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Increased investment by the pharmaceutical and biotechnology majors in offshore early drug development creates opportunities and challenges for outsourcing.
Globalization continues to be an important issue in the internal investment and outsourcing strategies of the major pharmaceutical and biotechnology industries, including in early-stage development. Pharmaceutical and biotechnology companies and contract service providers are strengthening their positions in research and development (R&D) and clinical trials offshore, particularly in India and China.
Implications for outsourcing
A bottom-line question for pharmaceutical and biotechnology companies is whether offshore drug development, particularly in Asia, is still viable given recent problems with the pharmaceutical supply chain there. “Rising operating costs, particularly in China and India, and growing regulatory scrutiny in the wake of recent high-profile safety incidents may lead some developers to consider slowing, or even reversing, their global outsourcing activities, but doing so could cost them more in the long run,” said Kenneth I Kaitin, director of the Tufts Center for the Study of Drug Development (CSDD), in an April 2008 release. “Developers should develop an overall outsourcing strategy, and the place to start is with an honest appraisal of what they can best contribute to the drug-development value chain.”
The Tufts CSDD analysis points to several key steps to effectively outsource drug development:
• Decide what to outsource based on an in-depth assessment of core competencies
• Achieve consensus across the organization on a standardized approach to outsourcing
• Be prepared to commit management time to administer external service providers.
• Annually review your forecast of planned studies and internal resources.
“Most importantly, companies need to keep in mind that one approach may not be appropriate for all development programs,” says Kaitin.“Some may require a tactical approach, which is more ad hoc and project-oriented, while others may benefit from a more formalized and portfolio-oriented strategic approach.”
Clinical-trial materials supply
The location of clinical trials is one issue to consider in pharmaceutical development. The globalization and increase in the number of clinical trials will impact the supply chain. A recent survey conducted by the management consultancy Bearing Point and the information-technology firm AMR Research found that 26% of more than 100 pharmaceutical and biotech executives surveyed expect to conduct 21 or more Phase I studies per year by 2010, an 18% increase from 2007. The survey also revealed significant growth in global trials, with Africa, the Middle East, Eastern Europe, and South America topping the list of regional expansion.
“Globalization is having a significant impact on every industry, and the pharmaceutical and biotech space is no exception; this study validates that,” said Ellen Reilly, managing director of life sciences at BearingPoint, in a company release discussing the survey results. “As a result, these organizations need to be implementing best practices now to efficiently manage their clinical supply chains to bring new drugs to market faster and in an effective manner, while also remaining compliant with global regulations. Otherwise, they will be left in the dust trying to navigate this very dynamic and competitive market.”
Additional key findings of the study include:
• More than 57% of survey respondents anticipate increasing or maintaining the number of subjects participating in their Phase I, II, and III studies by 2010
• Sixty-nine percent plan to conduct at least four adaptive trials in 2010, a 30% increase over those that expected to conduct at least four adaptive trials in 2007
• Only 13% of clinical trials products shipped and received are on time, and only 90% are complete
• The most significant clinical-trial supply-chain challenge is getting the right kit at the right time to the right site
“Although companies are looking to new products to fuel future growth, the complexity, regulatory demands, and disconnected demand-sensing and product-supply processes result in an extended and expensive development process,” said Hussain Mooraj, research director of life sciences at AMR Research, in a company release. “The conundrum is how to accelerate the speed of development and drive down supply-chain costs at the same time.”
In January 2008, Bearing Point reported that Pfizer (New York) recently engaged BearingPoint to analyze its clinical supply-chain business process of shipping clinical active pharmaceutical ingredients (APIs) internationally.With the analysis complete, Pfizer expects to see improvements in shipment lead times, cost reductions, and compliance enhancements in 2008.
“We were facing a number of clinical-API supply-chain challenges such as long lead times and short forecast horizons, but our biggest issue was the inconsistency around ownership of the preshipment choreography,” said Donald Freeman, continuous improvement lead at Pfizer, in a Bearing Point release.
Other support services and outsourcing relationships are being formed with the migration of clinical trials abroad. For example, the management-consulting firm Accenture and Bristol-Myers Squibb (BMS,New York) launched a joint center for pharmacovigilance in Chennai, India, in September 2007. The pharmacovigilance center is part of Accenture's Life Sciences Centers of Excellence in Bangalore and Chennai that BMS had already used. The pharmacovigilance center is part of a multiyear R&D agreement between Accenture and BMS that facilitates BMS’s efforts to expand its R&D capabilities in India.
The pharmaceutical and biotech majors are increasing their R&D capabilities in Asia, which in turn is fostering collaboration with local universities, research institutes, and contract-research organizations (CROs).
Genzyme. In April 2008, Genzyme (Cambridge, MA) announced it will build a new 200,000-ft2 $90-million R&D center in Beijing. Genzyme’s core R&D operations are located in Massachusetts, and it also has a research site in Cambridge, United Kingdom. The Beijing facility will be the company’s second product-focused R&D site outside of the United States. The Beijing site will have R&D for orthopedics, transplant and immune disease, oncology, endocrinology, and cardiovascular disease. The facility will also include laboratory-scale operations for the matrix-induced autologous chondrocyte implantation (MACI) cell therapy and polyclonal antibody operations. The facility is expected to open in 2010.
Genzyme already markets “Synvisc” (hylan G-F 20) and“Thymoglobulin” (anti-thymocyte globulin rabbit) in China, and is preparing to introduce additional products next year. The company has a pilot program at Beijing Wujing Hospital for the cell therapy product MACI. Genzyme has 25 employees working in offices in Beijing and Shanghai. Last year, Genzyme began a collaboration with the Chinese firm Sunway Biotech (Shanghai) for gene therapy for cardiovascular disease. Genzyme says it is seeking to form additional partnerships with local companies.
AstraZeneca. AstraZeneca (London) formed a strategic partnership with Peking University 3rd Hospital and opened its first clinical pharmacology unit (CPU) in China in September 2007. The CPU focuses on Phase I clinical research, including clinical pharmacology and safety evaluations. In 2006, AstraZeneca established the AstraZeneca Innovation Center China (ICC) at Shanghai’s Zhangjiang Hi-Tech Park as part of a larger $100-million R&D investment package. The ICC's initial therapeutic focus is cancer. In addition, AstraZeneca’s China sourcing center was founded in Shanghai in January 2006 as part of the company’s effort to strengthen global sourcing of APIs.
GlaxoSmithKline. In 2007, GlaxoSmithKline (GSK, London) opened a new fully integrated research institute in China. For the past decade, GSK has collaborated in discovery with the combinatorial chemistry laboratory at the Shanghai Institute of Materia Medica, the drug research institute of the Chinese Academy of Sciences. GSK started 17 clinical studies in China during 2006 and planned an additional 18 in 2007, according to the company’s 2007 annual report.
Sanofi-Aventis. In September 2007, Sanofi-Aventis (Paris) signed a collaboration agreement for cancer stem-cell research with the Institute of Hematology and Diseases Hospital, Chinese Academy of Medical Sciences.
Opportunities for CROs
The rising presence of and interest by the pharmaeutical and biotech majors in China and Asia is creating opportunites for CROs, which are enhancing their capabilities, securing additional financing, and forming R&D pacts.
A recent example is WuXi PharmaTech (Shanghai), a provider of pharmaceutical R&D outsourcing services, which in January 2008 acquired AppTec Laboratory Services (St. Paul, MN) for $151 million. The moves provides WuXi PharmaTech with biologics capabilities. in contract research and CGMP manufacturing services. The acquisition follows a successful initial public offering (IPO) on the New York Stock Exchange for WuXi PharmaTech last year. The company raised $100 million from its IPO.
In October 2007, ShangPharma (Shanghai), a pharmaceutical R&D outsourcing company, received $30 million in funding from the global private investment firm TPG. ShangPharma, through its subsidiaries Shanghai ChemPartner and Shanghai ChemExplorer, focuses on lead generation, lead optimization, synthetic chemistry, library design and production, process research, and pharmaceutical development.
In February 2008, NPIL Research & Development (NRDL), an independent company recently demerged from Nicholas Piramal India (Mumbai, India), and Eli Lilly (Indianapolis, IN) formed a second new drug-development agreement. Under the pact, NRDL is responsible for developing and, in certain regions, commercializing a select group of Lilly’s preclinical drug candidates. NRDL and Lilly will independently carry out early clinical development of two different candidate compounds directed against the same target. Following the evaluation of the data from the proof-of-concept studies, one or more of the drug candidates may be selected for further development. NRDL’s compensation, based on a pre-agreed formula, could total up to $110 million in call-back payments and milestones, plus royalties on sales.
“This additional collaboration with Nicholas Piramal is a prime example of the innovative risk-sharing relationships that Lilly is building around the globe as we implement our strategy of becoming a fully-integrated pharmaceutical network, or FIPNet,” said Robert W.Armstrong, vice-president, global external research and development for Eli Lilly, in a NPIL release.
NPIL also formed a R&D agreement with MSD Pharmaceuticals, the Indian subsidiary of Merck & Co. (Whitehouse, Station, NJ) in November 2007. NPIL is responsible for carrying out an integrated drug-discovery program from hits to leads through preclinical candidate selection, followed by investigational new drug-enabling nonclinical studies and human clinical trials demonstrating proof-of-concept, primarily for oncology. Merck has an option to advance the most promising drug candidates into late-stage clinical trials. NPIL may receive up to $175 million per target, plus royalties on sales of any products resulting from the collaboration.
Suven Life Sciences (Hyderabad, India) formed a second central nervous system drug R&D partnership with Eli Lilly earlier this year. Suven will receive research funding, potential discovery and development milestone payments of $19–23 million, and potential royalties on net sales of any products commercialized from the collaboration. Earlier this year, Suven’s CRO division entered into a strategic alliance with VPSCRO (Beijing) to conduct clinical trials in Asia.
US-based CROs are joining the Asian fray. Charles River Laboratories (Wilmington, MA) formed a joint venture with Shanghai BioExplorer to form Charles River Laboratories Greater China, Preclinical Services Shanghai Company. Charles River owns a 75% stake and control in Charles River Laboratories Greater China. The venture includes a new 50,000-ft2 facility in Shanghai, which is expected to open in the second half of 2008.