Read the Conversation
EF: UQUIFA is evolving as a business, and there is a calculated investment plan to expand the company. What can we expect from the company in 2024?
SG: UQUIFA has been in business for more than 85 years as a brand and producer of active pharmaceutical ingredients. It was founded in 1936, and a lot has happened since then. We have since invested in establishing manufacturing sites, and today, we are the producers of intermediates and active ingredients for the global pharmaceutical and specialty chemical sectors. Today, the group is a global chemistry company with a reach that surpasses that of our previous ventures. Our enterprise constitutes close to 800 colleagues spread across Spain, Mexico, Hungary, the US, and India. We currently export our products to over 70 countries. The US, Europe, and Japan are our top three export markets, making up about 80- 85 percent of our total sales.
We have also seen a shift in our customer base and business mix. Originally, we were a generic API manufacturing company. Ten years ago, the majority of our sales came from the sale of generic or off-patent APIs, which were a component of our product line. I believe that we have built on the experience and familiarity of that business and repositioned ourselves as a company that can provide services & manufacturing capabilities for different groups of customers who are involved in trying to bring new chemical or medical entities to the market. This segment of business, which is called CDMO (contract development and manufacturing organization), now makes up two-thirds of our business.
Given that our final markets and clients have evolved, the company has kept up with it as well. We are still an enterprise in transition, focusing on a strategy of investing towards our three Ps—our people, our products, and our plants. We are in a new phase of investment in those three components, and we have chosen to base the company across all of our locations on the values of customer centricity, digitization, and compliance.
EF: During the pandemic, in May 2020, you assumed the role of managing director. In your opinion, what are the most important lessons you learned from leading the business throughout this period and applying them going forward?
SG: The company was facing a challenging time, given the confluence of internal and external factors at play. There were external factors, like the disruption of the supply chain, which impacted our manufacturing productivity. At the same time, there were internal challenges too, especially in our Spanish operating company with volatility in the demand for some key products, which impacted our revenues and profitability. At the same time, we remained steadfast in our long-term strategy in other manufacturing locations, and the teams continued to execute the plans. The teams across our sites deserve credit for sticking by the implementation of both the near-term and the longer-term components of our strategic priorities. One of the lessons that the team frequently discusses is the importance of taking charge of the things that you can influence. I think we developed equanimity and tenacity as an organization through this period. As we exited this period of internal and external challenges, growth has become a central theme, and the teams across locations where we operate deserve credit for this mindset shift. Our people are at the core of the enterprise´s strategy and aspirations.
EF: What is your opinion of Spain's present manufacturing environment? What can we do to influence policy to favor local API production in the country?
SG: I believe that the events that transpired during and after the COVID-19 epidemic amplified the importance of local production. Supply chains have always been necessary and important, even before COVID-19, particularly in fields that are strategically significant to society, like healthcare and pharmaceuticals. Stakeholders today realize that actions need to complement the sentiment.
There was always an underlying theme that we needed to strike a balance regarding where we source our products, and COVID-19 made it more noticeable. This is the narrative that we frequently hear from regulators, government agencies, and customers. There is definitely an increased interest in local manufacturing in Europe today: we see ourselves as a Chemistry company, and in the last four years, the number of active projects we have with pharma and non-pharma end markets has grown, which to us reflects the space in the market for a reliable and competitive EU supplier.
We need to maintain an environment that supports this and makes it possible for real transformation to occur. We have discovered that things take time in the manufacturing industry because time is a factor that always exists in expansions, whether they are brownfields or greenfields. Policy continuity needs to be upheld, and it must be from a long-range perspective.
Companies must invest in building physical infrastructure locally. Customers have to be prepared to be flexible with their budgets to help achieve this goal. Cost advantage is not the main reason for the relocation of manufacturing supply chains to Europe. It is evident that the products would not be at the same price point as consumers or businesses currently purchasing from Asia if the West were to start engaging in some of that activity and bringing the products here. A certain amount of modification to profit and price expectations is necessary. We need to take a holistic view of the customers, the regulators, the investors, and the company itself. Continuity is important for all of these stakeholders.
I believe that we should choose fights that are worthwhile and that we can win. Selecting the products on which we want to establish some degree of onshore capability requires us to consider them from every angle, including the time it will take the regulator to grant approval, the additional cost to the customer, and the capital expenditures (CapEx) that the supplier will have to incur. To find common ground, all three of them need to communicate with one another.
Innovation to bring new products to market and/or balancing supply chain risks are not free. It is an investment cost for somebody in the ecosystem. The question is, how is this distributed across the different stakeholders?
EF: Recently, at CPHI in Barcelona, you spoke about how one of your key priorities is increasing your technological capabilities. How is UQUIFA leveraging technology to enhance its operations?
SG: The way our enterprise views digitalization is uniform across all of our sites. Essentially, we view it in two ways: in the chemical production sector, the basic idea behind the manufacturing process has essentially not altered over many decades. There is a manufacturing workflow: crystallization, separation, isolation, or filtration. Then, milling, micronization, and so forth are used to achieve the physical sizing of the product. That is the actual physical process involved in producing a fine chemical or a pharmaceutical ingredient.
What we mean when we talk about "digitization" is the application of technology to increase productivity: be it manufacturing yields, site engineering/ maintenance, warehouse management or supply chains. In the context of manufacturing in our company, "digitization" refers to the automation of certain steps or elements of a process, which allows us to better control the manufacturing process and produce goods with higher yields, higher quality, and lower waste.
We have been able to automate certain parts of a manufacturing process with the aim of eliminating the dependency on human skill to deliver a given product quality or yield. This is where we have begun to use the concept of automation. The largest obstacle facing the chemical manufacturing industry is variability; thus, we have attempted to employ automation to some degree to achieve control over the essential components of the process.
When we discuss digitization, there is another factor to consider. Over the past four years, our business divisions in Spain and Hungary have adopted an ERP, which serves as a digital framework and platform for all of an enterprise's operations. In Spain, this has also been complemented by the implementation of a digital quality management system (QMS).
EF: How do you assess the transition to sustainable healthcare models, and what is UQUIFA doing to increase its sustainability?
SG: Since we produce active ingredients / fine chemicals, it is our duty to handle both liquid and solid waste, or effluent, with greater care. We signed onto the Sustainable Development Goals (SDGs) of the UN. We recognize that protecting the environment is an intergenerational commitment, which is why the SDG metrics are a multifunctional project. We intend to begin adopting the SDG metrics department by department. It is crucial for manufacturers of chemicals and pharmaceuticals to be aware of this. Our attention is shifting more and more toward effluent-efficient operations. We propose the implementation of green chemistry options by which less waste is generated anytime we try to scale up or deploy newer APIs or advanced intermediates.
Higher conversion and selectivity of the reaction reduce all waste elements, whether they are liquid or solid. That, in our opinion, is a component of the chemical design concept, and given the chance, we suggest it to clients for both internal and external projects. On our manufacturing sites, we have extensively used LEDs now, and the teams are working on projects to incorporate solar energy consumption into our site´s daily lives.
EF: How do you assess the talent pool and the talent available to you in Spain, and how do you attract and retain this talent in such a competitive market?
SG: People are the organization's most important asset, and a business plan would not exist without them. One of our three Ps is People. Any firm, especially one that is knowledge-driven and science-focused, needs skilled people. Because we employ a large number of skilled individuals in these businesses—whether they be MSCs, PhDs, engineers, or chemists—the caliber of the workforce becomes a differentiator.
Spain is a country that has had an established presence in chemical and pharmaceutical manufacturing over the years. This has helped facilitate an ecosystem by which universities are able to offer a qualified people pool for an industry like ours. I would say this is also the case in Hungary and, to an extent, Mexico, where the presence of large organizations and a robust university system has helped to build a pool of qualified personnel for a knowledge-driven sector like ours.
EF: In terms of how we can create a more sustainable healthcare system, what is your parting message or piece of advice to upcoming healthcare executives?
SG: "To keep it simple and let logic and common sense point your path." What we have also learnt is that a business strategy needs to have a longer-term component to create value as well as a nearer-term set of actions to control outcomes. Striking a balance between the two is crucial.
We are fortunate to work in this sector of the economy, which is vital to society and affects the majority of us at some point in our lives.
Given this history and context, we must exercise responsibility and make the best use of the resources at our disposal. Societies and governments bear a heavyweight when it comes to healthcare, and there is also a clear message regarding the quality of life from both an economic and societal standpoint. Regulators, industry, and society should continue to focus on healthcare outcomes.
