Contract manufacturing organizations (CMOs) are investing in Asia, with several recent announcement on expansions there. Also, several companies add capabilities in sterile manufacturing and formulation.  

 (Basel, Switzerland) and the biocatalysis specialist 

 (Redwood City, CA) recently expanded in Asia. Lonza announced last month the start-up of its small-scale plant for active pharmaceutical ingredients (APIs) and intermediates in Nansha Guangzhou, China. The Nansha facility, which operates under current good manufacturing practices, is designed to produce quantities from 10 kg up to several hundreds of kilograms. Lonza is also building a commercial-scale API facility in Nansha. That facility is scheduled to go on line in the second half of 2008. 

 research and development center in Singapore in late October. The facility is the company's first in Asia and will support both innovator and generic drug companies. 

(Craigavon, Northern Ireland) announced in October plans to invest £50 million ($104 million) to establish a new North American headquarters facility in southeast Pennsylvannia. Almac's expansion project will be competed in several phases. Initially, the company will construct a 240,000-ft

 building in Lower Salford Township and combine its two Pennsylvania divisions located in Audubon, Montgomery County, and Yardley, Bucks County. Construction is scheduled to begin in 2008 with the facility expected to be fully operationally in 2010.  

Almac Group consists of five businesses: Almac Diagnostics, Almac Clinical Services, Almac Clinical Technologies, Almac Sciences, and Almac Pharma Services. Almac Sciences provides contract API manufacturing and related services, and Almac Pharma Services offers contract formulation services. Almac recently invested $10 million to expand its formulation services for solid oral dosage forms from preclinical through to pilot scale.  

In another example of a sale of Western manufacturing assets to Indian CMOs and pharmaceutical companies, the Swiss CMO 

 (Zofingen, Switzerland) sold is its subsidiary Siegfried Biologics to Avestha Biotherapeutics and Research (ABRPL), a joint venture between 

 (Bangalore, India)and Meditab Specialities, part of 

 (Mumbai, India). The companies announced the deal last month. Sigfried Biologics provides contract biologics manufacturing services with a manufacturing facility in Berlin, Germany. ABRPL plans to manufacture biopharmaeuticals for global markets with a focus on markets in Brazil, Russia, India, and China. The facility gained through the Siegfried acquisition will initially focus on biopharmaceuticals that are under development at Avesthagen through the Avesthagen-Cipla joint-venture agreement signed in May 2004.  

 (Parsippany, NJ) is adding aseptic fill-finish manufacturing services for injectable cytotoxic products. The facility will be ready for commercial production in January 2008. The company's aseptic cytotoxic capabilities include commercial-scale fill-finish services for liquid and lyophilized products in vial sizes as much as 65 mL. The dedicated suites use restricited access barrier systems to ensure product isolation and include a TL filler and a 

"The market for injectable cytotoxic products is expected to grow at double-digit levels over the next five years as evidenced by the number of customers interested in our cytotoxic capabilities," said Terry Novak, president of DSM Pharmaceuticals Inc., in a company release.  

Addressing the need to add anti-counterfeiting functionality to prefilled syringes, 

 (Ravensburg, Germany) launched a new tamper-evident closure system with a needle shield for prefilled syringes. Vetter launched the new system, "V-OVS NS," at CPhI/ISCE, held in Milan, last month.  

The V-OVS NS fits on a glass barrel syringe. It consists of a sealing ring and protective cap with a needle protection element of soft rubber. Removing the cap breaks the seal, indicating that the syringe had been tampered with or used.  

"The new closure system is a validated system, making it easy for a pharmaceutical company to adapt the product," explains Tilman Roedle, head of packaging development services at Vetter.   

The market for prefilled syringes is expected to grow by 12.8% per year, according to industry estimates. In 2006, about 1.4 billion prefilled syringes were sold, and by 2010 the quantity is expected to top 2.4 billion (1). 

Vetter is a leading specialist in the production of aseptically prefilled injection systems (syringes, cartridges and vials.) The company manufactures the products at is facilities in Ravensburg and Langenargen, Germany. 

 1. M. Rios and B. Harrison, "Big Shot: Development of Prefilled Syringes," Pharm. Technol. 

Articles

Contract Manufacturing

Recent activity among contract manufacturing organizations include expansions for Lonza and Codexis in Asia and the addition of aseptic cytotoxic capabilities for DSM. Also, Vetter adds anticounterfeiting capabilities for prefilled syringes.

CMOs roll out expansions

The playing field for contract manufacturing organizations (CMOs) of active pharmaceutical ingredients (APIs) is highly competitive as CMOs face cost pressures from suppliers from Asia, recent overcapacity, and increased purchasing power from pharmaceutical companies. Amidst these changing fundamentals, however, certain companies are prospering. Such is the case with 

(Detroit, MI), which has managed to grow at healthy rates and secure contracts for several recently approved APIs.  

Ash Steven's strategy has been to focus on smaller volume, more chemically complex APIs while leveraging its US-based manufacturing base. Cal Stevens, PhD, a professor at 

 in Detroit, Michigan and Art Ash, the first PhD recipient from Wayne State, founded the company in 1962. The company's initial focus was in contract research with government agencies, including the 

 (NCI). The company took the step of transforming itself into a contract manufacturer of APIs in the early 1990s with the commercial manufacture of fludarabine phosphate, the API in the anticancer drug "Fludara," now marketed by 

This initial success was followed with the company's manufacture of brimonidine tartrate, the API in the glaucoma drug "Alphagan" by 

 (Irvine, CA), explains Stephen Munk, president and CEO of Ash Stevens. Munk took the helm of Ash Stevens in 1997.  Before joining Ash Stevens, he led the adrenergic discovery team at Allergan.  

Ash Stevens now manufactures 11 APIs that have been approved by the US Food and Drug Administration. This total includes three recent approvals: "Velcade" (bortezomib) by 

 (Cambridge, MA), "Vidaza" (5-azacitidine) by 

 (Boulder, CO), and "Clolar" (clofarabine) by 

(Cambridge, MA). The company manufactures these APIs at its 30,000-ft 

 facility in Riverview, Michigan. The company's total reactor capacity is 1500 gallons (5.6-m

Bortezomib is produced using standard peptide coupling chemistry. The unusual, boron-containing amino acid is produced using a Matteson reaction. The actives 5-azacitidine and clofarabine (1) are both produced from simple sugars and appropriate bases.  

Although commercial development and manufacturing of APIs represents between 85-95% of its business, Ash Stevens is also keeping to its roots in working with the government on promising APIs. In October 2006, the company was awarded two multiyear contracts from the NCI totaling $12.4 million for synthesis-related work in medicinal chemistry in support of preclinical and clinical quantities of small molecules.  

The company's strategy is reaping its rewards. Although a small company (with annual sales of roughly $10 million), the privately held Ash Stevens has increased its revenues at double-digit to high single-digit growth per year for the past several years, and Munk is also optimistic for 2008. "We expect growth of roughly 10% in 2007, and see similar growth for 2008."  

Reflecting that optimism, the company is investing in its facilities. Ash Stevens recently invested $2.5 million for a new 100-L pilot plant with cryogenic capabilities at its Riverview, Michigan, development and manufacturing site. The new pilot plant has the ability to maintain temperatures as low as -80 °C and as much as 200 °C. The investment also includes the addition of two new Rosenmund filter-dryers.  

  filter dryer is equipped with glove-box technology for handling air-sensitive materials and Category 3 and 4 potent materials at plant scale. The 0.03-m

   filter dryer will be used in the new cryogenic pilot-plant system.  

The addition of cryogenic capabilities is the latest investment for the company. Between 1999 and 2003, the company invested $13.5 million to build its contract-manufacturing activities.  

 1.  W.E. Bauta et al., "A New Process for Antineoplastic Agent Clofarabine," Org. Proc. Res. Dev. 

Pharma Partner Focus

Ash Stevens is adding cryogenic capabilities as part of an overall strategy to focus on small molecules requiring smaller volumes and complex chemistry.

Ash Stevens Plots a Steady Growth Path

This summer's crisis in the financial markets is a timely reminder of the costs and disruptive consequences of sloppy due diligence. Biopharmaceutical and pharmaceutical companies as well as contract manufacturing organizations (CMOs) would do well to heed the lessons of the mortgage meltdown. 

The root cause of the debacle in the financial markets was the poor due diligence practices of mortgage lenders and of the institutions that invested in mortgage-backed securities. Mortgage brokers and packagers were most concerned with maintaining the high volume of originations, which generated a lot of fees for them. Knowing that the mortgages would be packaged and sold to investors, they had little concern for the ability of borrowers to sustain payments on their loans, and made little effort to check the veracity of income and other credit information that borrowers provided.   

Although the subprime mortgage sector itself is a small part of the overall financial market, its problems had implications across all financial sectors. It made investors appreciate that they had undervalued risk in their rush to chase high returns, and caused them to make terms on higher-risk assets more onerous. It also made them look more closely at the creditworthiness of those assets. 

What can pharmaceutical companies and CMOs learn from this? Our experience has been that both parties to contract manufacturing transactions have been remarkably lax about their due diligence practices. While pharmaceutical companies will send armies of quality assurance staff to audit a CMO's operations, they seldom put much effort into reviewing its financial status. In the 2005 edition of the PharmSource–

 Outsourcing Survey, only 17% of pharmaceutical company respondents said they reviewed their contractor's financial statements at least annually. 

Companies need to remember that adverse business developments at their CMO are likely to be more catastrophic than compliance or technical problems. Even when a CMO receives a warning letter from the US Food and Drug Administration, it is usually able to continue shipping product while correcting deficiencies. However, a client may be forced to take drastic measures if its CMO is facing financial distress. 

A clear case in point occurred this summer. In July, 

 (New York, NY), a contract dose manufacturer, had its United Kingdom operations placed in receivership, and its US subsidiary filed for Chapter 11 bankruptcy protection. The actions came after Inyx's principal lender, Westernbank Puerto Rico, declared the three UK subsidiaries in default of their loan covenants and demanded repayment of the $120 million loan outstanding to the company. Inyx had nearly $80 million in revenues, and clients have included Merck Generics (Darmstadt, Germany), NovaDel Pharma (Flemington, NJ), Kos Pharmaceuticals (now owned by Illinois' Abbott Laboratories), Genpharm (Quebec), and UCB (Brussels). 

Inyx has been supplying product to UCB, from which it acquired operations in 2005, and 

whose Puerto Rico facility was also acquired by Inyx in 2005.  

Proper due diligence could have alerted these companies to Inyx's highly leveraged financial situation, and to its management's association with a previous CMO's business failure. As a public company, its precarious balance sheet was readily available to potential clients. Now, these companies are dealing with a potential interruption of product supply and having to consider a takeover of facilities they had previously sold. 

A CMO faces a different and more complex due diligence problem. It must deal with at least three dimensions: 

1.  Does the client have the financial means to pay for our services? 

2.  Will the client's product achieve the projected manufacturing volumes if the product is approved? 

3.  Does the client have the management and technical expertise and experience to get the product to regulatory approval? 

Of the three dimensions, the second—validating the client's volume projections—is probably the most daunting and most crucial. When a CMO signs a contract with a client, it is committing a certain amount of its manufacturing capacity to a client's product beginning at a projected date. The business development team is committing to company management and stockholders that, at a certain point in the future, it will be generating a given amount of revenue.  

There is a big opportunity cost associated with that commitment: if the client's product is delayed or does not get approved, the CMO is not likely to be able to use the capacity for another product—revenue and profits will be permanently lost. 

Realistically, due diligence on a client's volume projections can be very difficult and, if done properly, expensive. It requires knowledge about the product's pharmacology and about sales of products currently in the market for the given indication.  

Market sales data from sources such as IMS or Wolters Kluwer can be very expensive, as is scientific and market knowledge about trends in a given therapeutic class. Even with good information, sales projections are a crapshoot: Major pharma companies with plenty of resources and experience cannot necessarily predict clinical and commercial success with great certainty. 

The risk to CMOs when projecting client sales volumes was underscored in September when a prominent research institution reported that rates of success for cancer drugs are only 40% of the success rate for all drugs. According to Tufts Center for Study of Drug Development, only 8% of cancer candidates entering clinical development in the mid-1990s won commercial approval in the United States, compared to 20% of candidates overall. This is critical to CMOs because cancer drugs represent a significant share of all drugs in the pipeline, especially injectable drugs. 

Despite the challenges validating client projections, it is worth doing because the stakes are high: a commercial manufacturing contract can be worth $10–50 million or more during a five year period.  

Yet, CMOs do not seem to be making a big investment in this area: there is a lot of pressure to sign new business, and the current state of the new product pipeline is providing numerous opportunities to close new contracts. Incentives 

 to do a deal are minimal. CMOs, however, will end up paying the bill for failing to carry out adequate due diligence in 3–5 years when projected sales fail to materialize.  

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

Outsourcing

Could sloppy due diligence practices hurt CMOs and their clients?

Avoiding Subprime Contractors and Contracts

Led by turnaround in its steroids business, 

 (PCS, Kalamazoo, MI) is optimistic about its performance in 2007 and prospects for 2008.  

"2007 has been a good year, particularly in our steroids business, which has been hurt by difficult pricing margins over the last several years," says Michael J. Kosko, president of PCS. 

PCS is an operating unit within Pfizer Global Manufacturing (PGM), the manufacturing arm of Pfizer. PCS provides third-party contract manufacturing services and products to other pharmaceutical companies. PCS consists of two businesses: contract manufacturing of dosage-form products and fine chemicals. 

PCS's fine chemicals business is primarily focused on the sale of steroids and steroid intermediates. PCS's position in steroids dates back to 1949 with the former pharmaceutical company Upjohn, which commercialized the first large-scale, cost-effective synthetic route for glucocorticosteroid. In 1995, Pharmacia & Upjohn was formed from the merger of Pharmacia AB and The Upjohn Company, and in 2000, Pharmacia acquired Searle, the pharmaceutical business of Monsanto. Pfizer then acquired Pharmacia in 2003. 

Given increasing cost-competition in the steroids market, PCS embarked on a new strategy in 2006 by deciding to outsource part of its steroid production to Asia through manufacturing pacts with 

Under the pacts, Pfizer is transferring the late-stage processing of 18 steroid APIs and intermediates to Shanghai Pharmaceutical and ScinoPharm over the next several years, beginning with certain commodity steroid APIs. Pfizer will continue to do the early-stage bioconversion operations at its plant in Kalamazoo, Michigan. PCS will also have parallel quality control testing of the APIs produced at the Asian manufacturing facilities and then at an external shadow laboratory. In addition to overseeing quality issues, PCS will file all drug master files and maintain distribution and marketing responsibilities of the products.  

Shanghai Pharmaceutical and ScinoPharm are both adding manufacturing capacity to implement the PCS projects. 

"We are pleased with the progress of these projects," says Jeffrey W. Frazier, PCS's vice-president of global marketing for fine chemicals. The first two products from the pacts will be progesterone and hydrocortiscone. 

Shanghai Pharmaceutical plans to run validation lots in the fourth quarter 2007 and begin production in the first quarter 2008 for its first product and to begin production of another product in the first quarter of 2008.  

 For ScinoPharm, the scope of the original project has changed, explains Frazier. The order in which specific product transfers will occur hs been rearranged, but technology-transfer activities will begin in Taiwan starting in 2008. 

Underlying market fundamentals and PCS's strategy to outsource is beginning to reap its rewards. "Our steroids business performed very well in 2007, and we see 2008 as another strong year," says Frazier.  

Part of the turnaround is related to higher pricing of steroid products from China stemming from several factors: the reduction of the rebate in China's value-added tax, exchange-rate variance, and rising prices for diosgenin, a key raw material used in many steroids produced in China, explains Frazier. 

In addition to the upswing in its steroids business, PCS is also experiencing healthy demand for its fermentation services. "We offer third-party fermentation services from our facilities in Kalamazoo, and we are seeing strong demand for these services,"says Frazier.  

Pfizer's active pharmaceutical ingredients facility in Kalamazoo, Michigan, is a large multipurpose, pharmaceutical chemical and fermentation facility. It is Pfizer's largest API facility and produces fine chemicals for use in Pfizer's drugs products as well as products for PCS. The site includes people involved in the administration, production, support, and development of APIs and intermediates. 

PCS's fermentations services process development expertise in culture improvement, fermentation process optimization, and commercial-scale manufacture. It also offers a number of complementary downstream capabilities ranging from cell separation and crystallization to vacuum evaporation and sterile packaging.  

PCS is broadening its position in sterile manufacturing. PCS provides contract manufacturing of solid and sterile dosage forms at facilities throughout Pfizer's internal manufacturing network, a function served as part of PGM's strategy to fully optimize its manufacturing capacity. PGM's sterile-manufacturing operations are in Kalamazoo, Michigan, Puurs, Belgium, and Dublin, Ireland. 

"Our capacity for sterile manufacturing has increased, helping to meet demand from both the large pharmaceutical companies and biotech companies," says Carlos R. Fernandez, PCS's director of marketing for global contract manufacturing. 

PCS is also on track with its plans to divest its Feucht, Germany, manufacturing facility and the related PCS-Feucht business unit. The PCS-Feucht business unit targets specialty APIs and solid-dose manufacturing, including high-containment drug product manufacturing for potent compounds.  

Pfizer is currently evaluating potential buyers for the unit and expects to complete the divestment by the fourth quarter of 2007, says PCS's Kosko. "We have had a strong level of interest from both financial and strategic buyers and are on track with our plans to sell the facility by the end of 2007," he says.  

APIs

Equipped with a new sourcing strategy in Asia and improving market conditions, Pfizer CentreSource expects a good performance from its steroid business this year and in 2008.

PTSM: Pharmaceutical Technology Sourcing and Management-11-07-2007

CMOs roll out expansions

Ash Stevens Plots a Steady Growth Path

Avoiding Subprime Contractors and Contracts

Pfizer CentreSource Sees Turnaround in Steroids Business