The contract manufacturing sector has undergone some serious changes during the last 10 years, with consolidation, increasing price pressures and evolving customer expectations all contributing to the way that services are now delivered.
In the first of a two-part roundtable series, Manufacturing Chemist speaks to leaders at a selection of contract manufacturing organisations (CMO) across Europe, ranging from larger full service providers to niche, specialist players, to uncover their views on the current landscape and what it takes to succeed in an increasingly competitive marketplace.
The experts
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).
MC: What do you believe is the single biggest development that has impacted the contract manufacturing sector in the last 10 years?
Kevin Cook, Sterling Pharma: Around 15 years ago, active pharmaceutical ingredient (API) outsourcing activities (particularly those commissioned by Big Pharma) began to find a home in emerging markets in the east.
During the last 10 years, those that have outsourced to these countries have not realised the value expectations. Costs also continue to rise, further reducing the economic benefit of eastern manufacture, so we are seeing projects moving back to the west. The growth and productivity of emerging pharma is also fuelling the drug development pipeline, with lots of virtual companies being established with no internal infrastructure or manufacturing capability.
This is driving growth in the contract manufacturing sector, as these companies require experienced and reliable CDMO support to progress their product development. Finally, the trend of Big Pharma companies outsourcing their manufacturing activities continues, as they focus on the research and development and sales and marketing parts of their business.
Colin Mackay, Symbiosis: There has been a huge amount of consolidation in the contract manufacturing sector, meaning the industry is less fragmented with fewer bigger players. This is reducing the choice that drug developers have when deciding who to work with for their promising molecule. As we move forward, the industry is going to consist of fewer small CMOs that can deliver the specialist skills and operational flexibility needed to move biotech and pharma companies through the clinical development stages in a speedy, nimble and agile manner. On a more practical, technical level, the development of robust single-use manufacturing technology has been a step change.
Mark Quick, Recipharm: Contract manufacturing has become a strategic part of most companies’ supply chains. It is now far more integrated into their thinking right from the start — and at a product concept level — whereas it used to be there as a back-up. Now, many companies look to CMOs and CDMOs to be the solution in their supply chains. This is a massive change from the position when the trend was to do everything in-house. One of the drivers of this has obviously been the financial pressures that the pharma industry has come under. Although in general it is still a great place to be with margins that other industries can only dream of, the need to sustain and improve returns has transformed our approach.
I think this, coupled with a number of CMO failures, has also led to companies giving careful thought and more stringently evaluating the partners they wish to work with. This has meant that they are much more discerning than may have been the case previously. High quality and financially robust companies tend to fair better under this scrutiny.
Anthony Sheehan, Saneca Pharma: There has been a major increase in manufacturing capacities in the CMO world in recent years, which is mainly derived from divestment within the industry. There is now a significant amount of spare capacity that exists, which is creating strong competition in the market.
Consolidation has also played a role in shaping the CMO sector, with many players growing through acquisition. Although smaller, niche CMOs will continue to exist and grow, the increased prevalence of large CMO groups with a broad service offering is an important trend in the industry.
Manuel Leal, Idifarma: “It’s difficult to point out a single development, although probably the most relevant factor has been the increasing demand for competitiveness in the pharmaceutical sector — generated by the growth of generics and the requirement to reduce prices for both public and private payers.”
MC: Has there been a shift in what customers expect from contract manufacturers?
Leal: Customers now expect CMOs to be more flexible and able to adapt to products with special demands in terms of manufacturing conditions, available technologies, smaller volumes, global distribution, etc. Also, the service level demands have increased and customers want better response times from trusted CMOs, without compromising the highest quality standards.
Cook: Quality by Design (QbD) is a service that is increasingly being demanded by customers to meet the growing interest in this area by the regulators. QbD provides a more structured and involved way of assessing and determining critical process parameters, with the ultimate aim of ensuring quality and consistency of manufacture. The demand for solid state services is also increasing as customers look to understand the impact of different salts and polymorphs, and their associated physicochemical properties, earlier in the drug development process. Understanding in this area can have a significant impact both on product performance and also on the downstream formulation process.
Sheehan: Customers expect a turnkey service; they wish to work with a single supplier that can take their product from API development through to finished dose manufacturing and distribution. The more that CMOs can do for their customers, the better. Many customers have capacity restrictions within their own teams and facilities. By offering a wide range of services and technologies combined with a responsive team, we can overcome that challenge.”
Quick: CDMOs are now much more integral and many customers want their CDMO to take complete control of the supply chain and provide a turnkey service. We see much more use of the phrase “full service provider” and this has been driven by customer demand. I think that confidence in the CDMO industry is now much higher and customers are willing to outsource more of the supply chain.
Mackay: There is a positive investor climate; however, this means that customers are under increasing pressure to demonstrate the success of their molecules at an early stage. As a result, there is a demand for shorter lead times to manufacturing slots and subsequent product release to clinical trials.
Cultural fit is also extremely important, particularly when working with emerging biotechs and pharma. We like to partner with dynamic, fast-growing companies such as our own, who are pragmatic yet focused on achieving the core project objectives. Smaller drug developers are more likely to want to partner with smaller CMOs that will value their business and offer real experience that can help them to navigate the drug development landscape.
MC: In your view, what does it take to be a successful contract manufacturer?
Sheehan: The broader the scope you can offer, the better. Also, it’s critically important to understand your customer and their expectations. For example, Saneca Pharma works with small to mid-sized companies that value open communication channels and a flexible, responsive service just as much as technical capabilities and pharmaceutical expertise.
Quick: There’s no rocket science here; you need to provide your customers with the services they want, offer good value for money and deliver when you say you will. It really is that simple. That said, innovation is also important. Our customers expect us to manage the complexity of drug development and manufacturing and, to do this, you can never stand still. You need to improve and innovate all the time, whether this is improving lead times or reducing costs.
Mackay: Regulatory compliance, technical capability and operational flexibility are core customer expectations that we believe need to be met in today’s competitive environment. CMOs need to invest in building a successful relationship with each client based on a clear understanding of the clients’ definition of an ideal outcome. Only then can a true partnership be established. A CMO should never be too busy to listen.
Leal: It takes long-term focus and a clear business model, having the customer as the “end goal” and not just as a means to other objectives. This requires the avoidance of conflicts of interest, which inevitably appear if the CMO has its own product portfolio, for instance. Alignment and integration with the customer as well as reliability and flexibility become very important factors for long-term success.
Cook: Quite simply, a CMO must be easy to do business with in terms of service delivery and communication, and agile enough to respond to the dynamic nature of projects. All of this must be underpinned by a track record of compliance in the areas of safety, environmental and quality.
Many CMOs claim to provide flexibility and a problem-solving approach, but those that live and breathe these attributes can really differentiate their offering. Contract service providers must move away from a “product” to a “project” mentality; service, passion and tailoring solutions to individual project needs is just as important as scientific expertise in a successful CMO-client relationship.
Featured companies
- Companies:
- Recipharm
- Saneca Pharmaceuticals
- Idifarma Desarrollo Farmacéutico
- Sterling Pharma Solutions