Jeremy Drummond, Business Unit Director – Formulated Products, Aesica Pharmaceuticals, explores the contract manufacturing market, with a focus on the overarching benefits of outsourcing, highlighting the need for unique services that add increased value.
As the contract manufacturing market continues to experience significant growth, increasing numbers of pharmaceutical and biotechnology companies are recognising the benefits of outsourcing their drug manufacturing requirements. Flexibility, swifter commercialisation, minimal capital expenditure and lower scale up costs are the key factors behind the significant contract manufacturing market growth.
The global contract manufacturing market is currently valued at $78billion and looks set to grow by a further 12 per cent over the course of the next two years. While API contract manufacturing remains the largest contributor to the market, the formulated products contract manufacturing and packaging market is steadily increasing and now accounts for $14 billion worth of projects alone.
Time for change
Over the last decade, the face of contract manufacturing has changed significantly and is continually evolving in response to new market trends and demands. It was the generic and specialty pharmaceutical companies who had limited human resources and assets that needed to be conserved to focus on the core competencies of developing new products and effective marketing that originally started the trend. However, larger pharmaceutical companies are now increasingly realising the benefits of outsourcing their manufacturing and packaging requirements, which were traditionally managed in-house.
While the industry has been affected by the recession, the significant changes have being taking place over a much longer period of time. Recently, the most important of these is the realisation by big pharma organisations that their massive infrastructures for development and manufacture are no longer sustainable in an environment when NCE’s are proving harder and harder to bring to market. This has led to many major pharmaceutical companies consolidating. The mergers have starkly highlighted the new companies over-capacity in terms of manufacturing and large overheads, with most big pharma companies now closely evaluating the long-term benefits of their site capabilities. The realisation is that sites have been running at a fraction of their capacity and trying to cover many different technologies with top-heavy overheads.
Pharmaceutical companies have been forced to conduct an extensive assessment and evaluation of their product portfolios as they focus on maintaining their profitability in the absence of new development of blockbuster products. As a result, this has led to old generic products being sold off to generics companies who then look for outsourcing solutions for their manufacturing. However, these generic companies have discovered that many old products are commercially sustainable even in their limited markets. Patients and doctors alike have learnt to trust some long-term therapies in niche areas and seek the assurance of a brand name despite the onslaught of non branded generic products.
As the market evolves, pharma companies are looking to contract manufacturing companies to provide them with specialist technologies and facilities. It is to their benefit that contractors can share the overhead of managing specific suites whether that is for steriles, controlled drugs or high containment. With the increasing number of biopharmaceutical NCE’s there is rapid demand for specialist aseptic filling and lyophilisation facilities. The drivers of much of this innovation, biotechnology companies, look to contract development and manufacturing organisations to provide this first so they can avoid the risks of capital investment. They do not have to factor in time for capital investment into their development programme, which can often delay commercialisation and crucially extend the time to market.
Not surprisingly, the growth in demand for contract manufacturing has attracted many players to the market. Many companies have grown through acquisition of plants no longer strategic to big pharma companies and the market place remains very fragmented. There has been some consolidation and yet even the leading companies have only small market shares when compared to their key customers.
One aspect, which is likely to differentiate the companies in the future, is financial stability. This had been highlighted by the recent global financial crisis and a number of contractors have failed to survive the burden of debt they have accumulated in easier times. Those companies that make it to the forefront and remain there will have to be financial sound and sustainably profitable whilst investing to stay ahead of the technological and regulatory trends.
Contract manufacturers are also increasingly broadening their service offering. Initially the trend was to cover development, manufacturing and packing, so they could manage the whole product lifecycle, but more recently companies are adding regulatory advice, supply chain management and artwork support to their host of services in order to set themselves apart from their counterparts.
The benefits of developing products from the clinical stage through to final commercial supply with the same partner are likely to become increasingly attractive to pharma companies. It avoids any duplication and allows the customer to remain with a partner they know and trust throughout the process. A rare differentiator is a contractor such as Aesica that can offer API development and manufacture, alongside that of formulated products. The advantages of coordinated communication that runs in parallel with API development and the resulting formulated product, should not be underestimated as poor communication, typically accounts for a significant number of issues.
A quality proposition
While a clearly defined proposition is essential, it is more important that the capability and expertise of the manufacturer affirms the proposition. As quality agreements can differ from company to company, it is crucial that the record held by the contract manufacturer is fully researched, quantified and qualified. Quality compliance records are vital, as is a history of positive FDA inspections. With the US accounting for over 50 per cent of the global contract manufacturing market, the need to demonstrate compliance with the FDA standard is increasingly important.
The relationship between pharma customer and contract manufacturer is invariably a long-term partnership because of the very significant financial barriers to change. It is a big decision for a customer to move their product to a new contractor, whether it be a generic or a blockbuster. The pharma company wants to be absolutely sure that the contractor will deliver to their expectations and proposals and as a result terms of reference may be subject to several iterations before being agreed. At the heart of any partnership is honesty and integrity and this has to be clear and transparent to both parties from the outset to ensure success.
Once a partnership has been established it is fundamental that contracts are put in place, which while documenting each parties commitments, also allow each party the flexibility to react to the ever changing marketplace and regulatory environment. The contract manufacturer in particular must help their client to negotiate a simple and cost effective path through new regulations and change management by the provision of value additional services.
It is clear that the contract manufacturing and packaging market for formulated products will continue to grow for some period to come. The transformation of pharmaceutical companies from ‘discovery behemoths’ at the end of the twentieth century to nimble and agile sustainable profit generators for the new century is not yet complete and this will continue to be a key driver for demand.
The successful contract manufacturers will be those who can remain financially strong whilst investing to adapt to their customers needs in the light of increased competition from generics and great expectations from patients.
Case study – High containment
As the overarching contract manufacture market grows, so it follows that the manufacture of potent drugs becomes increasingly important. At Aesica we believe that the investment in this marketplace and the technologies associated with delivering such products is increasingly important and as such, we have recently invested in a new containment facility, which will significantly extend our formulation offering in this particular market.
Once completed and operational in May 2011 the facility will enable our team to manufacture potent drugs typically classed as Safebridge category 3. The new facility will also include security measures that will ensure it can manufacture Schedule II controlled drugs such as opiates.
Housed in a purpose built facility at our Queenborough site, the new high containment unit will include suites for granulation, tabletting and blister packing along with the appropriate HVAC and cleaning facilities and will be completely separate from the rest of the site’s facilities to prevent any potential cross-contamination.
As we continue to consolidate and broaden our service proposition, the addition of the high containment facility has enabled us to add yet another dimension to our offer. The evolution of drug development and the use of more potent compounds has made high containment drug manufacturing a key focus for customers outsourcing their products and we are responding quickly to this demand.
With our proven expertise in the production of Formulated Products and APIs, it was a natural progression for us to broaden our reach into this marketplace. Our service offering and capability is the most advanced in the UK and the addition of the new facility will be of huge benefit to all pharmaceutical companies who require potent drug product production.
About Jeremy Drummond
Jeremy has a PhD in Chemistry from the University of Cambridge and a BSc in Biochemistry from the University of Sussex and joined Aesica in November 2008.
He has over 15 years experience in the commercial supply of raw materials and services to the pharmaceutical industry with ISP and Univar. These roles saw Jeremy undertake a variety of tasks including key account management, supply development, marketing communications and business development across the UK and Europe. Prior to this Jeremy was a formulation scientist with Dow and Shell for agrochemicals and pharmaceuticals, where he gained key skills and a broad understanding of the manufacturing industry.
As Aesica’s Business Unit Director – Formulated Products, Jeremy is responsible for the continued growth and strategic direction of Aesica’s formulation business currently centred at its Queenborough site. Under his leadership the formulation business has expanded significantly with a broad range of customers attracted to Aesica as an independent CMO, offering world leading quality standards and services. Jeremy has also been instrumental in expanding the company’s offering in manufacture and packaging to include Schedule II controlled and potent drugs.