CDMO evolution: shifting demands and new therapies reshaping sector

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Changes to the type of work outsourced by pharmaceutical firms combined with emerging drug technologies and therapeutic areas are reshaping the contracting sector, driving investments and acquisition activities.

The pharmaceutical industry began outsourcing in the late 70s in response to cost pressure. Initially, only relatively simple downstream operations such as fill finish and packaging were handed over to contractors. Drug production was generally kept in-house.

However, in subsequent decades the complexity and range of manufacturing work outsourced has increased. According to PWC [1] although cost reduction remains a major driver, pharmaceutical companies are handing over a greater proportion of unit operations to contractors. Indeed, some ‘virtual’ manufacturing companies eschew in-house production capacity entirely.

Likewise, drug companies are increasingly outsourcing to contractors that have capacity local to target markets.

In addition, drug companies are seeking contractors that offer multiple services to streamline management. A study [2] published in the Journal of Translational Medicine supports the idea of changing outsourcing practices, adding that pharmaceutical companies are increasingly likely to favour contracts that offer a broad range of services.

The authors say that, “What has been outsourcing on demand with many external service providers and redundant internal functions will become an integrated model of outsourcing with a limited number of strategic partners and long-term relationships.”

Emerging therapies: an opportunity for CDMOs?

Although the cell and gene therapies are far from fully established, drug company efforts to develop such products have started to bear fruit.

In August 2017 the US Food and Drug Administration (FDA) approved Novartis’ Kymriah (tisagenlecleucel) [3], a CAR T-cell therapy used to treat certain children and young adults with B-cell acute lymphoblastic leukaemia.

A few months later the agency cleared Kite Pharma’s Yescarta, a CAR-T cell therapy for adults with certain types of large B-cell lymphoma [4].

At present, the technical challenges involved mean it is more common for pharmaceutical firms to undertake most production of cell therapies in-house, although certain operations are starting to be outsourced.

This dynamic is likely to change according to Fiona Barry, Editor, PharmSource, a GlobalData product.

She predicts the contracting sector will need to invest in the specialist capabilities required to make and handle cell and gene therapies to take advantage of demand.

“In the PharmSource report “Cell Therapy Market Opportunity for CMOs – 2018 Edition,” we analyze CMO cell therapy production capabilities, anticipate cell therapy demand using an in-house model, and interview industry KOLs.

She also told us, “We found there is a significant opportunity for CMOs as these cell therapies start to hit the market, but they need to make the process more efficient, and build capacity and invest in automation technology. Undoubtedly, manufacturing commercial-stage cell therapies will require not just larger volumes, but very different techniques and equipment.”

API outsourcing

Another emerging dynamic is the greater use of outsourced active pharmaceutical ingredient (API) production.

Barry told us “Most global pharma companies reduced their levels of finished dosage form outsourcing for new drug approvals in the past decade, but contracts picked up somewhat in the second half. Growth of contract API revenues, both small molecule and large molecule, has been stronger than for dose.

She added that, “Certain small molecule API CMOs that manufacture cytotoxics, hormones, and very low-dose compounds are also benefitting from good growth.

“The manufacture of these products requires specialized facilities that protect operators from exposure to the chemicals and, as with controlled drugs, they will have to meet special regulatory requirements.”

Barry suggested pharmaceutical companies are choosing to outsource these types of API to avoid significant investment in specialized containment facilities and regulatory complexity.

Solubility issues

Drug industry demand for delivery technologies continues to increase. The key drivers include greater industry focus on compounds that are poorly soluble as well as product differentiation.

This trend is also impacting the contracting sector according to Barry, who told us “as new products become molecularly complex, issues arise such as bioavailability and formulation for products that often have poor solubility or are highly potent. Delivery technologies are therefore becoming increasingly important.

Dosage forms

The manufacture of finished products remains a major focus of CDMO sector activity Barry said, explaining that “most commercial dose CMOs have solid dose manufacturing facilities.

“We examined this trend in this year’s reports “CMO Scorecard: Outsourcing of NDA Approvals and CMO Performance” and “Contract Dose Manufacturing Industry by the Numbers,” she continued, adding “Among dose manufacturing generally, the largest percentage of dose CMO revenue is still for solid dose, despite the rise of biologics.”

One sub trend is the increase in demand for smaller production runs Barry says, citing the pharmaceutical industry’s increasingly patient-centric approach as the driver.

“As batches are becoming smaller due to an increasing use of orphan drugs and drugs for patient subpopulations such as paediatrics, flexible and small-scale manufacturing ability is becoming particularly desirable.”

References

[1] https://www.pwc.com.au/industry/healthcare/assets/pharmaoutsourcing_oct08.pdf
[2] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4847363/
[3] https://www.fda.gov/newsevents/newsroom/pressannouncements/ucm574058.htm
[4] https://www.fda.gov/newsevents/newsroom/pressannouncements/ucm581216.htm