September 15, 2016
Left to right: Gil Roth, Cory Lewis, Andrew Sandford, David Powell, and Rajan Puri (PHOTO BY LEAH ROSIN)
Outsourcing has become a critical part of the industry in general and will play a larger role as companies continue to seek faster and more cost-effective routes to market. On Wednesday 8 June 2016, Gil Roth (president of the Pharma and Biopharma Outsourcing Association, PBOA) chaired a lunchtime roundtable titled “Making the Correct Outsourcing Decisions.” Roth’s association is a nonprofit trade group that represents CMOs and CDMOs through work with Congress and the FDA, with a focus on intra-industry issues.
He brought together a panel of four experts:
Cory Lewis is vice president of business development at Cook Pharmica (Bloomington, IN). He has been with the team for seven years and in the CMO space for the past 14 years. Cook Pharmica handles contract manufacturing for biologics, from cell culture manufacturing to vial filling, syringe filling, and cartridge filling. It also complements that work with a complete range of packaging, including safety device and autoinjector assembly.
Andrew Sandford is vice president of global business development for Catalent Biologics (Madison, WI). He has over 15 years in the CMO industry with a focus on technology advancement and good manufacturing practices (GMPs) for biologics manufacturing. Catalent has a single-use bulk biomanufacturing facility. It also has a technology-led offering around cell-line engineering and antibody–drug conjugation.
David Powell leads the sterile injectable development services of Pfizer CentreOne, a global contract manufacturer formed by the union of CMOs Pfizer CentreSource and Hospira One 2 One. Core capabilities include small-molecule steroid and hormone intermediates and active pharmaceutical ingredients (APIs); custom small-molecule API synthesis; and sterile injectables fill-finish, including in-depth experience with complex biologics and lyophilization.
Rajan Puri has been the senior director of business development at Therapure Biomanufacturing since 2008. Therapure is a Canadian CDMO. It handles early stage development work, clinical work, and commercial manufacturing. Its specialty is mammalian cell culture along with large-scale downstream purification and aseptic fill-finish services, including lyophilization.
Current Biomanufacturing Demand
The moderator began by asking each panelist to describe his company’s perspectives on the demand for biomanufacturing services.
Lewis: As we look at the three branches of our business — drug substance manufacturing, drug product manufacturing, and packaging — each demand is a little bit different. About 80% of our portfolio is biologics based, with a smaller portion focused on small molecules. Along with recent and upcoming phase 3 successes, we are starting to see biosimilars eat into a fair amount of existing capacity, be it for drug substance or all the way through to the vial or syringe filling side of the business. I think that’s certainly an area in which commercial growth is happening and where many companies are vying for five, 10, 15, or 20% of the biosimilar market. So a number of companies and players are going after that capacity, triggering regulatory inspections, triggering capacity use, and using technology transfer resources as well. Our clinical business is continuing to do well, but the commercial piece of our business is where we see significant growth.
Sandford: The industry has been very successful in the past 10 years at evolving pipelines. As a result, we’re seeing a shortage of capacity in the industry both on the clinical and commercial sides as biologics and biosimilars start to experience approvals in regulated markets. The available capacity that is under construction today will be consumed quite readily. Catalent is aggressively growing its position in biologics manufacturing, both through aggressive, organic growth of the Madison, WI, facility and through global partnerships.
Powell: Commercial-scale manufacturing has changed with the advent of large molecules. High-value biologics don’t have the same volumes or batch sizes as small-molecule drugs. That requires rethinking business — and investing. When you invest in new capital and new kinds of equipment lines, you focus on efficiencies: saving API, minimizing loss, and maximizing yield. But that doesn’t necessarily mean manufacturing at a large scale. That’s been an adjustment for many contract manufacturers, especially for those with facilities in which the lines were designed for large-scale production.
Puri: We are seeing a number of redundant site requests. Companies with established manufacturing capabilities or that are working with a CMO want either a North American footprint or additional capacity to maintain product availability in case of emergency or issue at a particular site.
Capacity Needs
Roth then asked panelists to identify where capacity issues are becoming most critical. He asked them to highlight areas where they’d like to see their companies add capacity.
Puri: Therapure has a mix of standalone fill–finish projects as well as API production with integrated fill–finish. We may see a capacity crunch in the fill–finish side of our business. That is where we are planning an expansion and adding new capabilities. I think there’s a great value proposition to be able to perform both upstream API production as well as fill–finish.
Sandford: Catalent’s prefilled syringe offering is running at a tight capacity as well. We are ultimately looking at ways to expand our offerings across the globe. In the biologics bulk drug substance area, we are actively making decisions about expanding capacity in 2017.
Lewis: We are seeing more and more requests for cartridges. To meet that demand, we recently invested in bringing on essentially a flexible filling line that gives us the capability we did not have before for vial filling, syringe filling, and cartridge filling.
The other interesting piece that we are all beginning to watch on the biologic side in particular is drug substance capacity — which brings us back to biosimilars. In my perspective, if 30 companies are vying for a biosimilar, then those 30 companies will need to undertake phase 1–3 clinical manufacturing. But the reality is that only four to six of those products will succeed. So an increase in the number of batches being manufactured in a short time will be needed as companies go through this biosimilar wave, but the market for a particular molecule may not have grown at 5× and 6×. So we will see a crunch probably in the next three to five years. After that, many of those companies will start to shake out, some rising to the top and others getting purchased or consolidated. My perspective is that by the early 2020s, we’ll start to see some excess capacity relative to drug substances in particular.
Roth: What impact are biosimilars having on the rest of your businesses?
Sandford: Catalent’s been in the biosimilars space for over 10 years, with 12+ biosimilar cell lines and seven marketed biosimilar products using our GPEx technology. We have deep experience in developing starting points of biosimilar cell lines that we partner-out to companies for further development.
Much of the development and manufacturing work has been done by biosimilar companies in their own facilities — and for obvious economic reasons. We’re starting to see some of those products come back to the United States because they require greater capacity. The trend may be toward increased use of existing capacity and increased partnerships to bring more commercial capacity online.
Puri: I would say the vast majority of our clients are developing innovative products. We have a few biosimilar candidates that we’ve been working on with clients, and one of the differences is that they are very CoG sensitive. Obviously, that’s one of their key profitability metrics going forward.
Managing Client Expectations
Roth: How have client expectations changed? Are clients becoming more sophisticated when it comes to outsourcing relationships?
Powell: Yes, they are more sophisticated, but at Pfizer CentreOne we still find that at the last minute they often need to scramble to do a tech transfer, bring on a product, and develop it.
Lewis: I agree — perhaps 80% of it is still a “fire drill,” and 20% goes smoothly. Whether you’re a large pharma or a start up, you don’t want to spend your money early. You want to wait until you get that next clinical read and wait until you get closer to building your launch supply. Inevitably that puts pressure on the supply chain and on the teams to deliver quantities faster. Quality is always of utmost importance. But we’re seeing more pressure on the supply chain and management of that chain, whether that’s cost driven or the result of just poor planning.
Another thing that has changed is that teams have become more interested in collaboration in the past three to five years — not just by handing a project over and managing it from afar, but through joint steering committees. The concept is to develop requirements in clinical and commercial agreements to provide routine touch points for management. That may be a trend that others are seeing and observing with customers in general: the need for more frequent management touch points.
Sandford: I’m seeing higher levels of sophistication in the investment community. That translates into better planning, especially for small- or mid- sized venture-funded companies. They recognize that decisions are needed on aspects other than cost. The choice of partner can make or break a company. You have to go through the due diligence, make sure you’re selecting a partner that’s got the right people, the right capacity, and the right structure to deliver your program.
So from an industry standpoint, the sophistication has increased. But unexpected events will often drive rapid decision making, which is never a good idea in biologics manufacturing.
Puri: We are seeing that more of our clients want to be heavily involved in the decision-making process and are looking for a collaborative CDMO partner. Another thing I’ve seen from a contractual perspective is that more of our clients than in previous years are expressing concerns about having future capacity.
Sharing the Risk
Roth: Are these trends starting to border on risk-sharing relationships between clients and CMOs?
Lewis: Clearly some risk sharing is incorporated into the relationship, but it’s more of a need for that touch point, an ability to escalate quickly. We’re giving our clients that opportunity through normal business but also incorporating the importance of defining those touch points into a contract requirement. It is no longer an option, but a requirement to place into a contract the need for one, two, or even four meetings per year at the most senior levels.
Roth: Do clients seem to push in that direction at all, or are they still not quite getting what risk means for a CMO?
Sandford: Catalent approaches these decisions as true partnerships with clients. We also, similar to what Rajan mentioned earlier, are having many more conversations about both present and future capacity. Companies are stepping up to invest in manufacturing space. It’s been a long time since industry has been in that position.
So a steering-committee philosophy is something that we regularly exercise, especially with some of our larger partners. The smaller ones are starting to ask for it as well.
Powell: We have not seen a significant push toward risk sharing from Pfizer CentreOne’s client base. But steering committees help elevate issues and ensure the health of relationships. The project teams are typically in the weeds, so it helps to pull everybody back at times to make sure we are still charting the right course and are aligned on expectations. Relationships can go sour quickly if expectations at management levels of both companies are not on the same path.
Puri: I agree 100% with that. Where we’ve had challenges and things haven’t gone as well as we hoped is when we didn’t do a good enough job of clearly outlining expectations, scope, or responsibilities. These are things that we want to establish in the contracting phase so that everyone has the same view. Once you’ve got that nailed down, as issues may come up in the process development or even in production, then you can very quickly address them with minimal damage to the relationship.
Markets and Customers
Roth: Has the customer mix changed? Biosimilars aside, are your customers generally working on the same scales and in the same areas as they were five years ago? Or are you seeing trends toward different sizes and types of customers?
Lewis: I think the market is essentially the same. We are fortunate to have a global network of customers. As we’ve evolved our business and brought on more capabilities, we’ve been able to expand our offerings to take on more clients in Europe, Japan, and the Asia Pacific regions. So our customer mix has evolved just through that matrix of whom we’re pursuing.
But an important piece of being a CMO is to seek a good mix of large, mid-sized, and smaller virtual companies. It is important for CMOs to have a good blend of customer types to essentially have that feeder ground for three, five, and 10 years down the road.
Powell: One emerging customer segment we’ve seen at Pfizer CentreOne over the past five years or so are companies that pick up an old, off-the-shelf asset of another pharmaceutical company. Either it’s a marketed product or a technology that was shelved because of low sales, low volumes, or just lack of strategic fit. Customers often acquire these assets under the assumption that they’re much farther along in development than they truly are from a CMC perspective. For example, because a drug had been on the market, a customer may assume it can be brought back by just “turning on the switch.” The reality, however, is that typically quite a lot of remediation work needs to be done. Products that haven’t been looked at or touched for four or five years are subject to changing regulations. Even commodity providers may be off the market entirely. These customers come to us with high expectations — and usually not much money. So when they bring older products back to market, they face new challenges as well as general “sticker shock.”
Puri: In our market we work with many small and mid-sized companies. The one difference these days is that such companies are now funding multiple assets, developing several products at once, in contrast to when we started our business in 2008, and clients basically focused all of their spend on a single asset. This can further our good relationship with them and offer us a chance to work on those as well.
Sandford: To add to Cory’s [Lewis] comment earlier, we’re starting to see a lot more Asia–Pacific companies coming to the United States for support. I think the markets are starting to appreciate that it’ll take time for some regions to get up to speed. That is the biggest surprise for me over the past couple of years: that more companies out of China, Korea, and Japan are sourcing and manufacturing in the United States.
Changing Regulatory Challenges
Roth asked the panelists to comment on the biggest regulatory changes and challenges that they have faced lately.
Lewis: One new challenge for us is serialization. It has been on the docket for a decade now and is finally coming to fruition. How do we make sure that as an industry and as a CMO network we have the right serialization capabilities at the right time to track products throughout the supply chain? And are the guidelines clear? That is still not completely understood by our teams and by the industry. We have invested time, money, and effort to find partners that can advance serialization processes, but we’re not across the finish line yet. It does take a significant amount of time and effort.
Running Development and Commercial Projects
Roth: What are the differences between running a development business and running a commercial business? Obviously one’s a feeder into the next, but what sets of concerns cause a divergence of the two models?
Puri: Contractually we handle them very differently. When forecasting for commercial products, we have a very structured model with, typically, an 18-month window to see what our client needs; half of that is confirmed, and the other half is a nonbinding forecast. On the development side, we really can’t do that. We can tentatively schedule production slots, but until development activities are completed, we just don’t know.
It can be a challenge when clients that are more used to commercial outsourcing are beginning clinical projects. They don’t necessarily understand the difference between those two approaches.
Lewis: On the clinical side, it’s more challenging because development can take longer than expected. Whereas on the commercial side, once a process has been validated, you expect some consistency. The demand profile is never completely known at launch, so forecasting is always an important part of what we do. On the drug substance side of the business, we’ve done a fairly good job of managing slots in capacity to maximize facility use, but that is not nearly as predictable as commercial forecasting. In clinical manufacturing, you expect the unexpected, and in commercial manufacturing, you protect against the unexpected.
The Impact of New Technologies
The moderator then asked about the impact of new technologies on the panelists’ businesses.
Puri: Most of our clients are not particularly interested in vetting new technology that would raise regulatory questions and slow progress to the next phases. Biosimilars might be an exception: If a new technology potentially offers a significant improvement on cost, it might be worth the risk.
Lewis: I agree that our risk-averse market prevents people from trying new technology. But some companies have a different risk appetite for pursuing certain technologies and related cost improvements. As I mentioned earlier, we just installed a new flexible filler line. The market is going through a conversion right now with vials as it did earlier with ready-to-use syringes. Creating ready-to-use vials is new and different. I like to think that in 12 to 15 years the vial market will look very much like the syringe market does today, and we’re placing a bet to help advance that technology. But right now there’s reluctance to make that switch from standard to ready-to-use vials. It’s the same glass, but adopting a new approach causes hesitation. There is a clear benefit to converting this market, especially for programs with smaller batch sizes. Those companies can turn around things a little bit more quickly with a ready-to-use configuration.
Sandford: On the drug substance side, Catalent is one of the more aggressive development companies when it comes to evaluating and deploying new technologies. We’ve made a big investment in a company called Redwood Bioscience for antibody–drug conjugates (ADCs) and bioconjugates. That company has what is basically a site-specific protein conjugation platform — an innovative and very tailorable approach.
On the development side, we do use existing technologies in new ways to shorten timelines and improve data output. This enables better decisionmaking in development. Multiplexing of cell-line development, screening different products in the same time frame, has been a very big success. We are seeing progressive improvement in analytical technologies and have a very strong global capability around analytical development for GMP and good laboratory practices (GLP) with over 20 years of experience.
Ancillary Services
Roth: What other services are clients pushing for? You mentioned serialization as something that’s going to be necessary, ultimately. But what other perks or elements are they driving?
Lewis: We’re seeing many requests for more aggressive development and innovation in devices. I’ve seen more inquiries for safety devices in the past 15 months than I have in the past 15 years. The same goes for autoinjectors. Companies are thinking about how to make drug delivery easier for patients. Another new technology is based on creation of wearable injectors. Complex drugs need to deliver subcutaneous amounts of three, five, maybe even 10 mL of material. This is new technology that people are starting to ask about and pursue.
Powell: That leads into the topic of combination products. Most of our clients at Pfizer CentreOne are drug-based and don’t understand the device side. They’re asking for consultative services on the device side to help them through the new regulations. It’s tough, uncharted territory for a drug company to understand device
regulations and how to get through that maze.
Sandford: We’re also seeing the need for different delivery devices to handle new types of formulations. A number of smaller companies are developing new delivery approaches that will potentially add a lot of value for patient delivery. It is an interesting evolution to keep an eye on and support.
Adapting to the Pace of Change
Roth: What have you had to learn in the past few years in this business? What’s changed most significantly?
Puri: We launched this business in 2008, and I came from a product sponsor background, not a CMO. So one thing that I personally work hard to establish is the compensation structure for my team, making sure we have our incentives aligned with corporate objectives. Due to the complicated nature of our business and its long selling cycles, that’s been difficult, but it’s critical to driving the right behaviors.
Lewis: It is easy to get complacent and not realize that the evolution of our market and of customer expectations have not happened overnight. But we always need to adapt to a new norm. Batch and product sizes and volumes are getting smaller, and market needs are getting smaller. You have to adjust your expectations and business processes around that.
Sandford: Implementation of single-use systems has had and will continue to have a significant impact on the industry. I come from the stainless steel world. I have had many sleepless nights when a partner’s program in bioreactors has experienced failures caused by contamination or some other factor.
Today we run a state-of-the-art, completely disposable facility. We haven’t had a failure as a result of contamination ever since we’ve begun operating. So from that perspective I think single-use is going to continue to have a big impact. It enables more rapid expansion and more efficient operation of facilities.
The Uptake of Single-Use Technologies
Roth: The uptake of single-use technologies has been biggest change in bioprocessing over the past decade. What has this meant for your companies? Do you see other such disruptive technologies on the horizon?
Sandford: Single-use is enabling rapid turnaround, low failure rates, and the ability to expand operations rapidly. So that and analytical advances will improve development, reducing the chances that our partners will develop the wrong candidate. Those two areas of improvement will continue to drive meaningful changes in the industry.
Puri: As an organization with a facility built to perform downstream processing (DSP) and fill–finish, we now extensively use disposable technologies. We didn’t have upstream stainless steel infrastructure like many companies that had been in the space for 20 years, so we got to leapfrog and jump right into the latest technology. And on the DSP side, we’re using more disposable platforms simply because they allow us to turn around production suites and avoid cleaning validation for early stage projects.
Sandford: A related issue is scale. We will see more of a driving need to add smaller batches of products. At this point, the scale of disposable bioreactors is going up. We’re starting to see some multiplexing of such systems as companies are daisy-chaining 2,000-L bioreactors. So now you can imagine that disposability scale and analytics will continue to be important drivers toward success as scales are lowered again and especially as personalized medicine becomes more of a driving need.
Finding and Training the Right People
Roth: What have you all learned about how you build a successful team?
Lewis: The smartest people in the world are not always the best at working with customers and guiding them. The path to commercialization of drugs has many pitfalls. Your role is to guide your teams through that path. And no matter how smart your folks are, if they don’t know how to communicate with clients in a positive way, smartness doesn’t matter. So our hardest staffing challenge is finding those people who can blend scientific expertise with good customer communication skills. Science doesn’t always mix with the best personalities. Then, of course, once you find the right people, you need to retain them.
Sandford: I agree completely. Being able to work effectively in teams is probably the single most important thing that I look for. I’ve had the good fortune of hiring a very capable team, which allows me to do the other strategic things that I need to be doing. By contrast, if your team members are not up to snuff, you will spend all of your time fighting fires.
Roth: So is it like the sports analogy, where some of the best teams aren’t made up of superstars, but of very competent players who work really well together?
Lewis: How do you find those individuals? For example, we can do more to work collaboratively with the universities and also with some of our local community colleges to offer entry-level training for sterile manufacturing. So we can create programs to tap into training new people. We also need to offer cross training, both at our sites and through some of the university programs. We don’t all have this figured out yet, but the industry can and should support better efforts to work collaboratively with universities to develop talent for the job, not just for science or theory.
Powell: One challenging or uncooperative individual can derail a project team. Sometimes simply a clash of company cultures can cause stresses or misunderstandings. So when forming a steering team, we discuss the proposed makeup and how the teams will collaborate. We identify issues openly on both sides. We use routine surveys that allow people to assess how the unified project team is doing — and then those comments can stimulate an open dialogue about how we can course-correct if necessary. If both our teams don’t work together well, it doesn’t matter how strong any one team is.
The Progress of Consolidation
Roth: Where do you see the state of outsourcing in five to seven years from now?
Lewis: I certainly think we’ll see more consolidation. But at the root of it, we’re still going to have really good CMOs. The size may be different, but the focus will still be there. It’s an expensive business to be in, and consolidation will play its part. There still will be a place for all different sizes of operations, but more efficiencies can be gained through consolidation. My perspective on the client side is that consolidation provides a broader band of capabilities through one relationship. The challenge will lie in managing a project over multiple sites, sometimes different geographies. So I believe that we’ll see more investment in one source: You either build it internally, or you fill gaps within your service offering through acquisitions. I think that’s the benefit that the CDMOs will see as they come together, but also it’s that same benefit that the pharma companies will start to be able to take advantage of: simplifying the supply chain. What we do is hard enough, right? If you’re managing four or five CMOs for one product, versus being able to manage one or two CMOs or one or two sites, an internal site and a CMO, I clearly see why pharma teams have been pursuing consolidation.
Puri: Coming from a mid-sized, nonconsolidated company, I suggest that, although we offer many of the same services, we probably feel more “approachable” to our clients than some of the big players in the space. We are very fortunate to have an active project management group and our staff feel like they’re part of the process.
Going forward, consolidation is one of the things we have to consider very carefully. Although we have considered the acquisition of other sites, we have ultimately held off because we were concerned about our ability to maintain our culture. As we get bigger and add more clients, we have to maintain this culture because it is a key part of our success. It is an active process that won’t happen by accident.
Sandford: I think consolidation will continue. But with the further evolution of single-use technologies such as bioreactors and modular systems, the ability for someone to get into the space from a physical asset standpoint will be a lower hurdle. From my perspective, the industry will be starving for experienced people to handle increased capacity needs.
Lewis: My perspective is that consolidation probably made more sense about six to eight years ago. I think today’s lack of capacity lessens the financial benefit. But consolidation around service offerings, in which a company synergistically seeks out assets of another company to offer a better solution to customers — that’s what I suspect will be driving some of those moves. But two companies coming together with the same offering doesn’t really drive much in the market or for the customer.
The Future: Keeping Pace with Emerging Technologies
The panel concluded with comments about adapting to work with smaller-indication products that require smaller platforms. The infrastructures of a number of facilities were based upon larger scale products. As the industry evolves to handle emerging technologies and smaller indications that require less yield, how do CMOs adapt their infrastructure to handle them? How do they decide to bring in new technologies or discontinue existing ones? And how do they forecast how that trend is going to continue in the future?
Lewis: We’ve been fortunate that we built our facility from the ground up, so we built it with biologic manufacturing in mind. We didn’t go on the high end of production scale, knowing that there was going to be an improvement of titers and yield processing. We’ve stayed at a lower niche market. I think there’s a plentiful market for the niche that we’re serving for drug substance manufacturing. It’s the same thing on the fill–finish side. We make a lot of 30,000–50,000 unit batches and can make syringe batches of ~300,000 units. But we are geared toward the smaller end. Whether it be clinical or niche biologics, a couple hundred thousand units annually, the flexible filler line that I mentioned is geared toward smaller biologic programs. Whether it be on the batch side or annual volume, we’ve been fortunate to build it from the ground up rather than by acquiring older assets.
Roth: From the CMO and CDMO perspective, what is your take on the implementation and the likelihood of continuous processing taking hold in this industry? How much of that is driven by what we talked about when you brought up new technologies earlier — the need to get customer buy-in? For example, we’ve had meetings with the FDA about continuous manufacturing, and the disconnect seems to be that a client still has to make the step into an area requiring a very different filing with the agency than it previously had. How tough is that to overcome?
Puri: It’s really about particular clients’ needs. New technology is adopted by clients if they have a driving need to make it happen. So, for instance, you could envision a biosimilar company that might be a little bit late to the game, and with a low-producing cell line, risking development of a continuous process to provide a cost base that’s tenfold lower than everybody else’s.
Sandford: I’m extremely excited about it. It could change the landscape of our industry if it could be proven to work consistently. I think that’s the biggest question because it has been around for some time. At Catalent Biologics, we’re evaluating it from a concept standpoint. It could be a game changer because it could reduce the scale requirements and improve productivity. As a result, it’s going to incur lower costs, which, for biosimilars specifically, could really change the landscape.
Moderator Gil Roth is president of the Pharma and Biopharma Outsourcing Association, PBOA, [email protected] (www.pharma-bio.org). S. Anne Montgomery is cofounder and editor in chief of BioProcess International, [email protected].
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