Agnes Shanley is senior editor of Pharmaceutical Technology.

Agnes Shanley

A number of excipient database efforts are being developed, but are they getting to the essential materials science questions? Stephen Hoag, a professor at the University of Maryland (Baltimore), and a member of the National Institute of Pharmaceutical Technology and Education (NIPTE) offers a brief update on issues, and NIPTE’s database project.

’s 2016 Solid Dosage Drug Development and Manufacturing eBook.

Articles

Stephen Hoag, a professor at the University of Maryland (Baltimore), and a member of the National Institute of Pharmaceutical Technology and Education (NIPTE) offers a brief update on issues, and NIPTE’s database project.

Unifying Excipient Databases

As alternatives to gelatin capsules are sought, plant-based alternatives are being improved to address variability issues. Matt Richardson of Capsugel and Michael Morgen of Bend Research, discuss improvements and results that have been seen in the second generation of hydroxypropyl methyl cellulose (HPMC) materials. 

Matt Richardson of Capsugel and Michael Morgen of Bend Research, discuss improvements and results that have been seen in the second generation of hydroxypropyl methyl cellulose (HPMC) materials.

Establishing a New Performance Standard for HPMC Capsules

	Like so many around the world, I love Irish culture-its poetry and music, and the wit, brilliance, hard work, and endurance of its people.  I think of my great grandfather, who emigrated from a tiny town in Leitrim to start a business in New York, gradually convincing all but one of his nine brothers to join him.

	Next week in New York City, the St. Patrick’s day parade, and smaller versions of it throughout the Irish diaspora, will celebrate that spirit.  

	If it runs true to form, though, St. Patrick’s Day 2016 will also bring out the usual cheap stereotypes, the tired plastic shamrocks and leprochauns. You may hear the music of Sean O Riada, the cadences of William Butler Yeats, in your head, and think about Ireland’s new generation of artists and entrepreneurs. But what you’ll often find is streams of green beer and teary drunks singing fake tunes about smiling Irish eyes and colleens.

	I thought about this recently when I considered the number of U.S. companies that have recently “moved” to Ireland, not to invest in the country and workforce, but to gain tax relief. And there may soon be a new honorary Irish company: Pfizer, through 

its planned $160-billion acquisition of Allergan. 

	Forget about Pfizer’s roots in Brooklyn, in Williamsburg (the old, gritty, pre-hipster fairyland Williamsburg), and its start as the brainchild of two German entrepreneurs. It is now wearing the green, just like Actavis and Perrigo before it.

	Stories of corporate inversions and offshore deals always fuel debate about whether communities have the right to feel “entitled” to anything from local employers. Surely, corporations must seek profitability and shareholder value first. 

	While cheering for new jobs that would be created in Ireland, one must also ask: Must  corporate change come at the expense of communities and individuals who have brought the company profits? What exactly are the limits of the social contract connecting corporations, employees and the communities where those employees live? Does such a contract even exist anymore?

	It’s especially easy to point the finger at Pfizer, whose restructurings over the years have affected communities that include Ann Arbor, Pearl River, NY, Groton, Connecticut and, yes, even Brooklyn, here in the US, and Sandwich, Kent, in the UK.

	Michigan had tried to convince the company to stay after it acquired Pharmacia, and proposed tax breaks back in the early 2000’s.

	But this pattern is seen in every industry in the US.  According to a 

 local US governments pay $9.16 million in benefits every hour trying to get large corporations, particularly those in manufacturing, to stay.  They usually don’t.

	No one would argue that companies shouldn’t be able to change, but shouldn’t they preserve more of their identities, their heritage, and whatever makes them unique?  Isn't their connection to the individual important anymore?

 Restoring the Pharmaceutical Industry’s Reputation 

, intangible assets such as reputation can represent up to 60% of a company’s market capitalization.  Reputation, in turn depends on the experience and communication that people have had with the company. 

	So it was interesting to read the Americans for Tax Fairness’ 

 Not that we should expect impartiality from the group, but its February position paper’s title, “Pfizer: Price Gouger, Tax Dodger” says it all.

	Citing the company’s 18% profit margin, the group says that Pfizer’s plan to acquire Allergan will squeeze US families and communities twice, first by removing tax revenues that would pay for local services, and then by charging higher prices for pharmaceuticals sold to US consumers. Why not make prices for drugs the same for both US and Irish markets, the paper asks. It also singles out all the ways that the tax savings could be used to fund research, education and social programs, at “home.”

	Here are a few statements made in the position paper:

		Pfizer has avoided $55 billion in taxes on over $148 billion in offshore profits 

		The company has raised US prices for many of its prescription drugs by an average of 39% from 2013 through 2015

		The US has offered the company $59 billion in tax breaks so far

		The $35 billion that Pfizer would save in US taxes from the Allergan deal would fund the National Cancer Institute rsearch for almost seven years, provide preschool services for low and middle income children for five years, or fund two years of community college tuition for five million students for five years.

	What do you think of Pfizer’s proposed deal, and pharma’s wave of inversions and other overseas deals, in general? Please take our 

And so tax benefits doth make Irishmen of us all…

Kiss Me, I'm Irish

Time travelers from the 1980s would not recognize the typical pharmaceutical laboratory of 2016. Large spaces filled with dedicated tabletop instruments have disappeared, as pharmaceutical companies have shut down facilities, downsized, and are outsourcing more analytical laboratory work to contract analytical service providers.  

	As pharmaceutical facilities become modular and more flexible, instruments are shrinking. Portable devices bring more data to the warehouse, plant floor, and the lab, while wireless operation and use of radiofrequency identification (RFID) tags are being used to reduce operator error.  

	Data manipulation has been simplified in more user-friendly chemometrics and statistical analysis software. In addition, procedures such as chromatography have become easier and more powerful, while workhorse methods are gaining ground as “first-pass” alternatives to expensive and complex analytical methods.  

	To wrest value from every procedure and instrument, laboratories are embracing some of the basic concepts of lean manufacturing and optimizing workflow to reduce waste and improve efficiency. “With a move toward outsourcing and greater focus on biotherapeutics, customers are asking for more and better workflow solutions,” says John Rontree, senior director, chromatography and mass spectrometry at Thermo Fisher Scientific. “These solutions simplify tasks for outsourcing vendors, and reduce the complexity that comes with analyzing biologics,” he says.


	A growing number of pharmaceutical companies are outsourcing most, if not all of their analytical work. Today, stability testing, dissolution, and method development are typically outsourced, says Keith Moore, vice-president of analytical services at Metrics Contract Services.

	Standard processes include high-performance liquid chromatography (HPLC) assays, dissolution testing by either HPLC or ultra violet (UV), and Karl Fischer testing procedures, says Moore. Pharmaceutical manufacturers are also outsourcing operations that require specialized equipment and highly trained users, such as mass spectrometry, X-ray powder diffraction (XRPD), and nuclear magnetic resonance (NMR) spectroscopy, he says.

	Pharmaceutical manufacturers either outsource directly to contract laboratory companies or to larger contract manufacturing organizations (CMOs) that have acquired analytical capabilities. Metrics, for example, is a contract development and manufacturing organization (CDMO) with analytical testing capabilities.  

	According to Industry Standard Research’s reports on the state of pharma outsourcing, lab services are the seventh most widely outsourced function for small molecules and the sixth largest for biopharmaceuticals. It’s also an area that is seeing more mergers and acquisitions. Eurofins, for instance, which bought Lancaster Labs in 2011, acquired Sinensis Life Sciences, an analytical services company in the Netherlands, in 2016. At the end of December 2015, AMRI bought Whitehouse Analytical, a major analytical services company.


	Both pharmaceutical sponsors and their contract partners benefit from more powerful analytical methods. The workhorse method, HPLC, still dominates pharma labs, but alternatives such as UHPLC (ultra-high pressure liquid chromatography), offered by leading chromatography vendors, including Waters, Varian, Perkin Elmer, and Thermo Scientific, are gaining users. UHPLC, which uses smaller-diameter resin particles to improve resolution, speed, and sensitivity, allows more samples to be analyzed faster than with other methods. In addition, it reduces solvent requirements and waste for disposal, and requires less space, hood space, and storage.


	UHPLC for analytics has been likened to continuous processing in the manufacturing world. “If continuous processing reduces the cost of goods sold, UHPLC lowers the cost of analysis,” notes Emil Ciurczak, NIR spectroscopist who published the industry’s first papers on the use of process analytical technology (PAT) in pharmaceutical manufacturing when he worked at Sandoz in the 1980s.

	“With UHPLC, less material is required, and less time is needed for preparation,” Ciurczak says. “So, if, for example, you move sampling from 40 mLs to 1-2 mLs per run, you also save the cost of buying, storing, and disposing of materials,” he says. “The throughput increases are especially remarkable, with one instrument capable, in some cases, of doing the work of six conventional HPLCs,” he adds.

	For bioseparations, notoriously difficult to achieve efficiently, vendors such as BIA Separations, Diosynth, Biorad, Agilent, and Merck Millipore have developed monolithic columns that improve mass transfer and reduce purification times.  

	Continuous and simulated moving bed (SMB) chromatography, which allows several columns to be run in parallel, has also been developed by companies that include Novasep, GE Healthcare, Tarpon Biosystems, Knauer, ChromaCon, and Semba Biosciences. Vendors claim that this approach can improve productivity by a factor of up to six, and reduce the use of resin and buffer by 75% (1).


	For dissolution testing, Moore says, UV spectroscopy is often the first choice, even before HPLC, because it provides immediate data for trending and saves solvent, disposal, and other costs. It also uses one value, absorbance, to analyze data, so there is no need to transfer samples to vials. In some situations, Fourier-Transform infrared (FTIR) and Raman spectroscopy are being used to evaluate polymorphism, instead of the more challenging x-ray powder diffraction. In general, chemical imaging is becoming more important, says Ciurczak, and vendors such as Innopharma, which developed a real-time particle size imaging platform with Glatt in 2015, as well as Chemimage, Malvern, Bruker, and Perkin-Elmer, are improving their offerings in this segment.


	Use of ion mobility spectroscopy is also increasing for some applications. “It’s becoming the poor man’s mass spectrometer,” he says. Originally used in airport security applications, the technique, offered by vendors that include Smith’s Detection, Water, SelexION, and SCIEX, found its first pharma applications in cleaning validation back in the late 1990s. Today, it is finding increased use in some lower-end mass spectrometry applications, and is also taking over some HPLC applications. “If you can get the equivalent of HPLC testing in 20 milliseconds without column or solvent, why not?” Ciurczak asks. Although the technique cannot be used for stability studies, he says, it’s becoming a handy quality control (QC) tool.  “In some cases, it can be more specific than Raman or near infrared (NIR), and it’s also convenient for warehouse applications.”

	Use of mass spectroscopy is also increasing, however, and benefitting by improved workflows and features that can streamline processes, eliminate errors, and improve access to data, says Rontree. “The technology may become more sophisticated, but a single system today can provide more information [than was possible in the past] and reduce the potential for errors,” he adds.

Improved access to data and data processing


	Increased outsourcing has changed the equation for laboratory data access and manipulation. Laboratory jnformation management systems (LIMS) have become data storage systems, from which windows can be opened to allow access to and use of data. Some contract labs offer clients access to relevant portions of their LIMS in systems such as Eurofins Lancaster’s LabAccess. In other cases, contractors use a portion of their client’s IT platforms or install required data-access systems.  

	Instrumentation is also being developed so that contract partners can have immediate access to data. “Certainly the cloud is playing an increasingly important role as customers look to personalization and access to private information,” says Rontree.

	“There is also growing demand for more reliable approaches to method transfer,” he adds, which the company aimed to address with its AppsLab product, which allows methods to be accessed online and transferred directly without user intervention.

	Another enhancement has been availability of simplified chemometrics packages. As Ciurczak notes, these can save on training costs, and also mean that every location needn’t invest $10,000 in software licenses. In a typical pharma setup today, he says, software resides at the sponsor company’s home base, but results are cached so that it can be used at a contract partner’s facility or in the field.


	In today’s downsized environment, more pharmaceutical manufacturers are taking lean manufacturing approaches, developed for the plant floor, to the laboratory. The idea is to reduce waste, whether of time, space, or resources, to increase the value of each work step and procedure and improve productivity.  

	All analytical platform vendors are taking these needs into account with equipment and software that improves workflow. Mettler-Toledo has worked with the Swiss Lean consultant Irwin Studer to examine specific problems in the lab. The biggest problems, saysStuder, include time wasted waiting for measurement results, too many working steps, interface problems, where production is held up waiting for lab results, and incorrectly labeled samples. Mettler launched a Lean Labs platform in October 2015, which includes improved sample titration and weighing systems, as well as wireless data transmission and radiofrequency identification (RFID) readers and writers, to allow data to be picked up automatically from RFID tags on sample containers, pipettes, and dosing heads, reducing error (2).


	Portable devices, including handheld Raman and NIR spectrometers, are nothing new in pharma. Spinoffs of technology originally developed for the telecommunications industry, miniaturized spectrometers and imaging devices began to appear more than 10 years ago, but the technology has been steadily improving, Ciurczak says.  

	Today, batteries are much better and hold charge much longer than they did in the early 2000s, and the devices are getting smaller, he says. Some portable imaging systems from leading vendors are beginning to look more like the tricorders made popular by Star Trek, held in holsters, says Ciurczak. He imagines utility belts holding swappable heads for use with different materials, as well as holders for batteries, being worn by the QC technicians and analysts of the future.

	The pharmaceutical industry is already developing new approaches to buildings that would eliminate storage space and maximize flexibility, such as the PCMM (portable, continuous, miniature, and modular) systems developed by GEA Pharma Systems and G-CON Manufacturing, and evaluated by Pfizer and GlaxoSmithKline for oral solid-dosage forms manufacturing. This concept conjures images of the mobile QC technician being deployed throughout the facility, using technology that can move, seamlessly, from lab to process.


	Despite the availability of portable, miniature instruments, this is still far from reality at most pharmaceutical plants. It may be coming closer, however, as portable NIR, Raman, and other imaging systems are used throughout the pharma facility.

	Portability would represent a major change for an industry that has always kept lab and plant staff separate. Ciurczak recalls working for a pharmaceutical company and suggesting that lab technicians go out and insert NIR probes into the material being blended, instead of following the tedious but time-honored approach of sampling, delivering samples to the lab, and analyzing them by Karl Fischer and HPLC. There was no question of sending lab people to the plant, and, as a result, his team had to wait a week for answers, he says. Of course, union rules and restrictions were the first obstacle, Ciurczak says, but mindset might also play some part. “These are not technical problems but rather psychological ones,” says Ciurczak. “The equipment for doing this may exist, but the will to use it doesn’t.”


	However, Ciurczak sees change coming in work underway, for instance, at Rutgers University, which is working to standardize ab initio concepts for continuous manufacturing, focusing on powder flow and behavior.  Instruments used in this research will be calibrated in the lab and used throughout the facility, he says, essentially becoming both process and lab instruments and merging the two worlds.

	There may be other reasons why quality and manufacturing are kept in such different worlds, such as the need to ensure that manufacturing goals do not influence (or potentially weaken) quality standards. However, some of the industry’s strongest programs in lean and continuous quality improvement, at facilities such as Wyeth’s in Pearl River (started before the Pfizer merger) have brought quality and manufacturing professionals closer together (3). Perhaps quality standards could be maintained, or even elevated, in a system where quality staff were closer to those performing the manufacturing work. But, whatever shape the pharmaceutical laboratory takes in the future, instrumentation, methods, and services are clearly changing along with the industry and the pharmaceutical facility.

BioSC Continuous Chromatography for Biologics

,  press release, accessed January 28, 2016.
	2. Pharmaceutical Technology, “

Weighing Equipment Uses Lean Laboratory Principles

,” online, Oct. 13, 2015, accessed Jan. 26, 2016.
	3. A. Shanley and B.Swichtenberg, "

2007 Team of the Year Award: Wyeth’s Pearl River biotech Fill-Finish Optimization Team,

Analytical laboratory equipment adapts for new realities of downsizing, outsourcing, and speed demands.

Technologies Expand Horizons of the Analytical Lab

In the past decade, there was a movement within the pharmaceutical industry to benchmark drug manufacturers’ performance against that of manufacturers in other industries, to improve such areas as process robustness, speed and consistency, and to reduce waste (1). Proponents of lean manufacturing urged pharmaceutical companies to adopt best practices from other industries.

	Thought leaders began to look more closely at manufacturing, as well as such standard industry benchmarks as changeover times and inventory turns, and asked whether pharmaceutical companies could improve performance and become more agile.  To see how closely the industry has been examining its approach to inventory management and supply chain agility, 

asked Lora Cecere, founder of Supply Chain Insights, for her opinion on progress.

	“Pharma is stuck in the mud,” notes Cecere, who writes the Supply Chain Shaman blog (2) and has more than 40 years of experience managing major corporate supply chains, consulting, and analyzing industrial performance.

 report (3) noted, pharma is immature, compared to other industries, in its supply-chain management practices. It still has higher operating margins, but faces more complexity, commoditization, and globalization than it did in the past. Mergers and acquisitions have also had an impact, Cecere says. Today, most pharmaceutical companies still generally take a conservative, functional approach to their supply chains, and focus more on the demand cycle than on channel data, says Cecere, who suggests that more industry executives follow the advice of supply-chain expert Carol Ptak, a partner at the Demand Driven Institute. In a blog post on 

 (4), Ptak suggests that companies focus, first, on return on investment and cash flow, and secondarily on profit and loss, so that they can sense changes in demand and adapt planning and production dynamically.

	Cecere and her collaborators have developed a supply chain index to measure how individual companies and industries are improving their supply chain agility. Considering such big issues as overall growth, profitability and complexity, the index tracks industries’ and companies’ improvement by averaging metrics over different time periods.

	Each industry is analyzed individually, based on its unique characteristics, but then companies are ranked, with those that have made the greatest gains recognized as “Supply Chains to Admire” (5) within those industries, based on improvements in inventory turns, return on capital investment, and operating margins.

	Companies in  industries with lower operating margins tend to manage their supply chains better than those with higher margins, so Cecere was surprised to find that generic pharmaceutical manufacturers were not more agile than Big Pharma. In 2015, no generic or over-the-counter drug companies made the cut, while Biogen-Idec was the sole pharmaceutical company to make the list of 26 Supply Chains to Admire.

Biogen-Idec listed on the 2015 “Supply Chains to Admire” List

Biogen-Idec improved its overall supply chain index ranking from 6 (when considering the period from 2006 to 2014), to 2 (when considering 2009 to 2014), the study found. The company increased return on capital from 13% to 21%, respectively, during these same time intervals, and inventory turns, respectively, from 9.99 to 14.55. 

, shows performance for the seven top-ranking pharmaceutical companies from 2011 through 2014, comparing them with metrics for a manufacturer from a different industry: Apple, Inc.

	If traditional supply chain management is not a top priority, how is the industry becoming more agile, and what metrics best reflect its progress? 

 asked Greg Anthos, senior managing consultant at Tunnell Consulting, for his thoughts. Anthos says that pharmaceutical manufacturers are focusing more of their attention upstream, to improve the research and development process, and, in particular, the way they handle clinical trials.  

	More pharmaceutical manufacturers are moving to adaptive trial designs, he says, and a growing number of them are working to be able to bring life-saving products to market under accelerated approval in Phase II. This is a major feat, considering the Phase III failure rate for new drugs (6).

	At a time when some commodity generics continue to be in short supply, the emphasis is not on reducing inventories but on ensuring adequate supplies, Anthos says. Companies are also addressing the challenges brought by mergers and acquisitions, which can temporarily distract staff, at all levels, from operational and agility goals. McKinsey analysts argue for the need for greater CEO involvement, standardized processes, and greater communication and feedback, the hallmarks of any good lean or operational excellence program, when a merger or acquisition is underway (7).

	The following are some opinions on agile manufacturing that Anthos shared in an interview with 

Fear of stockouts and tendency to play it safe with inventory

 It was one of Tunnell’s analysts who first drew industry’s attention to pharma’s inventory turns, compared to those in other industries, as a measure of its agility.  Why is it that the industry appears to have made so little progress in improving its performance in this area?

  Not a lot has changed if you analyze the industry based on the classic supply-chain measures. Some manufacturers are probably carrying well over a year’s worth of inventory. Today, however, supply chain agility has to mean getting medicines to the patient more reliably and efficiently.

	You’ll see some progress in inventory management, but it has not been the primary focus. Today, the industry’s first goal is ensuring supply to market so that there will not be any stockouts. A growing number of processes, especially in biotech, can be complex and fickle, so there is a tendency to play it safe with inventory. In the end, pharma companies will be measured based on ensuring supply, but also on revenue and profitability and cash flow, so inventory turns are largely issues for manufacturing departments, the CFO, and the guys in the warehouse.  

  So how is agility being defined in pharma today?

 Agility is much more about, in the short term, getting new products to market quickly. It’s about launching adaptive trials for breakthrough medications and having a sufficiently strong foundation to be able to launch a new product based on Phase II data.

	In addition, agility means adapting immediately to changes in the market. These can be changes in demand, for example, when a competitor fails to get approval for a new drug and drops out of the market. But agility also means reacting to changes in internal processes or challenges within the company that must be overcome.

	In the end, agility is getting to market faster and better managing the supply chain, and overcoming, more dynamically, any issues, whether external or internal, that have disrupted the supply chain. It’s all about being more responsive to change.

The downsized challenge: doing more with less

 How can companies be agile when they are dealing with more, and more complex processes, as well as with reductions in staff and resources?

 As I see it, the most progressive companies are focusing on three areas:

Increasing risk assessments, on both the supply chain and the enterprise.

 They are becoming more proactive about determining the risks that are out there, prioritizing them, and ensuring that their resources are focused more effectively to address them.

Thinking through potential future changes as they develop any new product,

 i.e., how the process could be simplified to improve robustness and process understanding.  They are also taking steps to simplify their supply chains.  

Ensuring the potential of their processes to address future changes.

  Recently, I had a conversation with someone at a pharmaceutical company who had been in discussions with FDA regarding process changes. He told me that a number of people within FDA have become frustrated by the fact that they are spending most of their time addressing process changes (e.g., changes that incorporate the use of more up-to-date equipment, or even simple changes in the location of manufacture).

	As a result, less of their time is being spent on their primary mission:  ensuring that safe and efficacious medicines get to the public. For drug developers and manufacturers today, the key question is: How do we develop new products so that, in the future, no or only minimal regulatory changes will be required, except maybe filing for new drug approval in a new geographical market. It’s a great stretch concept, but it takes a fair amount of work to get to a point where you can think about, and address, all the issues involved.

	Certainly some of FDA’s and the industry’s early work with quality by design (QbD) had that goal in mind. The idea was to better understand your product performance ranges and the design space, file for approval in a wider range that would allow you to make adjustments in that range.  

	Today, complexity, both of the products and of the regulatory landscape, has boxed us in. Significant numbers of supplements must now be filed for individual products. That’s a challenge that the industry still has to surmount if it is to develop more robust supply chains and more robust processes.

 It requires figuring out design choices. For example, a company might choose to launch a new process using a stable platform that is already fairly well understood and characterized, and that has already been scaled up. It also means doing more of the classic QbD work, such as design of experiments (DoE) to really understand how the product behaves, where it works well, and what the process’ fault lines are. Simplification is key, so you lean out the process to reduce unnecessary complexity.

 But how can companies do that effectively with biologics, and how can they do it when they are also rushing to get product to market faster?

 With biologics, there is inherent complexity, so the key is designing in better controls or at least monitoring each process so that you better understand its behavior. It’s not easy. The industry is trying to move forward with greater process understanding while trying to get new products to market faster. These are competing forces.

 How can all of this be done when international mergers are going on and day-to-day conditions are in such constant shift?

 Mergers distract staff. It’s not only a question of pondering who will get to keep his or her job, but such questions as which processes to follow, whether in manufacturing or development.  You want to create the best lean practices that are most effective, but you’re often in a rush to meet some cost reduction synergy or regulatory target that a large consulting firm has told you to meet.

	As a result, many companies reduce staff before they’ve figured out how to simplify and improve their processes.

	Knowledge management is another major issue, because mergers and acquisitions drive a significant amount of employee turnover, both planned and unplanned. Knowledge often resides in individuals, rather than within the organization, and that jeopardizes business continuity. The way to avoid that is by understanding that you want to harmonize processes first, and engaging the folks who are already in the process of doing that to come up with the best work practices.

 Pharmaceutical Research Manufacturing Project, Final Benchmarking Report, 2006

, site accessed February 20, 2016.
	2. L. Cecere, 

Supply Chain Metrics That Matter: A Focus on the Pharmaceutical Industry

,” Dec. 3, 2012, Supply Chain Insights,  (site registration required).
	4. C. Ptak, 


	5. L. Cecere and R. Denman, Supply Chains to Admire, 2015, 

, excerpted with permission, Sept. 8, 2015, Accessible via www.beetfusion.com (site registration and free membership required).
	6. A. Shanley, 

, 40 (13)(February, 2016), pp 24-27.
	7. A. Agrawal et al, 

Pharma M&A: Agile Shouldn’t Mean Ad Hoc

, McKinsey and Co., site accessed February 19, 2016. 


	When referring to this article, please cite it as A. Shanley, “Redefining Pharma Agility," 

Supply-chain success is measured by how effectively new medications reach patients, and how swiftly manufacturers can react to internal and external changes.

Redefining Pharma Agility

For decades, APIs, the foundation of the pharmaceutical industry, have been a staid, solid, if somewhat invisible market. Some drug product manufacturers make APIs inhouse, while others outsource their manufacturing to contract development and manufacturing partners.

	Recently, however, as drug approvals have approached levels last seen in the early 2000s, APIs have become a dynamic focal point for mergers and acquisitions, investments in innovation, lab and plant expansions, outsourcing growth, and the development of new chemistry platforms.

	The past few months have seen significant merger and acquisition activity.  In July 2015, The Siegfried Group bought BASF’s API facilities in France, Germany, and Switzerland for $300 million (1).  In October 2015, Merck KGaA bought Sigma-Aldrich Corp., a supplier of APIs and fine and laboratory chemicals, for $17 billion (2). The acquisition solidifies its biopharmaceuticals business and emphasizes chemical manufacturing in its product portfolio.

	At around the same time, Johnson Matthey bought Pharmorphix, a specialist in solid dosage form chemistry, from Sigma-Aldrich (3). The company brings expertise in understanding polymorphism and cocrystallization, and helps to bridge the gap between toxicity testing through Phase I.

	Drug product innovation challenges are driving new developments in APIs. “Our customers must find new ways to bring new therapies to market,” says Nick Johnson, strategic marketing director at Johnson Matthey. The company, once synonymous with chemical catalysis, has rebranded its fine chemicals business to focus on custom API development, manufacturing, and life cycle management; chiral chemistry and catalysts; and controlled substance manufacturing. “From a contract manufacturing perspective, [our customers’ innovation challenge] affects how we structure our business and services. Our goal must be speed to market, and we must structure on areas of R&D and around technologies,” Johnson says.

	Currently, market estimates peg the global API market at $121 billion, and expect it to reach nearly $199 billion by 2022 (4). Generic pharma firms such as Teva and Mylan produce many of their own APIs inhouse, but also sell to other companies, a practice that is becoming more common.  

	More than 10% of the business is made up of specialty APIs outsourced by pharma innovator companies for clinical research (5). Contract companies that focus on API development and manufacturing include Cambrex, Hovione, Siegfried, Johnson-Matthey, and Lonza, are seeing business growth.

	Roughly 99% of API volumes (when measured in kilograms) are based on small molecules and 1% from biologics, says Matthew Moorcroft, global marketing director for Cambrex, a contract development and manufacturing organization (CDMO) that specializes in small-molecule APIs.  

	However, prices for small-molecule, and even some generic drugs, have been increasing, he notes. Market value share, historically reported between 80-85% small molecules and 25-20% biologics, might tip temporarily even further in favor of small-molecule APIs, Moorcroft adds.

	Quality has displaced cost as the top requirement, even in commodity businesses.  As a result, the API business is “no longer a race to the bottom,” according to Peter Werth, CEO of the generic API supplier, Chemworth, in an interview with CPhI for CPhI’s 2016 US Pharmaceutical Industry Outlook, which was released at the Informex show in February, 2016 (6).

	“Four years ago, the main consideration that finished formulation companies would take when sourcing an API was cost. These past four years have seen a rapid rise in quality concerns, which are now at the forefront of everyone’s minds,” he said.

“Worldwide, large innovator companies are increasing outsourcing requirements,” says Moorcroft. “Coupled with the increasing use of generics, and additional opportunities for increased penetration in developing markets, the industry will continue to experience strong growth,” he adds.

	Currently, API manufacturing is the largest business for pharmaceutical CDMOs, the operation most frequently outsourced by small-molecule manufacturers, and the fifth most frequently outsourced operation for biopharmaceutical manufacturers, according to Kate Hammeke, research director with Industry Standard Research (ISR), who shared recent market research findings with 

	On the commodity API side, an aging population and government spending caps are driving global demand for generic drugs and the APIs used to make them. Recently, Japan has been an area of high generics demand, according to a report by 

, as the Japanese government moves to boost use of generics from 50% to 80% of all prescription drugs by 2020 (7).

	In Japan, a number of commodity APIs are in short supply, Nikkei Asian Review reported in February, and the pharmaceutical manufacturer, Eisai, plans to start selling APIs for allergy, high-cholesterol and other therapies to generic drug manufacturers in Japan. The company plans to double API production capacity at its plant in Andhra Pradesh, southern India (7), which had been previously used as a captive source. Eisai will use revenues to expand its R&D pipeline, the report says.

Specialty API manufacturing moving back to the US and Europe
	

In specialty areas, API outsourcing demand that had moved offshore is now coming back to the United States and Europe. “Ten to 15 years ago, its perceived economic benefits made offshoring very attractive. Now, companies are focusing more on quality, and regulations are becoming more stringent,” says Johnson.  

	While tax incentives have played some role in stimulating API capacity expansion in the US, insiders say that the onshoring trend has been fueled by concerns about ongoing compliance and data integrity issues at some offshore API manufacturing facilities (

). The Generic Drug User Fee Act (GDUFA), which charges a fee for manufacturers who want to sell their APIs in the US, is also said to be having an impact.

	“Quality and regulatory concerns pertaining to China and India make the US market look increasingly attractive … We are in a renaissance for European and US manufacturing,” said David Hoffman, president of US operations for the API manufacturer, Hovione, in an interview in the CPhI report previously cited (6).

Hovione plans to expand its facility in East Windsor, NJ, by the end of 2017 (8).The company will more than double API manufacturing capacity at the site, and will also add a new commercial spray dryer, as well as highly potent API capacity.

	Meanwhile, Cambrex is expanding its Charles City, IA, facility. “In 2013, we added an additional 40,000 gallons of reactor capacity,” says Moorcroft, “and during the first quarter of 2016, we will see the completion of a new manufacturing facility, which will initially add a total of 70 cubic meters of glass-lined and Hastelloy reactors, significantly increasing the site’s current good manufacturing practices (cGMP) manufacturing capabilities,” he says.  Cambrex also plans to invest in its API site in Sweden to support new late-stage clinical projects, and in its Italian plant, to improve generic API development capacities, Moorcroft says.

	As pharma’s drug products evolve, so are the drug substances that make them possible. Specialty actives are becoming more complex and structurally larger, reflecting the increased sophistication of today’s therapies, says Johnson.  

Oncology drug growth drives investment in containment systems


	On the small-molecule side, Johnson notes, demand for oncology drugs, the fastest growing segment of the API market, is driving increased investment in high containment capacity. Because fewer of today’s complex new API therapeutics can be separated by crystallization, Johnson Matthey is emphasizing work in advanced separations based on chromatography, Johnson says.  

Johnson Matthey is focusing some of its API research work and investments in Cambridge, UK, a research hub for many Big Pharma companies, including AstraZeneca, GlaxoSmithKline, and Takeda. The company has expanded its facilities there to bring additional process R&D services and kilo-scale manufacture to the growing site, and to integrate assets that it gained when it bought Pharmorphix.

	The project has increased Johnson Matthey’s capacity to perform chemistry and biocatalysis process R&D, route scouting, process development, optimization and scale-up of heterogeneous, homogeneous and biocatalytic processes, as well as the non-GMP kilo-scale manufacture of APIs and intermediates. “We will now be able to scale up processes to the 100-L level,” says Johnson.

Developers have ambitious product-introduction goals


	Given robust drug product approval rates and pipelines, individual API suppliers are setting ambitious goals. Cambrex reportedly targets 10 new product introductions a year (9). For Neuland Labs, a specialized API supplier in India, the figure is 10 to 15, says Davaluri Suharsh Rao, director and president of contract research.

	Neuland focuses on developing custom manufacturing solutions for innovator companies in the US, Europe, and Japan. The company, which currently produces more than 75 APIs, has spent more than $2 million to expand its API R&D lab in Hyderabad, adding process engineering and parallel processing capabilities, as well as such tools as reaction calorimeters, software and data mining capabilities. The expansion should be completed by the end of 2016, says Rao.

	Neuland is investing in lab improvements and employee training to allow it to build skill sets around pharmaceutical quality by design (QbD) and cGMPs. “We’ve realized that QbD results in final product quality and reliability, so we are investing in the infrastructure required,” Rao says. “Companies getting ready to file investigational new drug (IND) and new drug (NDA) applications with FDA will need QbD data for these filings,” he adds.

	QbD has also become important for Johnson-Matthey, says Johnson, particularly the use of design-of-experiments techniques. The company has also used modeling and rapid screening to evaluate the effectiveness of APIs for solid-dosage forms, he says.

	Neuland’s strategy has been to avoid crowded areas where there is a lot of competition. “We prefer to focus on areas such as complex formulations where there is insufficient expertise, (e.g., metered dose inhalers for respiratory therapies),” says Rao. “These materials are hard to synthesize and have very complex particle size distribution requirements,” he says.

	The company has also invested in micronization capacity, and in niches such as deuterated molecules for repurposing approved APIs for new indications. Deuteration is one of many drug repurposing strategies that are being explored today. The idea of repurposing mature APIs in novel formulations may not be new, but Moorcroft says that it has been gaining more attention, as companies develop drugs for rare diseases and unmet medical needs, or new dosage forms that would offer enhanced benefit in a new dosage form or application.

	Repurposing challenges API developers, both on the specialty and the commodity side. Deuteration, for instance, which replaces hydrogen atoms with deuterium, requires the use of special process and storage equipment, because deuterium is flammable. On the commodity side, repurposing challenges supplier agility, Moorcroft says. “It requires that generic API manufacturers respond more quickly to customer demands for material, and that they supply targeted volumes that address a smaller patient subset. Cambrex has successfully supported many drug manufacturers working in the repurposing space,” he says.

	Recently, Neuland has moved into peptides, an area where Rao sees great potential, because close to 1000 commercial drugs today are peptide-based. “We started this business in 2010 in a very muted way, making building blocks,” he says, noting that the company recently partnered with a US client, using solution-phase technology to synthesize a fairly long-chain peptide at 30 kilograms/year.  

	Another new area of interest is carbohydrate chemistry, which Neuland is exploring through a partnership with a local university. Rao says the company started working on synthetic Vitamin D analogs about a year ago, challenging compounds that are highly potent and require highly specialized synthesis and analysis.

	Clearly, the market is becoming more competitive, and more consolidation can be expected as regulatory requirements become more stringent and demands for complex APIs increase. For suppliers that have invested in the knowledge and infrastructure required, however, a stronger drug product pipeline promises to yield more opportunities in the future.

, “PharmTech.com, January 6, 2016, accessed February 5, 2016,.
	2. C. Hroncich, “

Merck KGA, Darmstadt Germany, Announces Completion of Sigma-Aldrich Acquisition

 November 18, 2015, accessed February 5, 2016.
	3. 

Active Pharmaceutical Ingredients Global Market Outlook -Trends, Forecast, and Opportunity

, 2014-2022, Reportlinker Preview, Press Release, Accessed February 4, 2016.
	5. 

, p. 4, analyst report,accessed February 5, 2016, Site registration required for access.
	6. 

Eisai to Supply Generic Drug Makers With Bulk Ingredients

, Feb. 9, 2016, accessed Feb. 19, 2016.
	8. 

Hovione Announces the Expansion of its New Jersey Facility

, Press Release, accessed February 20, 2016.
	9. 

, p. 2, analyst report,accessed February 5, 2016, Site registration required for access, 


	When referring to this article, please cite it as A. Shanley, “Specialty Markets and Services Drive API Growth," 

As specialty API outsourcing grows, manufacturers and contract development and manufacturing organizations are investing for the long haul.