The pharmaceutical industry is evolving to meet the changing needs and expectations of patients, payers, governments and investors. Today, just about every activity along the development pathway – from early-stage discovery to commercial production and even beyond to lifecycle management – can be outsourced to service providers.
Outsourcing has become an integral cost-saving strategy for drug developers, ranging from virtual start-ups to Big Pharma.
In spite of the growing global demand for new safe and effective drugs, there has been an upsurge in the consolidation of contract research and manufacturing organisations (CROs and CMOs) driven by a multitude of factors that encompass growing price pressure, declining profit margins, increased competition, excess manufacturing capacity, and the impact of the 2007–2009 economic recession.
To circumvent declining revenues, a number of organisations began acquiring additional services to capture a broader range of the outsourcing market and improve their profits and competitive position. These organisations have come to be known as contract development and manufacturing organisations (CDMOs).
It is not an easy task to manage a network of consistent high-quality services across a range of diverse technologies and skill sets
In the past, these organisations have been referred to as one-stop shops and have met with varying degrees of success. It is not an easy task to manage a network of consistent high-quality services across a range of diverse technologies and skillsets, particularly if they reside in different locations. CDMOs providing limited and related services such as drug substance and drug product development may have an easier time of capturing continuity of services from sponsor clients and sustaining a high quality work product across their service offerings. Experienced drug developers, however, tend to pick and choose who they feel are the best-in-class service providers for a specific task, irrespective of the convenience of using a multiple service provider.
More narrowly focused companies such as those providing exclusively active pharmaceutical ingredient (API) development and manufacturing services may benefit from the upheaval and consolidation in the industry, particularly if they are an established and stable company with a track record for providing reliable, high-quality services. Typically smaller companies, more focused on a specific service area in the drug development pathway, these providers offer a high degree of competency in their respective area of expertise.
As larger CDMOs of the one-stop shop variety transition through mergers, acquisitions, integrations and personnel changes, sponsor companies may lose confidence in the CDMO’s ability to meet expectations as a strategic partner, leading to long-standing sponsor/CDMO relationships being re-evaluated. Sponsor companies may see an advantage in working with more stable boutique CDMOs that provide good services in their respective area of expertise.
With increasing competition, a well-positioned CDMO must offer clients a combination of flexibility, stability and technical expertise
Whether a boutique or a one-stop shop CDMO, providing reliable services with cost-effective pricing is essential for success in this new industry paradigm. With increasing competition, a well-positioned CDMO must offer clients a combination of flexibility, stability and technical expertise with continued investment in people, technologies and facilities focused on delivering a quality work product and customer satisfaction.
Flexibility is key
The fluid nature of the global market today requires all participants in the industry to be flexible. CDMOs must be able to rapidly adapt and respond to the changing needs of customers and to provide the tailored services required. Flexibility is an absolute must in the current period of consolidation and reduction of the customer base for contract manufacturers. As many as 30% of existing custom manufacturing organisations are expected to exit the market in the coming years, according to a 2013 Frost & Sullivan CMO report, and a lack of flexibility is likely to be a common feature among them.
Sponsor companies are only interested in service partners that can provide real value by understanding market developments, anticipating their changing needs and rapidly providing the innovative services, technologies and support required at any given time for each individual project.
Stability matters
Flexibility and responsiveness cannot come at the expense of stability, however. Both large and emerging/virtual pharmaceutical companies will only choose CDMOs with a strong track record across numerous evaluation criteria. Repeated demonstration of successful API development and commercialisation speaks for itself. An industry reputation for consistently delivering high-quality product on time and on (or under) budget is not only invaluable but a necessity. A history of successful agency inspections and customer audits is also a prerequisite for consideration. Clear evidence of financial stability and commitment to the business is also important, as sponsor companies want to feel confident that their CDMO partner will be around for the long haul.
Technical expertise
Drug development is becoming more complex and regulated, requiring more sophisticated process, safety and environmental controls. CDMOs should bring new expertise and capabilities in-house to keep pace with technology, remain attractive to potential customers and compliant with regulatory agencies. For example, many CDMOs are bringing inductively coupled plasma mass spectrometry (ICP-MS) equipment and expertise in-house in anticipation of regulations for the low-level detection of heavy metals in APIs.
For many sponsor companies, outsourcing is an efficient and cost-effective way to gain access to the most advanced technologies without the need to make significant upfront investments. Today, CDMOs are more frequently employed as a means to meet particular technical requirements or leverage novel, proprietary technologies rather than to achieve significant and direct cost-savings. This trend will only become more prominent as customers further reduce the number of CDMOs with which they are willing to develop strategic relationships.
High potency
Highly potent active pharmaceutical ingredients (HPAPIs), with occupational exposure limits (OELs) of ≤ 10μg/m3 of air as an 8 hr time-weighted average, can be administered in much lower doses and often targeted to the site of action, leading to reduced side effects. In some cases, new targeting technologies may allow the delivery of ultra-potent compounds that previously were too dangerous to administer systemically. It is not surprising, therefore, that the HPAPI market is growing at a much faster rate than the overall API market. Grandview Research estimates that the demand for HPAPIs will increase by 14.4% per year on average from US$12bn in 2014 to $25.86bn in 2022.
For many sponsor companies, outsourcing is an efficient and cost-effective way to gain access to the most advanced technologies without the need to make significant upfront investments
This high growth rate is attracting a number of contract manufacturers, but there are significant barriers to entry. For these products in particular, sponsor companies generally choose to work with CDMOs that have a strong track record of safely developing and commercialising HPAPIs. Advanced, state-of-the-art facilities and equipment, ranging from isolators to specialised HVAC systems to personal protective equipment, are required. Manufacturing suites, production processes, management systems and transfer and packaging capabilities must all be designed to prevent worker exposure and minimise the potential for cross-contamination in multi-product facilities.
Only CDMOs with comprehensive HPAPI manufacturing strategies that include extensive safety procedures and training programmes, risk management plans, and a thorough understanding of the potential risks associated with the production and handling of highly potent compounds provide sponsor companies with the confidence they need when outsourcing these projects. To avoid any need for process transfers, CDMOs that have the capability to support both the development and commercial HPAPIs from research through to production quantities, are preferred. Those that can provide security of supply and allow for single-sourcing have the advantage.
Positive interactions with FDA can lead not only to a better clinical trial design, but also a more efficient IND review
CDMOs that support both HPAPI development and manufacturing and investigational new drug (IND) projects will have further competitive advantage. Given the need to get drugs into clinical trials more quickly than ever before, CDMOs with a thorough understanding of the IND application process and experience in determining the necessary level of information that will minimise both risk and project timelines are preferred. These firms have, in addition to state-of-the art technologies for HPAPI synthesis and handling, effective communication strategies for interacting with the sponsor company and the group performing the clinical study. They also have a strong track record of on-time or accelerated delivery, available capacity, a good relationship with the US Food and Drug Administration (FDA) and the ability discuss the CMC (Chemistry, Manufacturing and Control) data package and any necessary amendments with the agency. Positive interactions with FDA can, in fact, lead not only to a better clinical trial design, but also a more efficient IND review.
The FDA offers a number of programmes for the accelerated development of drugs that address unmet medical needs, whether for rare diseases with no previous treatment options or widespread diseases lacking a truly effective cure.
Fast Track, Breakthrough, and Orphan drug designations often require the development of manufacturing routes under accelerated schedules and interactive and timely communication project management to ensure that the drug development programme and data collection are proceeding according to schedule.
Therefore, CDMOs must have a demonstrated track record of good regulatory compliance, flexibility to adapt to rapidly evolving project requirements, and successfully meeting project deliverables for a significantly accelerated development timetable to attract the attention of sponsor companies seeking outsourcing partners for these types of projects.
Continued investment
Innovation is at the heart of the industry, and that has never been more true than today. To be successful going forward, it will not be sufficient for CDMOs to rely on their existing capabilities. Nor will it be sufficient to rely only on technologies developed external to the organisation. Continued investment in innovation across the boardfrom automation and isolation technology to data management and human resources will be expected of CDMOs.
To be successful going forward, it will not be sufficient for CDMOs to rely on their existing capabilities
HPAPI producers also have the obligation to continuously upgrade technologies for enhancing worker safety protection. In general, it will be CDMOs that effectively invest in technologies for improved efficiency, productivity, safety, quality, customised support and product differentiation that find opportunities for strategic partnerships with established and emerging pharmaceutical companies.
In conclusion, while the global contract manufacturing market is predicted to grow at an average annual rate of 7.5% from $54.54bn in 2013 to $79.24bn in 2019 (Visiongain), the competition between CDMOs will increase as consolidated sponsor companies expand their internal capabilities and select a chosen few strategic partners with the right combination of flexibility, stability, technical expertise and commitment to continued investment in systems and collaborations. CDMOs that can help customers cost-effectively implement accelerated projects, even for the most complex and challenging APIs, will be successful going forward.
