March 24, 2023 PAO-03-23-CL-04
Nick Davies (ND): Prices are going up across the industry. That includes prices from CDMOs. Drug developers are also finding it more difficult to raise funds. The global economic situation has had an impact, and it is being felt particularly by early-stage companies looking for that initial funding. Outside of financials, the growing role of biologics is another important trend, as is the increasing number of projects involving cell and gene therapies and other new modalities/difficult technologies.
Ian Smart (IS): The continuing supply chain issues and need to reduce supply risks highlighted during the pandemic are driving onshoring. For example, manufacturers are looking for raw materials from Europe or the United States or asking API suppliers to look into manufacture of the raw materials rather than use the supply routes commonly leveraged in the past (e.g., India and China).
Small molecules are still very important, and a lot of work is going into improving the performance of existing products through the use of more efficient delivery solutions or in combination therapies. They are also being explored in new applications.
It is very difficult to predict what will happen in 2023. A considerable amount of money had been going into biologics, even though they make up a small percentage of actual marketed products; however, the appetite to invest in biologics for start-ups appears to be declining which some attribute to their high cost/long timeframe of development compared with small molecule drugs. The market is too much in flux to make any strong prognostications.
ND: The challenge with these new modalities is their astronomical cost. While the lucky few who live in Europe and North America and can afford good health insurance have a chance at receiving these treatments if they need them, most people around the world don’t have access, largely due to their extremely high cost, but also due to logistics and other inherent attributes of these technologies. There is, therefore, continued need for innovative small molecule drugs that are cheaper and easy to distribute. It is also why the generics market continues to expand dramatically. It is a huge industry today, which has created new sets of challenges — most notably drug shortages.
Beth Lindsey (BL): I would say that the pharma supply chain has not fully recovered from the effects of the COVID-19 pandemic, although strictly speaking, we have seen many improvements since COVID in the supply chain, especially with cold chain. Lead-times have decreased since peak COVID, and logistics service providers (LSPs) have brought in more temperature-controlled vehicles and passive and active packaging. Most of our clients move via road or airfreight, so we have seen lead-times at close to pre-COVID levels within the U.S. in particular. Rates have decreased a bit, but are still higher than pre-COVID, especially in Europe. Fuel is driving a lot of this for a number of reasons — most not related to COVID. The war in Ukraine is causing freight rate increases and lack of drivers for trucks on the ground in Europe. LSP's have been hit really hard in general with staffing issues that are continuing.
ND: From a supply chain perspective, the need for cold-chain management has increased, with sponsors requiring such solutions, particularly for biologic products. Access to temperature-sensitive packaging materials remains a challenge. Many service providers claim to have the capability, but sponsors must make sure they deliver on their promises. In general, the entire pharma industry has not yet recovered from the impacts of the COVID-19 pandemic. There are still challenges getting raw materials and single-use components.
On the flip side, there are some positive things that have emerged following the pandemic, most notably increased speed of development and reduced time to market. Those lessons will stay with the industry. Monoclonal antibody projects are moving from phase II through to BLA filing in 2 ½ years, a timeframe that was unthinkable prior to the pandemic.
BL: There is definitely a big emphasis today on moving API and all aspects of supply from China and India closer to regulated markets in Europe and the United States.
IS: It is also worth noting that within a short term (circa five years), biologics production capacity may exceed demand because so many companies are expanding existing or building new facilities in response to an expected increased need for vaccines and therapeutics. Unless there is another pandemic, it is likely there will be too much capacity.
ND: We saw that cycle with small molecules, particularly solid-dose manufacturing facilities. Many of them had to be closed down following significant consolidation. I agree something similar will happen with biologics. Five to 10 years from now, there will be too many biopharma manufacturing facilities, and then prices will drop and it will be a different game.
ND: Clearly, most pharma and biopharma companies outsource to some degree. And they are all being impacted by the high level of consolidation in the CDMO market. Big CDMOs are getting bigger, and it is becoming harder and harder for small CDMOs to remain competitive unless they offer specific niche skill sets. In addition, with CDMOs getting bigger and more acquisitive, it is also becoming more difficult for smaller pharma and biotech companies to negotiate with them, and the leverage is completely one-sided. Supply and quality agreements have always been somewhat one-sided, but they can be increasingly draconian in terms of the ability of CDMOs to walk away from their responsibilities. It is a bit contentious.
The driver for this situation is the current supply and demand imbalance. The limited capacity means that CDMOs hold all of the cards. Smaller pharma and biotech companies that rely on CDMOs for technical expertise are often faced with even more difficult situations, especially when there is a lot of movement amongst technical personnel at CDMOs.
ND:he concept of Verta as a broad-service firm is essentially that we have expertise in all aspects of CMC. There aren’t many dosage forms, technologies, analytical methods, packaging solutions, or whatever that we haven’t encountered. We provide technical experts as required, so that our clients don’t need to find and keep them on staff. Often, clients don’t actually know they need a specific expert until we start working with them and get involved with various aspects of their development projects. It is therefore much more efficient and effective than working with multiple specialist consultants who can each only support one aspect of a project. We have the ability to bring all of the people with different skill sets required to advance any type of pharma/biopharma programs through the various development stages as needed.
In addition, while the larger CDMOs offer that sort of one-stop-shop type solution, small clients tend to find that working with those CDMOs is often difficult, mainly because the CDMOs tell a great story, but often underdeliver. For the CDMOs, attention is directed to large clients, and frequently those small pharma and biotech companies are not the focus. For Verta, those companies are our focus.
IS: CROs/CDMOs often tout that they can do everything and provide all the services that a CMC consultancy like Verta can provide and propose closely tied partnerships as the answer. By working with Verta, however, clients maintain the flexibility to use multiple CDMOs as needed. We issue RFPs for different aspects of a project — the API and final drug product manufacturing, for instance — and find the correct development groups that can meet the specific needs for each of those program components. With cross-functional oversight by our SMEs, this provides the assurance of projects meeting increasingly tight timelines within budget.
BL: In addition, a huge advantage of Verta is that we can tie those multiple CDMOs and our client’s supply chain together. One of our areas of talent and expertise is logistics and import/export. We make sure for example, that a CDMO providing API in Korea and an LSP importing the API into the United States does so safely and full accordance with regulations, both with regards to the temperature specifications of the product, as well as the trade compliance requirements to ensure customs, FDA, and other relevant agencies don’t hold the API up at the border. Another example is that we find that nine times out of 10 our clients are transporting their materials and products with inadequate insurance coverage.
IS: Furthermore, as a contractor, Verta doesn’t suffer the constant personnel turnover that is seen at CDMOs. We have multiple people with relevant skill sets and if need be, can replace an expert very quickly, often the next day.
ND: I’m hesitant to say that we have sweet spots or focus areas because we literally do have the whole breadth of expertise needed for drug development and manufacturing. There are some industry trends and areas where talent and subject matter experts are in short supply.
Those include biologics, particularly for upstream and downstream processing, as well as analytical methods. We have these experts and biologics manufacturing is an area we know well. CMC regulatory compliance is another area that has always been a challenge; there simply are not enough people with those skill sets who have been successful applying for INDs, IMPDs, NDAs, MAAs, and BLAs and taken products all the way through the process. We have this expertise.
Beyond these, we see strong demand in areas such as synthetic chemistry, formulation development, analytical, quality assurance, packaging, artwork, and also supply chain — the whole gamut of topics.
ND: Historically, clients tended to come to us around phase II. Today, we are more frequently starting at the pre-IND stage, helping guide initial understanding of the APIs and BDSs, which speeds the secondary requirement of the drug product formulation. Small companies in particular during initial stages are very strapped for cash. They’re doing the absolute minimum to get to the next milestone. With our extensive experience, Verta helps these clients understand what’s required at each development milestone and helps them make significant investments in development based on risk-based decision criteria, thus delaying expenditure as late as possible. We know what they need to do and how to help them to get to each milestone. Essentially, we help these clients establish and implement their development plans and CMC regulatory strategy .
In addition, when clients come to us at phase II, we often have to unwind some of the early decisions they have already made. Going to the wrong CMO is a common mistake. They pick the CMOs that they think will work for phase I — perhaps after meeting someone at a conference — generally based on perceptions about cost at the early stages. Unfortunately, in the long run, these decisions often end up driving up costs.
IS: In a simplified view we have three customer bases: initial startups who are typically post-discovery and at the preclinical stage; companies at phase II or III who are looking to supplement their staff with additional specific high-skill set project management to take the project through; and lastly clients lacking expertise to take their projects forward in specific areas, such as logistics capabilities.
ND: In the third case, Verta provides subject matter experts either on an interim basis while the company is looking to recruit someone or to meet the needs of a particular project. For the latter applications, one or two Verta experts may work with a company for two to three years. There are examples, however, where positions are very transient.
In general, we do find it is best to start early with clients because as candidates move to later stages of development, the workload increases exponentially, and it is much easier to grow with a project, because we have an established relationship and are in a position to bring on the best combination of experts for that particular client and project.
BL: Actually, our best marketing is done within projects as they are being completed for clients. As they are working with Verta, customers realize that we can expand our support as projects move into more advanced phases. Often, projects just snowball into various areas where we can help small companies.
IS: While we like clients to come to us as early as possible, we do work with projects at any stage. In fact, we still get a large number of clients coming to use around phase II–III, usually when they need to scale up and prepare for registration batches and get ready to launch. It is essential that the CMC file is sufficiently robust and an appropriate supply chain in place. Verta can help with all of that.
ND: Obviously, as projects get closer to registration and launch, the decisions that companies make about their supply chains and CDMOs and setting themselves up for success are critical. Part of that is understanding what the business demand will be in terms of volume and numbers of batches of API and so on. Verta helps companies understand that. We provide much more than just technical support. We help with understanding potential growth trajectories following approval and putting supply chains together that support those expectations.
ND: We are seeing the need for experts that can support development of small molecule APIs with low solubilities and that have difficult synthetic routes.
IS: I agree; in the last three years, we have developed a number of specific processes for clients that have needed help increasing the solubility of their drug substances. That work has led to at least three patents that those clients have obtained, which gives them great protection that they couldn’t get if they had relied only on CDMOs.
ND: Biologics is another area, including CAR-T cell therapy and various immuno-oncology treatments, both of which are sectors that are growing dramatically. Given the ongoing supply-chain challenges, companies are also looking for assistance in that area. Regulatory compliance assistance also remains strong. We have ex-regulators that are up to date on the regulations and understand the regulators as well. They can help clients navigate those complex regulatory pathways.
BL: many cases, having a fully integrated supply chain with one CMO wouldn’t make sense because of many factors, including technology available within that CMO. This could include the ability to make the drug substance in question or the drug product or to provide unique packaging that might be required because of dosing or marketing. Also, you don’t necessarily want the CMO controlling the transportation nodes between API, drug product, and packaging sites, due to timing, risk, title to product, and cost. In addition, many of these CDMOs promise so many things, but frequently they are just not capable of doing everything that the client needs. This inability to deliver is often not equipment capability but due to their own human resource skill set and availability.
ND: The number of NDAs, INDs, and other registrations Verta has supported over the last five years is significant. We already mentioned the large number of projects focused on solubility improvement and also taking a mAb from phase I to BLA in 2.5 years, as well as the logistic and supply chain work that we do to help companies move product across borders without interruption and save millions of dollars on regulatory and import/export issues.
Those are all good, representative examples of Verta’s capabilities. Clients come to us with what are for them insurmountable problems. Verta provides the right experts that help them quickly resolve those issues — sometimes in as little as a matter of minutes. We can do that because our experts have extensive experience; they have been there and done that over and over again.
IS: Another interesting area to bring up is controlled substances. Candidates such as LSD and cannabis are receiving government approvals as new therapies and are entering the formal drug market. Most of the companies developing these drugs are small and have perhaps previously been involved in the supply of over-the-counter medicines and don’t really know the regulated pharma market.
ND: It is worth emphasizing that all of our clients have very bright people running them that are extremely enthusiastic about their molecules as medicines. Quite often they simply don’t know what they don’t know. They think they can do things quickly because they don’t understand how complex drug development is and are unaware of the quite extensive regulatory requirements that must be met. With our breadth and depth of expertise and experience, Verta can help them get from where they are to where they want to be.
Verta Life Sciences have over 100 CMC consultants based in the US, EU and China and may be reached at Experts @Vertals.com. There web site is https://www.vertalifesciences.com/
Nicks’ expertise lies in manufacturing strategy and rationalization, strategic sourcing and outsourcing, global supply chain start-ups and leadership, new product introduction, technology transfer, and complex global change program leadership. He has helped numerous clients; develop, manufacture, register and launch new products, establish and start up new manufacturing facilities globally, rationalize global manufacturing operations, and close and sell manufacturing facilities. Nick has a M.Sc. in design of production systems from Loughborough University of Technology, UK, and a B.Sc. in engineering science from the University of Warwick, UK.