Growth in demand for biopharmaceuticals will remain strong in 2016, further boosting both internal investments and outsourcing of drug discovery, development, and manufacturing activities.
Although the contract manufacturing and research markets will remain highly competitive, service providers with flexible operating strategies that can offer accelerated development services, proprietary and differentiating technologies, and a collaborative working environment with consistent high quality and on-time delivery will have tremendous opportunities for growth.
Both positive and negative forces continue to buffet the pharmaceutical industry in 2016. On the one hand, the global economy continues to strengthen and the growing middle classes in emerging markets are looking to take advantage of improving healthcare systems. Demand for medicines is expanding further as the global population continues to age and chronic diseases become increasingly widespread, even in emerging economies. The industry is also experiencing a significant return on its heightened investment in innovation over the last few years, with the strongest pipelines and largest numbers of drug approvals seen in many years. While these successes are leading to greater investment in internal production facilities and M&A activity by sponsor firms, including acquisitions to achieve vertical integration, they are also driving increased reliance on outsourcing, particularly to contract manufacturing organizations (CMOs) and contract development and manufacturing organizations (CDMOs) for drug substances that require specialized handling (e.g., highly potent compounds) or unique drug delivery solutions (i.e., poorly soluble drugs, unstable biologics, off-patent products), and contract research organizations (CROs) that can implement adaptive trial designs.
On the flip side, the movement towards evidence-based medicine marches on, along with growing pressure from payers, governments, and patients for reduced drug prices. Generics, and now biosimilars, are growing as more blockbusters fall off the patent cliff, and demand is largely occurring in emerging regions where lower prices aren’t optional. These trends are driving pharmaceutical/biopharmaceutical companies to improve efficiency and productivity, implement novel lifecycle management strategies, and seek technological solutions (single-use systems, continuous processing) that can aid both of these efforts. CROs, CMOs, and, increasingly, CDMOs with the right sets of capabilities are often part of the solution.
Opportunity No. 1: Managing Complexity
The structures of large- and small-molecule drug substances are increasingly complex and potent, requiring vast and advanced development and formulation expertise, as well as specialized production and analytical capabilities and packaging/delivery solutions. For CROs and CMOs/CDMOs that offer integrated services across discovery, development, drug substance, and product manufacturing and lifecycle management phases, this complexity provides numerous opportunities to attract client projects. A few examples include:
- Small-molecule drugs with complex scaffolds whose syntheses require the use of low-temperature or hazardous chemistries
- Highly potent and cytotoxic compounds
- Drug substances with poor solubility/ bioavailability
- Off-patent drug substances that require novel reformulation/delivery solutions
- Unstable biologics that must be produced via perfusion and require rapid purification and analyses
- Next-generation medicines (cell- and gene-based therapies, virus-like particles, etc.) that require state-of-the-art production techniques
Formulation to achieve high bioavailability, efficacy, and safety has become more challenging. The shift to specialized medicines, such as orphan drugs and therapies with breakthrough or fast track status, has required the development and commercialization of these complex products with highly accelerated timelines. Extension of product lifetimes through modification of delivery and/or packaging technologies has become crucial for achieving reasonable profitability levels, given heightened generics competition. Outsourcing to CMOs/CDMOs with state-of-the-art and often proprietary technologies is an efficient, cost-effective way to meet many of these rapidly changing industry needs.
Global Trials
The complexity of clinical trials has also increased dramatically in recent years, with global, multi-site studies, requiring larger numbers of patients and lasting much longer, which is increasingly common. The number of clinical trials has also risen dramatically. Sponsor companies now increasingly rely on CROs with advanced systems in place to collect, monitor, and manage the huge quantities of generated data, ensure that the data is accurate, and provide easily accessible, non-intrusive tools for both patients and investigators.
In fact, “Harnessing information technology and novel scientific tools in the service of medical product development has been a central priority for the FDA,” wrote Dr. Leonard Sacks, when serving as Acting Director for the U.S. Food and Drug Administrations Office of Critical Path Programs. He continued, “These innovative tools provide a historic opportunity to move medical product development into the 21st century and to deal with the challenges of spiraling research and development costs in the face of diminishing returns.”
The complexity of clinical trials has also increased dramatically in recent years, with global, multi-site studies, requiring larger numbers of patients and lasting much longer, which is
increasingly common.
Opportunity No. 2: Enhancing Efficiency and Productivity
The need for a more efficient drug development process attracted the bipartisan support of the U.S. Congress in 2015. The House of Representatives passed the 21st Century Cures Act, and the legislation is under review by the Senate Committee on Health, Education, Labor, and Pensions. The Act attempts to address the need to accelerate the discovery, development, and delivery of promising new medicines, with the need to streamline clinical trials.
Pharmaceutical companies, in response to continued downward pricing pressure on drug products, are also taking actions to reduce costs and increase efficiency and productivity. New technologies must, however, provide demonstrated benefits without impacting drug safety and efficacy. Early adopters of innovative approaches to development, manufacturing, analysis, and clinical studies therefore assume a high level of risk, but CROs/CMOs/CDMOs willing to take that risk have the potential to reap significant rewards.
- CROs/CMOs/CDMOs that employ automated processing and/or analytical solutions offer clients improved quality consistency, increased operating productivity and greater flexibility, creating overall manufacturing systems that are more cost-effective and efficient, and enabling more rapid development and commercialization of safer drugs.
- Continuous manufacturing leads to more consistent products and processes. CMOs/ CDMOs can achieve reduced resource consumption and waste generation for lower operating costs. Smaller footprints and the elimination of storage capacity can result in lower capital costs. Scale-up is simpler and more rapid, leading to lower costs as well as accelerated development and commercialization timelines. For small-molecule API synthesis, flow chemistry also enables manufacturers to perform reactions not possible in traditional batch mode.
- Adoption by CMOs/CDMOs of single-use technologies for commercial production of biologic APIs can lead to decreased capital expenditures and operating costs due to the reduction of cleaning and sterilization steps and the need for validation. Processes based on single-use equipment are also more flexible, with shorter required setup times and significantly reduced cross contamination risks, enabling faster time to market and more robust and reliable production processes.
- CMOs/CDMOs willing to utilize modular facilities can quickly deploy small, flexible, and pre-sterilized production sites to rapidly meet client and patient needs, even in locations where a traditional plant could not be built due to a lack of resources.
- CROs that employ electronic data capture technology benefit from efficient data monitoring, analysis and reporting, more reliable data, better tracking of drug suppliers, enhanced communication and collaboration, better budget forecasting, shorter study times, and significant cost savings.
Opportunity No. 3: Improving Quality
Quality is the top selection factor when sponsor companies are choosing contract manufacturing partners. It is also the top criterion on which existing partners are judged, the key source of dissatisfaction with service providers, and the main impetus for switching from one CRO/CMO/ CDMO to another. Furthermore, the FDA has made the improvement of quality in the pharmaceutical industry a priority, opening its Office of Pharmaceutical Quality in 2015 in order to more effectively address quality management issues.
In this environment, CROs/CMOs/CDMOs with effective quality management systems in place and “right-first-time” strategies for designing processes that provide maximum product quality will be most successful. Key practices include:
- Use of design of experiment (DoE) approaches to efficiently establish critical process parameters
- Application of advanced modeling, quality-by-design (QbD) and process analytical technology (PAT) methodologies during development and commercialization to ensure that processes are both robust and optimal for easy scale-up and consistent performance
- Focus on achieving enhanced process understanding for ongoing, continuous improvement
- Implementation of quality assurance programs and quality controls over data to support trial requirements
Opportunity No. 4: Increasing Flexibility and Collaboration
To address the development challenges presented by the creation of increasingly complex drugs in a more efficient manner, pharmaceutical companies are seeking outsourcing partners that emphasize collaboration within their own firms and with their clients. According to a recent report by the Tufts Center for the Study of Drug Development (CSDD), while seeking ways to better serve public and patient communities (reducing rising development costs, shortening cycle times, and delivering better innovations), many pharmaceutical firms are also implementing highly collaborative approaches to validating drug targets. These include integrating real-world data into the R&D process, employing flexible and adaptive clinical trials, and using green manufacturing techniques, including the sharing of pre-competitive information among government agencies, academia, patient groups, payers, and providers.
The accelerated development timelines so common in 2016 require effective cross-functional teams, open communication between the service provider and the client, and strong relationships with regulatory authorities. In fact, CDMOs with integrated capabilities across all stages of development and manufacturing, with advanced technologies and methodologies that are designed to speed development and reduce costs, are increasingly preferred over traditional CMOs.
This trend is, in fact, driving consolidation within the contract services industry. Patheon, Catalent, Capsugel, and AAIPharma – all leaders in the contract-manufacturing sector – have been exceedingly active on the M&A front and in making internal investments in capacities and technical capabilities. Examples of recent CRO deals include LabCorp’s $6.1 billion purchase of Covance, MPI Researchs’ purchase of Jasper Clinical Research and Development, and Eurofins Scientific’s acquisition of Viracor-IBT Laboratories. More of the same from these firms and many others can be expected in 2016.
Additional opportunities: Biologics, Emerging Markets’ and More
CROs/CMOs/CDMOs can find additional opportunities for expanding their client base by providing services that support branded biopharmaceutical and biosimilar development, formulation, and manufacturing. Outsourcing partners with flexible, small-scale manufacturing facilities, designed to provide safe, efficient/accelerated production of multiple materials, will be attractive to clients looking to produce niche therapies that target specific patient populations, including orphan drugs and drugs that receive breakthrough therapy and fast-track designations from the FDA. Providers of contract research, development, and manufacturing services with regulatory-agency-inspected facilities in emerging markets will be well positioned to serve clients interested in leveraging the stronger growth in demand in these regions.
Many Wins in 2016
The contract research and manufacturing markets are growing at very healthy rates, ranging from 6%-9%. There is stiffer competition though, with a limited number of larger, integrated CDMOs dominating the marketplace. Even so, both pharmaceutical and biopharmaceutical manufacturers have robust R&D portfolios of complex and highly promising drug candidates and will require the assistance of outsourcing partners to bring these molecules to the market. Contract research and manufacturing organizations that understand the changing needs of drug companies (for advanced technical solutions and flexible, collaborative support designed to ensure the rapid development of cost-effective, robust processes, yielding high-quality, safe, and efficacious medicines) will end up as winners in 2016.
