The contract research and drug-development organization Ricerca Biosciences LLC (Concord, Ohio) recently expanded its capabilities through the acquisition of the discovery and preclinical business of MDS Pharma Services, a deal completed in March 2010. With the acquisition, Ricerca is positioned as a full-service partner in clinical research and drug-substance development and manufacturing and support services for formulation development. The MDS acquisition also gives the US-headquartered company its first assets in Western Europe and Asia.

With the acquisition of the discovery and preclinical business of MDS Pharma Services, Ricerca gained facilities in Bothell, Washington; Lyon, France; and Taipei, Taiwan. The acquisition also added 600 employees to Ricerca and increased the company’s total staff to 850.

 The move expanded the company’s global toxicology activities to allow coordination of projects between North America, Europe, and Asia and increased access to active pharmaceutical ingredient (API) synthesis and process development for investigational new drug (IND) applications in North America and Europe. The move also expanded and enhanced the company’s drug, metabolism and pharmacokinetics (DMPK) service and efficacy models, broadened the company’s pharmacological profiling services to include molecular, cellular, tissue and 

 assays of development candidates and enhanced its lead-optimization services. The acquisition also allows the company to provide radiolabeled compound synthesis on a worldwide basis. 

The key impetus behind the acquisition, according to Ian Lennox, chairman and CEO of Ricerca Biosciences, was to expand the company’s capabilities in drug development. “The MDS Pharma Services pharmacology/DMPK business is perfect fit in terms of client needs,” says Lennox.  “As a contract research organization, I don’t agree with buying more of what you already have in this market. Looking at the MDS acquisition and Ricerca’s capabilities in terms of a Venn diagram, the service and client overlap in our two organizations is very limited, and where it does overlap, there is geographic diversity of North America and Europe.”

He points out that the facilities in Bothell (50,000 ft 

) gained in the acquisition provide early-stage pharmacology/DMPK services. The 190,000-ft 

 facility in Lyon offers drug-safety assessment (i.e., toxicology) services and will provide a model for the company’s operations at the Concord facilities. “One leverage area by next year is to enhance our North American drug-safety assessment at the Concord site by using the Lyon learning curve,” says Lennox. 

With the acquisition, Ricerca also expands its client base by sector and geographically. Prior to the acquisition, roughly 85% of the company’s business was in North America. Approximately 80% of its clients were biotechnology and mid-sized pharmaceutical companies, 10% were from Big Pharma, and 10% were specialty pharmaceutical companies or other client types. Following the acquisition, Ricerca’s client base is now approximately 50% from the biotechnology sector, 35% from Big Pharma, and roughly 15% from specialty pharmaceutical companies and other companies. Its geographic client distribution is now roughly 60% North American, 30% European, and 10% Asian. 

Lennox emphasizes that the MDS acquisition expands the company’s offerings in the drug-development spectrum. “This acquisition is a perfect fit in that it brings in the front end, which the pharmacology and DMPK attracts the clients at an earlier stage,” he says. “In the nonclinical space, clients like to bundle capabilities immediately into  chemistry and drug-safety assessment, so that’s a very nice fit.” On the API side, Ricerca offers medicinal-chemistry capabilities in the US and Asia, kilo-laboratory API production, process research and analytical stability testing, as well as manufacturing of APIs up to ton quantities for clinical and commercial use. 

Lennox says the company will focus on leveraging the MDS acquisition and growing organically and does not have any immediate plans for further acquisitions. The one potential area that Lennox says the company may be interested in augmenting is its presence in analytical chemistry and formulation development. “I’ll look to partner and explore that area. It would be a natural piece that missing from our equation,” he said.

Articles

Pharma Partner Focus

Ian Lennox, chairman and CEO of Ricerca Biosciences, outlines the company's growth strategy post its acquisition of the discovery and preclinical business of MDS Pharma Services.

Ricerca Biosciences Expands into Preclinical Sector

Ever since the contract manufacturing industry began to take off in the late 1990s, it has hailed itself as a great savior to the pharmaceutical and biopharmaceutical industries. Contract manufacturing organizations (CMOs) set out to enable companies to reduce capital expenditures, lower costs, and access new technologies, while unburdening them of facilities they no longer needed.  

Looking back over the past 10 years, the industry has achieved much of what it promised. CMOs have proven to be a desirable and dependable option for small and mid-size pharmaceutical and biopharmaceutical companies, and they have taken a lot of redundant facilities off the hands of larger companies. The major drug companies have not fully endorsed CMOs as an option, however, and they continue to build new capacity, especially for manufacturing dose forms and biologics. Contractors manufacture less than 20% of newly approved drugs for the global pharmaceutical companies, according to a recent PharmSource analysis. 

Furthermore, CMOs have  not been financially successful businesses. Except for a few standout performers with unique capabilities, most CMOs have been marginally profitable at best, generating barely enough cash flow to maintain their equipment.  

Contractors' performance has exposed a fundamental flaw in the business concept. CMOs haven't really changed the manufacturing model that has been predominant in the pharmaceutical and biopharmaceutical industries during the past 50 years; they've simply adapted it to a fee-for-service payment arrangement. As a result, they have inherited the problems of the traditional pharmaceutical manufacturing model, namely, high fixed costs, too much capacity, low utilization, and the high risk of product failure. 

The capital intensiveness of manufacturing makes it a high-fixed-cost business, and the special needs of complying with good manufacturing practice (GMP) drive those costs even higher. Meanwhile, the primary reason for the CMO industry's growth—the desire of the major pharmaceutical and biopharmaceutical companies to shed redundant manufacturing sites at any cost—exacerbates the overcapacity problem by keeping capacity in the market that should rightfully be shuttered. Ultimately, high fixed costs and overcapacity lead to price wars as companies compete to get any business they can to help cover their fixed costs. 

For the CMO industry, reducing overall capacity is critical, but consolidation isn't likely to occur soon. The problem seems destined to get worse as the global biopharmaceutical companies go through successive rounds of facility divestitures and European governments continue to force or assist unprofitable facilities to stay open. 

Reducing fixed costs could help many CMOs, but that is easier said than done. Multiproduct facilities require various processing capabilities, guaranteeing that much of their capacity will not be used at any one time. Organizing manufacturing networks into "centers of excellence" that each specialize in a single dosage form could reduce complexity and improve utilization. However, the costs of transferring products between facilities in a GMP regulatory environment are prohibitively high, thus making it difficult to implement such a strategy in the near term.  

CMO executives could help by resisting the urge to invest in capabilities they don't currently have but that are occasionally requested by clients. For instance, many CMO executives in the injectable segment are aching to invest in new prefilled-syringe capacity despite ample evidence of sufficient capacity, and an incipient price war, in the market. 

Looking ahead, CMOs need to find ways to reduce the risk they face from product failures during clinical development and from the underperformance of approved products once they reach the market. The most obvious defensive measure CMOs can take is to sign multiple candidates for each capacity slot they have available. Given the likelihood that a new product candidate will fail, CMOs need to sign two or three of them for every available capacity slot.  

As pharmaceutical and biopharmaceutical companies pursue a lean business model, they are increasingly clear about what they need from manufacturers: low prices, flexible capacity, and reliable supply. CMO executives need to examine their current business models closely and determine what it will take for them to meet those requirements while ensuring a return for their investors.  

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

Outsourcing

CMOs' business model has all of the flaws of the captive model it is meant to replace.

Time for a Model Upgrade


The US pharmaceutical industry rebounded in 2009 despite concerns over slowing pharmaceutical growth, according to an analysis issued by IMS Health on Apr. 1, 2010. Although growth was more robust that had been projected, it was still below historical levels. 

US sales of ethical pharmaceuticals and insulins through retail and nonretail channels increased 5.1% in 2009 to $300.3 billion, compared with growth of only 1.8% in 2008. “In 2009, demand for pharmaceuticals proved stronger than in the prior two years, yet remained at historically low levels,” said Murray Aitken, senior vice-president of Healthcare Insight for IMS. 

IMS identified several factors contributing to US market growth in 2009, which included stronger demand for prescription drugs despite macroeconomic conditions. Dispensed prescription-drug volume in retail channels increased 2.1% in 2009 to reach 3.9 billion dispensed prescriptions. In 2008, dispensed-prescription volume in retail channels increased only 1%. The uptick in 2009 was primarily due to increased volume for existing drugs. Although the volume of new-therapy starts in 17 major chronic disease areas declined by approximately 1% in 2009, the volume for add-on therapy starts, switches, and refills increased by nearly 2% in 2009. 

Specialty pharmaceuticals, broadly classified as drugs to patient-specific populations that may involve complex and chromic conditions, also contributed to positive growth in 2009. US sales of specialty pharmaceuticals increased 7.5% in 2009 and now constitute 21% of US market value, according to IMS. 

IMS also attributes better-than-expected growth in 2009 to sustained pricing practices by pharmaceutical companies and inventory-management actions by retail pharmacies at the beginning of 2009 to bring stocking levels in line with demand. Also, IMS also points to a lack of major product-safety issues and a reduced impact of patent expiries in 2009 compared with recent levels. 

However, generic drugs continue to play a significant role in the US prescription drug market. IMS reported that generic products, including branded generics, now represent 75% of all dispensed prescriptions in the US, up from 57% in 2004. The total number of generic prescriptions dispensed in the US increased 5.9% in 2009 while the number of branded prescriptions dispensed decreased 7.6%.




The three mega mergers of 2009—Pfizer’s (New York) $68-billion acquisition of Wyeth (Madison, NJ), Merck & Co.’s (Whitehouse Station, NJ) $41-billion acquisition of Schering-Plough (Kenilworth, NJ), and Roche’s (Basel, Switzerland) $47-billion acquisition of Genentech (South San Francisco, NJ) have shifted the rankings of the top pharmaceutical companies as measured by US prescription-drug sales. Pfizer retains the number position with US prescription-drug sales of $27.8 billion in 2009, giving the company an 9.3% share of the US prescription-drug market, according to data from IMS Health. Merck & Co. moves into the number two spot with US prescription-drug sales of $19.8 billion or 6.6% of the US market. In 2008, prior to its acquisition of Schering-Plough, Merck & Co. held the number five spot in the US prescription-drug market. 

The rise of Merck comes at the expense of GlaxoSmithKline (GSK, London), who dropped from the number two position in 2008 to number four in 2009. GSK posted US prescription-drug sales of $15.0 billion in 2009, down from $18.4 billion in 2008. AstraZeneca (London) maintained the third spot in the US prescription-drug market. In 2009, it posted sales of $18.3 billion for a 6.1% share of the US market, only slightly below Merck’s share of 6.6%. 

With its acquisition of Genentech, Roche moved up two spots from number seven in the US prescription-drug market in 2008 to number five in 2009. In 2009, Roche reigned in a market share of 4.8% with US prescription-drug sales of $14.3 billion. 

The 2009 rankings of US pharmaceutical companies saw the rise of one generic-drug company, Teva Pharmaceutical (Jerusalem). Teva jumped from the twelfth spot in 2008 to number 10 in 2009 with a 4.0% share of the US prescription-drug market with sales of $12.1 billion. Those sales put Teva in close proximity to four innovator-drug companies: Novartis (Basel), which had 2009 US prescription-drug sales of $13.4 billion, Eli Lilly (Indianapolis, IN) with US sales of $13.2 billion, Johnson & Johnson (New Brunswick, NJ) with US prescription-drug sales of $12.8 billion, and Amgen (Thousand Oaks, CA) with US prescription-drug sales of $12.5 billion. Amgen was the only mostly pure-play biopharmaceutical company to make the top 15 companies based on US prescription-drug sales.

Teva was the only generic-drug company to make the listing of the top 15 US pharmaceutical companies, and it eclipsed five major innovator-drug companies: sanofi-aventis (Paris), Abbott Laboratories (Abbott Park, IL), Bristol-Myers Squibb (BMS, New York),  Takeda Pharmaceutical (Osaka, Japan), and Boehringer-Ingelheim (BI, Ingelheim, Germany). sanof-aventis was ranked eleventh with US prescription-drug sales of $11.1 billion, and Abbott was twelfth with sales of $9.5 billion. BMS  came in thirteenth with sales of $8.9 billion, Takeda fourteenth with US prescription-drug sales of $7.9 billion, and BI with US sales of $7.6 billion. 




The top-selling prescription drugs based on value in the US market also underwent some change in 2009 compared with 2008, according to data from IMS. The top five spots were unchanged as Lipitor (atovastatin) by Pfizer retained the number one ranking, followed by Nexium (esomprazole) by AstraZeneca. Plavix (clopidogrel) from BMS and sanofi-aventis ranked third, and GSK’s Advair Diskus (fluticasone and salmeterol) came in at number four. AstraZeneca’s Seroquel (quetiapine) was ranked fifth in US prescription-drug sales. 

Three products earned a spot among the 15 top-selling prescription drugs in the US in 2009 that did not make the top rankings in 2008. The three newcomers to the top rankings were AstraZeneca’s Crestor (rosuvastatin), Avastin (bevacizumab) from Genentech/Roche, and oxycontin. Crestor came in at number 12 with US sales of $3 billion, and Avastin followed with US sales of $3.0 billion. Oxycontin was ranked fifteenth with US sales of $2.9 billion. 

Three products fell out of the top-selling products in 2009. Prevacid (lansoprazole) from Takeda, Effexor XR (venlafaxine) from Wyeth (now part of Pfizer), and Lexapro (escitalopram) from Forest Laboratories (New York). Several products moved up in their rankings. BMS’s Abilify (aripiprazole) moved to the sixth spot on US sales of $4.0 billion in 2009, up from number 12 in 2008. Takeda’s Actos (pioglitazone) moved up one notch to number eight with US sales of $3.4 billion. Remicade (infliximab) moved to the eleventh spot in 2009 from thirteenth in 2008 on 2009 sales of $3.2 billion. Remicade is from Johnson & Johnson, Schering-Plough (now part of Merck & Co.), and Mitsubishi Tanabe Pharma (Osaka, Japan). 

The other drugs among the top-selling 15 products in 2009 also made the top rankings in 2008. These include Merck & Co.’s Singulair (montelukast), ranked seventh in 2009; Enbrel (etanercept) from Amgen, Wyeth (now part of Pfizer), and Takeda, ranked ninth in 2009; and Neulasta (pegfilgrastim) and Epogen (epoetin alfa) from Amgen, respectively ranked fourteenth and tenth. The rankings also showed that five biologic-based drugs were among the top-selling 15 products in 2009: Enbrel, Epogen, Remicade, Avastin, and Neulasta.

Global Feature

The US market for prescription drugs grew better than expected in 2009, but growth is still below historical levels.

PTSM: Pharmaceutical Technology Sourcing and Management-04-07-2010

Ricerca Biosciences Expands into Preclinical Sector

Time for a Model Upgrade

US Prescription-Drug Market Rebounds