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Jim Miller is president of PharmSource Information Services, Inc., and publisher of Bio/Pharmaceutical Outsourcing Report.
Matching the production requirements of a bio/pharma company with the manufacturing capabilities of a CMO is a delicate balance, requiring attitude shifts on both sides of the table.
The need for flexibility in manufacturing arrangements and technologies has never been greater. New products are more technically challenging, produced in smaller volumes, and subject to great market uncertainty stemming from competing therapies and reimbursement risk. Contract development and manufacturing organizations (CDMOs) need to respond in both technical capabilities and business model flexibility to address the new realities of the bio/pharmaceutical industry.
A number of factors are driving the need for flexibility in manufacturing arrangements:
CMOs must address the new manufacturing requirements by investing in new capabilities that enhance flexibility and crafting business arrangements that are more responsive to clients’ changing requirements.
CMOs are investing in a number of flexible technologies. The most common by far has been single-use manufacturing equipment, especially for biomanufacturing. Single-use bioreactors for mammalian cell culture can be installed relatively quickly and inexpensively relative to traditional large steel-tank bioreactors, so capacity can be expanded in a timely manner if demand exceeds projections. Further, changeovers from one product to another are relatively quick, without the extensive cleaning required for steel tanks, so new batches can be started more quickly after the previous batch is done. Biomanufacturing CMOs have been adding single-use bioreactors at a rapid clip as the biologics pipeline has expanded.
A growing number of CMOs are investing in new fill/finish technologies that are especially suited to high value/low volume products such as orphan drugs. Equipment manufacturers have introduced new filling lines that are able to fill vials, prefilled syringes, and cartridges all on the same equipment. The equipment is designed to handle ready-to-fill containers supplied in tubs that do away with equipment needed to sterilize and depyrogenate the containers in bulk. Most contact parts are single use or dedicated, reducing the need for extensive cleaning between products and cleaning validation. Formulated product is supplied in disposable containers that are loaded near the line to minimize line loss of expensive drugs. The equipment is typically designed for batches of 30,000-50,000 units, which is much better suited to the market requirements of new drugs than traditional high-speed lines designed to manufacture batches in the 100,000s.
Potentially, the most far-reaching of the new flexible technologies is continuous manufacturing. Continuous manufacturing technologies have emerged in recent years thanks to close cooperation among bio/pharmaceutical companies, universities, equipment manufacturers, and regulators. Their compact scale, integration of in-line process analytical technology and adaptability is allowing manufacturers to make in a matter of hours quantities of drug that have traditionally taken days or weeks. That flexibility enables product to be produced in response to market demand (just-in-time) rather than the sponsor having to maintain large inventories in case of demand surges.
In the drug product arena, continuous manufacturing technologies are starting to have an impact for production of solid dose products; the first approval for a continuously manufactured solid-dose product was granted to Janssen Pharmaceuticals. Unlike traditional solid-dose arrangements where individual process steps were performed days apart on dedicated equipment in dedicated suites, continuous manufacturing links together small-scale processing units that can run continuously for hours or days at a time. In-line analytical instruments ensure that intermediates are within specification and adjustments can be made in real time; in traditional batch manufacturing, entire batches might have to be destroyed because out-of-specification results were discovered only upon completion of the entire batch.
CMOs are embracing continuous manufacturing in several ways. Some (e.g., Patheon and Catalent) are investing directly in continuous lines that will be available to customers much like traditional lines. Other CMOs are collaborating with bio/pharma companies that have developed their own technology. In one widely reported example, Hovione is building a new suite at its East Windsor, NJ, site to house a continuous manufacturing line developed by Vertex Pharmaceuticals to produce its own products. Hovione will operate the line and will be able to sell any uncommitted capacity to third-party customers.
The Hovione-Vertex collaboration is an example of another way that CMOs are responding to the need for flexibility in manufacturing: developing new types of collaborations with clients. The traditional CMO business model, with multiple clients sharing the same tightly scheduled production trains, is not adaptive; it is basically a one-size-fits-all. CMOs must be more innovative in their sourcing arrangements (i.e., they must offer manufacturing arrangements that can adapt to the market response as the new product is rolled out).
A more flexible approach can be built by effectively de-constructing the CMO value proposition into a menu of offerings that clients can select on a more “a la carte” basis. The traditional CMO value proposition includes sharing capital and operating costs across a broad base of products and clients, but experience and knowhow in process development, facility engineering, and equipment procurement can be leveraged to develop solutions that are specific to the product and sponsor but still far more cost effective than building a dedicated full-function facility.
A model of growing interest has been one in which a sponsor pays for a suite or suites and related equipment dedicated to its product(s). The sponsor contributes certain capital costs relating to the suite, including dedicated equipment, and pays a periodic fee to cover a share of the ongoing overhead expenses of operating the facility in which the suite is located. However, the sponsor gets the benefits of a dedicated manufacturing operation that it can operate as needed to meet its supply requirements, while sharing high-cost capital and operating expense items such as water and air handling systems, warehousing, shipping and receiving, security, quality assurance, and quality control. These types of arrangements can be housed in existing manufacturing facilities, or in purpose-built suites attached to an existing facility.
If sponsors and CMOs are to do a better job of matching manufacturing capabilities to uncertain launch requirements, there must be attitude shifts on both sides of the table. Sponsors must fully appreciate the risks associated with the uncertainty of launch forecasts. They typically are focused on the hard cash costs of manufacturing-capital, validation, unit cost of goods, inventory-and are likely to neglect or underappreciate the broader costs like lost market share or damage to company reputation because patients cannot get a promising drug. The foregone profit contribution on lost sales can far outweigh the costs of appropriate manufacturing arrangements. Spending somewhat more on dedicated facilities is an insurance policy against the risks of unreliable forecasts.
For their part, CMOs need to be more open to innovation in the business arrangements they will enter into. A challenge in achieving that openness is that flexible arrangements will require greater leadership vision than many CMOs have exhibited, and a range of deal-making and financial skills that many CMOs lack. It will also require risking capital for investment in new technologies, something that is somewhat foreign to CMOs because they tends to follow the clients’ lead and because cash for investment in process technology is scare.
Nonetheless, if CMOs are to remain relevant in the evolving and uncertain bio/pharmaceutical industry environment, they must embrace flexibility in their technology decisions and business arrangements.