The global pharmaceutical industry has been facing many challenges in the form of increasing competition from generics, rising cost of new product development, declining research and development (R&D) productivity, shrinking average patent life, and mounting governmental pressure to reduce drug prices. Given the backdrop of such a competitive landscape, the decisive factors for growth and sustainability are faster new drug development and cost containment with "contract manufacturing" emerging as a strategic option offering several advantages.
Firstly, outsourcing provides pharmaceutical companies the opportunity to avail flexibility, quicker time- to-market, and lower scale-up costs. Thus, companies are able to meet growing demand for new drugs and focus on their core competencies. Secondly, outsourcing enables companies to reduce excess capacity in their manufacturing networks and restructure supply chains. Finally, value-added outsourcing services meet the increased demand for specialized manufacturing capabilities in key technical niches and increased demand for back-up sources of supply.
The global contract manufacturing market was about $38 billion in 2007 as per ValueNotes & Know Genix estimates and is expected to grow at CAGR of eight percent by 2010 to touch $49 billion. Global market for pharmaceutical contract manufacturing is estimated at $20.4 billion for 2008, notes Global Industry Analysts. The US is the single largest market for pharmaceutical contract manufacturing with revenues projected to be $12.8 billion in 2012. In terms of revenues, although North America and Europe are the largest markets, Asia with its immense manufacturing capacity is projected to exhibit robust growth. Exhibiting a CAGR of nearly 16 percent, Asia Pacific is expected to emerge as the fastest growing region in the global pharmaceutical contract manufacturing market. Injectables represent the fastest growing product segment, and are forecast to record revenues of $10.6 billion by 2015. Solid Dosage Forms, the largest segment, is vibrant with a projected market value of $12.3 billion for 2010.
The European and North American pharmaceutical contract manufacturing sector has been categorized into three tiers. Tier 1 companies offer end-to-end services ranging from clinical trials to commercial manufacturing, logistics, packaging, and marketing assistance. Tier 2 companies provide services ranging from early stage project development to commercial level manufacturing. Tier 3 companies are conventional manufacturing companies, which address the needs of the generic drugs industry. However, contract manufacturing in Europe is dominated by generic drug variants, while in North America branded versions are preferred. In Asia, numerous local players operate in the market. Key global market participants include Althea Technologies, Catalent Pharma Solutions, Dishman Pharmaceuticals and Chemicals, DSM Pharmaceuticals, HAUPT Pharma AG, Jubilant Organosys, Kemwell, Nipro Corp, NextPharma, Patheon, and Penn Pharmaceutical Services.
The Asian contract manufacturing organizations (CMOs) account for an ever-expanding share of global pharmaceutical manufacturing and is expected to account for around $3.3 billion of the total projected $23 billion CMO market by 2010. A growing number of CMOs have obtained US Food and Drug Administration (FDA) approval for their operations and completed good manufacturing practice (GMP) certification. Asian countries provide a significant cost advantage with manufacturing savings of upto 50-80 percent of the cost that would be incurred, if the manufacturing is undertaken in western territories.
The governments in the region are encouraging local companies to shift to the Pharmaceutical Inspection Convention and Pharmaceutical Inspection Co-operation Scheme (jointly referred to as PIC/S)—two international instruments between countries and pharmaceutical inspection authorities, which provide together an active and constructive cooperation in the field of GMP. In South East Asia, Malaysia and Singapore have joined this PIC/S, which currently has 33 participating authorities including WHO, Unicef, EMEA and EDQM. Thailand and Philippines are soon expected to join this scheme. This will boost the volume of manufacturing activities to the region.
Frost & Sullivan says the region will continue to hold its lure with low production costs, increasing reliant manpower, incentives from the local governments to lure CMOs, implementing IP laws to assure companies of the viability of producing/outsourcing to their countries and expanding healthcare markets in the growing economies. These factors are supporting the Asian CMOs to secure more outsourcing orders from big pharmaceutical companies. In India, for example, there are close to 100 FDA-approved pharmaceutical facilities—the largest number in any country outside the US. Chinese company Zhejiang Huahai Pharmaceutical became the first company to get FDA approval in 2007 and is expected to start exporting its finished drug to the US by 2012. Opening of USFDA office in China in November 2008 is testimony that more companies in China are looking for the US approval and exporting their drugs to the western markets. All these make the region an attractive destination for pharmaceutical contract manufacturing.
PricewaterhouseCoopers notes that Asian countries provide a significant cost advantage for pharmaceutical manufacturing. The overall costs of drug manufacturing in India, for example, are up to 50 percent cheaper than in western territories. Cost savings on this scale present a compelling reason for manufacturing outsourcing to Asian CMOs. However, cost savings are nothing compared to the need to ensure quality and safety. The reports of deaths linked to contaminated heparin in the US sourced from China highlight the critical issue of quality. The general trend, however, is of ever-increasing quality of work from Asian territories. To overcome these safety and quality issues the governments in region are taking measures to provide quality healthcare to the public.
Besides regulatory system in place, the region has a large pool of educated and appropriately qualified talent with the ability to run manufacturing plants matching western complexity and quality. Several CMOs operating out of Asia have obtained approval from the FDA gaining credibility for their quality standards. China completed Chinese Good Manufacturing Practice (GMP) certification as far back as July 2004 on all the drug manufacturers in the territory. At the end of 2005, more than 5,000 Chinese drug manufacturers had obtained their Chinese GMP certificates. There is an ongoing effort in China to increase inspections on already certified manufacturing sites, in response to evidence that some of the certified manufacturers have not consistently adhered to GMPs in the past.
With an increased commitment to international standards, Asian CMOs are securing more outsourcing orders from big pharmaceutical companies. The commitment to Western standards is also being reflected in the modernization of plants, and moves to innovate through the development of technologies, to ensure facilities are ready to meet future manufacturing needs.
PricewaterhouseCoopers (PwC) also notes that China and India, followed by Korea and Taiwan, are now providing an atmosphere for the pharmaceutical industry where benefits such as the pool of educated and qualified scientists, intellectual property law reform and market growth are outweighing factors that had previously inhibited development, principally uncertain regulatory frameworks and enforcement. It also noted that Singapore is best suited for complex and technology intensive manufacturing. Among the hotspot territories, it has access to the best technology and funding for outsourcing high-technology intensive products. Apart from this, Singapore also has extremely well regulated IP protection and enforcement regime, and is considered one of the best among all Asian territories in terms of regulatory compliance. Along with Australia, Singapore has consistently topped the rankings as the top Asian territory for IP protection and enforcement. Singapore is able to attract companies like Lonza besides being home to local companies like A-Bio and Beacon Pharmaceuticals.
India
According to Frost & Sullivan, in 2006, the contract manufacturing accounted over 71 percent of the revenues of the Contract Research & Manufacturing Services (CRAMS) market. In 2007, the Indian contract manufacturing market was valued at $869 million, and consisted mainly of companies manufacturing older, generic molecules, some specialised generics and custom synthesis and scale-up of in-patent drugs. The Boston Consulting Group estimated that the contract manufacturing market for global companies in India would touch $900 million by 2010.
Currently, 80 percent of the pharmaceutical contract work undertaken by Indian firms consists of the manufacturing of active pharmaceutical ingredients (APIs) and intermediates, compared to 60 percent globally. Outsourcing API manufacturing of patented products has gradually increased with companies signing API contract manufacturing agreements with Indian CMOs. According to PwC, the pharma CMO market as a whole in India in 2010 is expected to reach $916 million from $492 million in 2007.
Mr Hareesh C P, Business Development Head (CRAMS Biz), Intas Biopharmaceuticals, India says, "Contract manufacturing is a market-driven industry and CMOs must be competitive with not only each other, but with the option to build manufacturing capacity. The fact that the contract manufacturing industry is projected to continue growing suggests that it is delivering value to its customers. Contract manufacturing market is expected to touch $2.46 billion by 2010 with a CAGR of 41.7 per cent from $869 million in 2007, according to KPMG report published in September 2008. Indian companies, through their high quality-low cost production models, have bagged some impressive deals in the contract manufacturing space. These deals validate India’s potential to achieve a larger share of the global manufacturing outsourcing market. Currently, India is among the top five countries in the Asia Pacific region in terms of biotechnology."
However, he adds, "These are challenging times where the global financial crisis has affected many biotech start up which were working on Novel Biologics. Many others that are mid-way into development may be forced to license out earlier than they had originally planned to. The large Pharma is on an acquisition spree of Biotechs to boost up the number of biologics in the pipeline. Under such a complex situation, it is difficult for the small or large pharma/biotechs to make decisions on outsourcing. However, it is important for the industry to stay visible and be on the radar of these companies.
China
China has been widely accepted as a primary choice of outsourcing destination for drug companies around the world. In the last few years Chinese pharmaceutical outsourcing industry has grown at an average annual rate of 48 percent. Starting with chemistry service only, a complete industrial structure with all service elements has now started shaping up. The growth of the industry was also accelerated by the influx of a large number of multinational service providers whose entrance greatly up-lifted the service capability of this Chinese industry. In addition, increasing numbers of traditional Chinese pharmaceutical companies and R&D-oriented Chinese biotechnology companies also join in the service.
According a latest report from JZMed, currently, about 250 professional service providers, 50 multinational service providers, 150 traditional Chinese pharmaceutical companies and 20 Chinese biotechnology companies have formed a joint force in today’s China pharma outsourcing industry. Together, they are serving an ever enlarging body of outsourcing companies from all over the world. The industry has thus realized the service revenue of more than $1.4 billion.
"The industry is certainly growing in its sophistication and ability to meet the challenges of complex molecule manufacture. Worldwide recognition of China as a fine chemical manufacturing hub has supported an unprecedented rate of change in this industry related to China’s participation," said Dr Joseph Marasco, CEO, Chiral Quest.
"The CMOs in China are currently clearly a "follower" instead of "trailblazer". Most of companies simply copy or execute the existing chemical processes/routes from their clients in the US or Europe. They are clearly lacking in technology to tackle unexpected events such as raw material problems or sudden accidents, e.g., material spilling, which may negatively affect the quality of final product. Chemistry drives technology and not another way around. That’s where Radiant is different from others," says Dr Fei Zhang, General Manager, Radiant Pharma & Tech Company, China.
According to Frost & Sullivan, the CMO sector in China is set to grow in leaps and bounds in the coming years, showing a very rapid increase in the number of players. It could pose a serious challenge to India in the coming years. The Chinese government has begun to support and encourage this sector, through implementation of a solid regulatory framework to instill confidence in the international business community.
Korea
Like any other Asian country, Korea has many small and medium biotech companies that have an impressive line up of therapeutic agents but were unable to manufacture them in bulk. So, the Korean government set up the Korea Biotechnology Commercialization Center (KBCC) with an investment of $100 million in Songdo International City in May 2008 to produce new biopharmaceuticals. The plant having current Good Manufacturing Practice (cGMP) compliance was established to meet the rising demand for contract manufacturing facilities in Korea. Also, these reagents need to be developed in a large facility that complies to not only local standards such as KFDA but also to FDA, FEMA, and others. In addition to KBCC, Celltrion, an emerging leader in the biopharmaceutical industry, is dedicated to providing high quality services to accelerate product development, while offering scalable manufacturing capabilities.
Malaysia
The CMO sector is small in Malaysia as most drugs (both branded and generics) are mostly imported, even with the presence of some mid-sized pharmaceutical producers in the country. In February 2006, Malaysia got its first biopharmaceutical plant with current Good Manufacturing Practice approval. The company Inno Biologics was a turnkey project from Malaysia, a plant built in Germany with assembly done in Malaysia. Alpha Biologics is another leading contract manufacturer of biologics drugs in Malaysia for use in pre-clinical, phase I, II clinical trials.
"We are very optimistic about our future in this industry. With the current market demand, the biomanufacturing industry seems extremely promising. The market for contract manufacturing has reached $2.5 billion in 2006 with an expected growth at the rate of 10-15 percent until 2011 (Business Insight, 2007)," says Mr Mohammed Nazlee Kamal, CEO, Inno Biologics, Malaysia.
The future of CMOs is likely to improve in Malaysia, as the government is encouraging the use of generics in its healthcare system. The expected outcome in the coming years will be contract manufacturing mostly for local consumption in Malaysia, and export to a few neighboring countries, because most pharmaceutical companies will find it prudent to outsource to countries like India or China.
Australia
Similar to Malaysia, the contract manufacturing in Australia is not very developed due to the small size of the market and its inability to compete as a major export hub compared to other countries in the Asia Pacific region. The trend of outsourcing manufacturing to Australia is low, given competition from Asian territories and the high level of imports in the market. Contract manufacturing is used for domestic consumption rather than exports from Australia. Eighty percent of all generic drugs sold in Australia are manufactured domestically but this is likely to decrease as more use is made of lower cost sourcing abroad. For biopharmaceuticals the Australian government wants to encourage the local production of biological drugs. In 2006, the government granted $10 million for the establishment of mammalian cell production facility, where local companies can produce their small batches of complex biological material for clinical and pre-clinical studies. Prior to that, these used to be done in Singapore or even the UK and the US. So, the trend for CMOs, in Australia is for local consumption, instead of exports.
Japan
Just like Australia the contract manufacturing in Japan began only recently. It previously had been held back by the cautious regulatory environment and significant and unique quality and specification demands in the marketplace. The Pharmaceutical Affairs Law (PAL) was changed in 2005 which allowed the Japanese license holders to outsource 100 percent of the drugs manufacturing, bringing Japan in-line with Europe and North America, where as before the rule stipulated that at least part of the process had to be conducted in-house.
The contract manufacturing industry in Japan is still young and very much growing. The market size was valued at $2.24 billion (¥220 billion) in 2004. The projection by Yano Research Institute is that it will be more than double to $5.31 billion (¥520 billion) by 2009. Currently, there are around 100 companies that conduct contract manufacturing but the majority of these do so simultaneously with their own commercial operations, particularly generics firms. Only around 10 firms are dedicated contract manufacturing organizations (CMOs), and these include Bushu Pharmaceuticals, Akiyama Jyozai, Toyobo and more recently MP-Technopharma, Mochida Pharmaceutical Plant, Tanabe Seiyaku Yamaguchi. The majority of these have been spun out of large parent drug manufacturers.
Japan has established itself as a unique country in the pharma industry that it has the most stringent expectations in terms of quality and anything less than perfection is simply not tolerated. This is where Japanese contract manufacturers have a role to play—assisting international firms with producing a product that is in line with what Japanese consumers want.
Huge potential
With upto 15 percent of the total prescription pharmaceutical market in the US and EU expected to be from biopharmaceuticals, and with more than 400 new biopharmaceuticals under clinical evaluation and another 700 new products in research or pre-clinical stages, there are huge potential demands for CMO-based manufacturing throughout the world within the next five-to-10 years.
From the perspective of CMOs, Dr Donald F Gerson, President, CMO Business, Celltrion, Korea says, "This situation is confirming their business model and the income levels and future prospects are stimulating investment and expansion. Throughout the CMO industry, there are significant expansion plans that include manufacturing scales from clinical scale to full production, cell technologies from bacterial to yeast and mammalian, and yields from nominally 1g/L to 10g/L. Adding to the variety of manufacturing options, the use of disposables at every stage from fermentation to final drug product manufacturing is becoming commonplace and providing further improvements in the speed of new product introductions."
"The Asian advantage in CMO is significant. Lower capital and operating costs reduce the entry barrier for CMOs and combined with the strong service sector business approach could make a winning combination for US and EU based drug developers. Given the present capital availability situation in the US and EU, it is expected that demand on Asian CMOs will increase, and that could lead to a concentration of biopharmaceutical manufacturing if quality, reliability and price are competitive with other geographical areas," concludes Dr Donald F Gerson.
Capacity Snapshot
Hospira, Australia
Hospira’s protEcol Services specializes in the process development and manufacture of therapeutic recombinant peptides and proteins in E. coli. protEcol Services has over 20 years experience and designs strategic manufacturing solutions to meet budget and commercial objectives.
Strengths
Process Design—a quick and cost-effective strategy to determine process feasibility
Cell line development
Cell banking
Optional proprietary expression systems using qualified host strainProcess Development—relevant to development stage, appropriate quality, quantity and cost
—relevant to development stage, appropriate quality, quantity and cost
Fermentation, purification and formulation development
Statistical experimental design—"Quality by Design"
PEGylation technologyAnalytical Services—assay development for in-process evaluation, release testing and protein characterization
—assay development for in-process evaluation, release testing and protein characterization
Physicochemical analysis of proteins and peptides
Impurity and safety testing
Design of accelerated and real-time stability studiesProcess Scale-up and Technology Transfer—to meet clinical and commercial milestones
—to meet clinical and commercial milestones
Single site location for an accelerated technology transfer to cGMP operationscGMP Contract Manufacture—
— Dedicated teams for manufacturing, QA, QC, validation, regulatory affairs
Master and Working Cell Banks
phase I to phase III bulk API
Inno Biologics, Malaysia
Inno Biologics is a medium scale global contract manufacturing organization (CMO) specializing in mammalian cell culture manufacturing of biopharmaceuticals for phase I and phase II clinical trial material. Located in Putra Nilai, Negeri Sembilan, Inno Biologics’ biopharmaceutical complex is strategically located in the network of transportation and technological hubs.
Strengths
Inno Biologics’ flexibility design, efficient operation and well-trained staff ensure high quality products with tangible benefits. With its technical capabilities in place, it is committed to ensure maximum competencies of its service offerings to meet customers’ needs. Products/ services offered
Inno Biologics provides contract manufacturing services to local and international pharmaceutical companies.
Inno Biologics also provides an array of R&D services including cell line development and engineering, hybridoma technology and antibody production.
Inno Biologics is also offering the antibody humanization service.
Capacity of the facilities
The 1,000 L-facility was designed and built by Pharmaplan GmbH (Germany) using the modular concept.Regulatory approvals received
The facility was built to conform to the US FDA, EMEA and PIC (Pharmaceutical Inspection Convention) regulations.
Intas Biopharmaceuticals, India
Intas Biopharmaceuticals Limited (IBPL) is a fully integrated, India’s first and only EU GMP certified biopharmaceuticals company with the capability to provide its customers with the range of development and manufacturing services required to get their products through clinical development and into commercial production. At IBPL, all manufacturing activities are carried out as per the ICH guidelines and products undergo a series of critical tests to ensure identity, purity, potency, safety & consistency of a higher degree.
Strengths
IBPL has fulfilled client’s requirements from small-to-medium scale GMP production. The scales are suitable for clinical phases, as well as commercial manufacturing of bulk and finished products from rHu microbial as well as mammalian expression systems. The company has expanded its Contract Research and Manufacturing Services (CRAMS) business with the acquisition of US-based biotechnology company Biologics Process Development.
Regulatory approvals received
EMEA, WHO, MCC Products manufactured
Bulk manufacturing of biotherapeutics from microbial and mammalian culture; Formulation & finished product manufacturing for liquid.
Capacity of the facilities
Bulk facility: Microbial facility up to 50 L scale to be expanded to 150 L scale by2009; Mammalian facility up to 150 L scale; 750 Lx6 bioreactor facility is currently under installation.
Celltrion, Korea
Founded in February 2002 by US firm VaxGen and a group of Korean partners, Celltrion’s primary focus is the provision of scalable production capacity to the emerging biomanufacturing market, although it has recently begun expanding its in-house R&D operations. Celltrion’s facility (around 215,000 sq ft) in Incheon (Korea) is the largest in the region.
The site is capable of production runs in the 50,000 to 150,000 litre range under good manufacturing practice (GMP) accredited conditions. It has a manufacturing facility in South San Francisco, California. Strengths and capacity
Celltrion is CMO for mammalian cell culture-based biopharmaceuticals and has a current capacity of 50,000 liters (Four trains of 12,500 L bioreactors), and is expanding by another 90,000 liters over the next couple of years. Regulatory approvals received
Celltrion has approval of the Korean regulatory authorities, KFDA and US FDA.
Products manufactured
Recombinant products in mammalian cell culture including monoclonal antibodies, fusion proteins, and native proteins.
Customers
Cutomers from US, EU and Australia.
BioPharmaceuticals Australia, Australia
BioPharmaceuticals Australia (BPA) is an initiative of Australia’s Queensland State Government, established to satisfy a critical capability gap in the nation’s biotherapeutic development pipeline. With additional support from the Australian Federal Government BPA will be Australia’s first fully dedicated biotherapeutic contract manufacturer.
Strengths
BPA will be the first to make its primary mission the development of the Australasian market and is currently applying focused and dedicated business development efforts toward this endeavor. With a globally-oriented and well-funded campaign such as this, BPA can more effectively harness local and regional demand for biotherapeutics manufacturing in a range of expression systems.
Regulatory approvals received
The facility is being designed to meet the GMP and GLP regulatory requirements for biopharmaceutical facilities across the world including, US, EU and Australia.Products and capacity
Both antibody and other recombinant protein Active Pharmaceutical Ingredients (APIs).
The facility will have the capacity to separately process from working cell banks though to bioreactors from (20/50 litre to 2000 litre capacity for both mammalain and microbial fermentation). Formulation or filling of end products is not part of the facility plan and will be performed by one of BPA’s network partners.
Radiant Pharma Tech, China
Radiant Pharma Tech offers a broad and integrated portfolio of laboratory and manufacturing services ranging from discovery chemistry to biological services and API supplies to global pharmaceutical and biotechnology partners.
Strengths
Discovery chemistry and the Full-Time Equivalents (FTE) services.
The company also has excellent track record in process development and custom synthesis.
IP protection
The company has established a strict documentation procedure enforced to protect partners’ confidential and proprietary information. Products manufactured at the facilities
Special boronic acids and esters, aminoacids, heterocycles, chiral auxilliaries and building blocks, and halides.
Capacity of the facilities
The company has a R&D laboratory center and kilo-lab facility spanning five acres. Another five-acre pilot plant facility is under construction. The production facility is highlighted by flexible production capacity varying from kilogram scale to ton scale, state-of-the-art reactors and controlling systems thereof, and the varieties of specialized reactions ranging from diazotization, ozonolysis and halogenation to metal catalyzed cross-coupling reactions.
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