Outsourcing of services continues to increase but as products get more complex and regulations stricter, the challenges can prove too much, as some companies have found to their cost. Susan Birks reports
Outsourcing, which began simply as a means to allow better resource utilisation to increase productivity, has developed into a strategy for achieving wider benefits, such as overcoming trade barriers and gaining entry into foreign markets, or gaining access to new technology, with reduced investment cost. Today, in addition to manufacturing, opportunities exist in all areas: drug discovery, clinical trial management, logistics, IT and many other functions.
In a recent article by Jim Zhang, President, JZMed,1 published by GSC (a non-profit organisation focused on sustainable, socially responsible sourcing practices), the author notes that along with changing discovery research strategies and practices, major pharma and biopharma companies have shifted their outsourcing strategy from a risk-sharing model to a more technology-concentrated partnership. Discovering new therapeutic targets and thoroughly validating them have become the new priorities of drug discovery research, it says, and the integrated drug discovery outsourcing model has become the prevailing trend.
An increased number of customers and products have made it more challenging for contract manufacturing organisations to plan ahead
Finished product and active pharmaceutical ingredient (API) manufacturing, however, remains as the largest outsourcing sector. But as traditional pipelines have dried up, reimbursement schemes have become restrictive and a new generation of biologically-based targeted medicines have come to the fore, the sector has experienced fluctuating market demands. An increased number of customers and products have also made it more challenging for contract manufacturing organisations (CMOs) to plan ahead.
The manufacture of highly potent APIs (HPAPIs) and cytotoxic drugs has been one of the major growth areas, says Roots Analysis.2 A large proportion of HPAPI/cytotoxics manufacturing is currently outsourced. According to a separate report by Roots Analysis,3 specifically for ADCs, the outsourcing proportion is as high as 75–80%. It identified 76 CMOs with more than 100 production facilities worldwide focused in this area. The report also says there is a limited number of CMOs with capabilities for development of ADC linkers and cytotoxins. In addition, even fewer CMOs provide conjugation services for ADCs. The report forecasts the overall ADC market will be worth US$10bn annually by 2024.3
The biopharmaceutical outsourcing market generally has been a growth market, albeit very competitive, with many of the main global players operating in the same geographies. However, due to the complex nature of biopharmaceuticals, various outsourcing opportunities have been created across the value chain. According to Transparency Market Research,4 clinical trial management is one of the fastest growing outsourcing areas in biopharmaceuticals.
Outsourcing of R&D activities has also reduced the time to market. There are other areas that biopharmaceutical companies prefer to outsource: services such as molecular imaging, companion diagnostics, construction of antibody library, cell line and biomarker development, and genomic testing. The report also suggests that geographically, Asia-Pacific is expected to be the major point of focus for this market.
But biopharmaceutical outsourcing also faces certain challenges and a number of high profile failures have put quality under scrutiny
But biopharmaceutical outsourcing also faces certain challenges. Quality issues are much more crucial and a number of high profile failures have put quality under scrutiny. For example, in 2013, GlaxoSmithKline filed a lawsuit against Hospira, for not complying with quality standards. Hospira may pay $25m in compensation. Filling line technology has also become a major challenge, particularly for complex combination products involving auto-injectors, safety features and new packaging materials.
A wider trend has seen several manufacturing sites fail to meet the MHRA and FDA strict criteria on quality. In the UK, SCM Pharma, which specialised in the sterile production of drugs for clinical trials and ‘specials’ for patients in niche markets, ran into difficulties in March after one of its manufacturing licences was stopped following a routine MHRA inspection at its Prudoe facility. The heavy financial impact saw its major client Shire Pharmaceuticals step in and acquire the SCM Pharma trading assets.
Despite the many challenges, outsourcing still attracts newcomers and investment
Despite the many challenges, outsourcing still attracts newcomers and investment. PSC Investments acquired a high potency, sterile fill finish production facility from Morgridge Institute in August. The new CMO, BioTechnique, will be a subsidiary of PSC Biotech and will provide specialised filling services for cytotoxic, high potency, biologic and other sterile injectable drugs and a newly built injectable facility is for filling and finishing HPAPIs.
Pfanstiehl, which separated from its parent Ferro over a year ago, is investing in its HPAPI contract manufacturing capabilities north of Chicago. The company says it is aiming at the growing market need for elite-level manufacturers of cGMP drug substances, including highly potent linker-toxins that play a critical role in an ADC platform.
CMO Recipharm, meanwhile, acquired Milan-based Corvette Pharmaceutical Group this summer. The deal provides access to some geographical areas including Italy and a number of emerging markets which are new to Recipharm. WuXi PharmaTech said that, based on solid performance in the second quarter, it plans to build new capabilities in manufacturing, biologics, genomics and cell therapy. Meanwhile Dishman Pharma expects margins to scale up to 20% by the end of its financial year in 2015. The company is focusing on contract manufacturing to boost its margins over volumes in its Vitamin D business, says MD Arpit Vyas. It plans to focus on high margins and high value business in the Netherlands.
Almac has integrated forecasting, material resource planning and interactive response technology into a single system to provide data in real-time
Aesica, which celebrates its 10th birthday this year, saw sales increase to £200m in 2013 and a successful transition into an international full service CDMO. It is one of the UK’s fastest growing companies now employing more than 1,300 people and offering API development and manufacturing, formulation development and clinical trial supply through to finished dose manufacturing and packaging in six sites across Europe.
AMRI, meanwhile, has expanded into the protein market, with an initial focus on protein expression and purification. The global revenue of the total proteomics market is anticipated to grow at a compound annual growth rate of about 4.1% to about $9.2bn by 2018.5 CDMO Almac says that as clinical studies become more global, sponsor companies face challenges with shorter availability of investigational products, variable patient demands and an increasingly stretched global supply chain. Sponsors are seeking oversight across all aspects of their clinical supply chain and so Almac has further developed its supply chain management service giving sponsors more control over the complete chain, reducing timeframes and aligning clinical supply with patient demand globally and driving down costs.
2. HPAPIs and Cytotoxic Drugs Manufacturing Market, 2014–2024, published in August by Roots Analysis https://www.reportbuyer.com
3. Antibody Drug Conjugates Market (2nd Edition), 2014–2024 http://www.researchandmarkets.com/research/867wjl/antibody_drug
4. The Biopharmaceutical Outsourcing Market – Global Industry Analysis, Size, Share, Growth, Trends And Forecast, 2013–2019 www.transparencymarketresearch.com
5. Source BCC Research ‘Life Science Tools and Reagents: Global Markets’ January 2014CDMO Aesica celebrates its 10th birthday this year and enjoys record sales Almac’s single system integration of forecasting, material resource planning and interactive response technology provides data in real-time