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The outsourcing of clinical-trial materials grows as pharmaceutical companies adapt to a changing market.
Outsourcing clinical-trial materials (CTM) is strong and growing. Because of significant cost pressures and the globalization of clinical research activities, pharmaceutical companies are hiring contract manufacturing organzations (CMOs) to provide many services, including CTM production. In response to the growing demand, CMOs are expanding their capacity both domestically and internationally.
Early-stage pipeline growth spurs demand for CTM services
Demand for CTM services stems from robust drug pipelines. The number of Phase I candidates has grown by 60% in the past five years, and the number of Phase II candidates by 30% (1). Approximately 75% of these candidates originated at small and mid-sized pharmaceutical companies (2). The Pharmaceutical Research and Manufacturers of America reports 1264 drugs were in Phase I development, and 1171 drugs were in Phase II development as of December 11, 2007.
Large companies pursue outsourcing
As early-stage pipelines increase, pharmaceutical companies are increasing their outsourcing of CTM supplies. The largest shift in demand for clinical supplies is occurring within the mid-sized to large pharmaceutical companies, observes Scott Houlton, chief operating officer of Aptuit (Greenwich, CT), a contract drug-development services company. Large and mid-sized companies historically outsourced only a small portion of their work, he remarks, but they are changing their approach. This segment of the market is beginning to strategically hire two or three key partners for certain projects.
Others confirm the trend toward multiple-vendor outsourcing. "Some sponsor companies may hire more than one contractor to develop the same drug product for the same phase," says Maureen Spataro, founder and president of the North Carolina-based consulting firm Spataro and Associates. "This way, they benefit from having two sets of scientists working on their CTM." Hiring several CMOs for the same project increases the chances that it will be completed successfully, she adds.
Another approach, according to Spataro, is to hire several contractors to develop different dosage forms or different release profiles for one product. "The ultimate goal is to save time," she says. "By contracting to multiple vendors, development efforts can be achieved on a parallel path. If one company's prototype fails along the way, there is a possibility that the other may succeed."
Phil Meeks, chief executive officer of the CMO Azopharma (Miramar, FL) agrees that meager late-stage pipelines are spurring increased outsourcing. Pharmaceutical companies are now trying to get more candidates into clinical trials, he says. "If companies have capital," he adds, "they'll outsource to achieve more at once."
Aptuit's clinical packaging and logistics facility in Bathgate, United Kingdom. (IMAGE IS COURTESY OF APTUIT)
Nailesh Bhatt, managing director of the New Jersey-based consulting and advisory firm Proximare, says, "Outsourcing has definitely increased by the large companies." Big pharmaceutical companies are deciding to focus on their core competencies. These companies are now more likely to ask CMOs to perform services for which they themselves have less expertise or ability. Spataro concurs, commenting that large pharmaceutical companies are now looking to contractors for CTM because they have made a strategic decision to outsource and focus on their core competencies. Manufacturing CTM "is not something that everybody's capable of handling," says Bhatt.
Cost pressures and Big Pharma's recent restructuring activities are creating the conditions for increased outsourcing. A reorganization plan that Pfizer (New York) announced in January 2007 reflects this trend. The company said it would cut 10,000 jobs and close several plants to save approximately $2 billion by the end of 2008. Among the plants to be closed are Pfizer's facilities in Ann Arbor, Michigan, where the company prepares clinical supplies. Pfizer said it would increase outsourcing to reduce expenses.
But restructuring is not the only reason that large and mid-sized companies outsource CTM. Anthony Moult, director of global clinical-trials supplies at UCB Pharm (Braine-l'Alleud, Belgium), notes that the primary reason his company outsources a given project is usually that it cannot be done in-house. "For example," Moult explains, "we don't really have a clinical-trials supplies capability for the storage and distribution of large volumes of refrigerated products." UCB generally looks to vendors to supply these services.
"Our internal approach," he adds, "is if we haven't got the technology, we contract it out. If we have internal capacity and, looking three, six, or twelve months out, we would be overloaded by our current plans, then we would look to strategically and tactically outsource the packaging and distribution of those materials."
Outsourcing aids small companies
Small pharmaceutical companies must outsource CTM services when they lack capacity and expertise. They "may have limited experience with drug-development activities, especially CTM," Spataro observes. "They have limited internal operations," she says, "and therefore must rely on contract providers for an array of product-development services such as formulation development and clinical-trial material manufacturing, packaging, and distribution."
CMOs agree that small and emerging companies are an important part of the outsourcing equation for CTM supplies. Meeks says most of Azopharma's CTM projects now come from small and mid-sized companies. Virtual companies must outsource many projects because they don't have the internal operations to complete them, he observes.
Aptuit continues to receive a steady number of contracts from small and emerging pharmaceutical companies, which are an important customer base for the company, according to Houlton.
Still, Houlton stresses that Aptuit "works with customers of all sizes—from virtual to large pharmaceutical companies—to help them advance their compounds from discovery to launch."
Outsourcing CTM is not a strategy that is limited to one segment of the pharmaceutical industry. Bhatt says, "All the players are outsourcing CTM. More and more, companies must fail faster and in a cheaper manner, so the [outsourcing] activity is by everybody."
Contract organizations expand
Responding to increased demand, CMOs are expanding their CTM-supply capabilities. In January 2007, DSM Pharmaceuticals (Parsippany, NJ) added a CTM manufacturing suite to its sterile parenteral manufacturing facility in Greenville, North Carolina. The suite manufactures large- and small-molecule liquid and lyophilized products for Phase I–III clinical trials. In November 2007, DSM added formulation development and clinical-trial manufacturing for solid dosage forms to its service offerings.
In April 2007, AAIPharma (Wilmington, NC) completed $2 million worth of upgrades to its parenteral manufacturing facility in Charleston, South Carolina, and its sterile-product release operation in Wilmington. The improvements were designed to increase capacity and ensure compliance with European Union aseptic-processing and testing guidelines. Lee Karras, senior vice-president of North American pharmaceutical operations, said that the upgrades were "of particular importance to customers who wish to conduct clinical trials in the EU." The EU's Clinical Trials Directive harmonizes the conduct of clinical trials and affects the manufacture and importation of CTM into the region.
Bilcare Global Clinical Supplies (Pune, India) opened five primary packaging rooms at its Phoenixville, Pennsylvania, facility in November 2007. The company planned to achieve the next phase of upgrades during the fourth quarter of 2007 by creating five additional primary rooms. The expansion would give Bilcare 10 primary and 16 secondary packaging rooms within its 153,000-ft2 US operation.
In addition, Bilcare is investing £11 million ($23 million) to establish a new clinical-supplies facility in Wales. This facility will replace the existing clinical-supplies facility Bilcare acquired in 2006.
In November 2007, Catalent Pharma Solutions (Somerset, NJ) added a Phase I sterile vial-filling suite to its facility in Research Triangle Park, North Carolina. The suite complements the clinical-manufacturing capabilities at Catalent's North Raleigh, North Carolina facility.
Meeks says that Azopharma made four major acquisitions during 2007. The company gained facilities for preclinical services, inhalation development, synthetic chemistry, and manufacturing during the year. "These added capabilities, coupled with our existing expertise, enable Azopharma to truly offer total product development, from discovery to manufacturing, with all the development activities in between."
In June 2007, Metrics (Greenville, NC) initiated a 47,000-ft2 expansion of its clinical-batch manufacturing and commercial-production capabilities. The expanded facility is scheduled for completion in April 2008 and will contain approximately 9000 ft2 of warehouse space, 17,000 ft2 of pharmaceutical manufacturing space, and approximately 7800 ft2 of analytical support laboratories.
West moves East
CMOs in India, China, and Singapore are gaining prominence as globalization plays an increasingly important role in the pharmaceutical industry. "More and more pharmaceutical and biotechnology companies are doing their trials in those countries," Bhatt explains. Conducting a clinical trial in China, India, or other parts of Asia, for example, requires a company "to have a storage facility, a manufacturing facility, logistics, or project-management capability in that region," he adds.
As drugmakers conduct more clinical trials in Asia, CMOs are responding to meet clients' needs. Some Asian CTM providers that previously served only their local markets now work for multinational pharmaceutical companies, Bhatt notes. These CMOs are familiar with the local infrastructure and supply chain, and they have the local expertise that companies from outside the region require. Increased demand also has "pushed companies such as Thermo Fisher to move into Singapore, India, or China in an aggressive manner," notes Bhatt.
For example, in October 2007, Thermo Fisher Scientific (Waltham, MA) broke ground on a $17-million facility in Ahmadabad, India. The facility will package and oversee the global distribution and logistics management of pharmaceutical samples for clinical-trial patients around the world. Thermo plans to open the facility in spring 2008.
Several other companies are building or improving plants in Asia. In June 2007, Aptuit teamed with Laurus Labs (Hyderabad, India), a provider of contract research and manufacturing services, to form Aptuit Laurus. The new company is headquartered in Hyderabad, India. Aptuit plans to invest roughly $100 million during the next several years to increase Aptuit Laurus's development, manufacturing, and informatics capabilities. The expansion includes the addition of development services such as formulation and analytical-testing services and clinical GMP packaging and logistics. "Our expansion into India, combined with our new packaging facilities currently under development in the US and Europe, will nearly double our capacity over the next 18 months," Houlton says.
Development activities are a large part of Aptuit Laurus's work, according to Houlton. "We expect to further our growth in India with expanded CTM services at Aptuit Laurus." In addition, Aptuit will also produce large commercial volumes of APIs and finished product in India.
Aptuit has also been active elsewhere in Asia. "Our clinical packaging and logistics operation in Singapore doubled over the past two years," remarks Houlton. Aptuit's expansions in Asia will continue. "We are looking to grow into a new facility in Singapore that will allow us to double or triple our CTM supplies business again," he says.
According to Bhatt, China, India, and Singapore are the main countries to benefit from the globalization of outsourcing. Because companies can raise or borrow money relatively cheaply in those countries, he explains, "it's become very attractive to grow inorganically through mergers, acquisitions, and joint ventures and to provide services to global companies on the value propositions of convenience, cost, and certainly quality products or quality service. And that's happening more and more."
Referring to the growing number of clinical trials that pharmaceutical companies are conducting overseas, Bhatt says, "The fact that India, China, Russia, and other countries are being exploited requires clinical-trial supplies to be [available] in a global marketplace. Why would Fisher go and invest $17 million in India if none of their customers were conducting any trials in India or China?"
In addition, Bhatt notes that companies based in China, India, and Singapore are buying small contract research organizations (CROs) and clinical-trials companies in the US and Europe. He cites Jubilant Organosys's (Uttar Pradesh, India) purchase of Target Research (Berkeley Heights, NJ) and Manipal AcuNova's (Bangalore, India) purchase of Ecron (Frankfurt, Germany). These Asian companies are seeking to increase their size and influence, he says.
The growth of the offshore outsourcing of CTM projects brings new responsibilities to pharmaceutical companies. Clients must familiarize themselves with the working environment in the CMO's country. They must examine the supply chain, infrastructure, and patient population, among other things. According to Bhatt, companies will have to cooperate with their partners to analyze all the factors that will ensure success. "A great deal of planning, a great deal of strategizing, both at a high level and at a tactical level, is going to be required," he comments.
The infrastructure in Asia (especially in India, China, and Singapore) for conducting clinical trials and producing CTM deserves particular attention, in Bhatt's opinion. Companies must work to ensure that the product gets to the patients in a safe and timely manner. They must be certain that CTM can be delivered without jeopardizing its temperature or quality. "These are major issues in these countries," Bhatt cautions.
On the other hand, the obstacles may not be as daunting as they seem. Bhatt says Indian and Chinese clinical trials usually are conducted at certain capable hospitals. Companies don't conduct trials in remote places reached by poor roads or unreliable transportation. Still, Bhatt repeats that drugmakers must plan to ensure that they "choose the right locations and the right partners."
Spataro remarks that, in addition to new responsibilities, globalized CTM outsourcing will bring benefits to pharmaceutical companies. Working with companies in China and India will give sponsor companies "more cost-effective options, which will result in lower research and development costs," she says. As demand for outsourced CTM increases, more contract companies will likely emerge in Asia, Spataro predicts.
The corollary is that the growing number of international CTM providers will compete with US-based CTM manufacturers. Although this might not be good news for American CMOs, it could be a boon for pharmaceutical companies. Global competition might result in lower costs, improved customer service, and faster turnaround times among service providers, according to Spataro.
Although Bhatt claims that outsourcing CTM offshore, particularly to Asia, is "increasing dramatically," Meeks is skeptical. Offshore outsourcing has had no effect on Azopharma's business, he says. Furthermore, the pharmaceutical market has not embraced this strategy, in Meeks's opinion. "I'm not sure the expertise is out there," he says.
Spataro agrees that some drugmakers are justifiably cautious about hiring international contractors. She says that even if an Asian CMO, for example, has highly educated employees, it still might not have expertise in CTM preparation or compliance with GMPs. "With the recent news of safety concerns about products made overseas, sponsors must be vigilant," she warns.
Houlton sounds a more optimistic note. "The workforce in India and China is improving steadily," he says. "In addition, the large concentration of patient populations in Asia means that many clinical supplies needed will be dosed in that region."
What does the future hold?
The rise in CTM outsourcing doesn't show signs of abating anytime soon. "This is a natural progression that's taking place," according to Bhatt. Meeks notes that more pharmaceutical companies hired contract CTM providers in 2007 than in 2006, and he expects the increase to continue for the next three years.
Spataro concurs and adds, "Offshore outsourcing of CTM will continue to grow." What could change, however, is what drugmakers expect from CTM providers. Although many companies now look to contractors to offer more cost-effective services, "there will be an increased demand for speed," she predicts.
1. J. Miller, "Pipeline Peril," Pharm. Technol. 31 (12), 70–72, (2007).
2. J. Miller, "How Long Will the Good Times Roll?" presented at the 2007 American Association of Pharmaceutical Scientists Annual Meeting and Exposition (San Diego, CA, Nov. 2007).
For more on this topic, see "How to Build a Better Outsourcing Relationship"