Big Pharma's Manufacturing Strategy: What is the Next Move?

Pharmaceutical Technology, Pharmaceutical Technology-08-02-2010, Volume 34, Issue 8

Pharmaceutical Technology's annual analysis of the pharmaceutical majors' activities shows a shrinking global manufacturing network amidst company restructuring, product intensification in biologics, and a strategic focus and push to emerging markets.

Change. In a nutshell, that is the word that best describes the strategies of the major pharmaceutical companies in managing their manufacturing and research and development (R&D) activities. Restructuring led by cost-savings initiatives, a shifting product-development and commercial focus to biopharmaceuticals, and an increased emphasis in emerging markets are the drivers behind the latest round of facility rationalization and capital investment.

Company activity

Pfizer. In May 2010, Pfizer (New York) detailed plans to reconfigure its global manufacturing network as part of the integration following its $68-billion acquisition of Wyeth (Madison, NJ) in 2009. The implementation of the first phase of Pfizer's plant-network strategy includes recommendations to cease operations at eight manufacturing sites in Ireland, Puerto Rico, and the United States by the end of 2015 and a reduction of operations at six other plants in Germany, Ireland, Puerto Rico, the United Kingdom, and the US. These changes will result in a global reduction of approximately 6000 jobs during the next several years.

IMAGE: PETER DAZELEY, PHOTOGRAPHER’S CHOICE RF, GETTY IMAGES/DESIGN: DON FRASER

Pfizer plans to discontinue manufacturing operations during the next 18 months to five years at three solid-dosage sites that manufacture tablets and capsules: those in Caguas, Puerto Rico; Loughbeg, Ireland; and Rouses Point, New York. Wyeth announced in 2005 that it would exit and sell the Rouses Point site. Pfizer also plans to phase out pharmaceutical solid-dosage manufacturing in Guayama, Puerto Rico, but that site will expand its consumer-healthcare operations. Reductions are planned at two other solid-dosage facilities in Illertissen, Germany, and Newbridge, Ireland.

Two aseptic facilities that make sterile injectable medicines are targeted for exit: Dublin, Ireland, and Carolina, Puerto Rico. Pfizer also plans changes to its biopharmaceutical-manufacturing network. The company plans to exit operations in Shanbally, Ireland, and Pearl River, New York. The Pearl River site, however, will remain Pfizer's Center of Excellence for vaccine R&D. Biotechnology plants in Sanford, North Carolina, Andover, Massachusetts, and Havant, United Kingdom, are expected to see reductions.

Pfizer plans to cease production of consumer-healthcare products at its plant in Richmond, Virginia, but consumer healthcare R&D operations will continue in Richmond. Pfizer said that R&D jobs in both Pearl River and Richmond will be unaffected by the planned manufacturing exits. The timing of specific exits will depend upon the complexity of operations, the amount of time required for product transfers, and other business requirements, said Pfizer in a May 2010 press release.

Pfizer Global Manufacturing currently operates 78 plants internationally with a workforce of approximately 33,000. In outlining the changes to its manufacturing network, Pfizer also summarized how its transformed manufacturing network will look. Pfizer's solid-dosage network will include plants in Freiburg, Germany; Amboise, France; Vega Baja and Barceloneta, Puerto Rico; Ascoli, Italy; Newbridge, Ireland; and Illertissen, Germany. Its aseptic-manufacturing network will consist of plants in Puurs, Belgium; Perth, Australia; Catania, Italy; and Kalamazoo, Michigan. Its biotechnology-manufacturing network will consist of sites in Grange Castle, Ireland; Strangnas, Sweden; Algete, Spain; Havant, UK; Andover, Massachusetts; and Sanford, North Carolina. The consumer healthcare network will include plants in Guayama, Puerto Rico; Montreal, Canada; Albany, Georgia; Aprilia, Italy; Hsinchu, Taiwan; and Suzhou, Jiangsu, China. Studies of the plants in the company's nutrition and emerging-markets plant networks will begin later this year.

Table I: Top 50 pharmaceutical companies (Rankings 1–25).

The company's restructuring in its manufacturing network follows a reorganization of its R&D operations announced in November 2008, which included the formation of a BioTherapeutics division focused on large molecules and vaccine research and a Pharma Therapeutics division focused on small-molecule discovery and drug-delivery technologies. Pfizer will have five main research sites that will serve as central hubs for research activities in its BioTherapeutics and Pharma Therapeutics divisions and vaccines business. These sites will be: Cambridge, Massachusetts; Groton, Connecticut; Pearl River, New York; La Jolla, California; and Sandwich, England. These research-oriented laboratories will be supplemented by specialized research capabilities such as monoclonal antibody discovery in San Francisco, regenerative medicine work in Cambridge, England, and R&D activities in Shanghai.

As part of the plan to consolidate its research sites, Pfizer will significantly reduce R&D activities at some of its sites. The company will move several functions from Collegeville, Pennsylvania; Pearl River, New York; and St. Louis to other locations and will discontinue R&D operations in Princeton, New Jersey; Chazy, Rouses Point, and Plattsburgh, New York; Sanford and Research Triangle Park, North Carolina; and Gosport, Slough/Taplow, England. In addition, Pfizer will consolidate R&D functions from its New London, Connecticut, site to its nearby research facility in Groton.

Table II: Top 50 pharmaceutical companies (Rankings 26–50).

As a result of these changes, Pfizer will reduce its global R&D square footage by 35%. R&D activities will be conducted at five main sites and nine specialized units around the world, compared with the 20 R&D sites that were active upon the closing of the acquisition of Wyeth on Oct. 16, 2009.

Merck & Co. In July 1010, Merck & Co. (Whitehouse Station, NJ) released details of a restructuring plan, which calls for phasing out operations at eight research sites and eight manufacturing sites, thusresulting in a 15% reduction of its global workforce. The measures are part of an overall integration plan that Merck is implementing following the $41-billion acquisition of Schering-Plough (Kenilworth, NJ) in 2009. Merck plans to reduce its manufacturing network from 91 facilities at the close of the Schering-Plough merger to 77 facilities. This further involves 29 animal-health facilities that are the subject of the planned joint venture of Intervet Schering-Plough with sanofi-aventis's (Paris) Merial, which are not included in the restructuring program.

Beginning in the second half of 2010, Merck will phase out operations at eight manufacturing facilities, and these sites will exit its global network as activities are transferred to other locations. The company intends to cease manufacturing activities at the following facilities: Comazzo, Italy; Cacem, Portugal; Azcapotzalco and Coyoacan, Mexico; and Santo Amaro, Brazil. The company intends to sell its Mirador, Argentina, and Miami Lakes, Florida, facilities. In Singapore, chemical manufacturing will be phased out at the legacy Merck site, but it will continue at the legacy Schering-Plough site. The company's pharmaceutical manufacturing operations will continue at these two Singapore facilities. Merck says it will continue to make new strategic investments, particularly in emerging markets such as Latin America, where the company is investing in facilities in Xochimilco, Mexico, and Campinas, Brazil.

A balance of internal and external manufacturing: Eli Lilly and Evonik

Merck plans to phase out operations at eight research sites during the next two years. These sites include: Montreal, Canada; Boxmeer (Nobilon facility only), Oss, and Schaijk, The Netherlands; Odense, Denmark; Waltrop, Germany; Newhouse, Scotland; and Cambridge (Kendall Square), Massachusetts. The resulting new research network will include 16 major R&D facilities worldwide. The company's research division will retain its focus on the seven key therapeutic franchise areas of cardiovascular disease, diabetes and obesity, infectious disease, oncology, neuroscience and ophthalmology, respiratory and immunology, and women's health and endocrine. Merck's women's-health research, currently centered in Oss, The Netherlands, will be relocated primarily to the United States.

Roche. The other megamerger in 2009 was Roche's (Basel, Switzerland) nearly $47-billion acquisition of the biotechnology company Genentech (South San Francisco, CA) in 2009. As part of its integration plan, Roche established Genentech's South San Franciso site as the headquarters of the combined company's pharmaceutical business in the US, including commercial operations for the US market. Genentech's research and early-development unit is being set up as an autonomous unit, and Genentech's late-stage development activities are being integrated into Roche's global pharmaceuticals division network.

During the assessment of its manufacturing network, particularly its biotechnology-manufacturing network, Roche decided to discontinue operations at several manufacturing faciliites and construction projects, most notably a bulk-drug production unit as part of the Genentech site in Vacaville, California, and a Roche manufacturing plant in Penzberg, Germany. Roche incurred restructuring and integration costs of CHF 2.4 billion ($2.3 billion) in 2009, which included the discontinuation of the construction project at the Vacaville site, termination costs for the closure of manufacturing operations in Nutley, New Jersey, the closure of an R&D site in Palo Alto, California, and other administrative costs. Roche expects to complete its restructuring activities by the end of 2010 and will have total restructuring costs of CHF 3.4 billion ($3.2 billion). At the end of 2009, Roche's Pharmaceutical Divsion operated 24 production sites worldwide.

In May 2009, Roche opened an additional large-scale multipurpose chemical-production unit in Florence, South Carolina. In June 2009, the company opened a new production center in Kaiseraugust, Switzerland, for sterile manufacturing products such as liquid and lyophilized vials and prefilled syringes. In August 2009, Roche exercised an option, previously held by Genentech, to purchase a biologic manufacturing facility in Singapore that had been built by the contract manufacturing organization Lonza (Basel). This facility, plus another Genentech biologic-manufacturing facility in Singapore, provided Roche with its first biopharmaceutial manufacturing facilities in Asia. A new technical R&D building in Basel, which will serve as a center for the development and manufacture of clinical-trial materials, is scheduled for completion in 2011. In January 2010, Roche announced an investment of CHF 100 million ($95 million) for a research hub for translational medicines in Singapore.

sanofi-aventis. In March 2010, sanofi-aventis (Paris) outlined an investment plan for adapting its chemical and biotechnology manufacturing facilities in France during the next four years. The project's goal is to change the company's chemical-industrial activities in France to biotechnology and vaccine production by 2014. The project also prepares the facilities for a decline in production that will follow the patent expirations of several major drugs derived by synthetic chemistry. Since 2008, sanofi-aventis has invested EUR 700 million ($904 million) to convert its chemical-production facilities in France to biotechnology facilities, according to company estimates. This total includes an EUR 350-million ($452-million) investment in facilities in Neuville-sur-Saône, and an EUR 200-million ($258-million) investment in facilities in Vitry-sur-Seine, which will include monoclonal antibody production. Some new activities of sanofi pasteur, the vaccine arm of sanofi-aventis, will be housed in the new facility in Neuville-sur-Saône, Rhône, France, where a new vaccine against dengue fever will be produced. This plant will become the company's third largest European center fully dedicated to vaccines by 2014. The company also launched new production units for sterile injectble products at its manufacturing plant in Le Trait, France in late 2009. The site manufactures the seasonal flu vaccine Vaxigrip, and beginning in early 2010, the intradermal flu vaccine Intanza. sanofi-aventis's plan also includes a gradual phase-out of the facilities in Romainville, Seine-Saint Denis, France, by the end of 2013.

sanofi-aventis will invest EUR 150 million ($194 million) in its industrial plants, including EUR 90 million ($120 million) for the creation of a new biosynthetic process in the industrial plants in Saint-Aubin-Lés-Elbeuf, Seine-Maritime, France, and in Vertolaye, Puy de Dôme, France, to improve the company's corticosteroid-production competitiveness. In a separate move, sanofi aventis also aquired a insulin-manufacturing plant in Frankfurt–Hoechst, Germany, from Pfizer in 2009.

sanofi is also positioning in emerging markets. In November 2009, the company signed a memorandum of understanding with Prominvest, a fully owned subsidiary of the Russian State Corporation Rostekhnologii, confirming its intent to participate in the Pharmpolis Project. The project is part of an overall effort by the Russian government to localize innovator-drug manufacturers in Russia and foster the expansion of the country's pharmaceutical market. sanofi-aventis will use its insulin-manufacturing facility in Russia as part of a pilot initiative in the Pharmpolis Project.

sanofi-aventis acquired the vaccine producer Shantha Biotechnics (Hyderabad, India) in 2009. It is also investing in prefilled injection production lines for its insulin product Lantus SoloStar in China; in vaccine production in Shenzen, China; and in an expansion and relocation to facilities in Hangzhou, China. The company also invested EUR 100 million ($129 million) for an influenza vaccine manufacturing facility in Mexico.

Novartis. In November 2009, Novartis (Basel) inaugurated the US's first-ever large-scale cell-culture and adjuvant vaccine-manufacturing facility in Holly Spring, North Carolina. The nearly $1-billion investment is a result of a partnership between Novartis and the US Deparment of Health to improve influenza vaccine-manufacturing in the US and facilitate domestic pandemic flu preparedenss. The plant is scheduled to be running at full-scale commercial production in 2013. If licensed in an emergency, the plant will be able to produce product in 2011.

In emerging markets, Novartis is investing $500 million in a new vaccine-manufacturing facility in Goiana, Brazil, which is scheduled to be operational by the end of 2014. The company opened a new technical R&D and API manufacturing facility in Changshu, China to support the production of Tekturan/Rasilez (aliskiren hemifumarate), which included a $56-million investment in 2009 as part of a $265-million investment in that facility. In November 2009, Novartis announced it is investing $1 billion during the next five years to expand its research center in Shanghai, making it the company's third-largest research institute in the world. The company also acquired an 85% stake in the Chinese vaccine company Zhejiang Tianyuan Bio-Pharmaceutical.

Bristol-Myers Squibb. Bristol-Myers Squibb (BMS, New York) has substantially completed its new multiproduct bulk biologics manufacturing facility in Devens, Massachusetts. Construction of the facility began in early 2007 and was substantially completed in 2009. The company plans to submit the site for regulatory approval in 2011 and hopes to begin commercial production of biologic compounds later in 2011. BMS also implemented in 2009 a productivity transformation initiative, which included reductions to its manufacturing operations, which numbered 19 production facilities as of the end of 2009. BMS is on track to realize its target of achieving $2.5 billion in annual productivity cost savings by 2012.