August 1, 2016 PAP-Q03-16-CL-001
Reliance on contract service providers is increasing in the pharmaceutical industry as drug makers seek to increase efficiency and productivity and gain access to advanced technologies and expertise that are not practical to develop internally. As a result, the global contract pharmaceutical manufacturing market is growing at an average annual rate of 7.5%.1 Participants in Nice Insight’s 2016 annual survey of professionals in the pharmaceutical and biopharmaceutical industries indicated that their companies have dramatically increased year-over-year spending on outsourcing for the last four years.2 In fact, nearly 95% of respondents to the 2016 Nice Insight CDMO Outsourcing Survey expect their companies to maintain (18%) or increase (75%) spending on contract development and manufacturing services over the next five years.
Outsourcing is occurring across all phases of development from discovery through final-product manufacturing. Although demand for API development and manufacturing services is currently much greater than that for discovery, final-product formulation and production support, drug companies are seeking more strategic partnerships with service providers that offer a broad portfolio of innovative and specialized capabilities. Back in 2008, Albany Molecular Research, Inc. (AMRI) recognized the growing market need for outsourcing partners that could offer a comprehensive range of services to support the full pharmaceutical drug development spectrum. Since then, the company has been strategically expanding the breadth and depth of its contract research, development and manufacturing capabilities to create a global “CRDMO” specifically to meet customer expectations today and in the future.
Following the most recent acquisition of Euticals, AMRI now offers a full suite of capabilities for exploration, a broad range of API development and manufacturing services from small to large volume — including the most complex and challenging chemistries and processes — and final-product formulation and manufacturing, including injectables. The acquisition also positions AMRI as one of the largest independent developers and suppliers of APIs to the global pharmaceutical industry and takes it a significant step closer to achieving the company’s vision of becoming a $1 billion, fully integrated, premier supplier by 2018. The challenge is to create a united company that provides added value to the marketplace for both large and small customers through access to a wider global network, more extensive resources and a broader set of technical and operational capabilities.
To meet its aggressive growth targets, AMRI must grow both organically and inorganically. Organic growth at a rate in the upper single digits year-on-year can only be accomplished through strategic partnerships with AMRI customers. Developing such long-term, collaborative relationships requires provision of unique, creative services that facilitate customer success.
For AMRI, that has meant focusing on advanced, complex technologies. Organic growth also requires continual enhancement of the R&D pipeline and capabilities necessary for ensuring efficient and smooth movement of projects from R&D to commercial scale production. Enhancement of processing capabilities allows our customers to have a smoother development timeline and a more efficient regulatory path. To achieve these goals, AMRI has established centers of excellence in R&D for new chemical entities (NCEs), chemical development and commercialized API compounds.
Following the integration of the Euticals business, AMRI will be a much larger company ($700+ million USD enterprise). Maintaining a customer-centric approach will be crucial to achieving further growth. Currently, the company is in a transformational mode, with a focus on increasing the discipline around operational excellence, enhancing and applying talent, and taking quality programs to another level so that they are appropriate for managing a complex, multisite supply chain.
A true CRDMO cannot focus solely on API manufacturing. It is also important to have capabilities that support customer discovery and final-product development and manufacturing efforts. With such a broad portfolio, a CRDMO has greater resources and thus an enhanced ability to solve customer problems regardless of the stage of drug development. To achieve its aggressive growth targets and expand its capabilities across the full development spectrum, AMRI has accelerated its acquisition strategy in the last 30 months.
Key acquisitions in the API area have included Cedarburg Pharmaceuticals, Gadea Pharmaceutical Group, including its Crystal Pharma division, and most recently Euticals. Cedarburg expanded AMRI’s service offering in the controlled substance space and its capability for the development and production of complex, more-difficult-to-make controlled substances. AMRI also gained more flexibility to provide manufacturing support at both small and large volumes. Crystal Pharma extended AMRI’s global reach and capability to support regulatory filings on a global basis, plus added further unique chemical capabilities, particularly those necessary for the production of hormones (steroids). Euticals further expands AMRI’s global capabilities and brings expertise in the production of highly potent APIs (HPAPIs). This additional diversification imparts additional flexibility to meet customer needs and increases AMRI’s ability to withstand unexpected changes in the marketplace, providing a stable partner to sponsors – customers for outsourcing.
Acquisitions outside of the API space have included SSCI, which provides advanced characterization services for discovery and early-phase projects, and Whitehouse Laboratories, which provides analytical support at the final product development stage, including compatibility and extractables/leachables testing. Additionally, Whitehouse Labs scientists are recognized thought leaders in container closure integrity testing (CCIT) and are currently working with the U.S. Food and Drug Administration to improve the knowledge and effectiveness of CCIT guidelines.
With all of these acquisitions, and successful customer-focused integration, it is now possible for AMRI to support (bio)pharmaceutical customers from the discovery phase through API manufacturing to final drug formulation and packaging, including sterile injectables. It is important to note, however, that realization of the benefits of these acquisitions has only occurred following true integration of each business within AMRI to form a new and better-functioning company. Achieving this level of integration can be challenging and requires consideration of the people, work processes and physical assets (plant/equipment/capital) of all entities.
It is essential to utilize the talent of all organizations within the expanded company. Following an acquisition, AMRI makes a concerted effort to not only identify the talent within the newly acquired business and match individuals with appropriate roles in the united company, but to create a welcoming atmosphere. With respect to work processes, the key to success is to identify the best practices within each business and adopt them in the newly formed entity.
For instance, Euticals effectively manages the transfer of projects from one business unit to another within the company so that projects move forward seamlessly. The methods used at Euticals are considered best practices as they relate to project transfer and will be implemented in the integrated company. Ultimately, the customer benefits from the massed best practices and guided integration of service offerings and operational excellence.
The new AMRI has a global network of facilities, including 15 API production sites. Successful integration is resulting in the effective utilization of all of these resources, (i.e., the appropriate placement of projects such that plants and equipment are used efficiently and productively) toward customer needs and delivery expectations.
Integration efforts at AMRI are driven by the chief operating officer (COO) and business development management. The executive team, with representatives from AMRI and a newly acquired company, has the support of consulting groups and works in a highly disciplined manner. Centers of functional areas and work streams are identified based on the current practices within each organization. The team considers what needs to be done to help AMRI become a premier API supplier; thinking through the vision for the company and looking for structures and work processes that will provide predictability, enable the efficient performance of complex chemistry and assure high quality — all while focusing on meeting current and future customer expectations.
An additional aspect of successful integration involves aligning the business models of the organizations that are being combined. Careful selection of acquisition targets can facilitate this process; it is best to avoid conflicting business models and choose targets that have similar or complementary operating approaches.
In the API space, AMRI’s recent acquisitions have had complementary business models that have strengthened the company’s ability to support its customers, both from a new business perspective and through greatly enhanced problem-solving capabilities.
All three of these complementary business models are now aligned within AMRI. The chemists, engineers and other technical experts performing the work for each have different mindsets because the projects must be approached very differently. For instance, NCE projects generally have a fairly long timeline, and the work is completed in a linear fashion, whereas generics must be developed as quickly as possible, with much of the work conducted in parallel.
Having all three business models within one company provides significantly increased capabilities for problem solving; AMRI now has the expertise to address any type of chemistry problem that arises at any stage of the drug development spectrum. In addition, with multiple ways of looking at projects, the ability to identify potential problems very early on before they become major issues is also greatly enhanced.
Underlying all of these integration activities is the need to maintain an ongoing connection between the R&D and manufacturing groups post-acquisition. The strength of a newly formed business is, in fact, predicated on implementation of a cross-matrix approach that is team-based and uses strong processes to ensure that R&D and manufacturing, along with sales and marketing, are all working together to reach the same objectives. The link between R&D and manufacturing is crucial to facilitate smooth and seamless transfers from development to commercial production, regardless of the business model. It also requires extensive knowledge of the company’s resources, including all of the R&D and manufacturing sites and the capabilities of each.
At AMRI, the Technical Operations group plays a major role in bridging R&D and manufacturing. This small virtual team comprising highly experienced personnel with knowledge about the capabilities of different business units and global sites determines which group should handle new projects and where the work should be done. Because AMRI now has significant flexibility with respect to where products can be manufactured, it is essential that the long-term needs of the customer be considered when making the selection. Whether or not a site has GMP production capabilities, HPAPI containment systems, a controlled substance license, an appropriate geographic location and/or the relevant equipment volumes, as well as future project stages, factors into the decision.
The Technical Operations group is also responsible for managing the movement of client materials from business unit to business unit and site-to-site to ensure that all transfers occur seamlessly. R&D programs are reviewed regularly by the team to confirm when they are ready to be transferred (a complete package has been prepared). The receiving site is also evaluated to ensure that it is ready to receive the project. During tech transfer and scale-up, the Technical Operations team also has the skills to troubleshoot problems that arise. Regardless of whether a project is an NCE, generic compound or late-stage tech transfer, it must be completed according to the customer’s timeline despite any unexpected issues. The Technical Operations team enables rapid problem resolution.
Careful consideration of the placement and transfer of projects also affords the Technical Operations team the opportunity to eliminate bottlenecks and increase operational efficiencies. Additionally, where possible, unused capacity is filled by bringing back in-house the production of building blocks/intermediates that were previously outsourced. Doing so may not only reduce costs, but it also provides AMRI’s customers with greater supply chain security assurance. Replacement of outsourced work with internal projects also makes it possible to guarantee the quality, purity and delivery of the materials. The Technical Operations team is currently working to transfer compounds from outsourcing providers to AMRI facilities.
Overall, the Technical Operations team helps ensure that as AMRI continues to grow, the focus on customers is maintained. Projects are placed where they will best meet customer needs and expectations and move smoothly through the development stages to commercialization.
Strategic acquisitions are designed to enhance the capabilities of the acquiring company, such as to reach new markets or geographic locations or expand technical expertise. AMRI from its initial inception focused on offering value-added, advanced technologies, working closely with both small and large pharmaceutical companies and helping define new medicines for commercialization. Consequently, its acquisition strategy has focused on the addition of high-value, state-of-the-art capabilities that allow the company to attract projects with higher technical requirements and thus higher barriers to entry for other contract service providers.
In the API space, differentiating capabilities include steroid manufacturing, the production of highly potent compounds and controlled substances, and the development and manufacture of APIs that require the use of highly complex chemistry. AMRI also has sterile API manufacturing capabilities. In the drug product space, AMRI can formulate and manufacture numerous dosage types, including injectables, which are highly complex and challenging from the perspectives of quality and patient safety. In addition, our discovery services go beyond high-throughput capabilities to include the use of advanced disease models.
Integration of the numerous acquisitions and successful integrations that AMRI has pursued since 2008 have resulted in an outsourcing partner for (bio)pharmaceutical partners that can provide value-added services from the earliest to the latest drug development stages — drug discovery and analytical support to preclinical studies and clinical and commercial manufacturing — significantly facilitating the outsourcing process for customers.
Indeed, most current customers of AMRI do not solely outsource API manufacturing. Many also benefit from AMRI’s capabilities to support discovery and final product formulation and manufacturing activities. These customers are strategic partners with whom AMRI has long-term relationships and collaborates closely with to ensure their success.
The new AMRI has over 400 customers and is a global operation with more than 50% of API revenues generated outside of the U.S. The successful integration of numerous acquisitions over the past eight years has made it possible for AMRI to serve the global marketplace with discovery, process development, scale up and analytical support, as well as a portfolio of generic products. The company’s integration approach has resulted in its ability to achieve rapid, cost-effective development and commercialization of highly complex and challenging APIs.
Dr. Hagen is responsible for technical operations. Prior to this, he was responsible for API and drug product manufacturing operations globally, including chemical and pharmaceutical development activities. Before this, he was responsible for analytical, quality and regulatory affairs at AMRI. Before joining AMRI, Dr. Hagen served as a Director of Analytical Development for Pfizer, Inc. Before Pfizer, he was an Analytical Biochemist with Ribi ImmunoChem Research, Inc.