Innovation is the mainstay of drug development, and it is particularly important to overcome challenges in improving global health outcomes. A recent analysis by the  International Federation of Pharmaceutical Manufacturers & Associations (IFPMA), which represents the research-based pharmaceutical companies and associations on a global basis, examines the role of “incremental innovation” in serving that role. The report was issued late last month concurrent to the Nineteenth Session of the World Intellectual Property Organization (WIPO) Standing Committee on the Law of Patents. WIPO is an United Nations agency focused on the use of intellectual property as a means of stimulating innovation. The report emphasizes the importance of incremental innovation in improving medicines, explaining its scientific rationale, its medical value, and the economic incentives needed for its development. 

“Evidence-based discussions are key to advancing global health,” says IFPMA Director General Eduardo Pisani, in a Feb. 25, 2012 IFPMA report. “This publication provides facts and tangible examples to illustrate how biopharmaceutical innovation benefits patients and dispel the misperception that incremental medicines are trivial.” 

 Innovation may be classified as revolutionary, radical, and incremental, according to the IFPMA report. In the context of drug development, a revolutionary innovation would be discovery of a new biological or metabolic pathway. Revolutionary innovation is defined as conceptual advances, such as new scientific theories or principles, which form the basis for subsequent research. A radical innovation puts these principles into practice. A “first-in-class” drug, meaning the first drug in a new drug class is an example of a radical innovation, notes the IFPMA report. Incremental innovation involves exploring and improving radical products.  Incremental innovation advances medicines by expanding therapeutic classes, increasing the number of available dosing options, discovering new physiological interactions of known medicines, and improving other properties of existing medicines, according to the report. 

“There are countless examples of the significant public health impact of incremental innovation,” said Pisani in the release. “R&D efforts based on existing medicines have led to wide-ranging therapeutic improvements, such as a new use for an antifungal medicine’s metabolite to treat Chagas disease, a neglected tropical disease affecting nearly 10 million people. Improved health outcomes have also been achieved by reducing the antimalarial dosing of ASAQ from eight to two tablets daily. A case study cited in the report highlights an improved treatment of hepatitis C, which has boosted cure rates from 38% to 54%.” 

ASAQ, which stands for Adapted, Simple, Accessible, Quality,  is the project name given to a collaboration between Sanofi and Drugs for Neglected Diseases initiative (DNDi) to develop a new and more easily administered combination of two antimalaria drugs, artesunate and amodiaquine. The project yielded a new fixed combination drug  that reduced dosing from eight tablets to two tablets daily. According to the IFPMA report, more than 150 million ASAQ treatments have been distributed in more than 33 countries. 

 In another example of incremental innovation, Eisai and DNDi  partnered to further explore the effects of the antifungal medicine ravuconazole against the pathogen that causes Chagas disease, a neglected tropical disease. Once administered to patients, ravuconazole naturally metabolizes other compounds or prodrugs, one of which E1224, is being evaluated to treat Chagas disease. With its partnership with Eisai, DNDi is executing clinical trials to determine  the safety and efficacy of the prodrug E1224, and Eisai is supplying the drug for the clinical trials and related scientific expertise. 

Articles

CSR and Sustainability Forum

Incremental innovation advances medicines by expanding therapeutic classes, increasing the number of available dosing options, discovering new physiological interactions of known medicines, and improving other properties of existing medicines

Pharma Industry Outlines Opportunity for Incremental Innovation to Improve Global Health

Informex, the exhibition of custom and batch manufacturers, which was held last month in Anaheim, California, provides an opportunity to review recent activity in the fine-chemicals and contract API market. In examining developments from 2012 and 2013 to date, companies are proceeding with select investments to build capacity and service capabilities. Highlights of some of this activity is outlined below. 

On the expansion side, Lonza reported on the first two build-out phases of its large-scale multpurpose cGMP API plant in Nansha, China, following FDA approval of several customer projects in late 2011. Also, a new cGMP kilo-laboratory in Nansha and an additional small-scale manufacturing train were successfully brought on line. The company’s large-scale antibody drug conjugates project in Visp, Switzerland was finalized on schedule and the plant received FDA approval in the third quarter of 2012. A second expansion phase has started and will be finalized toward the end of the first half of 2014. Five additional high-potency API (HPAPI) laboratories in Visp, with capabilities for cytotoxic substances, are operational and utilized, and new investment in additional cytotoxic API manufacturing capacity in Visp was started up, according to the company. Lonza also increased peptide-manufacturing capabilities at it site in Braine, Belgium. 

Other companies are proceeding with investments and alliances to build HPAPI capabilities. In 2012, Carbogen Amcis and ADC Biotechnology announced a partnership to provide customers with development and manufacturing services for antibody drug conjugates. ADC Bio will provide access to proprietary solid-phase immobilization technologies for conjugation and long-term storage of antibody drug conjugates, and Carbogen Amcis will focus on small- to large-scale GMP supply and on the formulation of antibody drug conjugate. In October 2012, Fujifilm Diosynth Biotechnologies formed a strategic alliance with Piramal for antibody drug conjugate production, whereby the two parties will offer contract development and manufacture of ADCs. Piramal offers antibody drug conjugate production at its site in Grangemouth, Scotland. Fujifilm recently announced an expansion of its cGMP manufacturing facilities at its sites in Research Triangle Park, North Carolina, and Billingham, United Kingdom. Novasep announced in 2012 a $3.9-million (EUR 3 million) investment to expand its highly potent API manufacturing capabilities at its Le Mans, France, facility. The plant expansion is expected to be fully operational by the beginning of 2013. The new Le Mans facility adds to Novasep’s strategy for total synthesis of antibody drug conjugates.

 Other companies are proceeding with investment or recently made investments in 2012. Almac expanded its API manufacturing facility at its European Headquarters in Craigavon, United Kingdom, with a scheduled completion for end of 2012. This upgrade includes installation of two 1000-L reactors and a pressure-filter dryer, which allows production of GMP APIs up to 150-kg batch. Cambridge Major Laboratories (CML) is planning an expansion of its large-scale API manufacturing facility in Germantown, Wisconsin. The expansion comes three years after commissioning the new site. The expansion will include additional reactor capacity as well as isolation equipment. Alongside capacity additions, CML has made additional investments in engineering controls to ensure the sustainability of the business. Cedarburg Hauser Pharmaceuticals expanded the capacity of its Wisconsin-based API manufacturing plant as a result of an increased demand for contract manufacturing of commercial APIs as well as additional upgrades for improving safety and GMP systems. 

Dr. Reddy’s reports expansion in the areas of activated mPEG manufacturing and in the development and manufacture of APIs for use in preclinical through to commercial development at its manufacturing facility in Mirfield, United Kingdom. Also,in addition to its HPAPI capacity expansion, Novasep is investing EUR 30 million ($39 million) to build a chromatography plant for the production of large volumes of commercial APIs. The plant will be built on Novasep’s existing site in Mourenx, France, and is expected to be operational and validated within 18 months. The new plant will contain Varicol continuous chromatography systems with 1200-mm diameter columns operated at up to 70 bars. SAFC, part of Sigma-Aldrich, is expanding its operations in Scotland by investing in the development of a new powder-manufacturing facility on its Irvine site. SAFC’s new facility in Irvine is its second powder manufacturing facility, which will support SAFC’s risk-management program, providing an internal back-up supplier for its customers. The new facility will be used to service customers across Europe.

Almac and DSM Pharmaceutical Products, the custom manufacturing and technology business of Royal DSM, recently reported the successful transfer of enzymes for enzyme screening, process development and scale-up manufacture, as part of an October 2012 agreement in biocatalysis. The agreement grants both parties access to their enzyme platform technologies and services for the manufacturing of APIs. The collaboration also enables Almac to offer its customers a preferred partner for large-scale production. In other news, DSM Pharmaceutical Products  signed a collaboration agreement with Chemtrix in the field of continuous flow chemistry. The collaboration is intended to provide equipment, development, and manufacturing services to the pharmaceutical industry. 

Contract Manufacturing

Contract API manufacturers and fine-chemical producers proceed with select investment in capacity and service additions.

Fine-Chemical Producers Outline Expansion Plans at Informex

Several formerly contract-only CMOs have converted, after recent acquisitions, to a more mixed model that combines contract manufacturing with proprietary products. The most prominent examples include Patheon's late 2012 acquisition of Banner Pharmacaps, a softgel manufacturer with its own lines of over-the-counter (OTC) and nutritional softgel products. 

The trend was further highlighted in 2012 with the acquisition of Metrics by Mayne Pharma, an Australian generic pharmaceutical company. Metrics has been known primarily for its analytical, formulation, and clinical manufacturing services, but the acquisition revealed that more than half of its $52 million in revenues came from sales of proprietary products it had developed internally. Conversations with other CDMOs indicate that a number of CDMOs have quietly pursued similar strategies in recent years. 

The effort to build a proprietary revenue stream is not limited to dose CMOs. Contract manufacturers of APIs have also been pursuing these opportunities. For instance, the development of proprietary generic APIs has been a major initiative for DSM Pharmaceutical Products in the business strategy it rolled out in 2012; up to that point the company had focused primarily on custom manufacturing.  

Companies that manufacture both their own products and client products have long been part of the CMO landscape. Most manufacturers of generic APIs have long offered custom manufacturing of advanced intermediates and proprietary APIs.  

Many bio/pharmaceutical companies have been offering contract manufacturing as a means of boosting manufacturing-capacity utilization. Although most companies are satisfied to pick up the odd product, some share manufacturing capacity between proprietary products and a strategically important contract manufacturing business that has a substantial sales and project management infrastructure. This shared capacity model is especially common in the injectables segment of the CMO market. 

There are other variants of the mixed proprietary–plus

contract model as well. Private-label manufacturers develop and manufacture products under their own application but package the product under the name of a contract client, usually a retailer. In a variation of that model, a generics drug company will out-license its products to other pharmaceutical companies and supply the manufactured product. A further variation of the model is a drug-delivery company that develops a product for a client using its proprietary drug-delivery technologies or know-how, and then manufactures the product for commercial supply.  

For CMOs entering the proprietary products game for the first time, the rationale seems rather clear:  

. Proprietary products typically promise better profitability than contract manufacturing. CMOs can capture the higher unit price of the finished product and the 40+% gross margin that drug companies can command.

. Proprietary products can absorb some of the unutilized capacity in CMO facilities. This utilization is especially valuable for solid-dose CMOs, among which there is significant excess capacity.

In the contract-only CMO model, manufacturers are totally at the mercy of their clients' marketing prowess and product success. With proprietary products, CDMOs can gain some predictability over revenues and utilization.

A move into proprietary products can be particularly attractive to smaller CDMOs that cannot gain traction in the contract manufacturing business and need an extra boost to drive growth. Global bio/pharma vendor-consolidation strategies favor larger CMOs with broader capabilities, which could leave smaller CMOs out of the mix and searching for new growth avenues. 

CDMOs have real advantages for developing or acquiring proprietary products, because of their development and manufacturing infrastructure and know-how. The frequency and apparent ease with which they can enter the products business, however, highlights one of the great contradictions of the bio/pharmaceutical industry. While much attention is placed on the high cost of R&D and the high probability of failure, the industry has remarkably low barriers to entry. Cheap generic APIs, low-regulatory barriers for OTC products and products with previously approved APIs (505(b) 2 products), and the ability to scale manufacturing operations to niche markets enable all sorts of companies to be successful with proprietary products. 

Efforts to clamp down on healthcare costs, however, could hamper that model going forward. In Europe and the US, governments and insurers are making it more difficult for new products to gain access to approved formularies and more difficult for physicians to prescribe off-formulary drugs. Market power is moving to larger generic-drug companies and to distributors that can offer a broad product list at competitive prices. That market power could make it harder for smaller products companies to break into the market. 

PharmSource expects that a lot of CMO proprietary product-development efforts will be channeled to the OTC and nutritional segments of the market, especially private label. OTC and nutritional products are benefiting from growing consumer acceptance and are not subject to insurance limitations. Further, marketing of private label products is in the hands of the labeler rather than the bio/pharmaceutical company, which means that CMOs won't have to build sophisticated sales and marketing infrastructure. Finally, the know-how of CMOs to develop and manufacture products with differentiating features and benefits will be a plus in dealing with the retailers. 

The CMO model was meant to be relatively low-risk because it avoided the inherent riskiness of new drug development while offering bio/pharmaceutical companies the benefits of lower manufacturing costs and no investment in manufacturing capacity. The model hasn't worked out that way, partly because of the low entry barriers to contract manufacturing, and partly because global bio/pharmaceutical companies have been able to greatly improve their internal manufacturing performance.  As a result, the industry will increasingly see CMOs mimic the business model they were meant to replace. 

 is president of PharmSource Information Services, Inc., and publisher of 

, tel. 703.383.4903, Twitter@JimPharmSource, 

Outsourcing

Is the contract-only CMO an endangered species?

End of the Dedicated CMO?

In keeping with overall pharmaceutical industry rends, recent growth in the global API market has slowed although the overall market is still increasing at a moderate pace. Led by India and China, Asia Pacific has had the recent highest growth in the API market although North America and the US remain the largest markets, respectively, on a regional and country basis in the global market. Generic APIs are outpacing growth for branded, innovator APIs. On a global supply basis, China remains the largest producer of generic APIs, largely for its domestic market as well as the largest exporter of APIs on global basis, primarily to emerging markets. Italy retains its historical position as the largest supplier of generic APIs to both Western Europe and the US although India’s position as a supplier to developed market is on the rise.

 The global API market (including both the merchant market and the captive market) was valued at $113 billion in 2012, up from $91 billion in 2008, according to a recent report, 

 by the Chemical Pharmaceutical Generic Association (CPA), an organization representing Italian API manufacturers (1). The captive API market is defined as APIs used by pharmaceutical companies for in-house production of finished dosage forms, and the merchant API market is defined as APIs sold by third parties. From 2008–2012, the global API market grew at an average annual rate of 5.6% compared to an annual growth rate of 7.2% from 2004–2008. The slowing market is attributable to factors affecting the pharmaceutical industry as a whole: slowing global economic growth, increased pricing pressure due to cost-containment policies adopted by most countries, increased competition from generic drugs, higher risk of pipeline failures with elevated costs for drug discovery, and increasing competition from low-cost producing countries. 

On a geographic basis, the highest growth rate for APIs between 2008 and 2012 was in Asia-Pacific (excluding Japan), which experienced average annual growth rate of 13.9%, followed by the Middle East with 8.7% average annual growth, and Eastern Europe and the Commonwealth of States (CIS) with 8.2% average annual growth, according to the CPA report (1). The developed markets in Western Europe, North America, and Japan had slower annual growth rate. Western Europe’s API market had the lowest annual average growth rate, 2.5%, followed by Japan at 3.4% and North America at 3.8%. (1). 

On an absolute basis, however, North America is still the largest API market (including both captive and merchant markets) followed by Asia Pacific although Asia Pacific is gaining ground. The North America share of the global API market declined three percentage points between 2008 and 2012 as the share of Asia Pacific increased. North America’s share was 43% in 2012, down from 46% in 2008. Asia Pacific’s share was 28.3% in 2012, up from 24.2% in 2008, according to the CPA report (1). The US remains the largestglobal market on a country basis, accounting for 39.7% of the global API market in 2012. 

These market positions change, however, if looking at the generic API merchant market alone. Led by China, Asia Pacific accounted for 39.6% of the global generic API merchant market in 2012. China is the largest consumer on a country basis of generic APIs in the merchant market, accounting for 23.7% of the global total, surpassing the North American market as a whole (21.9%) and the US (20.4%). Between 2008–2012, China registered the fastest annual average growth rate in the generic API merchant market at 13.2%, followed by India at 11.9%. Collectively, the two countries accounted for 29.7% of the global generic API merchant market, according to the CPA report (1).

During 2008–2012, the global captive API market grew at a slightly higher rate comparative to the global merchant market and is larger on an absolute basis. In 2008, the global captive API market was valued at $55 billion and rose to $69 billion in 2012, representing average annual growth of 5.8%, according to the CPA analysis. The global merchant API market was valued at $36 billion in 2008 and increased to $44 billion in 2012 91). 

. Within the global merchant API market, the generic API market is outpacing the branded, innovator API market. The global generic API merchant market was valued at $17 billion in 2008 and rose to $22.5 billion in 2012, representing average annual growth of 7.3%. In 2012, the global branded, innovator API merchant market was valued at $21.5 billion, slightly less than the generic market. Annual average growth in the global branded, innovator API merchant market between 2008 and 2012 was 3.1%, less than half of growth in the generic API merchant market.

The strength of the generic API merchant market is expected to continue. Overall, the generic API merchant is expected to increase at an average annual rate of 7.7% from $22.5 billion in 2012 to $30.6 billion in 2016. The market in Asia Pacific is projected to increase at 10.8% during the next four years, making it the fastest growing region in the generic API merchant market.  By 2016, China is expected to account for 27.7% of the global generic API merchant market, making it the largest market and surpassing the US, which will be the second largest global market with a 18.2% share. India will remain as the third largest merchant market for generic APIs with a projected 7.2% by 2016, according to the CPA report (1) Ten emerging markets are projected to experience double-digit growth of 10% to 14% in the generic API market. These countries include Brazil, China, Egypt, India, Jordan, Pakistan, South Africa, Thailand, Turkey, and Vietnam (1). 

. Western Europe ranks second behind Asia Pacific in the supply of generic APIs on a global basis, but its market share declined from 16.7% in 2008 to 14.2% in 2012. Italy remains the largest producer of generic APIs in Western Europe, accounting for 58.3% of the region’s total, followed by Spain at 21%. Italy is also the largest supplier of generic APIs to the US market. Italian API producers accounted for 31.2% of the supply to the US generic API market in 2012, and their growth in supplying the US increased at an annual average growth of 5.2% between 2008 and 2012. India is the second largest supplier of generic APIs to the US market with a 24.4% share, according to the CPA report. India is also increasing its supply to Western Europe, accounting for 19.2% of the supply to the region (1).

 In Asia Pacific, China is the largest generic API producer, with its domestic market representing its strength. Between 2008 and 2012, overall API production in China increased at an average annual rate of 7% from $6.43 billion in 2008 to $8.44 billion in 2012. During this period, sales to China’s domestic increased at an average annual rate of 11% while export growth increased only 5.8%. Sales to emerging markets represented the largest target for China’s API export sales, accounting for 63.1% of production. China’s export sales to developed markets (North America, Western Europe, and Japan) accounted for 36.9% of overall export sales and 24.7% of total API production, according to the CPA report (1). Overall, China ranks as the largest producer of generic APIs in the world and the largest exporter of APIs, followed by India. 

But unlike China, whose domestic market is the largest target for its API production, India relies heavily on export sales. India’s API production was valued at $4.70 billion in 2012, up from $2.27 billion in 2008. India’s supply to the US market has increased at an average annual rate of 44% between 2008 and 2012, increasing from $255 million in 2008 to $1.12 billion in 2012 (1).


 1. Chemical Pharmaceutical Generic Association (CPA), 

 (Milan, March 2013), www.cpa-italy.org/en/indexen.php.

APIs

Supply-demand fundamentals show strong growth for generic APIs as gains in innovator APIs lag.

The Weaknesses and Strengths of the Global API Market

, which marks the company’s 30th anniversary of financial, volunteer and product contributions to the organization to support the goal of creating safe, affordable housing in partnership with low-income families around the world. In 1983, Dow became one of Habitat’s first corporate partners, and over its three-plus decades has assisted in the construction of nearly 39,000 homes in 24 countries on six continents, including in Ghana, Africa, for the first time in 2013. 

 has launched an effort to eliminate rheumatic heart disease (RHD) in Zambia in collaboration with the 

Lusaka University Teaching Hospital (UTH)

. To measure RHD prevalence and identify those in need of secondary prophylaxis, teams of health care professionals from Lusaka UTH, the MGH, and Novartis will use portable echocardiography machines to evaluate 3000 children, ages 9–10, in Lusaka-area public schools

Echocardiography screening is estimated to detect more than 10 times as many cases as clinical screening. Images from the echocardiography screens will be analyzed in Zambia and at the MGH using a cloud-based electronic registry developed by 

, a Cambridge, Massachusetts-based company that designs open-source electronic healthcare systems for low resource environments. Children identified as having RHD will be treated with monthly penicillin injections (termed “secondary prophylaxis”) to prevent recurrent streptococcal infections and additional valve damage. Primary prevention, the treatment of children with streptococcal infection to prevent RHD, is key to elimination of the disease. To this end, all children diagnosed with strep throat will be treated with injectable penicillin in the community-based study sites. Prevalence of RHD and adherence to secondary prophylaxis will be determined via the mobile electronic registry. 

Union for International Cancer Control (UICC)

 partnership dedicated to fighting childhood cancer in low-resources countries for three years. The new partnership is built around three key priorities: enhanced support and evaluation of ongoing projects in 15 countries in Asia, Africa, and Latin America; backing to international care networks; and awareness-raising actions to make childhood cancer a priority on the global public health agenda. 

, a global specialist HIV company established in November 2009 by 

 focused on treating HIV, has formed a collaboration with the 

, a United Nations-backed public health mechanism created in July 2010 with the goal of increasing access to HIV medicines. Through this collaboration, ViiV Healthcare will grant MPP a voluntary license for pediatric formulations of the antiretroviral medicine abacavir in the 118 countries where most (98.7%) children living with HIV live. Abacavir is currently recommended as a preferred nucleoside reverse transcriptase inhibitor (NRTI) for first-line therapy in infants and children in the World Health Organization guidelines. 

A roundup of developments in corporate social responsibility (CSR) and sustainability from the bio/pharmaceutical industry, its suppliers, and other public and private organizations.

PTSM: Pharmaceutical Technology Sourcing and Management-03-06-2013

Pharma Industry Outlines Opportunity for Incremental Innovation to Improve Global Health

Fine-Chemical Producers Outline Expansion Plans at Informex

End of the Dedicated CMO?

The Weaknesses and Strengths of the Global API Market

CSR and Sustainability in the News