Agnes Shanley is senior editor of Pharmaceutical Technology.

Agnes Shanley

	With biopharma developments dominating most pharma industry news, it can be easy to forget that small-molecule drugs still drive the global pharmaceutical business.  Powering these therapies are small-molecule APIs.

	A March 5 webcast, “Resurgence of the Small-Molecule API Market,” sponsored by Cambrex Labs, explored the figures and drivers of today’s market. Presented by Cambrex VP Matthew Moorcroft and Edinburgh-based consultant Jan Ramakers, the program reminded viewers that small-molecule innovation and market growth are going strong. It also reinforced the message that, although much of the commodity API market has moved offshore, strong demand for high-end and specialty APIs will present growth opportunities for US- and European-based suppliers and service providers.

	The program sketched overall market growth, and also presented rankings of contract manufacturing organizations and contract development and manufacturing organizations (CDMOs), based on existing data. (More details will appear in the  cover story of 

 May issue). The data also suggested that today’s late-stage clinical candidates will mean more than 3000 new opportunities for CDMOs and CMOs in the small-molecule space.

	Moorcroft cited IMS Health data that the global pharma market was worth $1 trillion last year, and is expected to reach $1.3 trillion by 2018. Small molecules represented 84% of the industry’s revenues last year. Currently, more than 900 drugs are in late-stage clinical trials, and two-thirds of them are based on small molecules.

	Demand for APIs was relatively unaffected by the patent cliff and austerity measures, Moorcroft said. In addition, the top therapeutic areas have shifted significantly over the past 10 years, with an emphasis on antivirals, such as treatments for HIV and Hepatitis C, and oncology drugs. New therapy classes have arisen over the past 10 years, including protein kinase inhibitors, worth $18.4 billion; DPP-IV inhibitor antidiabetics, worth $10.3 billion; other immunosupressants, worth $13.8 billion; and antineoplastics, worth $12.6 billion.

	Small molecules are expected to remain predominant in most sales categories, Moorcroft said, citing projections that he developed for Cambrex, as well as data from Evaluate Pharma. In the blockbuster (over $1 billion in sales) category, he noted that 75 small-molecule drugs were on the market last year, but he expects that number to swell to 89 in 2020. In the $500- to $1-billion category, 111 small molecule drugs on the market in 2013 should increase to 140 by 2020, and in the $120- to $500-million category, the number of small-molecule drugs should increase from 160 in 2013 to 227 in 2020, Moorcroft said.

	New product approvals are expected to average 35 per year over the next few years, Moorcroft noted, returning to levels seen during the early 2000s, and boosting demand for APIs.

	Understanding the actual size of the API-manufacturing business can be extremely difficult, since fine chemicals companies manufacture some of these products, contract manufacturers produce some, and some pharma companies still manufacture APIs in-house. Currently, Moorcroft noted, estimates of the market range widely, from $55 billion to $113 billion per year. He sees the small-molecule API market as $20 billion for the United States and Europe, and between $50 and $60 billion if Asian CMOs and captive pharma manufacturing are included in the total.

	Using benchmarking data from consultant and Lonza veteran, Peter Pollak; consultant and former DSM executive Jan Ramakers; and the agency, That’s Nice, Moorcroft presented a ranking of top 100 small-molecule API manufacturers, which, collectively, did $20 billion in business last year.  Of these, the top 10 CMOs he noted, each control between 2â5% of the market. His research defines the Top 10 small molecule API CMOs and CDMOs as:

	While the growth in biopharma demand has led to a separation within the CMO market, with some companies opting to specialize in small molecules, and others in biopharma, Moorcroft says that demand for small-molecule APIs, and the drugs they make, should remain strong over the next few years.

	A number of companies, including Cambrex and DPx/Patheon, have been expanding US capacity and investing in more challenging areas of the market, such as highly potent API manufacturing, to keep up with growing demand.

Articles

Statistics presented in a March webinar suggest a strong, but highly fragmented, small-molecule API market

Stronger Pipelines and Approvals Drive Small-Molecule APIs and CMO Opportunities

Ionic liquid technologies offer a new way to improve bioavailability and potentially shrink patients’ daily dose requirements. Keith Hutchison, PhD, senior vice-president of R&D for Capsugel, describes the technology.

Ionic liquid technologies offer a new way to improve bioavailability.

Boosting Solubility in Lipid-Based Formulations

	Since FDA introduced the concept of Quality by Design (QbD) to the pharma industry, pharma's reaction has been interesting to watch. I was a keen observer, boring many people to tears over the years with detailed reports and commentaries. 

	There were, and are, so many good reasons to embrace QbD, as articulated by former OPS director Helen Winkle 

, one of many we have seen from FDA leaders and industry zealots over the years.  Years after the QbD guidance was published, the same questions remain:  Will pharma modernize the way it handles drug development and manufacturing? Will it take a more holistic and modern approach, as other industries do, to improve R&D success and profitability?   

it take this approach, given the sensitive and patient-variable safety issues surrounding drugs? 

	Pharma's response to QbD has been mainly positive, moving in phases, from the initial stage of confusion when QbD followed so closely after the guidance on process analytical technology (PAT), the methods and technologies underlying QbD, and necessary for monitoring and control. Then came the  “Pollyanna” stage, where everyone seemed to agree that QbD was the greatest thing, but many interpreted its underlying concepts differently.  For example, some said they were doing QbD without PAT.  Others had their own definitions of design space and critical quality parameters.  Then there was that minority that insisted they’d always used these principles and there was no need for labels, or new guidances.

	Pharma's response to QbD seemed to reach a “grounded,” more realistic phase when FDA made core QbD concepts part of Question-based Review. More companies, including those in developing markets, seemed to take QbD concepts to heart.  FDA’s Office of Pharmaceutical Quality continues to advance these efforts.

	But QbD has been around a while.  Not to add any more confusion or introduce another three-letter acronym, but shouldn't the concept be broadened to address, holistically, the quality, scientific and business challenges of drug development? Could this approach help companies address, from the earliest stages, the reasons why so many drugs fail during clinical trials, regulatory review, or commercial stages?  

	Robert Preti, Chief Scientific Officer and President of NeoStem, a cell therapy specialist with a contract development and manufacturing organization (CDMO) division, Progenitor Cell Therapy (PCT), explained his company’s approach recently in an 

in <i>Pharmaceutical Technology’s</i> February outsourcing supplement. The company has expanded QbD to “Development by Design” so that some of the factors critical to market success are also considered from the earliest conceptual stages, such as:

	·      Sustainability of the process

	·      Regulatory compliance costs (e.g., the potential savings from examining comparability requirements to optimize timing for process changes,  or by using new technologies, for instance,  installing new IT system for batch records that would enable “release by exception” and reduce validation and documentation requirements)

	With "DbD," Brian Hampson, VP of manufacturing has said, the product profile becomes an essential, and evolving document, from the start of product planning.  Contrast that approach with current practices at many companies when the document is started late in the process, once people "have all the answers."

	Cell therapy is a challenging area that magnifies some of the issues that developers of any pharmaceutical face.  But, cell therapies have the same needs as any area of pharma: product quality, reasonable cost, and processes that will meet demand.

	Could Development by Design be the way to go beyond QbD to ensure product value, quality and profitability?  Are any of you out there already formally taking this approach, even if you call it something else?  Please write to me at 

	This general topic, and others concerning cell therapies, will be discussed in 

in New York City on April 22 that Pharmaceutical Technology and Biopharm International are sponsoring, on the topic of Moving Cell Therapies Beyond R&D and into Manufacturing. 

	On the program will be Eytan Abraham, who heads up Lonza’s cell therapy R&D efforts, and had worked in this area for years at Pluristem, who will discuss commercialization roadblocks and the way ahead.  (An interview with him also appears in February’s <i>Pharm Tech</i> supplement). Robert Preti will share insights into the DbD approach, while Richard Grant, VP at Invetech will talk about equipment design, Harvey Brandwein, with Pall Corp. will discuss allogeneic therapy issues, examining recent research from University College, London, and Phil Vanek, general manager of cell therapy technologies, at GE Healthcare, will also share insights into the topic.

QbD represents a breakthrough in thinking, but does it go far enough to address today's business challenges? NeoStem has expanded it to include business and market issues, in "Development by Design." Could this be (or is it becoming) a new model for pharma?

Is It Time to Ditch QbD for Development by Design? Questions From a QbD Cheerleader

	Cell therapies, both autologous and allogeneic, have come a long way in just a few years. Countries around the world, most recently Japan, have passed regulations designed to speed development of these treatments, which are now a big and growing global business. 
	
	In 2013, according to the Pharmaceutical Research and Manufacturers Association, 69 cell therapies, six of them autologous, or patient-specific treatments, were in clinical trials or being reviewed in the United States alone, 15 of them in Phase III trials (1). 
	The road is littered with failures, however, often in clinical stages. This has been traced to problems with manufacturing and failure to understand process requirements earlier in the development process. 

	As a growing number of Big Pharma companies explore the potential for immune, regenerative, and other cell therapies, equipment manufacturers including Pall Corp., EMD Millipore, and GE Biosystems, have set up centers of excellence to focus on developing equipment for this new market. Engineering companies such as Invetech and Instrom are developing equipment specific to this niche.

More CDMOs are entering cell therapy market niche


	
	Demand for specialized cell therapy manufacturing and development services is also growing, and has attracted Lonza Bioservices, Cognate BioServices, WuXi AppTech, and Roslin Cells, among others. 
	
	NeoStem is following two paths, pursuing its own cell therapy pipeline and exploring contract services through its contract development and manufacturing organization (CDMO) subsidiary, Progenitor Cell Therapy (PCT). With bases in Irvine and Mountain View, CA and Allendale, NJ, PCT is currently working with Intrexon and Fibrocell on connective tissue treatments, and with the United Kingdom’s Adaptimmune on oncology treatments. 

									In the bioreactor area, there is great interest in moving from 2-D to 3-D processing, to enable the processing of the cell volumes required, something that companies such as Israel’s Pluristem have been doing for some time.
									
									Equipment designer Instrom is partnering with companies including BRTI Life Sciences to focus on 3-D cell matrix technologies developed by Dr. John Brekke.
									
									EMD Millipore has been partnering with PharmaCell B.V. to use its Mobius bioreactor platform to expand and harvest HepRG cells.
									
									GE Sciences is also evaluating Wave and other systems and set up a center of excellence in Wales recently.
									
									In other equipment areas, Pall Corp. has been partnering with CMDG LLC on cord blood processing technology.
									
									Following are some of the equipment manufacturers and systems applied in cell therapy development and manufacturing: 
									
									• Beckman Coulter
									• Corning Cell Stacks and Cell Cube 
									• EMD Millipore
									• GE Biosciences
									• Pall Corp.
									• Thermo Scientific’s Nunc Cell Factories 

	A new CEO, David Mazzo, with a doctorate in analytical chemistry and experience running both private and public international biopharma companies, assumed NeoStem’s leadership in January. He sees no conflict between growing a pipeline and a contract manufacturing business. “We are not trying to be two different companies, and we do not see the two competing with each other,” says Mazzo in an interview with 

during his second week on the job. “Instead, there is a symbiotic relationship between them.” As he sees it, the company’s track record in developing products should attract more sponsors. “Problems in development usually occur at the interfaces. Our unique experience of having ‘done that before’ should be helpful,” he says. 

	In January, PCT entered a partnership with Invetech, an equipment design firm based in Australia, with offices in San Diego, to develop automated equipment for cell therapy manufacturing.  The two companies have already been working together for a year now, honing the design and specifications for the instrumentation, says NeoStem’s Chief Scientific Officer (CSO) Robert Preti. The equipment will tackle cell therapy’s most challenging side, autologous treatments, where the manufacturing lot is the patient dose, administered at the patient’s bedside. 

	As Preti notes, there really isn’t much available today in the way of automated equipment for cell therapy, especially on the autologous side. The equipment will separate and wash cells, among other functions. 
	 


	So far, Preti says, the company is evaluating the evolving equipment in NeoStem’s own manufacturing efforts. “One of the largest commercial bottlenecks is the heavy labor required by processes, especially for patient-specific uses, where one batch is one patient.”  The cost of goods is very high, Preti says. “Success, longterm, will require a whole new approach to development.  The goal is to provide high quality and sustainability,” he says. Removing manual operations and human error from the process will be crucial.

	Invetech has been working on cell therapy process scale-up automation for more than 10 years and has successfully completed projects in North America, Europe, and Asia for companies that include Argos Therapeutics, Aastrom, CCRM, Humacyte, Innovacell, Janssen, kSep Systems, MolMed, Organovo, and ViaCyte, according to Richard Grant, global VP of the company’s biopharma operations, who has been with the company for more than 14 years. “The goal is to develop a mix of equipment and manufacturing strategies that maximize quality, scalability, and sustainability, with an eye toward cost-effectiveness and commercial viability,” Grant says. Invetech’s solutions typically tailor a mix of OEM and customized equipment to the client’s processes. The company recently commercialized equipment used to manufacture Janssen’s macular degeneration treatment.

	Costs of current manufacturing processes for both autologous and allogeneic therapies are difficult to peg. Last year, experts at University College, London, attempted to pinpoint the cost and overall economics of allogeneic cell therapy using single-use technologies (2). 

	What is clear, for both allogeneic and autologous systems, is that cell therapy development and manufacturing costs are currently prohibitive. “The starting points can vary dramatically,” Grant says. He recalls one customer whose autologous process ran to $80,000 per patient in early stage clinical trials. Automation, he says, could reduce costs by 40-90%, depending on the therapy involved.

: Manufacturing scenarios for cell therapies. Information courtesy of Invetech, Inc.

					Scale out (Increased number of lots)


	But before one can automate any process, one must understand it. NeoStem and PCT, like a growing number of companies, are taking the principle of quality by design (QbD) to heart in their work. 
	Mazzo, arguably one of few life-science company CEOs to even articulate the QbD concept, explains that the company has gone a step further, and broadened the International Conference on Harmonization guidances adopted by FDA into “development by design” (DbD). 

	“We say, first consider the endpoint, then take process as is and understand its unit operations. Develop inputs and outputs and discrete steps and define the process in a way that promotes understanding,” he says.“This is challenging, given product complexity, but there is a need to understand the mechanism of action very well, so you put each process in this overall envelope of DbD, and consider the cost of goods, scalability and sustainability,” Preti adds. “You consider the process from the end, only this time, each batch is an individual patient.” 

	The critical part is defining and measuring process needs, he says. “Product definition is very important, particularly the quality target product profile,” explains Brian Hampson, VP of manufacturing development and engineering at PCT, in an Oct. 22, 2014 webcast for the International Society for Cell Therapy (3). 


	Such things as formulation issues, dosage potency, impurities, residuals, and microbial assurance need to be thought out clearly from the start, Hampson says, as well as indications for use, geographic market projections, cost-of-goods targets, and IP issues. 

	The profile needs to be a living document that changes as the product takes shape, Hampson says. There is a tendency for people in the industry to ignore the product profile until they have all the answers, says Hampson. “Instead, it needs to be developed really early, even when you don’t have all or even many of the answers … you can leave them as blanks and continue to review, add to, and update.” 
	The result is, not only a tool for better understanding the product, process, and mechanism of action, but a communication tool for stakeholders. 

	When to start DbD for cell therapies? “The temptation is to begin later in the game when you need reasonable COGS and you need to be sure of sustainable manufacturing,” says Hampson. “The key thing is comparability and anticipating its implications early in the clinical program. It needs to be flexible at the early stages,” Hampson says. “But, as you near Phase III, you need to lock in your process.” 

 summarizes issues and points where changes will be easier.

					Change in process unit op and cell journey is the same

					Before 50% accrual in pivotal trials

					Change in process unit op and cell journey is similar

					Before initiation of pivotal clinical trials

					Change in process unit op and the cell journey is matched

	Thus, Hampson suggests that companies, whether working with CDMOs or in house, think through such issues as cost of goods, scale, and sustainability much earlier than they typically do today. “You don’t need to spend money on these issues, but you do need to think about them,” Hampson says. “Quality must be a key issue, even at Phase II trials, and early action pays off later.”
	In addition, he suggests that companies think about the entire process comprehensively. “There is often a tendency to focus on the core processing steps,” Hampson says. “But you really need to think about everything from collection of material through to administration of product to the patient and all steps in between.” 

	For cell therapies, disposable equipment and closed processes can be an effective way to reduce costs and improve quality and compliance, “They can allow you to isolate different processes so that they can share a Class 100,000 cleanroom environment,” Hampson says. 

	“Investing in automated information management can also pay off,” he says, “where an electronic batch record system that is fully validated can enable release-by-exception, reducing error, documentation time, and overall quality assurance costs,” Hampson says.

	In addition, he notes, it is important to look at costs comprehensively; an increase in one cost can, for example, reduce overhead, improve process sustainability and cost of goods. 


	Cell therapy is still a new area for regulators, and, as Preti says, some guidelines are clear and others aren’t. “Development by design is needed throughout the process, but the piece we still struggle with the most is mode of action (MOA) and product characterization. Regulatory agencies understand that it is difficult to pinpoint MOA.” 

	Preti emphasizes the importance of working with regulators. “You can be in a position to inform and influence regulations as products are developed,” he says. 

	For any company moving into this brave new world, top-level questions are needed, Preti says, emphasizing the following: “Do you have an understanding of scale? Can you scale up from very small? Can you characterize the process and control it for reliability and quality?” 

	In the stem cell area in particular, this is crucial, Preti said, since the product relies heavily on the process. “Manufacturing can be thought of as patient administration. It cannot be separated in the same way that it can for traditional medicines.” For contract suppliers, he adds, demonstrated success will be important, and sponsors should consider whether a prospective partner will be able to stay with them for the long run.


	1. P. Hourd, et al., Regulatory Challenges for the Manufacture and Scale-Out of Autologous Cell Therapies, Massachusetts General Hospital (Cambridge, MA, 2013). 
	2. S. Farid, et al., Allogeneic Cell Therapy Bioprocess Economics and Optimization, Biotechnol Bioeng. 111 (1) 69-83 (January 2014).
	3. R. Grant, Building Deliverable Cell Therapeutics: 
	A Methodical Approach to Manufacturing Development 
	(Webinar, Oct. 22. 2014). 


	Vol. 39, (2) Supplement
	Pages: s38–s43
	

: When referring to this article, please cite it as A. Shanley, “Taking a 'Development by Design' Approach to Cell Therapies,” supplement to

Whether outsourcing or developing cell therapies in-house, success demands
a focus on quality, cost of goods, and sustainability from the start.

Taking a "Development by Design" Approach to Cell Therapies

	The past few years have brought drastic changes to the pharmaceutical outsourcing services market.  As more in-house positions have been eliminated, pharmaceutical companies are looking for strategic partners and, where, possible, “one-stop” solutions.  
	
	The rise of the contract development and manufacturing organization (CDMO) has continued, and CMOs are making strategic investments to improve the services that they can offer clients, especially earlier in the value chain.

	For the past few years, contract companies have been acquiring companies, either partners with complementary strengths, or specialties in relevant niche services, to augment the array of services they can offer clients, and to expand upstream services. Just a few examples of these acquisitions include:

		The merger of Patheon and DSM, combining oral solid dosage forms with biopharma expertise

		Capsugel’s acquisition of Bend Research, a specialist in drug delivery and bioavailability research

		Catalent’s buying Aptuit’s Clinical Trials Supplies Division

		The formation of PCI, from acquisitions including Catalent’s Packaging, and the addition of Anderson Brecon in 2013, and Penn Pharma, and Biotec Services International in 2014, adding cold-chain expertise and a European presence.

 asked thought leaders at some pharmaceutical contract services companies to share their views on where the business is going, and what can be expected to drive future changes in the services market.  They singled out such factors as more challenging clinical trials, financial pressures from the patent cliff, more difficult pharmacokinetics and manufacturing, and the shift to orphan drugs.

	Experts from Capsugel, Cardinal Health, Catalent Pharma Solutions, PCI, Pharma Tech Industries, and Vetter answer our roundtable question about the future of the contract services industry in the following pages.
	
	

Managing Director, Encap Drug Delivery Capsugel Dosage Form Solutions

: Where do you see pharma contract services heading in the near future?  What are the top issues driving change today?
	
	

: Over the last decade, the pharmaceutical industry has seen:

		Changes to the drug discovery process, including an increasing reliance on biotech companies for new drugs and product innovation.

		Large pharma exiting non-core activities and focusing on their target therapeutic areas, and relying more on outsourcing, from development through manufacturing. There is increased need for technologies that can address such industry challenges as bioavailability enhancement, targeted delivery, and abuse deterrent formulations.

		An increasing number of compounds that require special handling (e.g., OEB4 and 5).  This growth is expected to continue within the contract manufacturing sector for the foreseeable future. The high capital cost of establishing appropriate facilities for the manufacture of such products and the need to maintain high quality facilities and personnel means that many companies will elect to use the outsource route.

		Increased interest and investment in orphan drugs, and the FDA NDA 505b2 pathway, to achieve faster approval and return with existing active ingredients. The ability to reference existing safety data and studies for this approval pathway decreases overall development time for existing actives being repurposed for new indications, improved bioavailability, altered dissolution profiles for targeted or controlled release, alternate delivery (injectable to oral), etc.

		The need for development partners that also have scale-up and commercial manufacturing capabilities, i.e. an integrated offering so that one partner can be utilized, instead of multiple service providers, thereby minimizing the cost and complexity of overall product development and increased speed to clinic/market.

		Continued demand for enabling technologies such as solubility enhancement. It is estimated that more than 70% of the drugs in the development pipeline today have solubility challenges that must be altered to achieve acceptable bioavailability.

	Customers take quality and regulatory compliance as a given.  Given all the changes affecting the industry, pharmaceutical companies are increasingly looking for end-to-end services. These include good development capability (not only in formulation, but in analytical services and project management) and demonstrated scale-up and commercial manufacturing capability.
	
	

Managing Director Vetter Pharma-Fertigung GmbH & Co.

: In examining the changing contract services market, it is best to look at it from two perspectives: that of the large pharma or bio company, and that of the small biopharma company.

	Increasingly, large pharmaceutical and biotech companies are focusing their efforts on their core competencies: late-phase drug development and their marketing. The latter begins immediately upon receiving regulatory approval and entry into the market. Due to this sharpened focus, larger companies need to be concerned with finding the right partners to help fulfill their drug manufacturing needs.

	Thus, larger companies are looking to create long-term working relationships.  Instead of working with a long list of contractors, many prefer to identify and work with only a few strategic partners to handle all aspects of their drug manufacturing. Often, these long-term strategic partnerships are created with a contract development and manufacturing organization (CDMO). Such organizations are well equipped to deal with the often complex nature of their customers’ manufacturing needs. A CDMO can also provide the long-term supply of their high-quality drugs.

	Meanwhile, smaller biotech companies are seeing an ever-increasing role and importance in the R&D of new drugs, and, thus, are helping to fill the dwindling pipelines of large pharmaceutical and biotech companies.

	Due to lack of internal resources, they need partners to help guide them through the development process. This is especially true in the early development phases. Once these phases are completed, they will very often out-license their drug and re-focus their efforts on the R&D of new drugs.

	CDMOs are well-equipped to help maximize the value of the complete drug package, which consists of the compound itself, the drug-delivery system, and the experience and trust that the CDMO partner brings to the early stages of development.

	We believe that this trend will continue, as larger companies increasingly rely on drugs that were discovered by smaller companies in order to fill their dwindling pipelines. Of course, their interest will only be to in-license promising and ‘well-developed’ drugs so that they can be successfully developed to the next phases and brought to market.

	First, recent forecasts suggest further growth in the injectables sector, with biologics driving this growth. This scenario offers opportunities with high promise for companies operating in the contract services sector that support pharmaceutical and biotech companies.

	Second, we continue to see the erosion of the blockbuster model, which means that large companies have come to rely more and more on small biotech companies for promising new drugs. This has led to significant opportunities for CDMOs to provide guidance to these smaller companies, and help support them in the early drug development process.

	Third, the globalization process has had an effect on the contract services industry today. With drug products increasingly being sold on a global scale, companies have to provide solutions that meet the needs of the differing markets efficiently and reliably.

	Consider the Asia Pacific (APAC) region, for example. Only 10 years or so ago, all medicines produced within this region were primarily used by the APAC countries themselves. Today, there is an ever-increasing amount of activity designed to enlarge the customer base for medicines manufactured within APAC by also distributing to countries outside of the APAC region. We expect this activity to increase in the future.

	As a result, there is greater competition for pharmaceutical companies and their contract manufacturers within the region. Now they also face external competition; requiring manufacturing companies to adapt to differing criteria of the recipient countries such as enabling distinct quality requirements are met for countries located inside, as well as outside, the APAC region.

	Fourth, we are seeing an increase in the global growth of such chronic diseases as diabetes and multiple sclerosis.  As a result, there has been a growth in demand for self-administration drug delivery solutions such as pens and auto-injectors. We have seen a steady growth in the home care sector, which requires an increased need to provide patients convenient and safe self-administration products such as those I just mentioned.

	Finally, we are seeing ever-increasing regulatory scrutiny of the contract services industry, the goal being safe drug manufacturing. Any company operating in this sector must pay special attention to compliance, and work hard to enable its quality systems to stay ahead of regulator demands.
	
	

Chairman and CEO PTI - Pharma Tech Industries

: Where do you see pharma contract services heading in the near future? What are the top issues driving change today?
	
	

: We see our customer base for pharmaceutical contract manufacturing services continuing to expand in the near future, particularly as the industry experiences ongoing consolidation, mergers, and acquisitions. One of the major factors for this is the relatively slow growth of branded pharmaceutical products due to increased regulatory requirements and generic competition.

	Another reason for the uptick in business opportunities is ‘customer customization.’ More small-to-medium-size pharmaceutical manufacturers are entering brand ownership, which is creating more niche-oriented prospective business opportunities. In fact, this trend was among a variety of factors in the company’s own recent rebranding process, one which intends to make a lasting impression on these emerging, increasingly targeted potential customers.

	Not only is the customer base becoming more tailored. These brand owners also are becoming increasingly focusing on sales and marketing, leaving an expanded percentage of actual product production in the hands of contract manufacturers. To capitalize on this trend, PTI has placed high priority on compiling new and expanded capabilities that extend established reputation as a trusted, turnkey CMO.

	PTI is also adding manufacturing capacity and production space by expanding its production facility in Union, MO, which will add approximately 55,000 square feet of manufacturing space, bringing the facility’s total area to 155,000 square feet. The new space will include a high-speed bottling line for the production of ingestible powders, as well as a production room built to International Organization for Standardization Class 8 ISO8/100,000 clean room standards. Another addition is a 20,000-sq

 building housing additional warehousing space and a new analytical and microbial lab.

	Each of these initiatives reflects the fact that pharmaceutical manufacturers are consolidating their total number of CMOs, with a plan to reduce their supplier bases and simplify their supply chains.

	In this environment, there is a need for contract manufacturers to be as turnkey as possible when servicing pharmaceutical brand owners. CMOs are now competing with each other, not merely on how well they produce product but on the overall value of their relationship, which encompasses the secondary and tertiary factors involved in holistically managing the entire supply chain from initial technology transfer to finished, packaged, market-ready product.

VP, Global Marketing and Strategy Catalent Pharma Solutions

: The role of pharmaceutical service and technology partners is rapidly changing. The following are driving this change:

		Increasingly, drug discovery and development are happening in smaller firms, which account for nearly half of the active development pipeline.

		Large pharma is increasingly refocusing resources on specific areas of core expertise.

		Molecules in the pipeline are becoming increasingly more challenging in their pharmacokinetics (e.g., bioavailability) and delivery profile needs.

		Manufacturing requirements are becoming more and more challenging as well--due to more challenging molecules, but also to increasing regulations and globalization needs.

	These factors require deeper partnerships between innovators and companies offering specialized drug development and supply expertise. Contract services companies, including Catalent, have invested in new technologies, capabilities and R&D expertise to help innovators meet these challenges.

	Increasingly, we are also engaging in more strategic partnerships with both large biotech and pharma companies, as well as smaller innovators. These partnerships start earlier, sometimes in late discovery, to help optimize the API and formulations of new drugs. In addition, they encompass deeper engagement, including analytical and clinical support, and last longer, through late-stage clinical, scale up and global commercial manufacturing.

	These partnerships often require new business models, changing the traditional ‘fee for service’ approach. These arrangements have included collaborative development, success-based financial arrangements like revenue sharing, hybrid ‘development-sharing’ models, faster collaborative approaches combining joint development contributions with licensing fees, and even joint investment in new capability creation.

	We have also collaborated with customers to apply technologies developed in-house to help develop better treatments across the industry. Examples include our OptiForm API optimization technology, originally developed by GSK, and OSDRC OptiDose advanced tableting technology for combination and controlled-released therapies developed by Sanwa in Japan.

	We believe that all these approaches can help solve the major industry challenge right now: the need to develop more products that are successful.

	By bringing together the best expertise in discovery, development, formulation and analytical methods with best of innovative advanced drug delivery technologies, more molecules have a shot at successfully meeting clinical end points.

Executive Director, Marketing, Business Development and Design PCI, Packaging Coordinators, Inc.

: As we ushered in a new year, there was much media coverage of both the number of new drug approvals in 2014, as well as the success rate for the industry in new drug application (NDA)/biologics license application (BLA) filings translating into approvals. In 2014, FDA approved 41 novel medicines. This is 14 more than the year prior and second most for any year, trailing only the 53 approved in 1996 (1).

	This was clearly encouraging news for an industry that is often criticized for weak pipelines and poor success rates for bringing products to successful commercialization. FDA notes that 32 of the 41 approvals were first-cycle approvals (2).

	Also noteworthy in evaluating 2014 approvals was the continuation of the industry trend of developing specialized medicines and products for narrow therapeutic classes. FDA’s designations for Orphan Drugs and Priority Review for drugs of unmet need helped expedite the development and approval process for products. Seventeen approvals, or 41% of the total, were for rare diseases that affect 200,000 or fewer Americans. Seventeen approvals were regarded as “first in class” therapies or 41%. Nineteen NDAs were approved utilizing the Fast Track or Breakthrough status (2).

	Three examples of priority review therapies garnered significant acclaim due to their importance:

		Pharmacyclics’ Imbruvica for chronic lymphocytic (CLL) leukemia and mantle cell lymphoma (MCL)

		Roche’s Gazyva for chronic lymphocytic leukemia (CLL)

		Gilead’s Soldalvi for treatment of Hepatitis C.

	It is noteworthy that oncology treatments alone garnered 8 approvals in 2014, or 18% (3).

	With more success in development and commercialization of lifesaving medicines with narrow therapeutic indices and modest patient populations, the economic model for the industry is challenged. The development costs for these therapies is every bit that of traditional medicines and often more challenging for identifying patient populations for these disease states and administration of clinical trials.

	Similarly, the supply chain requirements can be disproportionately burdensome, with economies of scale and specialized requirements, as well as increased cost for the API. This can also be true of specialized medicines such as those for oncology or autoimmune therapies, where manufacturing and handling may be very specialized due to the potent nature of the API, in-process or final drug product.

	The growth in biologics has similarly changed the industry supply chain with demands on its manufacturing, packaging, and logistics components.

	As a leading outsourced services provider for drug development and commercialization, we have experienced this changing dynamic first-hand. The industry shift from small molecule delivery forms to large molecule parenteral delivery forms has required us to adapt our technologies as well as our infrastructure for the expanding Cold Chain requirements of these products, typically requiring storage at 2–8 °C.

	For example, many of these products have allowable excursions for secondary packaging, so that they may be executed in a controlled ambient condition environment. However, they may vary substantially in the duration from as long as 24 hours to as little as a half hour in some instances. This creates the need for very tightly controlled procedures and work practices to ensure the integrity of the operation. In other situations, products may need to be processed completely in a Cold Chain environment, which creates its own unique challenges for logistics, equipment and personnel.

	Biologic products and drugs with parenteral delivery forms are seeing a shift in how medicine is administered to patients. Syringe and vial delivery forms traditional administered at a clinic or hospital are now shifting to a patient convenience model whereby through patient education and better drug delivery, patients can self-administer at home or on the go. The net effect on the industry and its supply chain is the evolution to novel delivery forms such as autoinjector devices, transdermal patches, and infusion therapies by means of personal delivery devices. These may require very complex and precise assemblies to enable patient safety and convenience. Often this translates to precision robotic automation for manufacturers and packagers. At PCI we have actively made these investments as the industry model rapidly evolves.

	In addition, more and more of the products that are being brought to market are regarded as potent, both in oral and parenteral delivery forms, with Occupational Exposure Limits (OELs) that create a need for very specialized handling and infrastructure to protect workers supporting the manufacturing, packaging, and supply chain logistics.

	PCI and Penn Pharma have invested substantially in state-of-the-art contained manufacturing, recognized by ISPE in 2013 as a Facility of the Year for our site in the United Kingdom. Having both the expertise in handling potent compounds as well as the appropriate technologies to isolate these therapies allows pharmaceutical firms to bring novel therapies to commercialization more safely and effectively, thereby benefiting patient populations around the globe by virtue of reduced time for pipeline development, lowered cost, and effective delivery.

	It is an exciting time to be in the pharmaceutical industry. Therapies are being brought to market that were once thought of as a pipedream. Now we are starting to see them graduate from the pipeline and giving hope to patients around the world. As the industry evolves, we are grateful for our role in helping develop and commercialize the therapies of the future.

Pharma and biotech on a roll as drug approvals hit 18-year high

,” (Jan. 1, 2015), accessed Jan. 28, 2015.
	2. J. Jenkins, “

CDER Approved Many Innovative Drugs in 2014

,” FDA Voice (Jan 14, 2015), accessed Jan. 28, 2015.
	3. B. Munos, 2014 New Drug Approvals Hit 18-Year High, 

 (Jan. 2, 2015), accessed Jan. 28, 2015.
	
	

Chief of Staff Cardinal Health, Nuclear Pharmacy Services

: Historically, large pharmaceutical companies performed all the major functions within the value chain and aligned with the product lifecycle of their drugs--from research and discovery to product development through manufacturing, sales, and marketing. Over the past several years, pharmaceutical companies have increasingly begun outsourcing functions in order to bring new products to market in a more cost effective manner, or to leverage a distinct capability not within their core.
	
	The rise in drug development costs has generated an increase in the use of contract research organizations (CROs), while the loss of patent exclusivity and shift to orphan drug development are driving the use of contract manufacturing organizations (CMOs).
	Here are what we see as five of the key issues driving change in the contract pharma industry today.
	
	


	A major source of economic pressure on pharmaceutical companies is the high expense associated with research and development (R&D). It’s no secret that the productivity of pharmaceutical R&D departments has declined in recent years. Many believe this is due to the increased scrutiny and new regulations by FDA.
	
	The Tufts Center for the Study of Drug Development estimates the cost of bringing a new drug to approval is $2.6 billion, this is in comparison to their published estimate of $802 million to bring a drug to market in 2003 (1). The rising expense to manage clinical trials due to the required size and complexity has made it more difficult for R&D departments to achieve the same level of productivity that they achieved in years past. Products also fail more often in development under the more stringent requirements, therefore burdening the successful products to carry the expense of those that failed.
	
	

Increased use of contract research organizations


	As pharmaceutical companies are challenged to reduce financial risk, R&D teams are under increasing pressure to reduce the cost of managing clinical trials. As a result, many companies have begun outsourcing their management of clinical trials to CROs in order to shift R&D fixed costs to variable.

	The total market for CROs has grown to an estimated $16 billion, including medical devices, with the biopharmaceutical space representing nearly $13 billion. This indicates an annual growth rate of 10.9% from 2009-2014, and IBISWorld is projecting an 8.7% annualized growth rate through 2019 (2).

	CROs come in all shapes and sizes, and the market is fairly fragmented. These firms offer efficiency, access to patients, and cost management paramount to expediting the drug approval process. According to Tufts Center for the Study of Drug Development, CROs are able to complete clinical trials four to five months faster than in-house R&D teams, savings that can translate to over $100 million in revenue potential.

Patent expiration and contract manufacturing organizations


	Another contributing pressure to pharmaceutical companies is the patent cliff. Among the blockbuster drugs that have lost patent exclusivity recently are Pfizer’s Lipitor in 2011, Eli Lilly’s Cymbalta and AstraZeneca’s Nexium last year. Several others such as Novartis’ Gleevec and AstraZeneca’s Crestor will lose exclusivity within the next several years (3).

	As branded blockbuster drugs lose patent exclusivity, the conversion to generics creates a steep decline in pharmaceutical company revenues. This evolution will likely increase the pressure for pharmaceutical companies to consider outsourcing their manufacturing operations to a lower cost CMO.

Other factors impacting growth of CMO use


	The rise in orphan drug development also encourages pharmaceutical companies to analyze their manufacturing capabilities and consider using a CMO. Many pharmaceutical companies have shifted to orphan drug development in the wake of difficulty in significantly improving approved drug effectiveness.

	By their nature, drugs approved for orphan indications will be marketed to patient populations of fewer than 200,000 US people. This translates to smaller manufacturing batches, which pharmaceutical companies may identify as best suited to outsource to a CMO, who can operate more cost effectively at the required smaller scale.

	Additionally, as drugs convert from prescription to over-the-counter medications, pharmaceutical companies will need to re-evaluate keeping production in-house. Companies may also determine that specialized pharmaceuticals, such as radiopharmaceuticals, may be best suited for outsourcing due to the process complexity and regulations. In all of these cases, pharmaceutical companies will need to assess required production volumes, cost effectiveness of their operations, and their ability to manage regulatory complexity-all balanced with the tradeoff of shifting their internal resources to other functions.


	Lastly, other major factors placing pressure on pharmaceutical companies to innovate their business models are those healthcare and payer industries are facing. The healthcare industry has faced a myriad of forces including consolidation of hospital systems and the industry is beginning the transition from ‘fee-for-service’ to an ‘outcomes-based’ payment structure. As consolidation in healthcare systems continues, health systems will have increased bargaining power, putting price pressure on the pharmaceutical industry. Additionally, cost management pressure from government programs have also placed increased price pressure on pharmaceutical companies.

	Pharmaceutical companies are facing a perfect storm of increased regulations, increased cost of R&D, loss of patent exclusivity of key blockbuster drug, a rise in orphan drug development, and pressures from healthcare industry stakeholders to reduce prices. Overall, each pharmaceutical organization will have to evaluate their core competencies and develop a strategic plan to transition through the many changes facing the pharmaceutical industry. As organizations evolve into their new models, they can re-deploy their talent to other high value functions of their organization in order to continue bringing innovative and effective products to market.


	1. J.A. DiMasi, H.G. Grabowski, R.W. Hansen, Tufts CSDD 2014 Cost Study (Boston, Nov. 18, 2014).
	2. IBIS World Industry Report 0D5708, Contract Research Organizations in the U.S. (April 2014).
	3. A. Rizwan, The Patent Cliff: Implications for the Pharmaceutical Industry, http://triplehelixblog.com, accessed Jan. 28, 2015.


	Vol. 39, (2) Supplement
	Pages: s14–s24
	

: When referring to this article, please cite it as A. Shanley, “The Future of Contract Services,” supplement to

CMO executives share their opinions on where outsourcing is going and what is driving market change.

The Future of Contract Services

	Over the past five years, Big Pharma and Big Biotech have laid off thousands of specialists in manufacturing and technical operations. As a result, sponsor companies have fewer in-house resources for handling technical operations or managing contract manufacturing and contract development and manufacturing partners.
	
	This challenging new environment offers contract partners a chance to play a much more strategic role in their clients’ development projects, and to take on more of the work that was once handled by internal tech ops departments. Focusing on these opportunities is Rottendorf GmbH, which has been working in oral solid-dosage form development for 87 years. The company set up Rottendorf Pharma, its US subsidiary, in 2011 and it is now one of the country’s top contract development and manufacturing organizations (CDMOs), manufacturing more than 600 products for more than 200 clients around the world.

	Rottendorf’s new mantra is Total Process Ownership, as its executives see a need for CMOs to move from a traditionally passive role. Today, instead of merely manufacturing products to client’s stated specs, they must actively manage process and product development and risk, with their clients.

	“In the end, all that customers want is a robust supply chain, with product that is on time, on spec, and deviation free,” says Stephan Fleck, CEO of Rottendorf Pharma GmbH in Germany. “However, achieving these goals requires a very good understanding of the manufacturing process for that specific product.”

, Fleck and Gordon Haines, CEO of US-based Rottendorf Pharma discuss industry trends and the company’s strategy.
	
	

: What made you decide to set up a US business, and how did the Total Process Ownership motto evolve?

: The turning point came in 2009, when I took over leadership of the company. Both Gordon [Haines] and I had been on the other side of the table, Gordon, with Procter and Gamble, and me with Bayer, and, years before that, with GE. We had a good idea of what we would expect if we were on the client side. This led to our establishing the US company.

	We think that next-gen CMOs are more tech ops companies than classical toll operators. They need to demonstrate competency on all levels.

	This requires being a really good pharma company, and being very strong in pharmaceutical technology, in modern manufacturing methods, and in Lean Six Sigma type operations. That way, you’re not simply manufacturing a product, but mastering what is needed to develop and make it. We’re focusing on that approach, and that’s also why we built a development center about three years ago. Today, we find that more US companies see the value of this strategy.

: How do you optimize technology transfer? That seems to be an area where many sponsors, and their contract partners, stumble.
	
	

: We’ve put a lot of effort into defining the transfer process. You can’t just copy a product. You have to design and define a new process based on customer requirements, but adapted to your equipment. The most important thing is doing gap analysis and linking it to risk assessment to define the true process manufacturing parameters and maintain them. This is also what regulatory authorities are increasingly coming to expect.
	We have our scientists work in development for a while, then move over to the tech transfer department, so their skills are available when the new product comes to us.
	
	

: All this assumes that clients are giving you the information that you need. In many tech-transfer projects, intentionally or unintentionally, critical information is not shared, leading to problems. Do you find that sponsors trust you, or do they withhold crucial information?

: As we talk with customers, we’re very proactive about addressing the need to communicate, up front. We tell them that they need to tell us what they already know, if we are to maintain schedules and goals.

: We have had more than one customer doing a transfer that did not give us all the information we needed. It’s understandable, especially when you work with a CMO for the first time. You may not yet trust them.
	In addition, there is some information about manufacturing that is necessary for understanding the product and process, but isn’t always documented in detail.

	But, in order to become a strategic contract partner, you need to understand the manufacturing even better than the customer does. That is why real product experts are needed during the transfer phase, to ask the questions that need to be asked. In turn, this promotes customer trust.

	We make a very clear risk assessment at end of tech transfer, in which we note areas where more investigation is needed, where there might be increased risk. Then we show customers the various options for mitigating that risk.

	When they get this information, customers tend to become more open. Without establishing confidence and trust, both parties dance around each other. That’s when you go into commercial manufacturing and have issues. This is why transfer is so important, and why it requires such a strong scientific base.

: You have mentioned that the company has a unique structure. Can you explain?

: The founder of this company set it up so that it would not end up as a pawn in the merger and acquisition game. The company is a normal GbmH convertible to an Inc., but it is owned by charitable trust, the Rottendorf Trust, which holds 99.4% of its shares. However, the trust has only 4% voting rights. Each of three minority shareholders holds 32% of voting rights. All profits stay within the company, where they can be used for growth and additional investment. In addition, the firm cannot be sold and is completely independent. The stability and agility that this structure promotes is very attractive to our customers.

: Do you see a difference between the way that sponsor companies in United States and Europe deal with contract partners?

: US companies are a bit more modern about this. They are more open, and can trust more. European customers tend to want to do everything themselves. It seems to me that more US-company leaders understand that you can’t have a full tech ops department inside your company and then also utilize toll processors.
	At this point, we see that US companies tend to be looking more for strategic partnerships and for collaboration. Some even give us access to internal IT so that we are treated like an in-house site. Most Europeans companies still outsource on a case-by-case basis. In general, we would like to start work with clients earlier in the development cycle.

: Also, small and virtual companies are often an ideal match because they don’t even have big bench or tech ops capabilities. Working with a partner that can take them all the way to market allows them to keep ownership of product themselves.

	Rottendorf doesn’t make any products with our own name or brand so we never compete with customers. We also bring an in-depth knowledge of what different coatings and formulations can do for a product.
	

: Looking at your overall contract business, what percentage would you see is made up of strategic partnerships and what percentage of transactional business?

: At this point, I’d say it’s 50/50, because nonstrategic business is still out there. However, we’ve come to realize that nonstrategic business can become strategic over time, after successful projects.

As CMOs shed their old toll processing role, sponsors can expect the right questions, proactive communication, and a firm grasp of risk management and tech transfer from contract service providers.