On Thursday, 18 June 2015, Gil Roth (founder and president of the Pharma & Biopharma Outsourcing Association, PBOA) chaired a midday roundtable titled, “CDMO Challenges and Opportunities.” He brought together a panel of four industry experts:
- Thomas Thorpe (chief executive officer of Afton Scientific)
- Michael Riley (vice president and general manager of Catalent Biologics)
- Victor Vinci (vice president and chief scientific officer for Cook Pharmica)
- Amit Arora (chief marketing officer at Jubilant HollisterStier)
Points of View
The Pharma and Biopharma Outsourcing Association (www. pharma-bio.org) was founded in 2014 to represent contract manufacturing organizations (CMOs) and contract development and manufacturing organizations (CDMOs). A number of member companies were represented on the panel.
Thorpe’s company, Afton Scientific, is a small-scale contract manufacturer of sterile injectables and presterilized ready-to-fill (RtF) vials based in Charlottesville, VA. The company is in the process of adding a second facility.
Arora heads the CMO business for Jubilant Pharma (an Indian conglomerate) in Spokane, WA, and Montreal, Canada. The company fills sterile and nonsterile vials, creams, lotions, and ophthalmics as well as develops solid formulations and active pharmaceutical ingredients (APIs). Arora himself is new to the biopharmaceutical industry.
Riley’s business is a division of Catalent Pharma Solutions, an international company providing drug-delivery technologies and development across all dosage forms. The biomanufacturing business includes cell-line development with the proprietary GPEx platform and proprietary antibody–drug conjugate (ADC) technology from the 2015 acquisition of Redwood Bioscience.
Vinci’s company is a CDMO based in Bloomington, IN. Biologic services include drug-substance, formulation, and analytical development; biomanufacturing for all phases of development; drug-product fill and finish (liquids, lyophilized, and prefilled syringes), packaging, and medical devices. Only cell-line development happens off site — through a collaboration with Swiss company Selexis.
Customers and Their Expectations
Thorpe said that customers are looking for three things from a CMO: regulatory compliance, on-time delivery, and competitive pricing. Arora said service customers have always demanded compliance and on-time delivery of right-first-time results with minimum deviations.
Riley concurred. He said clients are increasingly looking for flexibility, with a growing number of products on the Food and Drug Administration’s (FDA’s) fast track (orphan drugs). That clinical path can be difficult to predict, so sponsors need CMOs to react quickly to their needs. Also, he said, technology is very much a focus at his company. “Companies are looking for the next generation of products.” Citing a recent statistic that half of all pipeline antibodies are engineered in some way, he said, “We’re seeing more demand for technology that can differentiate a product as it goes through the clinic and into market.”
Vinci said quality and compliance are a given. “Beyond that,” he continued, “we’re starting to see broader collaborations.” Sponsors approach CMOs with a platform (e.g., monoclonal antibodies (MAbs) and unique delivery devices or packaging) and want to work on more than one product within that platform.
All customers are unique, said Thorpe, from virtual companies with only a handful of employees to large multinational corporations. Their knowledge and capabilities are different. Some people are biased for or against outsourcing, for or against certain technologies, and so on. CMOs need to recognize and adapt to those personal differences. “You have to respond and maybe bring in a third party that you think would help them succeed.” He said that CMOs shouldn’t let themselves be asked to work outside their own areas of expertise.
Based on his big-pharma experiences, Vinci said that cost once was first on customers’ minds. Now their approach is more collaborative and understanding of efficiencies. Early negotiations must address capabilities and timing even before price. Risk also comes into play. And project management becomes key to the success of campaigns that go on for months or even years.
As the biopharmaceutical industry has matured, Riley pointed out, its level of sophistication and standards regarding outsourcing have increased. Around the turn of the century, a sponsor company taking a product into clinical testing would build a dedicated manufacturing facility for it. Product failures then led to “mothballed” facilities. Now, however, companies moving into the clinic look for a CMO/CDMO. A perceived capacity shortage in the early 2000s led to a capacity glut, which Arora said is now shrinking again, particularly on the fill–finish side.
Roth wondered about the mix of customers, and Thorpe said that hasn’t really changed much over the years. As mergers and acquisitions happen, a CMO can begin working on a product for a small start-up but end up servicing a multinational conglomerate in the same project.
Riley has seen more of a shift in the mix of products (e.g., orphan drugs and biosimilars) than customers. On the customer side, he does notice more companies from emerging markets (e.g., the Asia–Pacific region) going global.
Vinci also pointed to the diversity of products and the prevalence of very small companies as drug sponsors. Alongside notable movement toward later-stage and commercial products, he still works with virtual companies.
Since the 2012 Generic Drug User Fee Amendments (GDUFA) to the Prescription Drug User Fee Act (PDUFA), FDA has been hiring hundreds of new investigators. Thorpe said that at his company’s latest inspection, three agency representatives were officially “GDUFA investigators” from Pennsylvania and New York — which indicates that the agency is cross training staff. So companies should expect to see larger inspection teams.
Sponsors are primarily responsible for product quality and compliance, even when outsourcing the work. But Thorpe said that the emergence of the quality agreement has changed that somewhat. A draft guidance suggests how to approach such documents, and now the FDA is issuing joint observations to both CMOs and sponsors.
“In 1980 when I started,” Thorpe said, “CMOs had a terrible reputation for being purely about price and quality.” Over the years, they have drawn expertise (and employees) from biopharmaceutical companies. Meanwhile, some power and leverage have shifted from sponsors to CMOs. Such companies are more mature, with more expertise, and get audited frequently by customers. “So they’re much more at the leading edge of what’s happening in the industry,” he said.
Arora spoke from the perspective of a company that dealt with a warning letter from the FDA. “We’ve had two inspections in the past year and a half, lasting six to seven weeks, with four inspectors from both CBER and CDER.” His company launched quality enhancement programs and regularly updates the agency informally on their progress. He said that the agency has been very helpful.
Riley said that the regulatory bar is continually raised. Working with specialized dosage forms and relatively new blow–fill–seal (BFS) technology, his company finds that inspectors seem to be more knowledgeable about such things than they were 10–15 years ago. Another change he mentioned was a trend toward sponsors looking to global markets. That requires CMOs to understand the requirements of different regions.
Vinci reiterated that CMOs and their clients are jointly responsible for good manufacturing practice (GMP) compliance and quality systems. He said that it’s not uncommon for his company to have someone auditing operations every week. “We have not only learned from US and European regulatory expectations,” he said, “but also from some very knowledgeable clients.” Some are surprised at the level of expertise they find. His company welcomes the increased scrutiny.
He also highlighted the diversity of opinions about how things should be done. Big companies, he said, often are reacting to recent regulatory feedback of their own. But the resulting conversations offer learning experience, as well.
Riley agreed. “The longer your operations have been around, the more customer audits you get,” he said. “Your systems and processes evolve.” Quality systems emerge from applying the most stringent customer expectations, ultimately placing CMOs on the leading edge. “Managing the highest expectations in the industry has led us to improve our processes.”
Audits, said Thorpe, also depend on the skill of the auditors. Small company auditors are generalists, sometimes with an ISO background. Larger companies’ auditors bring more precision. He distinguished between first audits with new/potential clients and with repeat/return customers. Familiar business partners have adapted their relationships to work smoothly. And early audit experiences help companies imagine what such relationships might be like: e.g., collaborative or adversarial. CMOs have more confidence in their own quality systems these days and feel more able to assert themselves even with prospective clients.
Thorpe described a two-tier approach to staffing: professional level and operators. Filling the latter positions, he said, requires extensive screening. Some very good employees might not fit into the biotech CMO culture. They need to be extremely detail-oriented because these days, operators can make catastrophic mistakes. And good people are worth going to some trouble to retain. At the professional level, Thorpe said he’d rather hire someone right out of college than convince someone experienced elsewhere to adapt to his company’s approach.
Arora described the challenges of his company’s facilities in Montreal and Spokane, especially the latter. “It’s very difficult to get people from the east coast to Spokane.” The company had some attrition (which is slowing) after the warning letter but is actively recruiting particularly for that site.
Riley said that finding the right people for biopharmaceutical contract manufacturing has always been difficult. “This business is not for everybody.” He attributes that to the range of challenges and the pace of the work involved. But the biologics industry is “a hot market,” with many companies seeing good investments. So competition for good people is also fierce. Working at a CMO can be intellectually rewarding with the wide range of products and technologies employees get exposed to.
Vinci said that many companies currently are recruiting formulators and project managers. Good cell-line development people and other specialists can be hard find. Vinci touted the creative approach his company has taken with biotechnology masters programs as a means of finding and developing talent.
Local community ties and relationships can be important not only to developing talent, but also to general operations, Roth pointed out. And Vinci agreed, saying that ties with the university and other local business leaders are critical. His company’s 900,000-ft2 facility was once a television factory. “We are in effect the next generation of technology to be in that building, and we take very seriously what that’s done to the community.”
Riley highlighted the idea of working with local universities and organizations for many reasons. Academic relationships help companies spot emerging technologies. And community relationships (e.g., with local governments) come into play especially when it comes to expansion plans. Arora pointed out that such relationships require partnerships (e.g., helping local universities develop programs) and mutual alignment.
Thorpe said that most CMOs are outward focused, with potential customers around the world. But they still need to invest in their local areas, even through volunteer efforts and sponsorship of local charities or working with local high schools.
Partnership and Risk
Highlighting industry growth, Thorpe cautioned that some companies might even be growing too quickly. “You grow 25% a year for two years in a row, and you’re going to have some compliance issues. That third year, things will probably start to get crazy. You want them to be boring and predictable as much as possible.”
Roth asked about risk sharing, and Arora said that many clients are willing to participate in strategic partnerships, even investing in capital and talent. Client advice and assistance have even helped his company address its warning-letter situation.
Riley picked up on the theme of capital investment. A customer will make an investment in a new capability, for example, that can be mutually beneficial. “We see a lot of demand for more creative types of deals rather than straight fee-for- service relationships.” But risk-share deals require understanding a product and its associated risks.
Thorpe highlighted risk management in a shifting regulatory environment. CMOs and their clients must negotiate who’s going to take responsibility for uncertainties associated with developing a product. Sponsors invest in the vetting process, negotiating contracts, and managing outsourced projects, making them somewhat reluctant to walk away. They do so only when things go terribly wrong — often attributable to bad communication and personal relationships. It’s seldom about cost.
“From the CMO’s perspective,” he said, “you’re thinking about the second, fifth, 19th project you’re going to get (that you hope to get).” So throughout early negotiations, in addition to worrying about the risk of a given project, he suggested, companies also should plan for the future to find a balance that works for both parties.
Looking to the future, Roth asked about opportunities and areas of growth. Riley pointed again to demand for new types of products, such as ADCs and engineered antibodies. He advised finding a platform technology that can distinguish one CMO from all the others. Biosimilars and orphan drugs represent an avenue for growth among those CMOs capable of moving fast and providing flexibility when needed.
Vinci agreed that speed could be a key distinguishing feature, but that it requires good relationships and risk sharing. He sees growth in drug- product packaging. As medical devices become more complicated, they will require more sophistication on the part of their manufacturers.
Arora said his company is focusing on its core capabilities. He predicted that available capacity will shrink, leaving a good deal of business for the familiar product areas. “What you do,” he said, “do it right.”
Thorpe cautioned that some dosage-form trends may come and go. After great interest in lyophilization and prefilled syringes, he said, now RTF is becoming popular. He pointed to the importance of productivity and technologies that can enable it. For example, he mentioned restricted- access barrier systems (RABSs) and isolation technologies — but cautioned against making assumptions about their reliability.
Finally, one audience member asked about consolidation within the biopharmaceutical industry — both on the CMO and sponsor side. “What do you see as challenges as well as opportunities as it continues?”
Riley said that customer interest in the CDMO concept is driving some consolidation on the outsourcing side. But the industry remains somewhat fragmented even so, with plenty of room for different approaches. Arora sees industry consolidation as a significant opportunity, especially over the long term.
Vinci again brought up the idea of big companies taking over a CMO’s start-up clients or their products. That reinforces the importance of establishing good relationships and doing quality work. He emphasized managing growth.
And Thorpe cautioned that sponsor companies often classify CMOs according to perceived expertise. “Opportunities come with closures and consolidations, but a CMO needs to recognize what it can do effectively.” His company has occasionally told prospective clients that it would not be the best fit for them. “You’ve got to be willing to say that,” he advised, “because then they’ll trust you later.”
As many people focus on speed to market, he warned, it can be dangerous to hurry things along. Unanticipated problems can wreck a schedule. Some up-front efforts can save time down the line. Smart CMOs develop relationships with customers and regulators and build trust with them.