Patricia Van Arnum was executive editor of Pharmaceutical Technology.

Patricia Van Arnum

 Biosimilars represent a niche segment in the global biopharmaceutical market , but their potential is engendering interest from a mix of traditional generic-drug companies, innovator biopharmaceutical companies, and new players to the market. As a second-generation wave of biosimilars, inclusive of monoclonal antibodies, is scheduled to come off patent during the next several years, opportunities exist, but it is unclear as to what the true potential of the biosimilar market will be given differing regulatory issues, technical requirements, and developmental costs compared with traditional small-molecule generic drugs. 

 Although the market for biosimilars is growing at a rate higher than the global prescription-drug market, it is still a relatively small market. The global market for prescription drugs is estimated to reach $1.1 trillion by 2015, increasing at a compound average growth rate (CAGR) of 3% to 6%, according to 2011 estimates by the IMS Institute for Healthcare Informatics. IMS estimates that sales of biosimilars are expected to reach $1.9 to $2.6 billion by 2015 (1). 

 BCC Research projects a slightly stronger market. It estimates that the global demand for biosimilars totaled nearly $2.5 billion in 2011 and should reach $3.6 billion in 2016, a CAGR of 7.7% over the five-year period. BCC breaks the biosimilars market into four regions: APAC (Asia-Pacific), the United States, Europe, and the rest of the world. The APAC region accounted for $683 million in 2011 and should reach $1.1 billion in 2016, a CAGR of 10.3%, according to BCC.  The US accounted for nearly $1.1 billion in 2011 and should increase at a CAGR of 4.1% to reach $1.3 billion in 2016.  Europe, worth $377 million in 2011, should reach $625 million in 2016, increasing at a CAGR of 10.6%. The rest of the world accounted for $335 million in 2011 and in 2016 should total $522 million, a CAGR of 9.3%, according to BCC. 

 Looking at global biosimilar demand by value and product type in 2011, low-molecular weight heparin accounted for 44% of the market, according to BCC. Epoetins held the next highest share of the biosimilars market in 2011 at 19%, followed by recombinant human growth hormone (11%), granulocyte colony-stimulating factors (7%), interferons (6%), insulins (5%), and other products (8%).

Interest in the biosimilars market is spurred by a number of top-selling biologics slated to come off patent during the next five years, including Herceptin (trastuzumab), Enbrel (etanercept), Humalog (insulin lispro recombinant), MabThera/Rituxan (rituximab), Remicade (infliximab), and Aranesp (darbepoetin alfa) (1). Unlike manufacturers of small-molecule generic drugs, however, the manufacturers of biosimilars face a different path based on developmental costs, regulatory issues, and technical requirements to bring a biosimilar to market as well as greater uncertainty as to payer, physician, and patient acceptance of a biosimilar product (1). 

 The establishment of a regulatory pathway for biosimilars through the passage of the  

Patient Protection and Affordable Care Act 

 in 2010 and the recent upholding by the Supreme Court of that law as well as recently issued FDA draft guidance on biosimilar development is moving the establishment of a regulatory pathway for biosimilars in the United States (1–4). The recently enacted 

on July 9, 2012, establishes a new user fee program for biosimilars to support the review of marketing applications for biosimilar biological products, further enabling regulatory implementation of a biosimilars pathway. 

While the US is considered potentially a strong market for biosimilars, the true test for biosimilars to date is in the European Union, which represents the most advanced market for biosimilars, accounting for 80% of global spending (1). Despite an established regulatory pathway, only a few manufacturers have launched biosimilars in the EU, which include Sandoz (the generic-drug business of Novartis), Stada, Hospira, Medicie and Ratiopharma (part of Teva Pharmaceutical) (1). According to a recent IMS analysis, biosimilar market penetration varies by region in the EU. Germany and France account for half of the biosimilars market by value with a 34% and 17% share (1). On a product basis, granulocyte colony-stimulating factors have generally achieved the highest penetration by value (25%) and human growth hormone (4%) the lowest (1). In its analysis, IMS points out that the first generation of biosimilars has met with limited uptake compared to small-molecule generic drugs mainly due to the limited price reductions of biosimilars. Average list (ex-manufacturer) price cuts in the EU of 30% are considerably less than those for traditional generic drugs, which are 70–80%. 

 A recent study by the IGES Institute, based in Berlin, and commissioned by Sandoz projects that by 2020, eight EU countries could save a cumulative total of between EUR 11.8 billion ($14.5 billion) and EUR 33.4 billion ($41.0 billion) through the use of biosimilar medicines (5). The study calculated the amount of expected savings from introducing biosimilars to eight EU countries: Germany, France, the UK, Italy, Spain, Sweden, Poland, and Romania. The IGES study was limited to three classes of biologics: erythropoetin alfa and granulocyte colony stimulating factors, for which biosimilars already exist, as well as monoclonal antibodies, considered an emerging opportunity with several drugs coming off patent. The study team at IGES developed different scenarios based on possible developments of market share, pricing and the time period for market entry of biosimilars after patent expiration. A typical biosimilar takes seven to eight years to develop, at a cost of between $100 and $250 million, which includes additional clinical trials (5) 

 According to the IMS analysis, the immediate opportunity for biosimilars will be in emerging markets although longer term, the US is positioned to be the leading market. It estimates that the US biosimilars market could reach between $11 billion and $25 billion in 2020, respectively representing a 4% and 10% share of the total biologics market subject to certain market, technical, and regulatory conditions (1). Part of this growth will also be tied to more complex biologics, such as monoclonal antibodies, assuming their position in the market. 

The biosimilars market has engendered several strategic partnerships among innovator biopharmaceutical companies, traditional generic-drug companies, new players to the biopharmaceutical market, and contract service providers. For example, in February 2012, Biogen Idec and Samsung formed a joint venture, Samsung Bioepis to develop, manufacture, and market biosimilars in keeping with their agreement announced in December 2011. Under the agreement, Samsung is contributing $255 million of the $300 million for an 85% stake, and Biogen Idec is contributing $45 million for a 15% stake in the joint venture. The joint venture, which will be based in Korea, will contract with Biogen Idec and Samsung Biologics for technical development and manufacturing services. Samsung Biologics is a Samsung business formed in April 2011 to specialize in biopharmaceutical manufacturing. The joint venture will not pursue biosimilars of Biogen Idec's proprietary products. 

 Also in February 2012, Samsung Electronics entered into a strategic partnership with the CRO Quintiles as part of Samsung’s entry into the biopharmaceuticals market. The companies formed a new joint-venture company to provide biopharmaceutical contract manufacturing services in South Korea, with Samsung owning 90% and Quintiles 10%. At the time of the announcement in February, Samsung said it plans to commercialize biosimilars by 2016 and to expand into innovative biologics in the future. The joint-venture company plans to construct a biopharmaceutical manufacturing plant in South Korea with the goal of beginning full-scale operations in April 2013. 

 Fujfilm has been building its biosimilars business beginning with several deals in 2011. In November 2011, it agreed to form a 50–50 joint venture for biosimilars with the biopharmaceutical company Kyowa Hakko Kiron. The joint venture was expected to begin in April 2012. In April 2011, Fujifilm completed its acquisition of the former Merck Biomanufacturing Network, which provides contract biologics manufacturing. The acquisition included facilities in Research Triangle Park, North Carolina, and Billingham, United Kingdom. Merck & Co. had acquired the Billingham facilities through its 2009 acquisition of the contract manufacturer Avecia and the Research Triangle Park facilities as part of its acquisition of Schering-Plough in 2009. Diosynth was the former contract manufacturing activities of Organon, the pharmaceutical business of the Dutch chemical company Akzo Nobel. Schering-Plough acquired Organon in 2007, and Merck & Co. acquired Schering-Plough in 2009. Merck combined the UK and US contract biologic activities into the Merck Biomanufacturing Network, which was acquired by Fujifilm in 2011, and later named Fujifilm Diosynth Biotechnologies.  Also in 2011, Fujifilm formed a partnership with Mutsubishi for contract biologics manufacturing under which Mitsubishi took a 20% equity interest in FujiFilm Diosynth Biotechnologies. 

Articles

Biosimilars represent an emerging niche in the biopharmaceutical market, but how strong is their true potential?

Biosimilars: Market Weaknesses and Strengths

What will the CRO/CMO of tomorrow be like? Jim Miller, president of PharmSource, shared his views in a podcast with 

Looking ahead 10 years from now, how will the contract service provider of tomorrow  differ from the provider of today and what factors will influence the outsourced relationship? 

 The big changes that are impacting the pharma industry generally will really be the big drivers of what happens to the CRO and CMO industry. If you think about the big changes that are occurring in pharma today, I think the ones that are most critical from a CRO/CMO perspective are first, a movement toward a world of smaller, niche products, often linked to diagnostic tests, rather than the blockbuster or even mid-sized products that had characterized the industry for much of the past 10 to 15 years.

Secondly, as the industry has become more global, its markets are more dispersed, and now you are not just dealing with the regulatory requirements of a handful of very large countries, but increasingly, the regulatory requirements and issues in places like China, India, Brazil, and South Africa, which have to be factored into your manufacturing and regulatory strategy planning.

Thirdly, the technologies and practices that companies are developing, particularly in the very earliest stages of the development process, will result in fewer candidates being progressed through the pipeline, but those candidates will have a greater probability of success. As that happens, you are going to see fewer opportunities for CROs and CMOs, but those opportunities will become all the more critical to the clients–the pharma companies–because they [the drug candidates] will be vetted and companies will have a lot more riding on them.

And finally, there is much uncertainty as to who is going to pay for new drugs and that's going to affect what new drugs move forward and how much revenue companies can get from new drugs, and perhaps more importantly, how companies demonstrate the efficacy and cost-effectiveness of these drugs as they move through the pipelines.  

So all these developments will create new demands on CMOs and CROs, and they are going to have to adapt their business models and capabilities. First among those, they are going to have be more results- and value-oriented, so they are going to have to demonstrate that they can do things  faster and more cost-effectively and that they are bringing services and insight to the table that address those broader issues that their clients are facing. Also, I think technology is going to be key. I think that information technology, both from the data management and analysis on the clinical side and from supply-chain and logistics management on the CMC side, is extremely critical, and you are starting to see the largest CROs and CMOs make significant investments in those information-based technologies.

Also because the markets and supply chains are going to be so dispersed, you are going to see companies move to a broader network of smaller facilities with equipment that is designed for smaller, more frequent batches of products rather than having one big manufacturing site that exports throughout the world. You may see smaller facilities in many different countries, each making smaller batches of products appropriate for local markets and able to handle multiple products in one facility. And you are going to increasingly see the equipment manufacturers develop manufacturing technologies that are much smaller scale, for instance, microreactors for the small-molecule API world or 'bioreactors in a bag' using disposable contact parts for large-molecule development. What that means is that you are going to see CROs and CMOs that are very global, but that are very savvy with technology and that have deep pockets, so that they will be able to make the necessary investments in these technologies and operate on a global scale.

Jim Miller, president of PharmSource, examines the future direction of CROs/CMOs and the factors influencing the pharmaceutical contract services sectors.

A Look into the Future of Pharmaceutical Outsourcing: Perspectives from Jim Miller, president of PharmSource

The top pharmaceutical companies of 2012  that focus on human prescription drugs, with some diversification, depending on the company, in consumer-healthcare and animal-health products, are different from leading companies of the 1990s (see Tables I–III). In 1990, several top players were not stand-alone drug companies but instead were the pharmaceutical units of multinational chemical companies, reflecting the historical marriage between the chemical and pharmaceutical industries. As the strategic value of pharmaceuticals as a business grew, so did merger and acquisition (M&A) activity, and with it, divestments of chemical and agrochemical concerns and M&A of pharmaceutical businesses that would eventually create the pharmaceutical powerhouses of today. Today, the industry is again at another crossroad as it contends with generic-drug incursion and reduced R&D productivity, thereby facing challenges by which the top companies have responded by increasing biologic-based drug development, targeting growth in emerging markets, and beginning to apply diagnostics in drug development.   

More than two decades ago in 1990, Merck & Co. was ranked as the number one company in prescription drug sales, followed by Bristol-Myers Squibb, which had moved into the number two spot with the 1989 merger of Bristol-Myers and Squibb (see Table I). Glaxo was ranked third and SmithKline Beecham fourth, following the merger in 1989 of Philadelphia-based SmithKline Beckman with the UK-based Beecham Group. In 1995, Glaxo and Burroughs Wellcome merged to form GlaxoWellcome, and in 2000, GlaxoSmithKline was established through the merger of GlaxoWellcome and SmithKline Beecham (see Tables I, II). 

Table I: Top global pharmaceutical companies, 1990 			

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

In 1995, the German chemical conglomerate Hoechst acquired Marion Merrell Dow of Kansas City, Missouri , a pharmaceutical concern created from the 1989 merger of Marion Laboratories and Merrell Dow Pharmaceuticals. In 1989, Dow Chemical had acquired a controlling interest in Marion Laboratories, which was renamed Marion Merrell Dow. In 1999, the pharmaceutical unit of Hoechst, Hoechst Marion Roussel, merged with Rhône-Poulenc (which had spun off its chemicals division in 1997 into a separate company, Rhodia) to create a separate pharmaceutical company, Aventis, which was later acquired by Sanofi–Synthélabo in 2004 to create Sanofi-Aventis. Sanofi–Synthélabo had been formed in 1999 by the merger on Sanofi and Synthélabo. 

In 1996, Novartis was established  from the merger of the pharmaceutical businesses of Ciba-Geigy and Sandoz following the respective spinoffs of the specialty chemical businesses of Ciba-Geigy to form Ciba-Geigy Specialty Chemicals and of Sandoz to form Clariant, which later acquired the specialty chemical business of Hoechst in 1997. In 2000, Novartis divested its agrochemical business and combined it with the divested agrochemical business of AstraZeneca 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 of the 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 called Wyeth-Ayerst, merged in 1994 with the conglomerate American Cyanamid, which was diversified in consumer and industrial products, pharmaceuticals, agrochemicals, and industrial chemicals. Seeking to build its life-science activities, American Home Products was subsequently involved in three unsuccessful deals in the late 1990s: a merger with SmithKlineBeecham in 1998; a merger with Monsanto in 1999; and perhaps its most notable, a failed 2000 bid for Warner-Lambert, which was later acquired by Pfizer. In 2002, American Home Products changed its name to Wyeth, after spinning off unrelated businesses to focus on its pharmaceutical and consumer-healthcare businesses.  

  ranked pharmaceutical company in 1990 to the number one company in 2000 was achieved by acquisition, most notably the acquisition of Warner-Lambert in 2000, for which Pfizer had outbid American Home Products (see Tables I, II). In 1996, Pfizer had formed a comarketing agreement with Warner-Lambert on Lipitor and with its acquisition of Warner-Lambert in 2000, Pfizer secured its top prize in Lipitor, which was to become the top-selling prescription drug for Pfizer and the industry during the 2000s. With the acquisition of  Warner-Lambert, Lipitor became one of eight blockbuster drugs (defined as drugs with sales of $1 billion or more) for Pfizer in 2000. The others were: Norvasc, Zoloft, Neurontin, Celebrex, Zithromax, Viagra, and Diflucan. 

Table II: Top global pharmaceutical companies, 2000 			

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

In 2009, Pfizer acquired Wyeth for $68 billion, cementing its position as the number one global pharmaceutical company (see Table III). The Pfizer–Wyeth merger was one of three megamergers in the late 2000s. In 2009, Merck & Co. acquired Schering-Plough for $41 billion, and Roche acquired the remaining shares that it did not already own of the biopharmaceutical company, Genentech, for $47 billion. In April 2011, Sanofi-Aventis completed its acquisition of the biopharmaceutical company Genzyme and simplified its name to Sanofi in May 2011. 

Table III: Top global pharmaceutical companies, 2011 			

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

What will the next decade bring? In looking at the list of the top 15 global pharmaceutical companies in 2011, we see two key trends already represented: the rising role of generic drugs in the prescription drug market through the positioning of the generic-drug compay Teva Pharmaceutical among the top 10 global pharmaceutical companies and the growing importance of biologic-based drugs through the rise in the rankings of the biopharmaceutical company Amgen as well Roche and Sanofi following their respective acquisitions of the biopharmaceutical companies Genentech and Genzyme (see Table III).  

What then will be the pharmaceutical company of 2020 be (see sidebar)? Will the next decade bring more bolt-on acquisitions as pharmaceutical companies focus on specialty-based products as the blockbuster-drug model erodes? Will there be acquisitions in diagnostics for building positions in personalized therapeutics or other healthcare-related businesses? What role will emerging markets play? Are there other megamergers in the offing? Although we don't know the answers to these questions yet, one thing is certain: as in previous decades, the decade of the 2010s portends to be another period of change for the global pharmaceutical industry. 

A look into the future: the pharmaceutical company of 2020 			

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

35th Anniversary Special: Decades of Change for the Top Pharmaceutical Companies

To gain a perspective on what have been the most significant changes affecting pharmaceutical development and manufacturing, 

 conducted a series of reader polls between December 2011 and May 2012 that asked our readers what they regarded as the most important changes affecting drug-substance and drug-product development and manufacturing during the past 10 years. The polls were directed in five main areas: small-molecule API manufacturing, biologic-based API manufacturing, solid dosage/oral drug delivery, sterile manufacturing, and analytical methods development and instrumentation (see Figures 1–5). Although individual technological advances were cited, an important theme throughout all the polls was the importance of quality by design (QbD).  

QbD came into prominence a decade ago when FDA announced a significant new initiative in August 2002, 

Pharmaceutical Current Good Manufacturing Practices (CGMPs) for the 21st Century

 (1). The initiative was intended to modernize FDA's regulation of pharmaceutical quality for drugs and select human biological products such as vaccines. The initiative evaluated the pharmaceutical as well as the chemistry, manufacturing, and controls (CMC) regulatory programs with the following specific goals: 					

Encourage adoption of new technological advances

Facilitate application of modern quality management techniques, including quality systems, to pharmaceutical production and quality assurance

Encourage implementation of risk-based approaches

Ensure that regulatory review, compliance, and inspection policies are based on modern pharmaceutical science

Enhance the consistency and coordination of FDA's drug-quality regulatory programs, in part, by further integrating enhanced quality-systems approaches (1).

The science- and risk-based approach to pharmaceutical manufacturing that underpins quality by design has been furthered by subsequent guidance from FDA, EMA, and the International Conference on Harmonization. It is not surprising, therefore, that QbD was cited as a significant factor in reader polls.  

When asked what was the most important change that has influenced chemical API development and manufacturing during the past 10 years, 61% of respondents cited QbD (see Figure 1). The significance of QbD far exceeded any single technological advancement in chemical API manufacturing, including microreactors, chemocatalysis, and biocatalysis.  

Figure 1: What is the most important change that has influenced chemical API manufacturing during the past 10 years? 			

Readers also cited QbD as the most important change in biologic-based API manufacturing (see Figure 2) although its importance was more evenly matched with specific technology gains. Thirty percent cited QbD as the most significant change in biologic-based API manufacturing. Advancement of single-use technologies closely followed at 28%, and then improvements in upstream and downstream processing, each cited by 21% of readers polled.  

Figure 2: What has been the most significant development in biologics-based drug development over the past 10 years? 			

Dosage form development, manufacturing, and analytical technology

We also asked readers to evaluate which technology has contributed the most to advancing oral product forms or oral drug delivery (see Figure 3). The two areas that received the highest responses were orally disintegrating tablet technology (24%) and nanotechnology-based applications (21%). 

Figure 3: Which of the following breakthroughs has contributed the most to advancing oral drug delivery or oral product forms? 			

Advances in isolator technology and systems was cited as the most significant gain in sterile manufacturing, being cited by 36% of respondents, making it the highest ranked change in this area (see Figure 4). QbD followed at 23%.  

Figure 4: During the past decade, what has been the most significant advance in sterile manufacturing? 			

Reflecting again the importance of QbD, 30% of respondents identified process analytical technology (PAT) as the most significant development in analytical methods development and instrumentation (see Figure 5). PAT tied with greater throughout in chromatographic methods as the most importance advance. 

Figure 5: What would you identify as the most significant advance in analytical instrumentation and methods development during the past 5â10 years? 			

We also asked readers to identify what they think will be the most significant change influencing the future of drug development and manufacturing (see Figure 6). More than one-third (36%) of respondents said the move to personalized medicine through the increased use of diagnostics with traditional pharmaceuticals. More than one-quarter (29%) said the rise of biologic-based drugs in drug pipelines and commercial product portfolios followed by fuller adoption of QbD (22%).  

Figure 6: Looking forward 10 years from now, what do you think will be the most significant change in drug development and manufacturing?			

Pharmaceutical CGMPs for the 21st Century—A Risk-Based Approach, Final Report (

Readers point to quality by design as having a significant influence on manufacturing and drug development during the past decade.

35th Anniversary Special: Reader Views on Changes in Pharmaceutical Manufacturing

High-potency manufacturing continues to be an area of investment for pharmaceutical companies and contract service providers. Many companies have recently invested or are planning expansions in API manufacturing and finished product manufacturing. 

The impetus behind this investment has been the growth in the oncology drug market. In 2010, the global market for oncology drugs was $57.1 billion, according to the IMS Institute for Healthcare Informatics. Market growth was strong; the compound annual growth rate (CAGR) for oncology drugs was 13.2% between 2006–2010. Although growth is expected to slow, due in part to generic-drug incursion, the global oncology drug market is still expected to increase at a CAGR of 5–8% through 2015, and reach between $75 billion and $80 billion, making it the largest single largest therapeutic drug class by value, according to IMS estimates.  

To keep pace with market potential, several CMOs recently expanded capabilities for high-potency API manufacturing. In October 2011, SAFC was granted SafeBridge certification for its commercial-scale high-potency facility in Verona, Wisconsin. The SafeBridge program assessment focuses on four primary areas: management, hazard identification and evaluation, hazard controls and communication, and education and training. The $30-million facility in Verona opened in 2010 to support Phase III and commercial-scale high-potency API manufacturing. The SafeBridge assessment also included a successful recertification of SAFC's nearby Madison, Wisconsin, high-potency manufacturing facility. 

In March 2012, the CMO Aesica opened a new $4.6-million high-potency manufacturing facility for formulated products and confirmed plans to upgrade its API manufacturing facilities to manufacture high-potency APIs at commercial scale. The upgrade will enable Aesica to manufacture SafeBridge Category III API and formulated products from pilot to commercial scale from two of its sites in Europe. The new facilities will produce high-potency APIs in quantities of 1– 200 kg. Further investment in 2013 will equip Aesica to produce batch sizes up to 600 kg. 

Lonza invested CHF 24 million ($25 million) to expand its cytotoxic manufacturing capabilities in Visp, Switzerland, by adding multikilogram-scale cytotoxic production for clinical and commercial production. The expansion, announced in May 2011, was scheduled to be completed in the second quarter of 2012. The expansion complements the company's high-potency GMP laboratory suites that operate on a gram scale. In its first-quarter earnings release, the company noted approval for a 250-L high-potency API expansion in Visp.   

Helsinn Advanced Synthesis recently reported on its cytotoxic and high-potency manufacturing facilities in Biasca, Switzerland and multiyear expansions. Its capabilities include pilot-scale, small-scale, and commercial-scale capabilities for manufacturing highly potent APIs. It cytotoxic capabilities include isolated and dedicated cytotoxic quality-control and R&D laboratories, raw-materials and finished-goods warehousing, and finishing and sampling areas. A new laboratory was constructed exclusively for small-scale cytotoxic production, design of experiment, and initial process development. The company also has pilot-scale, small-scale, and commercial-scale capabilities for manufacturing cytotoxic small molecules. 

Last October, the CMO Saltigo reported it was adding new production capacities for potent APIs at its facility in Redmond, Washington. The expansion, scheduled for completion in early 2012, allows for production and handling of Category III substances up to the kilogram range.  

Almac is expanding its manufacturing capacity to more than 30 m

  at its European headquarters in Craigavon, United Kingdom to include reactor vessels with product isolation and drying equipment to allow highly potent API manufacture up to the 600-kg batch size. Almac reported the expansion last October and said the facility will be built, commissioned, and validated in the next two years.   

Carbogen Amcis reported earlier this year that its facility in Bubendorf, Switzerland, which includes the manufacture of high-potency APIs, successfully completed a FDA GMP audit for several commercial products and a pre-approval inspection for another program. The audit involved an analysis of all systems, procedures, and processes related to the development, validation, and manufacture of APIs and highly-potent APIs at the Bubendorf site. The site includes R&D capabilities, analytical laboratories, and development and manufacturing units for manufacturing Category III and IV compounds. In January 2012, Carbogen Amcis acquired Creapharm Parenterals, a CDMO specializing in liquid, semisolid, and injectable aseptic dosage forms. The acquisition gives Carbogen formulation, lyophilization and sterile GMP capabilities for drug products, including highly potent products, for preclinical and clinical-trial materials.  

In 2011, the biopharmaceutical company OPKO Health acquired FineTech Pharmaceutical, an Israeli company focused on manufacturing high-potency APIs. The acquisition included a facility in Nesher, Israel, for pilot- and commercial-scale production of high-potency APIs. 

Companies also are investing in finished product manufacturing In September 2011, Roche opened a new 17,000-ft

 clinical-supply manufacturing facility at its campus in Nutley, New Jersey, for producing dosage forms of highly potent compounds for preclinical safety studies and Phase I and II clinical studies. The clinical dosage forms produced at the facility include tablets, capsules, powders, suspensions, and solutions. The facility has warehouses for components, excipients, APIs, mechanical rooms, and multipurpose isolation suites for manufacturing. 

In November 2011, Metrics began offering neat API capsule-filling at its potent and cytotoxic facility in Greenville, North Carolina. The company secured a Capsugel Xcelodose system, a powder microdoser and automated encapsulator that places API directly into capsules with a high level of accuracy. Metrics also installed a custom-built isolation system for the equipment. The company offers dedicated and segregated potent and cytotoxic cGMP manufacturing for Phase I–III projects. It opened a new potent and cytotoxic drug-development facility in 2009 as part of an expansion of the company's Greenville facility. 

Earlier this year, Baxter reported that its high-potency manufacturing facilities in Halle and Bielefeld, Germany, received SafeBridge certification. The facilities in Halle and Bielefeld support Baxter's BioPharma Solutions business, a CMO providing contract sterile manufacturing. In November 2011, Baxter's BioPharma Solutions business completed a capacity expansion at the company's cytotoxic contract manufacturing facility in Halle/Westfalen, Germany. The primary component of the expansion was the modular installation of an additional large-scale, commercial lyophilization unit for increasing freeze-drying capacity to support commercial cytotoxic manufacturing capacity. The expansion followed expansions for cytotoxic manufacturing capacity in 2010 and 2006.  

The CDMO Pharmaceutics International Inc. began construction of a new 24,000-ft

 cGMP aseptic fill–finish manufacturing facility earlier this year. Targeted for completion in the fourth quarter 2012, the new facility will more than double the company's current sterile GMP manufacture capacity. Fill–finish suites will include automated vial and syringe filling, inspection and labeling equipment capable of producing batch sizes of 100,000-plus units. The additional facilities will enable the company to provide preclinical through commercial-scale production and meet the growing demand for fill–finish services for potent compounds and oncology drugs. 

The CDMO Penn Pharma is investing €14 million ($22 million) to expand high-potency manufacturing at its facilities in South Wales, United Kingdom by adding a new 15,000-ft

  development and commercial manufacturing unit for tablets and capsules. The new production facility is expected to be validated and running by the end of the first quarter 2013.  

Pfizer CentreSource has various technologies and capabilities for high-containment oral solid manufacturing, which includes its production facility in Freiburg, Germany. The Freiburg facility was recognized by the International Society for Pharmaceutical Engineers with the 2011 Facility of the Year Award for Sustainability for its Strategic Plant Restructuring and Energy Master Plan project. The Facility of the Years Award recognizes pharmaceutical manufacturing projects that use innovative technologies to enhance quality and reduce costs. The Freiburg facility was recognized for its technologies and automation as part of a sustainability program. Some highlights include a fully automated material-flow system, multipurpose automation systems, paperless order documentation, computer-integrated manufacturing systems, a wood-pellet boiler system for powering air-conditioning systems, and other manufacturing and energy-efficiency practices.  

 485 Route One South,  Bldg F, First Floor,  Iselin, NJ 08830 tel. 732.346.3072,  

Companies roll out expansions in manufacturing high-potency APIs and finished products.

High-Potency Manufacturing Remains Strong

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, 

 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.    

Industry roundtable participants, from left to right: Kuljit Bhatia, vice-president of R&D, DPT Laboratories; Arnaud Hanquez, head of business development, EU Pharmaceuticals, Hospira One 2 One; Michael Kosko, president, Pfizer CentreSource; Andreas Weiler, global director of technical sales, SAFC; Derek Hennecke, president and CEO, Xcelience; and Michael Ruff (not pictured), PharmD, vice-president of pharmaceutical development, and Jeffrey Basham (not pictured), vice-president of business development, Metrics.			

 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? (See also "Reader Views on Changes in Pharma Manufacturing").			

 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:  					

: Moving forward, contract service providers will have to expand their global footprints to fully support their customers across major and emerging markets.  

 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. 

: 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. 

 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.  

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.