Boom time for US CDMOs: part I

Published: 12-Jun-2017

Having commercial-scale manufacturing in North America is driving business for many large CDMOs in the pharmaceutical sector. Manufacturing Chemist recently visited the first CPhI North America show to find out more

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UBM’s decision to move Informex from its traditional February slot in attractive cities such as New Orleans to the more prosaic location of Philadelphia in May and to pair it with a North American version of CPhI appears to have paid off, judging by the response on the show floor at the first event. Much of that will have been down to timing.

Recent years have been broadly positive for suppliers to the US pharmaceutical industry for multiple reasons. There is an improving pipeline at all stages of development, thanks in part to FDA’s increasing use of accelerated approvals and the improved funding available to biotech and small companies. Customers, some chastened by bad experiences and influenced by growing numbers of warning letters to (mainly) Indian companies — or just greater awareness of the true cost of outsourcing to Asia — have returned to Western suppliers.

Whereas suppliers of all kinds of services at all stages of development have enjoyed the benefits, to varying degrees, American-based CDMOs have been among the most fortunate. Their increasing attractiveness to investors was, indeed, demonstrated on the eve of the show when the largest of them all, Patheon, was acquired by Thermo in a financially driven deal.

Senior executives from CDMOs present in Philadelphia agreed that the clearest trend in the market was that business has been strong and will be for the foreseeable future. This applies to both drug substance and drug product, although the two markets differ markedly in other ways. All, likewise, agreed on why, but said that customers’ desire to place manufacturing in the West in general, and the US in particular, goes deeper than the obvious reasons.

“I also see a deeper analysis of the overall cost of a project — the cost of time, the cost of quality and the cost of logistics — and the challenges that can have on the supply chain,” said Dr Garrett Dilley, Senior Director of Business Development, Sales and Marketing at Johnson Matthey (JM), which has three US east coast sites in its global active pharmaceutical ingredient (API) manufacturing network.

“Companies are finding that working with a quality partner with locations proximal to where they are making their drug product and delivering to the patient is actually providing value — as is a strong regulatory background,” Dilley added. Registered starting materials (RSMs) matter too. FDA is also scrutinising the early stage of supply chains more and this is leading clients to start GMP synthesis earlier in some cases.

“Even if they don’t start earlier, customers are interested in having their RSMs produced to a level of sophistication and to a regulatory specification level higher than they had previously sourced. They need to understand everything about the facility, the traceability of the reagents that went into it, and so on.” This plays to the strength of JM, which can source RSMs from its own facility in China at lower costs … but to Western quality standards.

Warning letters

The main effect of all the FDA warning letters, in Dilley’s view, are two-fold. Companies are looking beyond a one-dimensional financial analysis at costs and seeking to stay one step ahead of what FDA wants, “so if they are pushed back on GMP in Phase III, they are working with a company and facility that can handle it without making major changes. That has come up in a lot of conversations and is a benefit we can sell.”

Dr Stephan Haitz, VP of Sales and Business Development at Cambrex, another major Western CDMO on the API side, agreed that there has been a strong trend during the last 5 years for business to come back to the US. “They now look at the total cost rather than just the price, including travel and response time on problems; there are always problems in pharma, so the issue is how they are dealt with.”

Cambrex is projecting 7–11% growth this year to follow 3 years of previous growth. This has been driven by strong demand in the US pharma market and an increased acceptance of outsourcing. To address these trends, during the past year, the company has invested organically in large-scale capacity at its site at Charles City, Iowa, has also expanded at its Swedish site and acquired Pharmacore in North Carolina.

FDA, Haitz agrees, has clearly made an impact by looking at all suppliers and raising the bar generally, mostly by fines. “Our industry is very risk-averse and if a supplier is hit with a warning letter, you think twice,” he says. “There are not many CMOs in the US and they are all at a very high standard, so when FDA raises the bar, it impacts us less than others.”

Audits and capacity

Alcami, which straddles the drug substance–drug product divide, has also benefited from the return of projects to the US, according to Mark Millar, Director of the API and Drug Product business unit. In many cases, this has come from companies coming to Alcami once they get ready to launch after doing early manufacturing offshore, perhaps because they are no longer willing to risk a lower-cost provider and want to lock things down.

“There is a lot more scrutiny and companies aren’t willing to send it into a black box and get product out; they want to know that the sites have appropriate environmental and health controls,” Millar said. Customers’ ability to audit companies such as Alcami is another advantage, in his view.

Capacity is a big issue right now, Millar noted. Some CDMOs have none and Alcami itself is feeling the pinch; although, having invested against the curve in US-based commercial manufacturing some years ago, it still has capacity and is scheduling new projects. “A lot of people are coming to us, wanting deliveries at the end of this year; and that’s not a reload, it’s a tech transfer followed by delivery of methods, as well as delivery of GMP material, which is challenging if there are a lot of synthetic steps.”

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