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Patricia Van Arnum was executive editor of Pharmaceutical Technology.
Increasing costs for Indian-based CMOs may be reducing their total cost of ownership advantage.
WHILE CUSTOM MANUFACTURERS of active pharmaceutical ingredients (APIs) and intermediates report some improvement in market conditions, certain key fundamentals remain. In-sourcing by major pharmaceutical companies, a slowdown in drug productivity, and competition from Asian suppliers remain concerns. Although conditions are challenging, opportunities exist as custom players proceed with expansions.
Custom manufacturers remain cautious
In assessing the outlook, major players are cautious. "Capacity utilization at Western small-molecule contract manufacturing organizations (CMOs) has certainly improved over 2005–2006, driven in part by capacity consolidation among CMOs, and, to a smaller extent, at the top pharma houses themselves," says Joe Pont, head of custom manufacturing sales and business development, Europe and Asia, custom manufacturing, Lonza, Ltd. (Basel, Switzerland, www.lonza.com). "Nevertheless, challenges in the Western CMO market remain high because of several factors. These include the still-high level of pharma in-house manufacturing capacity, the pipeline for new chemical entities remaining relatively weak against a backdrop of stringent agency hurdles, and the recent strong push of Indian pharmaceutical CMOs into Western markets."
Other CMOs point to measured opportunities. "As a result of restructuring, many major pharmaceutical companies are refocusing their efforts on licensing and developing new drugs and divesting themselves of noncore activities such as manufacturing," says Daniele Piergentili, head of contract manufacturing and exclusive synthesis for North America for BASF AG (Ludwigshafen, Germany, www.basf.com). "As a result, there is an increase in the outsourcing of molecules that are at the end of their patent life as well as new clinical candidates."
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However, Asian suppliers remain a concern. "Companies in India and China are working to expand their relationships with key accounts in Europe and the United States," adds BASF's Piergentili.
"Despite some concerns, Asian suppliers have been very attractive because of flexibility, cost, and capacity," says Wilhelm Stahl, head of the pharmaceutical business line with Saltigo GmbH (Leverkusen, Germany, www.saltigo.com). "However, increasing costs (such as salaries and energies) are reducing the total- cost-of-ownership advantage over Western suppliers significantly, as independent studies have shown."
Other custom players point to the changing role of Asian companies."We continue to see low-cost supply from producers in India and China," says Frank Wicks, president of SAFC (St. Louis, MO, www.safcglobal.com). "India is further along than China, which is seen more as a source for key CGMP raw materials. While India has strengthened its position, particularly in early-stage development, the cost structure of Indian suppliers, in turn, is rising."
Biologics led growth for Lonza
Although conditions are difficult, there are positive signs. For example, Lonza posted a 14.1% gain in first-half 2006 sales to CHF 470 million ($378 million) in its exclusive synthesis and biopharmaceutical business. This gain was largely led by its biopharmceuticals business, which had asset utilization of roughly 90%, says Pont.
Pharmaceutical ingredient suppliers expand
Reflecting this strong showing in biopharmaceuticals, Lonza has several expansions underway or recently completed. Key developments include start-up of its fourth 20,000-L bioreactor in Portsmouth, New Hampshire; beginning construction of a mid-scale biologics plant in Portsmouth that is scheduled to be completed by 2009; and the mechanical completion of the first of two large-scale microbial lines in Visp, Switzerland (a third line is in the development stage). Lonza began construction of a new $250-million mammalian cell–culture facility in Singapore that is scheduled for completion by the end of 2009, and integrated Lonza Braine SA, its newly acquired peptide manufacturing site from UCB-Bioproducts, the former peptide manufacturing division of UCB. And it is investing CHF 14 million ($18 million) to expand its clinical-scale mammalian manufacturing capacity in Slough, United Kingdom, which is scheduled to come on line at the end of 2006.
In small molecules, Lonza generated a pipeline of 150 projects as of the first half of 2006, an approximate 10% gain year over year. In 2006, Lonza brought on line a new research and development center in Nansha, Guangzhou, China, with a scientific staff of 27, and will continue increasing staff through the first quarter of 2007. Construction work on a CGMP small-scale-plant in Nansha is underway, and start-up is planned for the third quarter of 2007.
In addition, Lonza is investing $200 million in Nansha for a new multipurpose API and intermediate plant complex for large- and pilot-scale production. The initial development activities for the API facility are underway, and civil construction will start in third quarter of 2006. It also is expanding its small-molecule production capacity in Visp, Switzerland, with a new drying and packaging line expected to be operational in the fourth quarter 2006.
SAFC expands organically and through acquisition
SAFC is in expansion mode. In May 2006, it acquired Honeywell International's (Morristown, NJ, www.honeywell.com) Iropharm unit, a custom synthesis business in Arklow, Ireland. "The acquisition satisfies our interest in adding commercial-scale manufacturing capacity," says Wicks. "We will continue to look to add commercial-scale capacity in the United States as well."
With Iropharm, SAFC gains reactor capacity of 90,000 L and existing projects for manufacturing APIs for 15 generic drugs, explains Wicks. It also provides SAFC with a commercial-scale simulated moving bed (SMB) multicolumn chromatographic separation unit, which may be used in resolving racemic mixtures of chiral compounds.
In August 2006, SAFC acquired Pharmorphix (Cambridge, UK), a firm offering solid-form research services such as polymorph investigation, structure and crystallization characterization, and salt selection in a pharmaceutical formulation. "Better understanding and characterization of solid forms provide valuable intellectual property that can be used to extend the patent life of drugs, an important consideration for companies that may be facing patent expiry on certain drugs," says Wicks.
These acquisitions follow several expansions for SAFC. Earlier this year, SAFC doubled its high-potency manufacturing capabilities at its facilities in Madison, Wisconsin through a $12-million investment. It also is investing $17 million for building a facility for isolating biological material from genetically modified plant material or animal mass in segregated facilities in St. Louis, Missouri. It broke ground and expects the facility to come on line in the second quarter of 2007.
Saltigo proceeds with select investment
Saltigo GmbH (Leverkusen, Germany, www.saltigo.com), a subsidiary of Lanxess AG (Leverkusen, Germany, www.lanxess.com), invested 1.5 million euros ($1.9 million) in 2006 to integrate its small-volume production plants and upgrade these units. It introduced "Plant 5," which consists of these upgraded units and parts of the "ZeTO," its central organics pilot plant in Leverkusen, Germany. Saltigo also invested roughly 0.5 million euros ($637,000) to expand its low-temperature capabilities by adding a new liquid-nitrogen deep-freeze unit. The unit came on line in mid-2006, says Stahl.
Other 2006 developments include the formation of a new fluorine team, organized as part of its pharmaceuticals business line to provide custom research services for chemical research laboratories in the pharmaceutical and agrochemical industries, and the commissioning of "Kaspar," a new parallel reactor for automated catalyst screening of phosgene reactions.
Archimica proceeds with investment
Archimica (Frankfurt, Germany, www.archimica.com) also is expanding. It is the new company formed from the former pharmaceutical fine chemicals business of Clariant (Muttenz, Switzerland, www.clariant.com), which Clariant sold to the private equity firm Tower Brook Capital Partners LP in July 2006 for CHF 110 million ($88 million).
In forming Archimica, the company retained virtually all the assets of the former pharmaceutical fine chemicals business of Clariant and expects no facility rationalization. "We do not currently have any plans for facility closures or staff reductions of any kind," says Ralf Pfirmann, global business director, Archimica.
Instead, Archimica is planning ahead. "We intend to enhance our position as a global supplier and to increase our manufacturing footprint into new regions," says Pfirmann. "It will be done with the same business models that have been developed for our US and EU-based sites."
In February 2006, Archimica began a series of facilities expansions totaling $12 million in Springfield, Missouri; Sandycroft, the United Kingdom; and Frankfurt Germany. In Springfield, Archimica invested $8 million to expand production capacity to support the production of a CGMP pharmaceutical intermediate. The expansion is expected to go on line this year. Earlier in 2006, the Springfield site moved into full-scale production of controlled substances authorized by the US Drug Enforcement Administration.
At Sandycroft, Archimica invested more than $1 million to increase production capacity for a generic API that uses acetylnitrate chemistry. In Frankfurt, it invested roughly $1 million to add laboratory, quality assurance, and new production capacity to support a chiral intermediate for a central nervous system drug for which a new a drug application has been filed.
Archimica debottlenecked capacity in 2006 at its Molecule Synthesis Centers, which provide small-scale capability and process development services, in Springfield; Frankfurt; Bon Encontre, France; and Origgio, Italy. These investments follow a new, $5-million injectable analgesics production line that became operational in Tonneins, France in December 2005. Archimica also upgraded its sterile API manufacturing capabilities at Tonneins.
BASF, ISP, Siegfried, and NPIL Pharma add to its toolbox
BASF added to its capabilities in custom manufacturing with the 2005 acquisition of Orgamol SA (Evionnaz, Switzerland). With the acquisition, BASF now has roughly 600 m3 of production capacity in multiproduct reactors and offers specialized technologies such as phosgene and azide chemistry, asymmetric hydrogenation, and low-temperature reactions.
ISP Fine Chemicals (Wayne, NJ, www.ispcorp.com) plans to add a new double-cone rotary dryer to expand capacity at its facilities in Columbus, Ohio. ISP is increasing its efforts and focus on its large-volume, low-temperature chiral synthesis capabilities, with particular emphasis on boronic acid chemistries and expertise in Suzuki and Sonogashira coupling chemistry.
Siegfried Group (Zofingen, Switzerland, www.siegfried.ch) is investing CHF 2 million ($1.5 million) to renovate its crystallization facility in Zofingen, which is scheduled to be completed by the end of 2006. For its generics business, Siegfried is constructing a new pharmaceutical manufacturing facility for solid-dosage forms in Hal Far, Malta. The first phase of the project, estimated at 15 million euros ($18.2 million), will add capacity for 500 million units. The project is on track to have production systems installed and validated during 2006, with full production start-up scheduled for 2007. The second phase of the project, estimated at 12 million euros ($14.5 million) will increase capacity to 800 million units. Full production start-up for the second phase is scheduled in 2007. The new facility in Malta is in addition to Siegfried's secondary manufacturing plant in Zofingen, Switzerland.
NPIL Pharma (Mumbai, India, www.npilpharma.com) is one Asian player building its position in custom manufacturing. Key recent moves are the acquisition of Avecia Pharmaceuticals in late 2005; the acquisition of Pfizer Inc.'s production and supply chain facility at Morpeth, United Kingdom and resulting gain of a supply agreement with Pfizer; and an expansion of its high-potency manufacturing capabilities in Grangemouth, United Kingdom in CGMP capacity for clinical-trial materials, due on stream by the end of 2006.
DSM Biologics BV (Heerlen, Netherlands, www.dsm.com) and Crucell NV (Leiden, Netherlands, www.crucell.com) plan to open a new research and development center for their "PER.C6" human cell line, an expression system for recombinant pharmaceutical proteins. The center is scheduled to open before the end of 2006 and will be headed by CEO Marco Cacciuttolo.
Custom players invest in specialized technology
Helsinn Advanced Synthesis (Biasca, Switzerland, www.helsinn.com) in July 2006 completed an expansion, which added a production bay at its facilities in Biasca, Switzerland. The new production bay increases multipurpose production capacity from 16 m3 to 24 m3, giving the company total capacity of 106 m3, explains Gabriel Haering, director, commercial division at Helsinn. The new bay can be adapted, with minor modifications, to produce high-potency active ingredients (HPAIs) at large scale. Helsinn also is adding the capability to produce small clinical and registration and validation batches for 50–200 g. The company is completing qualifications and expects the first production between October 2006 through January 2007.
Pfizer CentreSource (Kalamazoo, MI, www.pfizercentresource.com) is expanding its high-potency manufacturing at its site in Feucht, Germany. The site includes both the manufacture of finished dosage-form product and the manufacture of fine chemicals that include highly potent actives.
"Pfizer's Feucht facility has made a number of investments in 2006, including the addition of charging and discharging installations in the final API process facility on site as well as drying and milling operations," says Hans-Dieter Zeitz, vice-president, sales, Feucht, Pfizer CentreSource. "We are currently upgrading our large-scale units to handle OEB 4 [occupational exposure banding] products. We also are taking steps to handle small-scale API manufacturing under high-containment conditions, an improvement to serve worldwide clinical-scale requirements in the industry."
Ferro Pfanstiehl Laboratories, Inc., part of the organic specialties group of Ferro Corporation (Cleveland, Ohio, www.ferro.com), commissioned a new ICH Q7A-compliant kilo laboratory containment facility in Waukegan, Illinois. The facility provides SafeBridge Level III containment and is designed to handle production of small-volume, highly potent compounds with occupational exposure limits as low as 0.03 μg/m3 of aspired air/8 h-period. The 2000 ft2 addition offers production of preclinical through commercial quantities, including small-molecule new chemical entities in early-phase development.
Ferro also commissioned a new CGMP supercritical fluid–based particle engineering pilot facility in August 2006. The facility brings additional expertise in particle sizing, purification, and formulation for fee-for-service pharmaceutical and biopharmaceutical companies.The new facility will provide ICH Q7A-compliant small-molecule scale manufacturing of drug particles and compounds for Phase I and II clinical trials and feasibility studies of engineered particles for desired drug delivery applications.
And, EaglePicher Pharmaceutical Services (Lenexa, KS, www.eaglepicher.com) completed the addition of a commercial isolated suite for the manufacture of HPAIs in 2005.