Patricia Van Arnum was executive editor of Pharmaceutical Technology.

Patricia Van Arnum

MedImmune, the global biologics arm of AstraZeneca, 

 that it is restructuring its infectious disease and vaccines R&D and operations. This will result in the closure of MedImmune’s sites in Mountain View and Santa Clara, California.

The company estimates that approximately 300 jobs will be affected. Of those, approximately 100 positions will move to other MedImmune locations, including its Hayward, California site. The changes will not disrupt the delivery of the company vaccine supply, according to the company.

In February 2012, AstraZeneca announced an efficiency program to improve productivity, foster innovation, and strengthen the company’s commercial, operations, and R&D capabilities, which runs through 2014. The restructuring at MedImmune’s sites are part of that program.

Articles

MedImmune, the global biologics arm of AstraZeneca, announced that it is restructuring its infectious disease and vaccines R&D and operations. This will result in the closure of MedImmune's sites in Mountain View and Santa Clara, California.

AstraZeneca Restructures Vaccines R&D and Operations

World leaders met in Rio Janeiro, Brazil, last month for the United Nations Conference on Sustainable Development. Dubbed Rio+20 to mark the twentieth anniversary of Earth Day that was held in Rio de Janeiro in 1992. The conference brought together more than 40,000 representatives from government, business, civil society, and multilateral development banks to discuss and build consensus for action and financial commitments to address a range of global issues that include access to clean energy, food security, water, sustainable transportation, and healthcare care. 

“Rio+20 has given us a solid platform to build on,” UN Secretary‐General Ban Ki‐moon said, in a June 22, 2012, UN press release. “Rio+20 has affirmed fundamental principles—renewed essential commitments—and given us new direction.”

World leaders approved the outcome document for Rio+20, entitled “The Future We Want.” The outcome document calls for a wide range of actions, including: beginning the process to establish sustainable-development goals; detailing how the green economy can be used as a tool to achieve sustainable development; strengthening the UN Environment Program; promoting corporate-sustainability reporting measures; taking steps to go beyond gross domestic product to assess the well-being of a country; developing a strategy for sustainable-development financing, adopting a framework for tackling sustainable consumption and production; focusing on improving gender equity; recognizing the importance of voluntary commitments on sustainable development; and stressing the need to engage civil society and incorporate science into policy. “The outcome document provides a firm foundation for social, economic and environmental well‐being,” Ban said in the UN release. “It is now our responsibility to build on it. Now the work begins.” 

Beyond the negotiated document, voluntary commitments played a key role in the outcome of Rio+20, with an estimated $513 billion mobilized from the 13 largest commitments alone, according to the UN release. More than 700 voluntary commitments by civil society groups, businesses, governments, universities and others were reported during the conference. The total included more than one hundred commitments and actions in support of the UN’s "Sustainable Energy for All" nitiative in achieving three objectives: ensuring energy access, doubling energy efficiency, and doubling the share of renewable energy by 2030. More than 50 governments from Africa, Asia, Latin America, and Small Island Developing States have engaged with the initiative and are developing energy plans and programs. Businesses and investors have committed more than $50 billion to achieve the initiative’s three objectives. 

Additionally, eight multilateral development banks announced they will provide financing of more than $175 billion through 2020 to support sustainable transport in developing countries. The World Bank announced that more than 80 countries, civil society groups, private companies, and international organizations have declared their support for the new Global Partnership for Oceans. Ban also issued a Zero Hunger Challenge, calling on all nations to be boldly ambitious as they work for a future where everyone enjoys the right to food and all food systems are resilient. The challenge aims to provide 100% access to adequate food year round while increasing small-farm productivity and zero loss or waste of food. Several countries have already taken up the challenge. For example, the United Kingdom pledged £150 million ($234 million) to help smallholder farmers. The Brazilian government also announced the creation of the Rio+ Center, the World Center for Sustainable Development, which  will facilitate research, knowledge exchange and international debate about sustainable development. Its partners include the State Government of Rio de Janeiro, the Rio Municipality, and several UN agencies, as well as academic institutions, businesses and civil society groups.

Pharma companies advance sustainable water

More than 200 commitments to sustainable development by businesses were announced at the conclusion of the UN Global Compact’s Corporate Sustainability Forum, which also was held last month. The forum, organized by the UN Global Compact, in cooperation with the Rio+20 Secretariat, the UN System and the Global Compact Network Brazil, brought together 2700 business leaders, investors, academics, government officials, environmentalists and grassroots activists. Among the decisions taken at the forum were: an offer by business leaders to be a part of the creation and promotion of new sustainable development goals; a communiqué signed by 45 CEOs of major corporations, including pharmaceutical companies, to outline ways that governments can improve water management and set frameworks that will help businesses to scale up their role in reducing usage and restoring natural sources; and an endorsement of nearly 300 institutions of higher learning of a plan to place sustainable development at university curricula. 

The 45 CEO signatories on the communiqué to advance corporate water-management practices include executives from Allergan, Bayer, Dow Chemical, DSM, GlaxoSmithKline, and Merck & Co. The communiqué highlighted the urgency of the global water crisis and called on governments to step up their efforts and to work more actively with the private sector, civil society and other stakeholders. The CEOs of the communiqué, which also are endorsers of the UN Global Compact’s CEO Water Mandate, outlined a range of public policy actions they believe governments should undertake to make meaningful progress on water and to better leverage the resources and capabilities of the international business community. These include: 

• Developing policies and incentives to improve water productivity and efficiency in all sectors, especially agriculture.

• Establishing fair and appropriate valuation of water for agriculture, industry, and people while at the same time ensuring water and sanitation access in accord with the UN human right to safe water and sanitation. 

• Increasing investment in infrastructure and developing policies to accelerate progress on access to and ensuring efficient and reliable delivery of, water, and sanitation services.

• Sharing policies, innovations, and tools among governments and other stakeholders to scale up good practice and to improve general efficacy over time.

 • Working more actively with the business community, private finance and civil society.

Through the CEO Water Mandate, the signatories committed to advancing the concept of corporate water sustainability by developing, implementing, and disclosing policies and practices in relation to six key areas: direct operations; supply chain and watershed management; collective action; public policy; community engagement; and transparency. Actions being undertaken by endorsers of the CEO Water Mandate include setting targets on water efficiency and waste-water management in factories and operations; working with suppliers to improve their water practices; and partnering with NGOS, UN agencies, governments and public authorities, investors, and other stakeholders on water-related projects and solutions. 

The "Future We Want" outcome document, adopted by world leaders at the UN Conference on Sustainable Development, also included a continued pledge to improve healthcare. “We recognize that health is a precondition for and an outcome and indicator of all three dimensions of sustainable development,” stated the report. “We understand the goals of sustainable development can only be achieved in the absence of a high prevalence of debilitating communicable and noncommunicable diseases, and where populations can reach a state of physical, mental and social well-being. We are convinced that action on the social and environmental determinants of health, both for the poor and the vulnerable and for the entire population, is important to create inclusive, equitable, economically productive and healthy societies. We call for the full realization of the right to the enjoyment of the highest attainable standard of physical and mental health,” according to the document. 

In making that recognition, the leaders recognized the value of universal health coverage to enhance health, social cohesion, and sustainable human and economic development and pledged to strengthen health systems toward the provision of equitable universal coverage. The leaders in signing the document also recognized  that HIV and AIDS, malaria, tuberculosis, influenza, polio, and other communicable diseases remain serious global concerns and pledged to redouble efforts to achieve universal access to HIV prevention, treatment, care and support, and to eliminate mother-to-child transmission of HIV, as well as to renew and strengthen the fight against malaria, tuberculosis and neglected tropical diseases.

The representatives agreeing to the outcome document also recognized the global burden and threat of noncommunicable diseases as one of the major challenges for sustainable development in the twenty-first century. They committed to strengthen health systems toward the provision of equitable, universal coverage and promote affordable access to prevention, treatment, care, and support related to noncommunicable diseases, especially cancer, cardiovascular diseases, chronic respiratory diseases and diabetes.

The leaders also supported in the outcome document access to medicines, particularly in offering assistance to developing countries. The outcome document also called for further collaboration and cooperation at the national and  international levels to strengthen health systems through increased health financing, recruitment, development and training and retention of the health workforce, through improved distribution and access to safe, affordable, effective and quality medicines, vaccines and medical technologies, and through improving health infrastructure. The outcome document also affirmed a goal to reduce maternal and child mortality and to improve the health of women, youth and children, including with respect to women’s reproductive health. 

Highlights of UN Conference on Sustainable Development, held in Rio de Janeiro, Brazil, last month and related industry initiatives.

The UN at the Sustainability Table

As pharmaceutical companies face greater cost pressure, they must decide how to best allocate resources for development and manufacturing, which entails working with contract services providers. To examine these dynamics, Pharmaceutical Technology conducted an industry roundtable to gain input on how the expectations between sponsor companies and contract service providers have and will evolve. Participating in the roundtable are: Kuljit Bhatia, vice-president of R&D, DPT Laboratories; Arnaud Hanquez, head of business development, EU Pharmaceuticals, Hospira One 2 One; Michael Kosko, president of Pfizer CentreSource; Andreas Weiler, global director of technical sales, SAFC; Derek Hennecke, president and CEO of Xcelience; and Michael Ruff, PharmD and vice-president of pharmaceutical development, and Jeffrey Basham, vice-president of business development, both at Metrics.

 What have been the most significant changes in pharmaceutical outsourcing during the past 10 years?

 The most significant change over the past decade has been the ever-growing acceptance of outsourcing as a core supply-chain strategy within the pharmaceutical industry. In the past, most major pharma companies felt the need to control the vast majority of their supply chains internally. As these companies have faced loss of exclusivity on patent-protected products, research productivity challenges, and capital constraints, the contract manufacturing market segment has thrived. The emergence of specialty, second tier, and virtual pharma companies has supported this developing trend. The type of outsourcing has shifted as well–away from ‘transaction activity’ and toward ‘strategic activity.’ Key factors influencing the relationship between contract service providers and their customers include supply assurance, regulatory compliance, product quality, customer service, and cost. A shortcoming in any of these areas could result in a challenging situation for the sourcing company. 

 Internal cost pressures and a dearth of blockbuster approvals have driven Big Pharma and emerging bio/pharma companies to look outside their organizations to contract pharma, but life-sciences companies have become more selective in choosing a contract provider. They are increasingly moving toward a strategic partner relationship model rather than a tactical one. In the past, Big Pharma would only outsource specific tasks of the development program to a CRO or CDMO. This resulted in increased overall cost (translational and professional), increased cycle time, and significant oversight. A strategic partnership with a ‘one-stop-shop’ CRO that specializes in the sponsor company’s specific therapeutic area eliminated these drawbacks. This is the most significant change that has occurred in past 10 years.

 The change is the organic maturation of the industry for both categories of players. On one side, customers grew internal outsourcing/purchasing groups and developed skills in CMO selection. They have accumulated experience, started to use sophisticated evaluation tools, thereby making the whole CMO-selection process structured and more predictable. This level of sophistication decreases randomness of the outsourcing relationships and is a major driver of growth for top-CMOs

Providers, on the other side, started falling into two distinctive categories: CMO powerhouses, rich in experience and technical capabilities, and those who purchased one to two facilities from larger biopharma companies hoping to build a healthy CMO business while harvesting the inherited contracts. Now, many of them struggle to fill capacity and keep up with investments required to stay on the top of growing quality and compliance requirements. So, we have a duality in the market: relationships are becoming more strategic between visionary biopharma companies and preferred CMOs, but relationships with second-tier CMOs are becoming even more transactional based on the short-term customer benefit of a lower price. 

 Ten years ago, pharmaceutical outsourcing was still viewed with a touch of suspicion, and when it was embraced, it was for two fundamental reasons: reducing costs and increasing turnaround times. Those two reasons are still front and center, but now they’re so basic, customers take them for granted. Of course, outsourcing will cut costs and increase turnaround time. But what else? The field has grown increasingly more competitive and today’s client expects an innovative, high-performance provider that will open doors to specialized expertise or proprietary technology, help them with solubilization challenges and other problem-solving, reduce business risk, and tighten the supply chain. Really what we’re talking about is a change of mindset among outsourcing providers from reactive service delivery to proactive solutions. Many firms still haven’t adapted. Those who have are not only increasing market share, they’re embedding themselves in the pharma decision-making process at a higher level because the outsourcing solutions they provide are strategically important.

 A key change is the transition from the technical lead independently deciding where, when, and how to outsource to an outsourcing manager leading the decision on a team. Outsourcing management by teams allows for preferred-provider operations and cost controls. Additionally, the cycle of spend on outsourcing ranged from a frenetic pace during the first five years of the last 10 years to the drying up of venture money supporting the outsourcing of the virtual bio/pharma business model. During the first half of the past 10 years, there has been a switch at the top 25 to 30 large pharma companies, both in mergers and in consolidation of their facilities, which has both provided opportunity to the outsourcing company as well as challenges. In addition, large pharma companies have begun to compete in the CMO area by offering contract manufacturing to keep their facilities operating. At the same time, outsourcing competition has expanded exponentially due to large layoffs in the large pharma/biotech companies. Many very good scientists in R&D and manufacturing have gone out on their own to build new competitive businesses. 

During the past 10 years, we have seen significant change. In 2010, only 20% of all launched drugs were originated by the top 25 Big Pharma companies. This paradigm shift and the increase in more specialist-care drugs coming to market have made it a requirement for drug manufacturers to have faster and more flexible processes to get drugs to market. Smaller pharma or virtual biotech companies are looking for a different type of partnership with their CMO. These companies need speed, regulatory experience, technical knowledge, and best-in-class project management, which creates opportunities for CMOs in the Western world, including for emerging technologies, such as high-potency APIs, gene therapies, and microbial fermentation.

 In certain areas (i.e., clinical research), we see the preferred-provider model. Will the preferred-provider model evolve for other segments?

 A definite trend toward the preferred-provider model is gaining marketplace momentum. A number of current examples show major pharma companies establishing partnerships with CROs as they focus on managing fixed costs and increasing productivity. As more and more technical platforms become universally available, I can see this trend expanding into formulation development and process development. Manufacturing may be a larger challenge, in that the best solid dose preferred-provider may not be the best sterile partner, which increases the likelihood that preferred providers may segment along technology lines rather than on inclusive one-on-one relationships. By using a preferred-provider model and consolidating to fewer providers, outsourcing firms can exercise greater influence and control over the operation of the CMO. The industry preference for secondary sourcing, which may or may not be available from a preferred CMO’s network, will be another challenge. 

 The preferred provider model will surely evolve into other CMC segments, including formulation development, process development, and manufacturing. As drug products become more complex, sponsor companies are looking for an outsource provider to draw a roadmap to the target goal. They are primarily looking for reduced cycle times (both in contract negotiation and development times due to preferential treatment) and limited oversight, resulting in cost savings and more importantly, quick approval and launch. The reasons to deviate from the preferred provider model may be because of a specific task or technology that only a non-preferred provider can deliver.

 I don’t think you can take for granted at this point that the preferred-provider model is strongly rooted and gaining ground in other segments. It’s certainly an arrangement that is being experimented with by companies. A preferred provider is a marriage of sorts—one with a pretty serious pre-nup. Should you marry one key outsourced provider in your pipeline? Maybe. Should you look for long-term happiness with every outsourcer in your pipeline? Probably not. 

The whole concept of preferred providers is still developing. Some global CROs have established these partnerships and have delivered real client value while others have failed to lead to the returns expected by either side. Ultimately, this sort of business-relationship decision is, like marriage, personal. There’s no one-size fits all. Each company must look for the arrangement that best de-risks its overall drug-development program. Most will probably continue to choose best-in-class providers that can provide services, such as formulation development, which require a level of complexity or attention than a one-stop shop cannot provide. The key to a successful portfolio strategy is to have service providers that are willing to coordinate with upstream/downstream providers to smooth transitions, accelerate timelines, and ensure quality of supply.

 We have seen this already taking place. While specialty needs will still be needed, the outsourcing management model will continue to downsize the number of contractors with which a company will work. This is particularly true for large pharma/biotech and the larger mid-sized pharma/biotech companies. This allows for streamlined management of the vendor, common rules, and less overall personnel needed to manage the outsourcing model.

 Has quality by design (QbD) influenced the outsourcing relationship?. 

: I fully expect that the benefits and advantages bestowed by a QbD approach will be an increasing topic of discussion, especially for new high-value projects proceeding through the development cycle. Selecting a service provider with expertise, capability, and experience can lead to a valuable dialogue on the range of potential benefits. A robust QbD approach also can lead to a greater understanding of the manufacturing process for both partners, which ultimately results in a better management of quality, change control, and supply. 

 Increased FDA oversight has resulted in a strong emphasis on quality management systems. Failure to adopt new initiatives that drive quality has recently resulted in warning letters, consent degrees, and even closure of plants for pharma, biotech, and contract providers. QbD is a similar initiative that will ultimately drive quality. It is expensive and requires change in processes and systems. But that is what is needed to deliver the quality that the agency is targeting for the future. The survival and success of the CRO that supports CMC could depend on the decision to either sit on the sidelines or make the tough decision to support this initiative.

 With more than 80% of all new chemical entities originated by small virtual pharma or biotech companies, QbD plays an important role. CMOs have to use all their experience to advise their sponsors on the fastest and most efficient way to move forward. An experienced CMO will have worked with many different sponsor companies, so the concept of continuous improvement is built into daily operations. As a CMO, we are always looking at ways to build out each process by adopting and implementing best-practice procedures. This experience, coupled with the speed and flexibility of virtual pharma companies can be one of the key success factors when using the QbD approach in an outsourcing relationship.

 The pharmaceutical industry has learned the collective lesson that a lack of process control can lead to significant downstream costs in terms of time and money. The industry’s response has been to bring QbD into the earlier stages of development. The question is not really whether or not to implement QbD, but how and when. Because of their breadth in customer bases and scientific understanding, service providers are increasingly in a strong position to offer solutions to complex formulation and process-development needs using QbD. 

Many sponsors are looking for advice from consultants and outsourcing partners on the role of QbD in their drug-development strategy. More and more, I see contract service providers actively engaging in discussions with sponsor companies early in the development process, recognizing the significant value in the CMC data package as sponsor companies consider approval submissions or technology transfer to commercial manufacturers. A provider that can provide QbD services really sets itself apart from the pack and takes solutions selling to a new level. 

 QbD has definitely raised client expectations. They have read the ICH guidances and listened to FDA, which has signaled that failure to follow QbD is to invite delays in drug approvals. Sponsors now expect their providers to fully understand and apply QbD principles in their development projects. Clearly, this is already happening and will become increasingly important. Contract service providers who follow the QbD pathway will have a significant competitive advantage. 

 How will the contract service provider of 10 years from now differ from today’s provider? Are there models from other industries that might be adapted?

 I see a number of areas where contract providers might modify their existing business model to be successful in the future: 
 • Reach: Moving forward, contract service providers will have to expand their global footprints to fully support their customers across major and emerging markets. 
 • Partnership arrangements: I anticipate the development of new partnership arrangements that are designed to meet the needs of both customers and suppliers on a longer-term basis.
 • Cost-effectiveness: Managing cost will continue to be a focal point for the pharma industry. As specialized medicines becomes more important, the ability to handle small volumes in a cost-effective manner will be critical.
 • Services: Suppliers will likely expand their service offerings to encompass responsibilities that are currently handled by the customers, in areas such as global regulatory file management. 
 • Technology: The industry will look toward incorporating new and emerging technology to enable more highly consistent quality product while managing cost; broader adoption of continuous processing is one example. 
 

: The future contract service provider will be an extension of the pharma or biotech industry in the true sense, with a focus on approvals rather than task completion. Decision-making, regulatory strategy, and a global presence will be key prerequisites in selecting a contractor. The relationship will be more strategic rather than tactical with a significant monetary milestone focus on final approval from the agency (i.e., risk sharing).

The biggest driver of the future change in outsourcing relationships is the ever-increasing regulatory scrutiny, and it will reshape the outsourcing competitive landscape. Certain providers will weather the storm by keeping one step ahead of changing regulatory expectations and by investing in equipment and facilities to meet what will become the ‘new norm’ with regard to pharma manufacturing. Many others will not. Those providers that come out on the winning side will find themselves much more aligned with the pharmaceutical industry, paving the way for the creation of stronger and broader relationships. 

 The expectation is that our industry can move into the type of relationships that one sees in other industries. An example could come from the auto industry, where you see that the key suppliers of automobiles are truly an extension of the branded automaker, and the question is whether this can be applied, through QbD and other methods, to a highly regulated pharma marketplace. I have confidence that we will continue to move in this direction, but it will not be easy as regulatory guidance, innovation and clinical attrition will be key differences to other industries. 

 The next big change in our industry may come from within, but it will more likely be adapted from a peek over the fence into another industry. There is a small chance that our own industry’s Steve Jobs is out there now envisioning what none of us have yet imagined, but that will soon become obvious .

 What do I see happening in our industry right now? There are so many changes afoot, but one I find particularly interesting is the increasing separation of new product development from existing operations– something our industry is gleaning from the high-tech industry. This separation lets each functional group focus on what it does best. Operational plants can apply lean Six Sigma concepts to streamline process flow and re-engineer facility design in a way that maximizes quality, productivity, and safety while new product-development sectors can harness their market knowledge and development strengths. The contract service provider of tomorrow will almost certainly be one best able to incorporate the voice of their customers into their service offering, but more than that, tomorrow’s provider will challenge its customers to think about why they buy the way they do and to help them adjust their business models to better achieve their goals.

 We view the changes over the next 10 years will direct most CDMOs to become more global; that is multisite facility operations. However, different than today, we think that these sites will need to have offerings that encompass the whole of the development process. This does not include discovery and research, but a focus on delivering the development process, including analytical support. We think that the pharma industry has some differences in modeling that make it more difficult to use models from other industries. The key item from other industries will be oriented to in process quality and the extension of this into our industry. 

Sponsor companies' increasing focus on strategic outsourcing has changed the rules of the game.

New Models in Contract Services

The top pharmaceutical companies of 2012 that focus on human prescription drugs, with somediversification, depending on the company, in consumer-healthcare and animal-health products, are different from leading companies of the 1990s (see 

). In 1990, severaltop players were not stand-alone drug companies but instead were the pharmaceutical units ofmultinational chemical companies, reflecting the historical marriage between the chemical andpharmaceutical industries. As the strategic value of pharmaceuticals as a business grew, sodid merger and acquisition (M&A) activity, and with it, divestments of chemical andagrochemical concerns and M&A of pharmaceutical businesses that would eventually createthe pharmaceutical powerhouses of today. Today, the industry is again at another crossroad asit contends with generic-drug incursion and reduced R&D productivity, thereby facingchallenges by which the top companies have responded by increasing biologic-based drugdevelopment, targeting growth in emerging markets, and beginning to apply diagnostics in drugdevelopment.

More than two decades ago in 1990, Merck & Co. was ranked as the number one company inprescription drug sales, followed by Bristol-Myers Squibb, which had moved into the numbertwo spot with the 1989 merger of Bristol-Myers and Squibb (see 

). Glaxo was rankedthird and SmithKline Beecham fourth, following the merger in 1989 of Philadelphia-basedSmithKline Beckman with the UK-based Beecham Group. In 1995, Glaxo and Burroughs Wellcomemerged to form GlaxoWellcome, and in 2000, GlaxoSmithKline was established through the mergerof GlaxoWellcome and SmithKline Beecham (see 

). Other leading pharmaceuticalcompanies in 1990 were not stand-alone entities, but instead were the pharmaceuticalbusinesses of multinational chemical companies: Ciba-Geigy (Swiss), Hoechst (German), Sandoz(German), and RhÔne Poulenc (French). The spinoffs of the pharmaceutical units fromthese chemcal companies and subsequent M&A resulted in the creation of largerpharmaceutical-based companies. 

In 1995, the German chemical conglomerate Hoechst acquired Marion Merrell Dow of KansasCity, Missouri , a pharmaceutical concern created from the 1989 merger of Marion Laboratoriesand Merrell Dow Pharmaceuticals. In 1989, Dow Chemical had acquired a controlling interest inMarion Laboratories, which was renamed Marion Merrell Dow. In 1999, the pharmaceutical unitof Hoechst, Hoechst Marion Roussel, merged with RhÔne-Poulenc (which had spun off itschemicals division in 1997 into a separate company, Rhodia) to create a separatepharmaceutical company, Aventis, which was later acquired by Sanofi–Synthélabo in2004 to create Sanofi-Aventis. Sanofi–Synthélabo had been formed in 1999 by themerger on Sanofi and Synthélabo.

In 1996, Novartis was established from the merger of the pharmaceutical businesses ofCiba-Geigy and Sandoz following the respective spinoffs of the specialty chemical businessesof Ciba-Geigy to form Ciba-Geigy Specialty Chemicals and of Sandoz to form Clariant, whichlater acquired the specialty chemical business of Hoechst in 1997. In 2000, Novartis divestedits agrochemical business and combined it with the divested agrochemical business ofAstraZeneca to form Syngenta, thereby focusing Novartis and AstraZeneca in pharmaceuticals.AstraZeneca was created from the 1999 merger of Astra AB of Sweden and the Zeneca Group ofthe UK. Zeneca was formed from the demerger of three businesses (pharmaceuticals,agrochemicals, and specialty chemicals) of the UK chemical company ICI beginning in 1993.

American Home Products, which included its pharmaceutical business, then calledWyeth-Ayerst, merged in 1994 with the conglomerate American Cyanamid, which was diversifiedin consumer and industrial products, pharmaceuticals, agrochemicals, and industrialchemicals. Seeking to build its life-science activities, American Home Products wassubsequently involved in three unsuccessful deals in the late 1990s: a merger withSmithKlineBeecham in 1998; a merger with Monsanto in 1999; and perhaps its most notable, afailed 2000 bid for Warner-Lambert, which was later acquired by Pfizer. In 2002, AmericanHome Products changed its name to Wyeth, after spinning off unrelated businesses to focus onits pharmaceutical and consumer-healthcare businesses.

 Pfizer’s ascent from the 14th ranked pharmaceutical company in 1990 to the number onecompany in 2000 was achieved by acquisition, most notably the acquisition of Warner-Lambertin 2000, for which Pfizer had outbid American Home Products (see 

). In 1996,Pfizer had formed a comarketing agreement with Warner-Lambert on Lipitor and with itsacquisition of Warner-Lambert in 2000, Pfizer secured its top prize in Lipitor, which was tobecome the top-selling prescription drug for Pfizer and the industry during the 2000s. Withthe acquisition of Warner-Lambert, Lipitor became one of eight blockbuster drugs (defined asdrugs with sales of $1 billion or more) for Pfizer in 2000. The others were: Norvasc, Zoloft,Neurontin, Celebrex, Zithromax, Viagra, and Diflucan. 

In 2003, Pfizer acquired Pharmacia. In 1995, Pharmacia & Upjohn was formed through themerger of Pharmacia AB and the Upjohn Company. In 2000, Pharmacia acquired Monsanto, whichincluded G.D. Searle, the pharmaceutical unit of Monsanto, and in 2002, Pharmacia spun offMonsanto as a separate agrochemical/agricultural company. 

In 2009, Pfizer acquired Wyeth for $68 billion, cementing its position as the number oneglobal pharmaceutical company (see 

). The Pfizer–Wyeth merger was one of threemegamergers in the late 2000s. In 2009, Merck & Co. acquired Schering-Plough for $41billion, and Roche acquired the remaining shares that it did not already own of thebiopharmaceutical company, Genentech, for $47 billion. In April 2011, Sanofi-Aventiscompleted its acquisition of the biopharmaceutical company Genzyme and simplified its name toSanofi in May 2011.

In 2011, Abbott Laboratories announced plans to separate into two companies: one inmedical products, which will keep the Abbott name, and a second company focused onresearch-based pharmaceuticals, which will be called AbbVie. The separation is expected to becompleted later this year in 2012.

 What will the next decade bring? In looking at the list of the top 15 global pharmaceuticalcompanies in 2011, we see two key trends already represented: the rising role of genericdrugs in the prescription drug market through the positioning of the generic-drug compay TevaPharmaceutical among the top 10 global pharmaceutical companies and the growing importance ofbiologic-based drugs through the rise in the rankings of the biopharmaceutical company Amgenas well Roche and Sanofi following their respective acquisitions of the biopharmaceuticalcompanies Genentech and Genzyme (see 

 What then will be the pharmaceutical company of 2020 be (see related story, 

Tracking change from spinoffs of chemical companies to life-sciences powerhouses.

Decades of Change for the Top Pharmaceutical Companies

Small-molecule APIs dominate pharmaceutical manufacturing, so where may future innovation reside? The scientific literature abounds with novel approaches to a given synthesis or refinements to existing syntheses as a means to improve product yield, process conditions, enantioselectivity, or production economics. These efforts are an integral part of process development and commercial manufacturing and will continue to be so. But what may be the game-changer in small-molecule manufacturing? As we consider the possibilities, continuous-flow technology through micreactors as an alternative to traditional batch manufacturing may be one possibility. 

Continuous-flow technology involves the continuous introduction of a stream of chemical reactants into a flow or microreactor to yield a desired reaction product on a continuous basis (1). Continuous-flow technology may offer potential advantages compared with traditional batch manufacturing of pharmaceuticals, such as greater optimization and control of the process, an improved safety and environmental profile for a given process, and a reduced manufacturing footprint compared with batch-reactor systems (1).In general,microstructured devices with small internal volumes and high surface-to-volume ratios offer transport capabilities for rapid mixing, enhanced heat transfer for good temperature control, and intensified mass transfer (2). Microstructured devices operate in a continuous-flow environment, which can provide controlled process conditions, high flow rates, and high mass throughput. Continuous operations also may allow for bulk-chemistry processes to have high production capacities. Fluid dynamics determine the characteristics of continuous-flow equipment, such as pressure loss, heat-transfer characteristics, residence time, and mixing time (2, 3). 

Reflecting growing interest in microreactor technology for fine-chemical manufacturing, Lonza reported earlier this year investment in what it terms the “Factory of Tomorrow,” at its facility in Visp, Switzerland. The facility will offer production of multiton intermediates and/or APIs based on continuous-flow processing. Lonza currently operates assets that can produce several kilograms to several tons of small-molecule APIs using microreactors. The new facility will provide an integrated solution where all common unit operations in flow can be streamlined in a flexible fashion using microreactors (FlowPlate, Lonza). The facility was slated to be operational in June 2012.

The new unit will enable the integration of complete flow processes in addition to microreactors, according to company information. It will be able to integrate a range of flow reactors, such as continuous stirrer tank reactors or ultrasounds and streamline flow processes, including work-up unit operations, such as liquid–liquid extraction, distillation (wiped-film, thin film). Higher pressure applications will be enabled as well by allowing gas–liquid reactions, such as ozone and HCN chemistries. The technology can be used for chemical reactions under severe and extreme conditions, such as very high temperatures or cryogenic conditions.

Effectively applying continuous-flow technology involves a multidisciplinary approach of chemistry and engineering. As an example, researchers at the Massachusetts Institute of Technology (MIT) reported on the development of a Suzuki–Miyaura cross-coupling reaction in a continuous-flow microreactor system. Suzuki coupling is a palladium-catalyzed coupling between organoboron compounds and organohalides and is an important reaction in organic chemistry in general and for pharmaceutical compounds specifically. The researchers developed a continuous-flow Suzuki–Miyaura cross-coupling reaction that started from phenols and produced various biaryls in good yield using a microfluidic-extraction operation and a packed-bed reactor. The project used a multidisciplinary approach with the research on microreactor technology developed by a team led by Klaus F. Jensen, department head, Warren K. Lewis professor of chemical engineering, and professor of materials science and engineering at MIT. The organic synthesis portion of the project was developed by a group led by Stephen Buchwald, Camille Dreyfus professor of chemistry at MIT (3–5).

  1. J. Hamby, “API Synthesis, Formulation Development, and Manufacturing” supp. 

  2. N. Korman et al., “API Synthesis, Formulation Development, and Manufacturing” supp. 

  4. T. Noel et al., “Suzuki–Miyaura Cross-Coupling Reactions in Flow: Multistep Synthesis Enabled by a Microfluidic Extraction,” 

. online, DOI: 10.1002/anie.201101480, May 17, 2011.

Flow chemistry and microreactors offer an alternative to traditional batch manufacturing.

What is Ahead in Chemical API Manufacturing

 Looking ahead, how will the pharmaceutical company of 2020 be different from the pharmaceutical company of 2010? How would it be the same?

Carolyn Gauntlett, consultant, IMS Health: 

2012 could mark the year when the first company, Teva Pharmaceutical, which neither originated in Europe or the United States or that is primarily a R&D-led organization, becomes a top-10 global pharmaceutical company. The grouping of top-10 global pharmaceutical companies that Teva joins is, itself, changing rapidly as innovative launches become fewer and yield less and  pharmaceutical companies are diversifying into other healthcare fields. Crucial questions are how companies are most likely to develop in the next 10 years and what the successful models to survive and thrive will be. 

To understand the drivers that will shape the top-10 companies of the future, IMS finds that the innovative R&D model is under increasing pressure, with R&D costs rising for at best, no more, but more likely, fewer, new molecules, which in turn do less well in terms of overall sales and market share in the cost-constrained Western markets, which constitute most of the sales opportunity. We believe this inexorable pressure will not only cause the top-10 companies to continue to diversify out of their core of innovative prescription medicines, but it could also mean that within a decade, fewer very large companies will depend on full-line discovery to commercialization as their primary business. The listing of top-10 companies will still have companies fitting this bill, but the top-10 companies also will include organizations focusing only on the commercialization of products developed elsewhere. In addition, the top-10 companies will contain some companies with a primary focus not on innovation, but on the payer, and therefore will be an international player capable of delivering low-cost, high-volume solutions to major institutional buyers across the globe and across the spectrum of pharmaceutical, and maybe, more generally healthcare provisions from specialty to primary care. Innovative players also will become more payer-focused and be intimately involved in the production and interpretation of real-world evidence to develop the use of their protected products. 

The innovative- and payer-focused company models already exist, but a third model also will develop, aided by the rise of patient power and new technology. A combination of consumer focus, direct communication with patients through social media, and the development of applications (i.e., apps) as genuinely useful, even vital, tools for patients and prescribers will allow companies to create a patient-led competitive space that has, to this point, not existed.

Lastly, all companies that aspire to enter or remain in the top-10 will have to grow the value contribution that emerging markets make to their global revenues. This strategy will be both from business models adapted to pharmerging markets’ voracious appetite for low-cost, high-volume generic products and by developing the market for high-value, patent-protected new agents. The BRICT countries (i.e, Brazil, Russia, India, China, and Turkey), which soon will drive more than 50% of the world’s value growth, will become viable drivers of innovation and value.

How will the pharmaceutical company of 2020 be different from the pharmaceutical company of 2010? A look at emerging business models and the factors influencing the direction of the global pharmaceutical industry.