Manufacturing Chemist, June 2015
For three years running, the results of Nice Insight’s annual Pharmaceutical and Biotechnology Outsourcing Survey1 have revealed a steady rise in the percentage of respondents who work at traditional pharma companies engaged in the development of biopharmaceuticals. In addition, expenditure on the outsourcing of biologics activities by these companies significantly exceeds that on small-molecule projects.
At the same time, traditional pharma companies are looking for more collaborative relationships with CROs and CMOs that are recognised for high quality. And while pricing is not considered a crucial factor when choosing a service provider, cost-effectiveness is a key criterion when traditional pharma companies evaluate the performance of CROs and CMOs.
The increase in the percentage of respondents who work for traditional pharmaceutical companies that are involved in the development of biotherapeutics has occurred across all three segments tracked by Nice Insight’s survey: emerging pharma, medium-sized and speciality pharma, and Big Pharma.
The largest increase in the last two years has occurred in the emerging segment. From 2013 to 2014, the number of respondents who indicated their company is pursuing biologic drug development rose by 14 percentage points (pp) from 34% to 48%. The increase was far more dramatic from last year to this year – 33 pp to 81%.
As was the case last year (52% in 2013 to 65% in 2014), the increase was not quite as large for speciality pharma companies, which rose to 86% in 2015 (21 pp). Even the number of Big Pharma companies developing biopharmaceuticals increased again, although on a much smaller scale than in the previous year (76% in 2013 to 82% in 2014 and 90% in 2015).
Ageing of the global population and the worldwide increase in chronic diseases that are better suited for treatment with biologic drugs are two important drivers of this growth.
Given these results, it is not surprising that a significantly greater share of the outsourcing spending at traditional pharmaceutical companies is directed towards biologics projects. On average, respondents who work at traditional pharmaceutical companies indicated that 57% of outsourcing dollars go to biologics-related efforts, while just 43% are earmarked for small-molecule projects.
It is interesting to note that the number of respondents at traditional pharmaceutical companies that outsource solid (66%) and semi-solid and liquid dose (59%) formulation activities is no longer much higher than those that outsource injectables manufacturing (54%). When it comes to API manufacturing, the results were quite different, with 1.7 times as many survey participants indicating that they outsource biologics API production than do small-molecule manufacturing.
In addition, more outsourced Phase I/II CTM projects were for large-molecule drugs than for small-molecule drugs (69% to 50% of respondents) and for injectables than solid, semi-solid and liquid dosage forms (61% to 51% of respondents).
The greater numbers for biologic APIs compared with formulated products may reflect the recent entry of many of these traditional pharmaceutical companies into the biologics space.
All of these trends are reasonable given the strong growth of the branded biopharmaceutical and biosimilars markets, which are predicted by market analysts to expand annually at rates of approximately 10% and 15% respectively.
Ageing of the global population and the worldwide increase in chronic diseases that are better suited for treatment with biologic drugs are two important drivers of this growth.Expansion of the middle class along with growing wealth and improving healthcare systems in emerging markets is also fuelling demand for biologic drugs, both branded and biosimilar.
Similarly, these trends are reflected in the growth of the biopharmaceutical outsourcing market, which analysts estimate is also growing at approximately 10% annually. Both biopharmaceutical manufacturers and traditional pharmaceutical companies that are increasingly involved in biologics development are relying on CROs and CMOs for several reasons.
The use of third-party services allows manufacturers to avoid the long lead times and high costs associated with constructing, equipping and validating manufacturing plants. CROs, CMOs, and CDMOs with specialised expertise are also often required for the production of the highly complex biologic drugs in development today. Some manufacturers also outsource to improve quality, increase speed to market, free up inhouse expertise for relevant tasks, gain access to regulatory expertise, or mitigate supply chain risk.
Microbial vs Mammalian cell culture
Many more respondents to Nice Insight’s annual Pharmaceutical and Biotechnology Outsourcing Survey work for traditional pharma companies that outsource microbial cell culture (80%) than outsource mammalian cell culture (47%) or vaccine manufacturing (51%). This result is not surprising given that microbial processes are increasingly used for the production of key building blocks and intermediates needed for the synthesis of complex small-molecule APIs, as well as for the manufacture of biologic APIs.
The average number of projects that respondents indicated their companies outsource was three at all phases of drug development and manufacturing (discovery, pre-clinical, and Phase I, II, II, and IV/post-launch), regardless of whether those projects were based on microbial or mammalian cell-culture technology. However, the number of respondents outsourcing projects at each phase decreased as the phase progressed toward commercial production (from 111 to 94 for mammalian cell-culture projects and 187 to 154 for microbial cell-culture projects) and the average actually rose slightly (2.77 to 3.5 and 2.69 to 3.58, respectively).
The latter trend reflects the fact that as the stage of commercialization progressed, the percentage of respondents outsourcing 10 or more projects increased noticeably. For discovery phase mammalian cell-culture production, 75% of respondents indicated their company would outsource 1–3 projects, 13% 4–5 projects, and just 6% 10 or more projects. By Phase IV/postlaunch, those numbers were 15%, 18%, and 26%, respectively. Similarly, 76% of respondents indicated that their company would outsource 1–3 discovery-phase microbial cell-culture projects, which decreased to 54% for Phase IV/postlaunch projects. In the latter case, 20% and 26% of respondents indicated that their company would outsource 4–5 and 10 or more projects, respectively.
The Importance of Partnerships
When choosing CROs and CMOs, respondents indicated that they rely most on industry research, followed by consultants and referrals from colleagues. They also ranked businesses that give the impression that they will treat each project as receiving priority when selecting CROs and CMOs.
Businesses that give the impression they will meet all project milestones and timelines also receive high placement on the selection lists of survey participants. These priorities reflect a growing interest on the part of traditional pharma companies to form partnerships with CROs and CMOs. In fact, only 35% of survey respondents indicated that their outsourcing projects are tactical in nature, while another 35% have established preferred providers and 30% are involved in strategic projects.
Notably, 80% of respondents indicated that their companies are interested (54%) or very interested (26%) in forming strategic partnerships with CROs and CMOs (defined as a ‘long-term, win-win commitment between two organisations for the purpose of achieving specific business objectives by maximising the effectiveness of each participant’s resource’). Service providers that demonstrate the ability to make longterm commitments, participate in the collaborative development of operational procedures, and use dedicated project managers are the most likely to be chosen for strategic partnerships.
Interestingly, survey participants indicated that flexible payment terms and discounted pricing arrangements were of least importance when evaluating a potential strategic partner.
It should also be noted that nearly all respondents (97%) are interested in partnering with CROs/CMOs that utilize advanced technologies to increase efficiency, quality, safety and traceability during the research, development and manufacture of pharmaceutical and biopharmaceutical products. It should not be surprising that traditional pharma companies, particularly those just entering the biologics space, choose to outsource more complex and challenging biomanufacturing processes to third party providers with the relevant expertise.
In addition, as innovative new biologic drugs are developed, CROs and CMOs with state-of-the art technologies and capabilities will be needed to support commercialisation of these advanced biotherapeutics.
According to the survey respondents, CROs and CMOs that demonstrate technological innovation in the areas of safety, efficiency, regulatory compliance, and security will attract the attention of traditional pharma companies looking for service providers.
When selecting service providers in general, financial stability, a track record of success, and adaptability and flexibility are specific attributes that survey respondents indicated are important factors. Least important were the size and structure and geographic location of the CRO/CMO and the use of contractors in emerging regions to save money. Having an industry reputation for quality work and being able to demonstrate the ability to communicate well and be transparent are qualities that will positively influence the evaluation of a CRO/CMO during the selection process. Service providers that can demonstrate an understanding of customer requirements and responsiveness to customer needs will also be seen positively by traditional pharma companies looking for service providers.
On the flip side, survey respondents pointed to poor product quality, a lack of timeliness in resolving issues and unexpected charges as key sources of dissatisfaction with CROs and CMOs they have used in the past.
It is not surprising, therefore, that quality is the top performance evaluation factor by far for survey respondents. Interestingly, cost-effectiveness was important to a high percentage of respondents, despite the fact that pricing and billing practices were generally indicated as least important in the selection process. CROs/CMOs are also evaluated for their technical expertise, safety/compliance audit history, and their on-time delivery performance.
- 2015 Pharmaceutical and Biotechnology Outsourcing Survey, Nice Insight, January 2015.