More than ever before, specialist expertise is being called upon by the pharma industry – from strategy, supply chain and regulatory boutiques through to one-stop CDMOs that provide the whole spectrum of API development to final product production. Susan Birks talked to Patheon about the trends
Today, outsourcing is applied to almost every aspect of a pharmaceutical company’s routine tasks and its implementation has been steadily rising. As a result, the current total global pharmaceutical outsourcing market is estimated to be worth about US$130.65bn, according to Research and Markets.1 In the past six years (2009–2014), the sector has been growing at a CAGR of around 9.4%; the market is expected to record a CAGR of 8.7% in the next six years (2015–2020) and may reach as much as $215bn by 2020, the company says.
Cost pressures are greater than ever and the need to focus on developing more efficient drugs more cost effectively is the key driver for the outsourcing strategy of most multinationals. As a result there has been greater use of third-party service providers in both operational and strategic process areas, such as R&D and sales and marketing for branded and generic products. The greatest increase, however, has been seen in the biopharmaceutical sector. As the global financial situation has experienced greater stability, venture capital funding has become more readily available to biotech companies, which in turn has boosted demand for outsourcing within the sector.
As the global financial situation has experienced greater stability, venture capital funding has become more readily available to biotech companies, which in turn has boosted demand for outsourcing
According to Roots Analysis’s latest contract manufacturing market report,2 high potency and biopharmaceuticals manufacturing represent the major growth opportunities for CMOs. Owing to the capital intensive nature of the business and complex manufacturing requirements, CMOs have become the preferred manufacturing partners for majority of the industry.
The report says that intense competition in the marketplace is driving CMOs to explore innovations such as eClinical systems, cloud-based computing and risk monitoring tools to create differentiation. Specifically, for biopharma manufacturing, CMOs are also using relatively novel bio-processing services and technologies such as single-use bioreactors.
Roots Analysis estimates the more mature active pharmaceutical ingredient (API) and finished dosage formulation (FDF) contract manufacturing market to be worth $35bn currently, and expects it to grow at an annual rate of 8.3%.
In recent years, new areas for outsourcing as noted in KPMG’s analysis Outsourcing in the pharmaceutical industry: 2011 and beyond3, include real estate and facilities, regulatory, R&D, legal and government pricing. Many CMOs have added regulatory services to their offering for companies who want to outsource this constantly evolving task and providers with experience in dealing with multiple regulatory regimes are in increasing demand.
Other trends that have led to greater outsourcing include increasingly diversified global business models that enable companies to access alternative sources of growth, and company strategies designed to de-risk businesses.
The growth in outsourcing has also forced pharma companies to increase emphasis on the governance of outsourcing contracts
The growth in outsourcing has also forced pharma companies to increase emphasis on the governance of outsourcing contracts. In particular expertise is being sought to find ways of bringing together or ‘tearing apart’ existing outsourcing contracts due to anticipated mergers and spin-offs. There are also more outsourcing contract renegotiations to reduce pricing.
While the general outsourcing growth trend is good news for those offering outsourced services, there are still many challenges. Lukas Utiger, President, Drug Substance at CDMO Patheon, says one of the main challenges facing contract manufacturers today is changing dynamics within the industry, which has led to a more diverse customer base.
‘To be successful, CDMOs need to be able to meet the needs of the entire spectrum of biopharmaceutical customers, including large, mid-size and speciality pharmaceutical and biotechnology companies, emerging biotechnology companies and generic companies. Each of these customers has specific needs, and all expect the highest quality, efficiency and expertise from outsourcing partners.
‘Besides the specific needs based on customer diversity, most clients are looking for flexibility and speed in their supply chain. Depending on the CMO set-up, this may create a great challenge,’ he adds.
Scientific expertise and technology are among the services currently in the greatest demand
Picture courtesy of Patheon
Utiger believes that scientific expertise and technology are among the services currently in the greatest demand. This is largely due to the fact that pharmaceuticals and biopharmaceuticals have become more sophisticated, and hence the complexity and operational challenges facing pharma companies have increased.
‘The investments necessary to manufacture these compounds efficiently and effectively have led to a greater dependence on CDMOs with the scientific expertise and the technologies to deliver the medicines to the patients who are in need,’ says Utiger, adding: ‘It is estimated that 60–90% of all new compounds entering development will need specialised manufacturing or molecular profile modification. Specialised technologies, such as solubility solutions, sterile production, high potency active ingredients (HPAPIs) synthesis or complex biopharma down-stream process development (DSP) are capabilities in great demand.’
Developments such as the change from batch to continuous production can require time and investment that many pharma companies cannot afford
Investment in new technologies is another driver for outsourcing. For example, developments such as the change from batch to continuous production can require time and investment that many pharma companies cannot afford.
‘Patheon focuses on developments in drug product (formulation) and drug substance production. Micro reactor technologies are already being used in the industry, and in biologics, perfusion is an already widely used concept. All of these technologies are mastered by Patheon,’ says Utiger. Another area seeing considerable legislative and demographic change is the supply chain; global sourcing and supply chain security require greater management and integration.
‘Longer and more complex supply chains need faster solutions,’ Utiger points out. ‘At Patheon, we are focusing on linking raw material supply, drug substance and drug product manufacturing into a fast, flexible and reliable operation, delivering flexibility, security of supply and optimised inventories.’
Another major trend is the need for greater integration required in API and final drug product process development to speed the process – driven largely by the move to Quality by Design (QbD) practices.
‘So far QbD has been partially used in drug product and drug substance process development. But the concept has not often linked together in both areas, because in most cases, drug product and drug substance have been developed in different labs by different companies,’ suggests Utiger. ‘However, process robustness and solutions for low solubility may be approached from a combined, integrated QbD approach in drug substance and formulation development.’
CMOs and CDMOs have experienced a transformation from holding a ‘transactional’ relationship to a ‘strategic’ relationship with clients
In addition, CMOs and CDMOs have experienced a transformation from holding a ‘transactional’ relationship to a ‘strategic’ relationship with clients. ‘This is the result of a migration of expertise moving out of the traditional pharmaceutical companies into CDMOs industry,’ says Utiger. ‘The pharma companies are relying on those experts to work in tandem to take a molecule through development, to clinical and commercial-scale manufacturing to packaging.
This is also visible in the day-to-day activities, he says. Customers are increasingly asking for solutions to challenges instead of request for proposals (RFPs) or toll manufacturing. ‘Overall, outsourcing plays a far more strategic role in the pharmaceutical industry and CMOs/CDMOs have far more complex and strategic partnerships within the industry.’
Utiger notes: ‘Developing deeper and long-term relationships with customers has led to the development of the Patheon OneSource end-to-end development offering, driving value through three key ways: simplicity, speed and quality.’
For example, Patheon looks to streamline supply chain activities by assigning a project manager to serve as a single point-of-contact for overseeing both API and finished product; this, in addition to offering customers a flexible contracting process, results in simplicity. The company says value is derived through speed, achieving as much as an eight to 12-week saving in time – a significant improvement on the industry standard of a 15-month development cycle. In addition, redundancies are reduced through combined analytical activities, scientific collaboration and parallel processing.
‘Industry-leading experts collaborate, providing early input and bringing a depth of expertise to the process. In addition a single, harmonised quality system across a global network ensures adherence to right first time and on time delivery for both large and small molecule API and drug product manufacturing,’ says Utiger.
1. Outlook of Global Pharmaceutical Outsourcing Market report. http://www.researchandmarkets.com/research/fjqc45/outlook_of_global)
2. Contract Manufacturing in Pharmaceutical Industry, 2015–2025 by Roots Analysis Private Ltd