Building critical mass
CROs are also broadening their capabilities in the drug-development continuum. In late April 2010, the CRO Charles River Laboratories
(Wilmington, MA) agreed to acquire the CRO WuXi AppTec (Shanghai) for $1.6 billion. "The combination of Charles River's expertise
in in vivo biology and WuXi's expertise in chemistry creates a partner capable of supporting early-stage drug-development efforts from
molecule creation to first-in-human testing and through Phase I clinical development," says Nancy Gillett, corporate executive
vice-president and president of Charles River Global Preclinical Services.
Charles River had 2009 sales of $1.2 billion, of which approximately 55% were in research models and services, and 45% in
preclinical services. WuXi had 2009 sales of approximately $270 million, of which 93% were in laboratory services and 7% in
manufacturing services. The combined company will have sales of $1.5 billion, with 44% of its revenue in research models and
services, 41% in preclinical services, and 15% in discovery services. With the acquisition, the size of Charles River will
increase from its current size of approximately 8000 employees to 12,200. Inclusive of the 4200 employees from WuXi are 2900
scientists with advanced degrees, including 2000 chemists.
CSR and sustainability forum
Charles River gains several facilities in the acquisition: a 1-million-ft2 research and development (R&D) discovery facility in Shanghai; a 253,000-ft2 discovery-chemistry facility in Tianjin, China; and a 314,000-ft2 good laboratory practice (GLP) preclinical toxicology facility in Suzhou, Jiangsu, China.
Gillett points out that Charles River also nets active pharmaceutical ingredient (API) manufacturing capacity on a CTM- and
commercial scale, formulation-development capabilities, and secondary manufacturing capabilities, which will provide Charles
River with its first capabilities in those areas. The company will acquire a 300,000-ft2 good manufacturing practice chemical API manufacturing facility in Jinshan, China, and a 75,000-ft2 biopharmaceutical services facility in Philadelphia, which includes biologic drug-substance manufacturing.
Charles River's acquisition of WuXi AppTec, which is expected to close later this year, is reflective of larger changes occurring
in the CRO market. "Pharma is looking at how to do R&D differently and looking to outsource more as a means to reduce costs
and improve development times," says Gillett. "The large pharmaceutical companies are reevaluating what they are willing to
outsource. Certain functions that they may have historically kept in house, they are now outsourcing or evaluating opportunities
to outsource," she says. Such functions include toxicology and safety assessments, development of high-throughput assays,
and pharmacological models.
Partnerships among CMOs
CMOs also are forming new models to respond to demand for more integrated outsourcing. For example, Avantium Pharma (Amsterdam),
a specialist in solid-state chemistry, Cambridge Major Laboratories (Germantown, WI), a contract API manufacturer, Xcelience
(Tampa, FL), a contract provider of formulation development and finished-product manufacturing, and Beckloff Associates, a
scientific and regulatory consulting firm and subsidiary of Cardinal Health (Dublin, OH), formed a partnership this year that
marries the respective capabilities of each company to offer a new service model in pharmaceutical development. Under the
model, named the Chemistry Playbook, each company is independent and is responsible for its own activities and project management,
but a prospective sponsor company, if it wishes, can use the complementary service offerings of all or some of the partners.
"The partnership is all about suppliers talking to each other," explains Brian Scanlan, chief business officer at Cambridge
Major Laboratories. "Chemistry Playbook is in direct response to a market need for coordination between functional areas in
outsourcing. It's not a traditional one-stop-shop model. Instead, we are leveraging the expertise of four specialists in pharmaceutical
outsourcing as a means to accelerate a company's development program by aligning project management and business development
groups to ensure optimal information flow. The partnership is designed to work with external or in-house chemistry, controls,
and manufacturing (CMC) management," says Scanlan.
James Kanter, director of business development at Xcelience, explains that there may be functional-group-deliverable bias
in a one-stop-shop model similar to that which may be found in a vertically integrated model. Under a classic vertically integrated
model, discrete companies specialize in particular functional areas, and the sponsor company is the point of contact between
contract-service providers and must coordinate activities between discrete functional areas of expertise. "Often, each company
has a distinct deliverable and may not be aware of the overall project timeline, thereby suffering from a deliverable bias,"
says Kanter. "The focus is on the discrete deliverable such as the API and the formulation. Project management tends to be
'silo-centric,' and the interactions between other contract-service providers is usually minimal and sometimes can be acrimonious,"
Derek Hennecke, CEO and president of Xcelience, says that the partnership model offered by Avantium, Xcelience, Beckloff,
and Cambridge Major Laboratories seeks to minimize deliverable bias by emphasizing project ownership that entails full responsibility
for integrated project management and timelines while preserving the advantage of the functional-area expertise offered by
each company. "The partnership acts as a one-stop shop but with streamlined timelines as agreed by a sponsor company and project
manager of each of the partner companies," says Hennecke. "The amount of individual project-manager presence is determined
by the phase of the project. A Gantt chart, which is used to show the project's schedule, deliverables, and project timeline
are shared among all functional areas to prevent 'silotization,'" he says. "Constant communication flow between technical
and regulatory areas of expertise establishes real-time feedback loops across the entire development program," adds Michael
Beckloff, president of Beckloff Associates. "This maximizes efficiency and prevents delays and cost overruns. A single point
of client contact can be established based on a client's needs and interest," he says.