, and contract packaging. The company also manufactures tablets, powders, capsules, and liquids under contract, as well as producing its own line of products. Of the roughly 240 people who work for Chanelle, about 60% are employed on delivering services, with the remainder working in the manufacturing business.

Chanelle is one of a flotilla of smaller companies that have sprung up around the giants of Ireland's pharmaceutical manufacturing industry, providing "subsupply" services that range from engineering and analytical chemistry to packaging and project management. More than 120 Irish companies now offer services to the pharmaceutical and medical devices sectors, according to a database run by Enterprise Ireland.

"I'd say that for every job provided by the pharmaceutical companies, there are at least two in subsupply," says Matt Moran, director of PharmaChemical Ireland, an industry body that represents 55 pharmaceutical and chemical companies. With at least 24,000 jobs in mainstream pharmaceuticals, there are more than 48,000 in subsupply. Eight of the world's top ten pharmaceutical companies in terms of global sales manufacture in Ireland, and the sector has proved to be an enduring one, with continuing reinvestment.

For service companies, supplying to Ireland-based companies has been a good path to growth, Moran says. "The main challenge is posed by the global purchasing policies of the pharmaceutical companies, so the Irish subsupplier has to come in with globally competitive costs." That means competing with companies in other regions where the prices of labor and raw materials may be lower, says Ita McStravick, senior technologist for the life sciences area at Enterprise Ireland, a government-established body.

"The trend has been towards outsourcing of elements that are not core to the business, and certainly there is a market opportunity for Irish companies seeking to serve the pharmaceutical industry with respect to these elements," says McStravick. The question is where companies choose to do that outsourcing. "In relation to contract manufacturing it could be India or Asia," she says, "but I hope it would be Ireland because of the closeness to large European markets and direct access to service companies with high-quality systems."

Irish subsupply companies have other advantages that will help maintain a competitive edge, says Moran. "Service, quality, reliability, and compliance are more important than costs, and we have well-structured operations in Ireland. And having once established a track record, they can pursue opportunities with companies overseas." McStravick also points out that Irish companies can fulfill all the key elements of the pharmaceutical value chain. "For example the ESPIRE network is an excellent model of several companies coming together to offer a complete suite of services." ESPIRE is a network of seven companies that offer contract services to the pharmaceutical and allied industries.

Enterprise Ireland also encourages Irish manufacturing companies to add on service offerings, says Tom Kelly, manager of the organization's Environment, Industrial, and Life Sciences Division. "For example, where a subsupplier is providing a pharmaceutical company with advice and support in the regulatory environment, it could also offer help with product safety. And a business supplying maintenance could begin to offer specialist training to that particular pharmaceutical company, and then broaden it out to others."

Inevitably there comes a time when companies that have grown up servicing the local pharmaceutical industry begin looking beyond Ireland's shores. For those that have established themselves in supplying Irish-based firms, what are the chances of breaking into exporting? McStravick says several companies are already marketing their services overseas. Chanelle is one example. Others include Microchem Laboratories and EirGen Pharma.

Microchem, a contract test and development facility, was set up in the mid-1980s. Based in Dungarvan in the southeast of Ireland, it provides microbial and analytical testing and was sold last year to a US company, Lancaster Laboratories. EirGen, from the same region, develops and manufactures high-dosage solid forms, and sells clinical trials supplies, among other services. Microchem supplies services to 19 out of the world's top 20 pharmaceutical companies, with many clients throughout Europe, but the company does not name client companies for reasons of strict confidentiality. EirGen is not allowed to divulge client names, says the company's managing director, Patsey Carney. "We currently have four customer companies in the US and three in Canada, and we have customers in 12 European countries," he adds.

In seeking new markets abroad, Ireland's pharmaceutical subsupply companies are facing an economic reality. The population of four million in the Republic does not offer a large enough market to sustain high-tech businesses, so exporting is almost an automatic strategy.

McStravick advises companies to stay focused. "Contract manufacturing can be challenging, particularly in relation to generic markets, but if a company identifies a niche area with low-volume, high-value products, there are good opportunities, because the market for niche products is growing globally."