Evaluating Competitive Forces in Contract Manufacturing - Pharmaceutical Technology

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Evaluating Competitive Forces in Contract Manufacturing
The author examines the opportunities and positioning of contract service providers.


Pharmaceutical Technology
Volume 36, Issue 2, pp. s30-s32

Company activity

Providing contract-manufacturing services is not in of itself new for pharmaceutical companies, and several large pharmaceutical companies have well-established contract activities. As the underlying fundamentals for cost-effectively managing a manufacturing and supply network evolve, however, these third-party services provide another way to monetize capacity and fixed assets. The interest of Big Pharma companies in highlighting their contract-manufacturing activities was evident by the participation of pharmaceutical companies at recent trade shows. A case in point is CPhI Worldwide, the large trade show of contract API manufacturers and fine-chemical producers, which is colocated with the International Contract Service Expo (ICSE), which includes contract manufacturers of finished drug products. At the recent CPhI/ICSE event held in Frankfurt, Germany, in October 2011, the contract-manufacturing arms of several large pharmaceutical companies, both innovator-drug companies and generic drug companies, were on display.

On the innovator-drug company side, these companies included the contract services of Pfizer (Pfizer CentreSource), Sanofi (Commercial and External Partnership, Industrial Affairs [CePiA]), GlaxoSmithKline, Mitsubishi Tanabe Pharma (API Corporation), Bayer (Bayer Healthcare Pharmaceuticals), Boehringer Ingelheim, Abbott, and Merck & Co. (MSD API). Generic-drug companies at CPhI/ICSE offering contract services included Sandoz (the generic-drug business of Novartis), Teva Pharmaceutical Industries (Teva Active Pharmaceutical Ingredients [TAPI]), Activas, and Mylan. A review of these companies' activities shows capabilities in both API and finished product manufacturing.

For example, Pfizer CentreSource, headquartered in Kalamazoo, Michigan, is a provider of APIs and dosage-form manufacturing. It is a supplier of fine chemicals, steroid APIs (e.g., corticosteroids and hormonal steroids), and steroid intermediates. It also provides custom fermentation services as well as sterile manufacturing (blow/fill/seal/services) and solid dosage manufacturing, including high-containment services.

The CMO division of Sanofi, CEPiA, provides corticosteroids, steroid diuretics, vitamin B12, cardiovasculars, analgesics, anti-inflammatories, antihistamines, antibiotics, prostaglandins, and opiods (morphine and codeine salts). The company has expertise is multistep custom synthesis, steroid chemistry, prostaglandins chemistry, enzymatic conversions, synthesis of high-potency compounds, peptide and protein chemistry, micronization, and large-scale chromatography. The contract arm uses Sanofi's chemical, fermentation, and biotechnological facilities in France, Germany, Italy, Hungary, Eastern Europe, Singapore, and India

On the API side, Bayer Healthcare Pharmaceuticals uses several plants for its contract activities. Its supply center in Bergkamen, Germany, is Bayer Pharma's major facility for the production of intermediates, active ingredients, and bulk pharmaceutical chemicals for steroid hormones through chemical and microbiological synthesis. It also has a micronization plant in Berlin-Charlottenburg, another API plant in Elberfeld, Germany, and a second major chemical facility for hormone and steroid production in Orizaba, Mexico.

On the API side, the contract-services arm of Boehringer Ingelheim provides contract manufacturing of biologic-based APIs, chemical APIs, and fine chemicals. On the biologics side, a key offering is its BI Hex high-expression system for monoclonal antibody production. The company recently launched a new program, "Lean-to-Clinic," which consists of streamlined work packages and which speeds up cell-line development, Phase I process development, and preclinical and clinical supplies from mammalian cell cultures.

Although small relative to the revenues generated by drug sales, the contract-manufacturing activities of pharmaceutical companies can contribute positively to a company's bottom line. For example, TAPI, the contract manufacturing arm of Teva Pharmaceutical Industries, the largest generic-drug company, generates approximately $640 million in annual third-party sales, according to company information. The contract-services arm operates through 21 production plants, which includes the company's major manufacturing facility in Israel.

Through its acquisition of a controlling interest in Matrix Laboratories in 2007, the generic-drug and specialty pharmaceutical company Mylan gained a position in API manufacturing. Based in Hyderabad, India, Mylan Laboratories (the former Matrix Laboratories) has several operating units, including a network of API and intermediate manufacturing facilities in India and China.

Reference

1. P. Van Arnum, "API Outlook," Pharm. Technol. Sourcing and Management 8 (1), online, http://www.PharmTech.com/PTSM, Jan. 12, 2012.


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