Say what you will about contract manufacturing and services companies, but the operations they’ve got out on the road these days are driving more and more of the industry’s strategic successes — and that’s pretty exciting. While The Maybachs, Rolls-Royces and Cadillacs of Big Pharma were cruising rough roads, finding new strategic routes past cGMP construction zones and patent-cliff detours, The Aston-Martins, Porsches and Maseratis — Contract Pharma’s Grand Tourers — started downshifting, not only to better compete for the growing business opportunities that their executive-class clients were offering, but also to accelerate their own strategic ambitions as independent pharmaceutical manufacturing concerns.
Whether CMO, CDMO, CRO or some combination of all three, Contract Pharma is taking advantage of lighter, better handling operational platforms, high performance quality regimes and new sport-tuned process and information technologies to accelerate their capabilities and keep pace with the demand for their services.
ON INDUSTRY TRENDS
Patheon’s Harry Gill, senior vice president, quality and continuous improvement, finds that for the customer market, “We are observing a shrinking fixed asset base among large Pharma, as there has been 4% CAGR decline since 2007.” He notes that more mid-sized and specialty pharmaceutical companies are maintaining core competencies in research and commercialization while outsourcing the rest. “Additionally,” says Gill, “we are noticing that more emerging biotech companies are using virtual outsourcing models and generic companies are outsourcing more of their complex products.”
In 2012, says the August 2013 Frost & Sullivan report “Global Pharmaceutical Contract Manufacturing Market,” the global pharmaceutical contract manufacturing market generated $13.43 billion in revenue and a CAGR of 6.6% through 2017. Solid dose formulations comprise the largest segment, say Frost analysts, constituting 49.8% of the total CMO market, but point to injectable dose formulations as a primary outsourcing growth driver through the forecasted period with a strong 13% CAGR. Frost & Sullivan’s study points to several key drivers of this growth, including increasing demand for safe effective solid-dose generics and sterile products and increased focus on complex disease therapies answered by lyophilized and sterile cytotoxics for oncological disease management. Behind it all: “Because of Big Pharma’s increased outsourcing, the pharmaceutical contract manufacturing market is expected to show consistent growth.”
Ajinomoto Althea, which says it specializes in cGMP-compliant manufacturing and aseptic filling of sterile injectable therapies, is also producing protein delivery technologies for recombinant protein and parenteral products. According to Ajinomoto Althea’s Jack Wright, vice president, sales and marketing, “One of the biggest market trends that will impact … our business specifically in the years to come, is the increase in outsourcing by Pharma and Biotech companies. The improvements in the CMO market environment stem primarily from new drug approvals, greater funding of biotechnology companies and demand for new services.” Biologics hold great potential, he says. “In an effort to cut costs, many biopharmaceutical companies are choosing to outsource the manufacture of their drugs instead of investing in [the] … facilities suitable for manufacturing the drugs themselves.”
Biologics (as do opportunities from complex solid dose formulations) do hold great potential for CMO business, and to better meet such demand, companies are merging and acquiring new capabilities to meet it. Case in point is the November 2013 announcement from Royale DSM that DSM Pharmaceuticals, its finished dosage business, was being combined with Patheon to form a yet-to-be-named (dubbed NewCo in the press release) company that will create an “industry leader” custom development and manufacturing organization (CDMO) for the pharma sector. According to DSM, the creation of NewCo will take DSM from being one of the smaller units of the larger parent to that of a dedicated CDMO with Patheon, and in the process promulgate $2 billion in sales from the work of 8,300 employees worldwide with capabilities for the manufacture of small molecule API and intermediates, biopharmaceuticals via mammalian cell cultures and microbial fermentation. Comprehensive dose form capabilities ranging from oral solid dose to sterile injectables are also on the menu as well.
A merger, no doubt, that’s a strategic response to market trends. DSM’s Hank Nowak Sr., director, business development & account management notes that analyses of pharmaceutical product pipelines clearly show evidence of an increasing trend towards two major growth areas: large molecules (proteins, peptides, nucleic acids, etc., and oncology indications. “Most large molecules require sterile production, whether liquid or lyophilized, says Nowak, noting that, “technologies to handle, compound, formulate and fill these types of products will certainly see adoption and growth over the next five years.”
Clearly market forces and opportunities are being responded to in different ways by Pharma’s contract services community. Take fill and finish operations, for example. Peter Soelkner, managing director of Vetter Pharma International, oversees the operations of six production facilities and some 3,300 employees. “Vetter’s business strategy has been entirely focused on the aseptic fill and finish of parenteral customer’s drug products.” What market trends are important to Vetter and most likely to impact their business? “The continuing erosion of the blockbuster model and the overall growth of the syringe market are the … trends that we foresee affecting business in the immediate future.” Related to this, says Soelkner, is the “monoplant” model which Vetter believes is no longer viable, “and will result in a growing need for production sites that allow for efficient and flexible manufacturing of complex and sensitive compounds …”