Contract manufacturing organisations (CMOs) are operating in an increasingly demanding environment, with new challenges brought about by more complex pharmaceutical products, evolving patient needs and regulatory changes impacting the way they do business
In the second of a two-part roundtable series, Manufacturing Chemist speaks to a selection of leaders in the CMO space to uncover the opportunities for growth and development in the sector, and the trends that will influence the future of contract manufacturing.
Manuel Leal, Idifarma: A very relevant challenge is to reconcile the growing regulatory requirements with the pressure on price coming from “payers” and clients, which is especially important for high-volume products manufactured by big CMOs. The need to adapt to the new serialisation requirements coming to the EU in 2019 will also be a challenge for large CMOs in terms of resources and investments. Smaller CMOs focused on more niche and complex product manufacturing will be less exposed to those challenges.
Kevin Cook, Sterling Pharma: Low volume, complex targeted therapies are dominating drug development pipelines, representing a considerable challenge for contract manufacturers. API manufacturers must be able to offer a wide range of chemistries and scales of manufacturing to accommodate significant volumetric changes across the synthetic process. Integrated process engineering capability is also critical to enable the efficient introduction of complex and hazardous processes.
Mark Quick, Recipharm: I think the industry as a whole is working well; but, I do see that in the short-term, being ready for serialisation is an issue for many. The large pharma companies that understand the impact are of course ready and have ensured that their CDMO partners are prepared, but there are many companies that have not really understood the implications. The CDMO industry needs to provide education to those customers that may not be so aware of the regulations and what it means to them. Clearly, some of the smaller CMOs will be having a tough time explaining this to their customers, particularly if they are not fully aware of the implications or prepared for the changes. Consequently, some CMOs are going to be faced with some huge difficulties when the regulations do come into force.
Colin Mackay, Symbiosis: Although larger CMOs consolidate to offer a one-stop-shop provider model, others are specialising in more niche areas of manufacturing and often work in collaboration with other supply chain partners. The danger is that those companies that fail to differentiate in a way that resonates strongly with their target clients may get lost in an increasingly competitive marketplace.
Bigger doesn’t necessarily mean better, but if you are a smaller industry player you need to demonstrate how you are best placed to overcome the specific challenges a customer may encounter and offer a niche competitive strength that others can’t. For example, whereas larger CMOs offer relatively fixed offerings, as a small-scale sterile manufacturer, we have the operational flexibility to meet tight timescales and tailor our services directly and specifically in response to customer requirements.
Anthony Sheehan, Saneca Pharma: There are two major challenges currently faced by contract manufacturers — the overcapacity that exists because of a growing number of providers and increasing price pressures on the whole supply chain as governments continue to drive down the cost of generics. Those CMOs that can offer a broad range of capabilities and added value services such as fully integrated supply chains including API, R&D, regulatory affairs and distribution support are best placed to offer full-service solutions and therefore attract new customers.
Mark Quick, Executive Vice President, Corporate Development, Recipharm, Sweden Mark is responsible for leading Recipharm’s merger and acquisition (M&A) activities, as well as all external and internal communications. He has more than 20 years of experience in the pharmaceutical contract development and manufacturing industry in supply chain and business development roles. Mark also holds an MBA (www.recipharm.com).
Colin MacKay, CEO, Symbiosis Pharmaceutical Services, UK With more than two decades of experience in the life science industry working for small and large organisations at an international level, Colin has spent most of his career helping clients to overcome drug development challenges within the sterile manufacture of pharmaceuticals. He holds a BSc (Hons) in cell biology from Glasgow University, an MSc in molecular genetics from Glasgow University and an MBA from Strathclyde University (www.symbiosis-pharma.com).
Anthony Sheehan, CEO, Saneca Pharma, Slovakia Anthony has more than 25 years of experience in the pharmaceutical industry and worked as Site Managing Director at Stada AG before joining Slovakia-based Saneca Pharma as CEO in 2015. He has an MBA from the University of Limerick, Ireland (www.saneca.com).
Manuel Leal, Business Development Director, Idifarma, Spain Manuel is the Business Development Director at Idifarma. He is responsible for generating new business for the Spanish contract development and manufacturing organisation and exploring international markets as part of the company’s ongoing growth strategy. He has more than 15 years of experience in business development and management, and has been with Idifarma for more than 6 years (www.idifarma.com).
Kevin Cook, CEO, Sterling Pharma Solutions, UK Kevin Cook is the CEO of Sterling Pharma Solutions and is responsible for strategically ensuring compliance, growth and profitability for the UK-based contract development and manufacturing organisation (CDMO). He has more than 30 years of experience in the pharmaceutical industry, having worked at a number of companies and CDMOs before joining Sterling in 1993. In January 2014, Kevin was appointed as president and, in 2016, he led the business through a management buyout (MBO) to form Sterling Pharma Solutions, which is now the largest independent API CDMO in the UK (www.sterlingpharmasolutions.com).
Mackay: Ultimately, companies will grow, shrink, rise and fall based on their ability to be flexible and meet the evolving needs of drug development clients. The decision to establish Symbiosis was driven by the need to address specific gaps in the sterile small-scale injectable drug manufacturing market. We have experienced significant growth in the US market in recent years and expect that to continue as demand from US-based biotechnology firms looking for small-scale aseptic manufacturing capabilities increases to support clinical trials in line with their collective financial good health.
Cook: A cultural shift must take place in the CDMO sector — companies that embrace the “project versus product” mentality and focus on service will continue to grow. The US remains our biggest market and will continue to offer opportunities as the emerging pharma sector thrives and benefits from favourable funding structures.
Sheehan: Those CMOs that establish true partnerships with their customers, supporting them in as many ways as possible, can expect to see growth from their existing client base. In addition, CMOs that also provide a development service for APIs and formulations are well positioned to grow the manufacturing side of their businesses as promising molecules move closer to being a commercial reality.
The contract manufacturing of opiate-based products and other controlled substances is a significant growth area, as the Western population ages and the developing world becomes more affluent. Saneca Pharma is working with partners in these areas to develop combination products to meet growing market demand. More complex technologies are required to reduce the risk of substance abuse, and we expect to see growing demand in this area.
Leal: There are many opportunities in specialised or niche contract manufacturing. The capacity to handle highly potent compounds and the flexibility to manufacture small-scale batches are becoming very important for a number of customers and products. The availability of innovative technological platforms able to improve cost and process efficiencies, product safety and bioavailability or patient compliance constitute other growth opportunities for CMOs.
Quick: At a macro level, the industry is definitely growing as the propensity to outsource increases … and that will provide a source of growth. At a company level, we believe growth will come in a number of ways. First, by deepening our relationships with existing companies — essentially doing more with them across a range of different dose forms. Secondly, we are focusing a lot of resources on our development services. By being able to work with a customer in early stage development and then provide a manufacturing solution, it not only saves time but, ultimately, cost.
Thirdly, we see much growth coming from emerging markets. The pharma industry is growing at a much faster pace in these markets and this was behind our decision to develop our business in these markets and our recent acquisitions in India.
Sheehan: We can expect to see continuing consolidation within the CMO sector, which will influence the way that contract manufacturing services are delivered. More manufacturers will move into biologics and biosimilars production to take advantage of the growing drug pipeline.
In addition, market regulations will continue to evolve, creating new requirements and quality demands. Serialisation is a good example of the impact that regulatory changes can have on the industry, as manufacturers must make significant investments into new technologies and processes.
Finally, whereas previously companies would turn to the East for cost-effective manufacturing solutions, they are beginning to look closer to home. As more products (and API projects) are returning to Europe, companies such as Saneca that are based in Eastern Europe are well positioned to deliver a service that combines cost effectiveness with quality.
Quick: One of the main trends I see is a consolidation of the fragmented nature of the sector. There are so many small-scale providers living off single or very few contracts and slim margins, and these types of companies will not be able to survive in the long-term. Many of these CMOs will either fall by the wayside or more likely be acquired by larger players and consolidators. Also, customers will start to look for a more global solution from their partners — CMOs that can provide solutions across the globe including supporting market access restrictions such as those in Russia, Turkey and some other countries. I also believe that we will start to see more CDMO owned technology and IP in customers’ products.
Leal: In the short term, the adoption of serialisation might have a relevant impact in the industry. The challenges of growing regulatory and quality requirements together with price reductions and margin erosion will still play an important role in the years to come. In addition, technological advances, and particularly those that might contribute to cost reductions such as continuous manufacturing, will shape the future of the industry.
Cook: We expect to see a continuation of the big pharma focus on their front and back end activities, while manufacturing activities are outsourced. This will increase as the CMO market matures and consolidates, providing Big Pharma with the confidence and security to advance this business model and outsourcing strategy.
Big Pharma customers will continue to look for breadth and depth of service when selecting contract partners and must also feel comfortable that CMOs will deliver. Those companies with a long heritage and track record help to minimise risk by reassuring the customer that they will be there for them today, tomorrow and in the future.
Finally, the trend towards low volume, high value and often complex (and sometimes hazardous) targeted therapies will continue, requiring a wide technology offering and manufacturing capability at a range of scales.
Mackay: I expect to see further consolidation and merger and acquisition (M&A) activity among the larger contract service providers that cater for large-scale commercial supply. However, with a shift towards the development of personalised medicines among emerging biotech and pharma companies, there will be a greater need than ever before for small, agile, specialist CMOs such as Symbiosis that can rapidly manufacture small batches for small patient populations.
In addition, location will become a less prominent factor in outsourcing decisions as we see increasing harmonisation across many of the pharmaceutical regulatory bodies worldwide. This is no surprise, given their shared core objective of ensuring patient safety. We are starting to see this already with the recent announcement that the European Medicines Agency (EMA) and the US Food and Drug Administration (FDA) will begin to share inspection data from November 2017.