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Overall industry growth conceals growing numbers of smaller, faster-paced, adaptable corporate structures.
It’s a useful end-of-year exercise to take stock of our industry—and more specifically the stock of the publicly traded companies that comprise what must, by now, approach $6 trillion in stock value (Table I) (1). The ‘From the Editor’ commentary on page 10 of this issue, reveals that the value of messenger RNA (mRNA) publicly traded companies shot past the $300 billion mark in a little over 12 months from around $15 billion in 2019 (2). Within the same layer of financial intensity sit cell and gene therapies, clustered regularly interspaced short palindromic repeats (CRISPR), and other gene editing approaches.
Interestingly, the lion’s share of the growth in value has been somewhat democratized (Figure 1) (1) since the golden awakening and acceleration of biotech. Next year, follow up on early conversations about organ-on-a-chip approaches will gain coverage, as these approaches are likely to shorten both cost horizons and shrink drug development timelines, amounting to getting better working drugs to market faster, with less cost and unintended side effects.
On the machine side of things conversations at CPHI in Frankfurt made clear that a long standing dual tiered system still operates. Lower value more commodity-oriented products are produced on less expensive equipment, which is less well supported by the original equipment manufacturers (OEM) and sell into a more relaxed regulatory environment. These types of OEM equipment often come from Asia. Higher performance, higher cost equipment caters to a different type of customer with more stringent contract times, with far less flexibility regarding potential machine failures and project delays. This has been the case for many years and is not expected to change anytime soon.
What might be less visible surrounding this equipment is the emergence of the “junior” sized enterprise—big enough to have deep industry know how, but small enough to act decisively when unmet opportunity presents itself. This development is truer for contract manufacturing organizations (CMOs), contract development and manufacturing organizations (CDMOs), raw material suppliers, and analytical tool providers, than equipment manufacturers per se. But the trend is proliferating generally.
Rapidly changing patient expectations combined with increasing biological complexity drives some of this trend because large-scale legacy enterprises find adaption an inherent challenge. The need for speed is obvious and can sometimes trump a strong preference to have only one external manufacturing partner who can take a project the full distance through approval and ahead into commercialization and distribution. Most companies prefer to deal with only one other company, if at all possible, but will jettison that requirement if substantial speed advantages are included in discussions. And this is where a junior pharma company can often shine.
“Across various product groups, we have seen the demand for agile suppliers who can customize raw materials in a timely fashion. For this reason, finished drug manufacturers are looking to mid-sized organizations to supply such materials with the scale and quality standards of a large organization, but with the agility of a small organization. This level of service is critical to help meet their commercialization objectives and ensure they are first-to-market,” says Paul Staunton, global communications manager at Actylis.
When specifically discussing APIs, Scott Mohler, director of Business Development at Actylis, points out, “While many of the top pharmaceutical companies run their own operations to develop and manufacture the APIs for their own approved drugs and drug candidates, they only account for roughly one-third of all New Drug Applications (NDAs) (3). The trend, especially for clinical phases, continues to skew toward smaller biopharmaceutical developers who don’t have the full internal teams and facilities to develop and manufacture their drug candidates. This shift has led to an increased demand for outsourced R&D and manufacture with mid-sized organizations who can help them both though clinical phases and full-scale manufacturing as quickly as possible.”
Marching to the same drummer as Mohler, Marc Sauer, chief science officer, at BioVectra, comments that “many large CDMOs have facilities spread all over the globe, which can require external technical transfers, depend on a vulnerable and widespread supply chain, and slow down production.”
As a very new entity ten23 health has been gaining both traction and visibility for handling an array of challenging fill finish assignments. Swiss business consultant Michael Petersen describes ten23 health as being focused on development and flexible clinical manufacturing offering agility and flexibility. “They have examples of customers receiving material within a few weeks after signature [through] flexible changes in the production schedule based on customer requirements.” He continues they can be proud of “resolution of unexpected observations and root cause investigations by inhouse experts—because the whole team is one purpose-driven company and not split up in business units and departments.”
Similarly, Sauer goes on to highlight the way in which BioVectra functions, which is with all the facilities operating within the same region. “This localized form of operations means that all the facilities can share a single system for quality management, document control, inventory, procurement finance, and ERP [Enterprise Resource Planning]. Therefore, thanks to this way of operating, the company can decrease decision time and be nimble when moving processes from chemistry into biologics, or combining chemical synthesis with fermentation, without needing to adapt any of the processes or documentation,” Sauer specifies.
Furthermore, Sauer stresses that the entirety of the company’s increase in size has stemmed from organic growth, without acquisition of target companies as a path to business growth, one of the typical means through which big companies just keep getting bigger. “Over the 50 years since we first started manufacturing small molecules and enzymes for diagnostic reagents, we have steadily grown into new markets, including complex chemical synthesis, the production of highly potent APIs and PEGylation reagents, microbial fermentation of biologic drug substances, and drug product manufacturing capability. For more than 20 years we have been capable of all the upstream and downstream processing requirements and the purification of biologic drug substances. Our clients are pleasantly surprised, for example, when we onboard them for a large molecule fermentation, and they learn that we also have extensive chemical synthesis capabilities. They realize that we can make custom mPEGs and linkers for conjugation with their biologic, we can ferment small molecule metabolites for their process, or we can synthesize lipids for their lipid nanoparticles—all using GMP,” says Sauer.
A similar account about the state of the market is pointed to by Gearoid O’Rourke, VP of Global Marketing, Actylis. “In the biologics market, with high demand for critical raw materials with low impurity levels, there is a need for mid-sized organizations to fill the void that currently exists for such products,” he states.
O’Rourke reveals that for biopharmaceutical applications it is common to find that many of the existing product monographs require additional endotoxin and bioburden testing be performed. “Many such [large-molecule] products are used in smaller quantities than with small-molecules, thus the need for alternative mid-size manufacturers with the capability to GMP-manufacture in specific packaging formats with additional testing requirements,” he says.
“There is also a trend for outsourcing of downstream buffers, where there is a large number of buffers required for one finished drug product,” O’Rourke continues. “Some buffers will be large volume, but some will be quite small and may not fit a large manufacturer’s business/profitability strategy.”
Instead of the traditional role of producing large amounts of drug product for one-size-fits-all medications, many biologic drugs, for example, require smaller doses for a limited number of patients or even a single patient. These drugs need to be made and shipped much more quickly because the turnaround from diagnosis to treatment is measured in weeks, not the usual months. Now, modalities are calling for entirely new skill sets, the types of skills and organizational structure that allow performance at junior pharmaceuticals to shine.
1. Torreya, The Pharma 1000 Top Global Pharmaceutical Company Report, September 2020.
2. W. Xie, B. Chen, and J. Wong, “Evolution of the Market for mRNA Technology,” Nature Reviews Drug Discovery, Nature.com, Sept. 2, 2021.
3. S. Mohler, “Meeting the Need for Innovative Small Molecule APIs,” Specialty Chemicals, pp. 26-27, Sep/Oct 2022.
Chris Spivey is the editorial director of Pharmaceutical Technology.
Volume 46, No. 12
When referring to this article, please cite it as C. Spivey, "Shining a Light on Junior Pharmaceuticals" Pharmaceutical Technology 46 (12) (2022).