“We intend to make money with sustainability,” says Alexander “Xander” Wessels, new president and CEO at DSM Pharmaceutical Products. He and his company have a history of leveraging sustainability—not just as a good idea, but as a business driver and competitive advantage in pharmaceutical contract manufacturing. In this interview, Wessels talks with PharmaManufacturing.com Senior Editor Paul Thomas about why sustainability matters, and how sustainable practices can become part of a drug manufacturer’s genetic makeup.
(Editor’s Note: Listen to the audio version of the interview here.)
P.T.: There are a number of major trends, as you know, shaping pharmaceutical contract manufacturing today—emerging markets, global supply chain issues. What do you see as the greatest challenges for DSM Pharmaceutical Products in the next few years?
A.W.: I'd say most of the challenges that we face as DSM Pharmaceutical Products are the same that the whole industry is facing. It's a massive change of the whole business model, of the traditional pharma business model, particularly for those CMOs [in] regulated markets. The fact that the pressure on health care costs, the pressure on the patent cliff, the upcoming of generics, are all leading to huge pressure on the total value chain, and also the dynamics of the pharma market. As a consequence, the CMO market is massively changing.
What we see as a challenge is to make sure that, in this changing landscape, we get our fair share of the opportunities that will come as we see many more of the large pharma companies outsourcing part of their supply chains.
P.T.: So I guess that you would see those challenges as opportunities as well, then?
A.W.: Yes. We certainly see the opportunities. We are also engaged quite deeply with our customers—large pharma, mid-size pharma—on how to address this challenge on the total value chain. And often it means innovation beyond, let's say, the classical innovation on product, but more on the supply chain, on the value chain, on close cooperation, on co-innovation. There are a number of things that we'll do quite differently than they were done in this industry in the past.
P.T.: You spent a lot of time in the food industry, of course—most recently as CEO of DSM Food Specialties. What things did you see there that might give you a unique perspective on pharma and help you to anticipate some of these trends?
A.W.: I think if you look to the nutrition and food industry, some of the pressures that the pharma value chain feels right now we had already seen in those value chains, say, twenty years ago. And as a consequence, you see that some of the business models there have changed. What typically would be different compared to the pharma world is a very high degree of open innovation, supply chain integration, cutthroat competition. So there was a value system that was already under lots of pressure—a kind of live-and-let-die environment, and therefore quite cost-conscious.
One also has to say that there are similarities: Supply chains, particularly in nutrition and food, have become increasingly global like they have in pharma, with all the associated consequences of that—regulations and risks. And a number of the things we've seen in nutrition and foods we've seen in pharma as well—longer supply chains, different local legislations—also demand a kind of control mechanism to ensure optimal product quality.
And there's a lot that we are actually taking from DSM internally from our nutrition and food experience. In nutrition, we've built the Quality for Life seal focused on quality, on sustainability, on traceability of ingredients, to give our customers the guarantee of these elements while the supply chain is becoming increasingly international rather than regional [as] in the past.
P.T.: It's interesting that you mention risk and quality. As you know, pharmaceutical executives are being held much more accountable for what happens in terms of overall quality of products and what's happening in manufacturing. Do you see this as a positive trend? Does it make you approach your work any differently?
A.W.: Well, we certainly see it as a positive trend. As a company that is dedicated and well reputed for quality, it's like a driving principle; it's more or less in the genes of the company. We do believe that this accountability, and as a consequence, the creation of a more level playing field, certainly will work in our favor and all those that are committed to really drive quality across the supply chain.
P.T.: You mention accountability, and it’s one of the things that is driving a lot of corporations, especially in our industry, towards sustainability and sustainability initiatives. Of course your parent company, Royal DSM, has a history of emphasizing sustainable practices, and DSM Pharmaceutical Products does as well. How do you really assess the business benefit of your sustainability initiatives?
A.W.: As you are aware, in DSM we formulated a new strategy about half a year ago, becoming a life science and materials science company. And clearly, let's say, one of the pillars underneath that is to focus on sustainability—not only as good corporate citizenship, but really as a business driver. And that is, I think, a difference from a number of other players in the industry. We consider it really a business driver.
Our commitment to sustainability is extremely high, but particularly from a business perspective. We intend to make money with sustainability. Now, in the pharma industry, of course, there is no general answer—like, is [sustainability] well applied? What we do see, though—let’s say, with our green chemistry toolbox, with [some] of the routes that we're developing based on enzymes—is that there's quite some interest with large pharma to look to what at they would call more greener routes to new medicine.
And we certainly are totally focused on making sustainability a more prime element in our total value proposition to our customers. And as I said, there is no general answer. There are places where there's not that much attention on sustainability. There are customers, big pharma companies, that are totally focused on getting sustainability in their businesses as a business driver.
P.T.: You talk about it as a business driver, but do you really see it as a competitive advantage in terms of, are customers telling you that it really matters to them?
A.W.: At this point in time, of course, everyone is focusing on sustainability. You see it also more in the press. Has it gone deep into the genes and behavior of a lot of companies? Not yet, although we've done some market research, and I think approximately 95% of our customers say that it is important in their key decisions—how sustainable their suppliers are.
However, we look to this as a business driver, particularly moving forward, and we think that sustainability, while not maybe a prime criteria just yet, will develop in that direction in the next five years.
P.T.: I hope you're right. As you know, there are still a lot of cynics out there, and especially there are a lot of people who would like to say that corporate executives often like to pay lip service to sustainability. But how do you, as a president and CEO, really make sustainability integral to what you do, and communicate that your employees?
A.W.: I think it is not for nothing that DSM, I think three years in a row, has been voted in the Dow Jones Sustainability Index as number one in its category, and it is because we have developed sustainability as part of our value system. Our CEO only last, I think, September was voted Humanitarian of the Year [by the United Nations], which was based on our engagement with the World Food Program. And I think that whatever we do in the company, the metrics are focused on bringing sustainability in as a value driver.
As an example, all the bonuses of our executives, moving forward, do contain a sustainability element. So it's not purely the profit that the company brings; it's also sustainability on which we get awarded. So there are a number of things intrinsically we have done to build sustainability or get sustainability in the genes of the company.
If you then look to DSM Pharmaceutical Products, I can only say that particularly with respect to the environmental quality and the developing of technologies, the total focus is on reducing waste and reducing the CO2 footprint of everything we do.
Internally, we have a measurement—we call it our Eco+ Solution. The metric for that is that, whatever solution we develop, it needs to be more environmentally friendly than what is, let's say, considered the best in the industry. Just to give an indication, most of our targets go in the direction of 75% of our products being Eco+, meaning making the criteria of being a more environmentally friendly product than the best that is available in the industry.
P.T.: I wonder how employees think about this. I read recently that the parent company has decided to integrate its annual report with its sustainability report, and that was based partly upon the suggestion of employee committees. So I wonder if you would feel that the sustainability mission really matters deeply to workers in your group, and does that translate to greater employee satisfaction and commitment?
A.W.: I think, in general, absolutely. And sustainability, for us, is indeed about people, about planet, and about profit. Every year, we measure employee engagement, and over the last four years, both in DPP as well as DSM, this has gone up considerably—like a couple of percentages every time that we measure, underlining that all these activities that we do in the sustainability field, as well as, of course, the strategic direction, is very much supported by our employees, and very much also the reason that employees like to work for our company.
P.T.: Good to hear. You mentioned green chemistry earlier, and obviously DSM has done a lot of things on the small-molecule side in terms of sustainable practices. Can you tell us a little bit about what you're doing on the DSM Biologics side. There has been some criticism of the biopharma industry, in general, that it needs to be more environmentally friendly. Can you share what you're doing?
A.W.: This basically exemplifies everything that I said before, because in Biologics we have focused on acquiring the technologies that actually do change the footprint of biologics manufacturing, the making of biologic medicine. We have two unique competitive technologies that basically allow us to make similar kinds of products in much smaller footprint factories, leading to much lower investments, a much lower environmental footprint, therewith reducing the waste of the total process.
And it's really focused on the yields that we get, as well as the downstream processing, and those are really good examples of how we use technologies to make sustainability work, but at the same time, they lead to a much lower cost or cost efficiency. So it really hits on both ends. It's both economically advantageous for our customers, as well as, from an environmentally friendly standpoint, an enormous benefit.
P.T.: In initiatives like this do you feel like you're just scratching the surface and there's still plenty of low-hanging fruit out there, or do your sustainability gains now require a bit more sophistication?
A.W.: I think there is still low-hanging fruit. To be in the game, DSM started years ago, and will continue to evaluate technologies and to assess new processes when sustainability is critical or when traditional operations won’t support advances required. All these changes never go fast.
We have a track record of unique integration of chemistry, biotechnology and process technology—DSM’s green scale-up routes for the production of semi-synthetic beta-lactame antibiotics being a prime example.
In the area of microreactor technology, DSM has been working on the development of microreactors for more than 10 years; more than 6 years pharma when DSM’s first non-GMP process for pharma began in 2003 with lab trials and in early 2009 we completed a full scale cGMP commercial campaign. Things don't happen overnight. But clearly, with our long-term view, we see the shift, and certainly the shift moving to our benefit.