Вы находитесь на странице: 1из 22



Power Moves:
Contract Services
Success Strategies

Strong Growth Ahead for

Contract Manufacturing

Unlocking the Value of

Supply Chain Collaboration

Belle of the
Manufacturing Ball

Mission Possible: NEXT PAGE u

Excellent Clinical Logistics

2O16 Contract Pharma Trends www.pharmamanufacturing.com

By Steven E. Kuehn,
Pharmaceutical Manufacturing


2O16 Contract Pharma Trends www.pharmamanufacturing.com

Pharmas Top CMOs are playing to their

strengths, toning operations and flexing
their technical muscles in an effort to compete
CONTRACT SERVICES ORGANIZATIONS are Nice Insights Nigel Walker (See Strong Growth Ahead
pursuing a number of strategies to be successful, com- for Contract Manufacturing p. 6) notes that contract
petitive and relevant to their customers. To get there, this service providers that wish to attain a similar level of
important Pharma sector is driving manufacturing and growth going forward will need to find ways to provide
process innovation at an impressive pace. Critics may measurable added value something that sponsor
argue that compared to other industries this is all just so organizations cannot realize on their own. Emerging
much catch-up, rather than true innovation. But that markets, value-added generics (so-called supergenerics),
would be selling way short the direction CMOs are taking and biosimilars provide other potential opportunities for
the industry strategically, tactically and operationally. growth, says Walker, but only if contract manufacturers
Its becoming very clear todays Pharma contract have the global reach and technical capabilities necessary
services providers are preparing themselves to compete to capitalize on them.
for their spot in an increasingly sophisticated and According to Nice Insight analysis, some 30 CMOs
multifaceted supply chain. Attracting customers in this account for more than half of the industrys revenues
environment is predicated on fielding the technologies (PharmSource), and more than 18 acquisitions in the
and techniques to meet capacity and processing needs, CMO space (including only CMO-CMO deals) have
but keeping those customers for the long haul and taken place in the last three years.
maintaining the stable, long-term revenue streams they Current dynamics point to the contract services
bring, is another thing entirely. industry readying itself to play its increasingly important
and primary role contributing to the global supply of
ONE RULE, OVER ALL pharmaceuticals. Many members of this Club of 30
Operational excellence is the rule, with no exceptions, are well known and increasingly visible to the industrys
especially as it relates to regulated, GMP-delivered phar- highly professional observers. Visiongain, in its pursuit
maceutical manufacture. But excellence is the desired of market intelligence, recently released Pharma Leader
end; the result: a goal to measure, achieve and sustain. Series: Leading Pharmaceutical Contract Manufacturing
Ultimately its the expression of an organizations overall Organizations (CMOs) 2014-2024, which analyzes 30
competence and internal ability to execute its business leading companies in the space.
plans and roll out product, manufacturing and organiza- Jonathan Weymer, a senior analyst for Visiongain,
tional strategies via its people and resources effectively. said: There is a historic trend in the pharma
From the point of view and a recent study of 2,000 industry of outsourcing activities such as drug and
companies by the Council of Supply Chain Management API manufacturing. Recent years have been lean for
Professionals (CSCMP), supply chain performance in a number of the big players in the pharmaceutical
Pharma has not been as strategically important in this contract manufacturing market, with M&A activity
high-margin sector as it has been in other industries. To a core driver of revenue growth. However, the ability
effectively respond to the many changes in the industry, to deliver high-quality, flexible production will drive
CSCMP explains pharmaceutical companies (Branded business to the leading firms in coming years. Amen to
Pharma primarily) will need to build better end-to-end that Mr. Weymer.
supply chains. Well, no kidding, and certainly driving the Visiongain forecasts strong revenue growth for CMO
demand for competence among supply chain partners. market leaders between 2014 and 2024. Their analysts say


2O16 Contract Pharma Trends www.pharmamanufacturing.com

DPx Holdings and other leaders like Lonza and Catalent LONZA
will experience the greatest increase in revenue between A key to the development of highly targeted therapeu-
2014 and 2024. Bottom-lining it, Visiongain notes CMOs tic approaches for a range of diseases, Antibody drug
with specialist expertise, proprietary technology and conjugates (ADCs) are an increasingly popular tool and
flexible production facilities will experience market- the bio/pharmaceutical industry sees it as an important
beating growth rates over the forecast period. capability. Lonza, the preeminent Swiss biopharmaceuti-
Whos the hottest? Visiongain singled out Vetter and cal CMO, recognized the potential and positioned itself
Lonza as two of the best-placed companies for high accordingly. In an item covering the emerging value of
revenue growth during the forecast period. Visiongain ADCS, PharmSource consultants explained in one of its
analysts also called out Catalent and Lonza in particular newsletters that because of their complexity, ADCs offer
as two companies that have placed considerable unique opportunities and challenges for CMOs and bio/
investment into high potency API and antibody-drug pharmaceutical companies seeking CMO partners for
conjugate facilities, a couple of high value competencies their ADC candidates. PharmSources Tom Ransohoff,
that, at least according to just about anyone observing the explains: There are some real technical challenges in
industry, will help fuel revenue and growth. producing ADCs. It is not an easy thing to attach a drug
These areas are predicted to experience long-term to a monoclonal antibody (MAb). There are four main
growth in demand over of the next 10 years, says Weymer, elements to manufacturing ADCs: bulk production of
and will drive growth for firms with experience and the monoclonal antibody; bulk production of the small
production capacity. Similarly, say Visongain and others, molecule drug; coupling of the monoclonal antibody and
competency with complex processing such as lyophilisation the small molecule drug via the use of a chemical linker;
and pre-filled syringes will win increasing business from plus a fill/finish operation to put the product in the final
biopharmaceutical companies seeking partners that can dosage form for the patient.
demonstrate their ability to deliver such capabilities. Its recognized that one of the major technical hurdles
Patheon announced recently the appointment has to do with the fact that the antibody and the drug
of Gilles Cottier as president of the companys retain their viability after the components are chemically
pharmaceutical development services (PDS) division attached. Tom Rohrer, senior director, Lonza (Basel,
effective immediately. According to Patheon, Cottiers Switzerland) offered this to PharmSource subscribers:
appointment is part of a larger realignment effort by the The union of the antibody, a biological compound,
company to create three distinct business segments and the drug coupled to the linker, a small molecule
drug product services (DPS), drug substance services compound, must be made chemically, with the ADC
(DSS) and PDS. Patheon says the structure will help retaining the binding activity of the antibody as well as
forge deeper relationships with clients and employ new the biological activity of the drug.
business models to help clients simplify their supply
chain management activities and support the expanding SMALL/LARGE MOLECULE COMPETENCE REQUIRED
number of new business opportunities and increasing The production of ADCs requires small molecule and bio-
complexity of client relationships. logic manufacturing acumen within an HPAPI processing
Deeper relationships with customers are at the core high-containment environment. PharmSource says this
of Patheons go-to-market strategy called OneSource. limits the number of CMOs that can participate in the
Its under one roof that Patheon customers can combine process. Rohrer illuminates the task at hand: Perhaps
drug substance and drug product development and one of the greatest technology challenges associated with
manufacturing into a single customized solution to ADC manufacturing is the design and construction of an
simplify your supply chain and accelerate your discovery aseptic biological manufacturing environment that allows
to proof of concept. Patheon claims customers will be safe manipulation of highly toxic drugs. ADC manufac-
able to develop small molecules 8-12 weeks faster than the turing requires manipulation of cytotoxic drugs with very
industry-standard 15 months and large molecules 14-20 low occupational exposure levels, in the 10-9 gram/M3
weeks faster. range. The linkers are chemically synthesized and require
Lifecycle management is also a niche that Patheon traditional small molecule technology for production.
chooses to pursue publicly, and its literature online Analysts say Lonza comes closest to offering a single
identifies areas of formulation, dose form and associated source CMO option. It offers ADC conjugation services at
attributes that the companys operations can deliver for its Visp, Switzerland, facility, where it fields manufacturing
customers looking to extend the commercial lives of their operations for highly potent APIs. Lonza manufactures the
products and part of Pharmas kit of tactics to wring more monoclonal antibody at production sites in Slough, UK;
revenue out of existing product lines. Portsmouth, NH, USA; and Tuas, Singapore.


2O16 Contract Pharma Trends www.pharmamanufacturing.com

More recently Lonza announced the expansion of

mammalian production capacity at its Slough operations.
According to Lonza, Based on the increased demand
for biopharmaceutical development and clinical AND TECHNICAL ACUMEN ARE
manufacturing services, two 1000L single-use bioreactors
have been installed at the site. This expansion will
significantly increase the existing single-use manufacturing TO A CMOs SUCCESS.
capacity. Lonza says the Slough cGMP facility is the center
of excellence for this kind of development and clinical licenses and all options are exercised, Catalent says it has
supply. The site provides cell line construction, process the potential to receive up to $618 million in development
development and clinical manufacturing services for and commercial milestones, plus royalties on net sales of
mammalian-derived biotherapeutics. products. Naturally both companies are pleased with the
Capacity to meet customer demand is at the heart arrangement. Our goal is to combine our differentiated
of it as is the companys investment and commitment SMARTag technology with Roches expertise to create new
to competing in this lucrative segment. The increase transformational treatments, says Mike Riley, Catalent
in bioreactor capacity continues the implementation Biologics vice president/general manager.
of single-use technologies at the Slough site and
complements existing single-use equipment for both VETTER
seed train systems and downstream processing, Last September Vetter announced it was embarking on
including chromatography, filtration and ultrafiltration a 300 million (Euro) investment strategy to develop its
unit operations. The new reactors are equipped with manufacturing sites. Vetter says the move was in keeping
controllers that enable parallel reactor operations, with its commitment to manufacturing high quality drug
expanded process capabilities with flexible operating products for its customers. Vetter says the investment, to
scales and bioreactor types. The last line of their press take place over the next five years, is intended to expand
release says it all: Use of these technologies supports and upgrade its portfolio of manufacturing facilities.
Lonzas ability to accommodate a variety of customer Vetter is continuously developing its manufacturing
projects and processes across scales and clinical phases. sites and techniques to prepare them for future needs
and requirements. The upgrades are being driven by a
CATALENT changing healthcare market that is affected by issues such
Contract Service providers must demonstrate absolute as ever-more complex molecules, smaller batch sizes and
competence regardless of the drug category. However, like increasing regulatory requirements.
Lonza, the advances in biopharmaceutical science require Facility expansions are already underway at several
some next-level strategery to win and keep business in the of the companys locations in Germany, including its
coming years. Case in point is Catalent Biologics recent Ravensburg Vetter West center for visual inspection
news announcing its research collaboration with Roche and logistics. According to Vetter, structural work for
on Catalents SMARTag technology. Through its wholly the facility enlargement, which will more than double its
owned subsidiary Redwood Bioscience Inc., Catalent has capacity, is complete with the site being on schedule to
embarked on a collaboration with Roche to develop next- become fully operational in 2017. In general, Vetter says
generation molecules coupling different therapeutic mo- all of its site expansions will result in additional capacities
dalities using Catalents proprietary SMARTag technology. for drug product manufacturing and logistic services.
According to Catalent, Roche will gain non-exclusive
access to the SMARTag platform and will have an BETTER CONTAINMENT, BETTER OUTCOMES
option to take commercial licenses to develop molecules A central technology element of the planned upgrades,
directed to a defined number of targets. Use of SMARTag, says Vetter, is the implementation of an internally engi-
Catalents programmable protein-modification neered restricted access barrier system (RABS) concept
technology, combined with the highly stable Hydrazino- which the company says will contribute to increased
Pictet-Spengler (HIPS) conjugation platform, will permit operational excellence in aseptic manufacturing. For
evaluation of alternative sites of drug conjugation so that decades Vetter says it has relied on RABS and isolators to
Roche may develop molecules optimized for efficacy, assure sterile conditions for its aseptic processes. To bet-
safety and stability. ter meet future industry trends, Vetter created a corporate
For its part, Catalent receives an up-front fee of $1 project team to develop an Improved RABS concept by
million and additional research funding during the initial combining the advantages of isolator and RABS technol-
phase of the collaboration. If Roche pursues commercial ogy. The core of the approach, says Vetter is a uniquely


2O16 Contract Pharma Trends www.pharmamanufacturing.com

fast, by todays standards, three-hour cycle and fully auto- for drug product development and manufacturing, it is
mated decontamination of the cleanroom using hydrogen our intent to always get each customers job done right.
peroxide (H2O2), resulting from an extremely high level In order to reach this level on a continuous basis, these
of process innovation. Following a successful pilot, the investments are the right step, at the right time.
company says it intends to roll the concept out to all of its Its nearly universal that operational competence
cleanrooms within the next few years. and technical acumen are essential and fundamental
Naturally Vetter has its customers in mind and echoes to CMO success. Granted, the Top 30 CMOs have the
the sentiments of the industry of late. Managing director weight and momentum to preserve their share, but
Peter Soelkner put it like this: We are continuously there are hundreds of companies out there preparing
monitoring and reacting to a changing marketplace and to compete in similar ways, carving out niches, playing
are pleased that we are in the position to be able to make to their strengths, and investing in their operations to
these strategic investments to further develop our sites answer customer and market demands. Big, small or
and meet these challenges. Individually and collectively, in-between, contract service companies are readying
they will help us keep pace with the market... Managing themselves to make the power moves they need to be
director Thomas Otto notes that, As trusted partners successful.

Strong Growth Ahead

Markets robust in 2015, but for how much longer?
By Nigel Walker, Managing Director, Thats Nice LLC / Nice Insight

CONTRACT MANUFACTURING organizations cost efficiencies and access to novel, proprietary

(CMOs) of small- and large-molecule drug substances technologies for achieving product differentiation.
and formulated drug products have had profitable busi- And the increasing complexity of both small- and
nesses in recent years, including 2015. Growth rates for large-molecule drugs, such as antibody-drug
contract manufacturing have been much higher than that conjugates (ADCs) and highly potent compounds that
of the market for the pharmaceutical/biopharmaceutical require specialized skills and capabilities.
industry due to several factors:
Increasing consumption of medicines around the There are questions, however, as to how long such
world, both in emerging markets as incomes rise and strong growth can continue. Merger and acquisition
mature markets due to aging of the population. activity has been rampant among both sponsor
A more robust pipeline of drug candidates and an companies and contract service providers, leading to real
increasing rate of FDA NDA/BLA approvals. consolidation within both sectors. Several pharma firms
The growing number of biologic drugs in development, have also acquired contract service providers to achieve
many by traditional pharma companies that lack vertical integration. Others have elected to invest in
biotech expertise. their own in-house capabilities often smaller, flexible,
The entrance of numerous small, virtual startups into multiproduct facilities designed to meet the dynamic
the market that have no manufacturing capacity. needs of todays marketplace.
The rise in patent expiries and increasing generics Both strategies are designed to limit the need for
competition, which is driving a greater need for outsourcing. As a result, contract service providers that


2O16 Contract Pharma Trends www.pharmamanufacturing.com

wish to attain a similar level of growth going forward

will need to find a way to provide measurable added Recent, notable CMO
value that sponsor organizations cannot realize on their mergers and acquisitions
own. Emerging markets, value-added generics (so-called
supergenerics), and biosimilars provide other potential Merck KGaA acquisition of Sigma Aldrich
opportunities for growth if contract manufacturers have Pfizer acquisition of Hospira, including its contract
the global reach and technical capabilities necessary to parenteral drug manufacturing operations
capitalize on them. Albany Molecular Research acquisitions of Cedarburg
Laboratories and Oso Biopharmaceuticals
STRONG MARKET GROWTH EXPECTED FOR YEARS Merge of Patheon and DSM and the subsequent
The global contract (bio) pharmaceutical manufactur- acquisition by the newly formed DPX Holdings of Gallus
ing market is predicted by Visiongain (February 2015) Biopharmaceuticals.
to reach $79.24 billion in 2019, increasing at an average Par Pharmaceuticals acquisition of JHP Pharmaceuticals
annual rate of 7.5% from $54.54 billion in 2013 (1). The Merger of Cambridge Major Laboratories
market research firm also expects strong revenue expan- with AAIPharma
sion to continue through 2025. Key drivers identified by Siegfried Group acquisition of Hameln Pharma
Visiongain include growth of biologic drugs and biosimi- Consort Medical acquisition of Aesica
lars, including the growing demand for novel therapies Pharmaceuticals Limited
such as antibody-drug conjugates, treatments based on Piramal Enterprises purchase of Coldstream Laboratories
highly potent active pharmaceutical ingredients (HPAPIs) WuXi PharmaTech acquisition of XenoBiotic Laboratories
and regenerative medicines. Recipharm acquisitions of Corvette Pharmaceutical
The healthy growth of the contract services market Services Group, a Flamel Technologies facility in Pessac,
isnt surprising in light of the trends identified by Nice France and Lusomedicamenta
Insights annual Pharmaceutical and Biotechnology
Outsourcing survey of more than 2,300 outsourcing- companies spend more than $50 million on outsourcing
facing pharmaceutical and biotechnology executives has remained fairly stable over the last three years
(2). While the percentage of survey participants whose (23 to 24 percent), the percentage of respondents
whose companies spend $10 million to $50 million on
Figure 1. outsourcing has increased dramatically from 38 percent
to 62 percent, while the percentage of participants whose
Average Number Of Services companies spend less than $10 million has decreased by
Outsourced By Company Type slightly more than half (43 to 16 percent). In addition,
the average number of services outsourced by survey
2013 2014 2015
participant companies increased from 2014 to 2015,
8.2 regardless of the buyer group or budget size. See Figure 1.
4.9 5
A continued high level of M&A activity is expected by
Visiongain over the next five years, leading to further
consolidation of the contract services market (1). The key

driver: the desire of contract manufacturers to provide
Biotech Emerging Specialty integrated service offerings across the entire pharmaceu-
Biotech Pharma tical development cycle from discovery to commercializa-
tion (APIs and formulated drug products) and lifecycle
8.8 management. The number of contract manufacturing
7.28 7.4 organizations (CMOs) transforming themselves into
5.7 5.5
6.3 contract development and manufacturing organiza-
4.7 tions (CDMOs) reflects this trend, as does the rise in the
number of primary contract manufacturers that have
expanded into secondary (finished dose) manufacturing
(and vice versa) through mergers or acquisitions.

In fact, according to PharmaSource, just 30 CMOs
Big Emerging / Overall
Pharma Start-Up account for more than half of the industrys revenues


2O16 Contract Pharma Trends www.pharmamanufacturing.com

(3), and more than 18 acquisitions in the CMO space dedicated project managers, demonstrate a clear
(including only CMO-CMO deals) have taken place in the willingness to make long-term commitments, and the
last three years alone (3). Acquisitions of facilities from ability to customize protocols for different projects (2).
sponsor pharmaceutical and biopharmaceutical companies It remains to be seen, however, whether the newly
also continues, but at a slower pace than in the past (4). formed CDMOs resulting from the frenetic M&A
There are several reasons CMOs are acquiring one activity can actually provide fully integrated services
another: to gain a more global footprint to meet client that meet the expectations of pharmaceutical and
needs for global partners and large-scale capabilities biopharmaceutical sponsor firms.
for greater cost efficiencies; to expand into service areas
(development, final formulation); and to gain access to COST NO LONGER THE MAIN
advanced technologies. Overall, CMOs are looking to SELECTION CRITERIA
become CDMOs in order to develop extensive networks The focus on cost reduction initially associated with the
of capabilities similar to what sponsor companies have growth of outsourcing no longer seems to exist today.
access to in-house, but with cost, productivity and Quality has supplanted cost savings as the key criterion
technological advantages. when sponsor companies are seeking contract service
The internal investments being made by CMOs and partners. For three years in a row, respondents to Nice
CDMOs add up to quite significant sums and are too Insights survey have indicated that quality and reliability
numerous to mention. Leading the pack is Catalent, are the top two priorities, while affordability has dropped
which also recently acquired several companies in priority as one of the drivers for selecting an outsourc-
(Pharmapak Technologies, Redwood Bioscience and ing partner (2). See Figure 2. Poor quality also remains
Micron Technologies). Both Catalent and Patheon the top source of dissatisfaction for survey respondents,
announced initial public offerings to raise capital for followed by a lack of timeliness in resolving problems and
further expansions. unexpected charges.
Its also worth noting that FDA in 2015 opened its
THE VALUE OF INTEGRATED SERVICES Office of Pharmaceutical Quality, which is anticipated
These activities seem to indicate that the CDMO concept to aid the agency in more effectively addressing quality
has been well established. They also underscore the re- management issues in the pharmaceutical industry.
cent trend toward the formation of strategic partnerships Respondents of the Nice Insight survey that work
with a few preferred suppliers that have the expertise to for sponsor companies are also keenly interested in
support fully integrated capabilities and culture, systems contract service providers that have track records of
and processes necessary for the development of collab- success, financial stability and an industry reputation
orative relationships. for doing quality work (2). Partners with operational,
This approach allows drug manufacturers to meet methodological, and therapeutic experience to meet a
aggressive development times while realizing greater wide range of project needs and the ability to be adaptable
efficiencies in their own supply chains. According to the and flexible are also preferred. Clearly demonstrated
Nice Insight survey results, sponsor companies look for communication skills, a willingness to be transparent
strategic partners that have the capability and willingness and a deep understanding of customer needs are also
to collaboratively develop operating procedures, use important to survey respondents, as are a reputation
for being responsive, willingness to go the extra mile to
Figure 2. Rank Of Industry Drivers ensure success and implement sponsor methodologies,
and an eagerness to foster good rapport among project
20122013 20132014 20142015 team members.
Reliability 2 2 2 Candidate drugs today are more complex and challenging
to formulate, often requiring unique solutions to ensure
Productivity 5 4 3 high bioavailability, efficacy and safety. Many of these
complex drugs are also granted orphan drugs, break-
Affordability 4 5 4 through therapy, and/or fast track designations from the
FDA and must be commercialized in half the normal time.
Regulatory 3 3 5
At the same time, payers, governments, physicians and
Innovation 6 6 5 patients are requiring demonstration of value, and the
shift to evidence-based medicine is placing additional cost


2O16 Contract Pharma Trends www.pharmamanufacturing.com

and performance pressures on drug Figure 3.

manufacturers. Generic competition
Categories Of Technological Innovation
is fierce, and the need to gain ad-
ditional profits through the extension That Influence Outsourcing Partner Selection
of product lifetimes is becoming an
additional necessity.
1 2 3 4 Regulatory
Safety Efficiency Security Compliance
In many cases, sponsor companies
do not have access to all of the
state-of-the-art technologies that 5 Patient 6 7 8
are necessary to develop and Compliance Speed Loyalty Traceability
commercialize the complex APIs
and formulated drug products in SPONSOR COMPANIES MAKING opportunities for collaborative
their pipelines. Outsourcing is an THEIR OWN INVESTMENTS capacity management and long-term,
efficient and cost-effective way to Currently, CMOs account for multi-project relationships. The
gain access to the most advanced approximately 33 percent of the expanding biosimilars and biobetters
technical solutions. As a result, CMOs pharmaceutical industrys cost of markets will create additional
and CDMOs that can offer the most goods (COGs) for drug product demand for contract development
advances in technical capabilities, and manufacturing (4). That number isnt and manufacturing support,
more importantly novel, proprietary likely to change, particularly given particularly from service providers
technologies, have the greatest chance that sponsor companies, in response that can offer both quality and cost
of attracting the attention of sponsor to their more robust pipelines and advantages. Similarly, there is a
firms. As sponsor firms continue to strong cash positions, have begun to real need for lifecycle management
pare down their vendor numbers invest in additional internal manu- support of off-patent, small-molecule
and establish strategic partnerships facturing capabilities. drugs through the development of
with fewer, integrated suppliers, According to PharmaSource, modified generics with uniquely
technological capabilities will only spending on plant and equipment enhanced properties from technically
become greater differentiators. by the 25 largest bio/pharma advanced contract service providers.
According to the results of the companies grew 13 percent in 2013, Finally, CMOs/CDMOs with the
Nice Insight survey, the introduction and 11 percent more in 2014 to $19 ability to establish manufacturing
of innovative, new technologies to billion. Some drug companies are facilities in emerging market
the lab, manufacturing plant and also acquiring CMOs (e.g., Pfizers countries can position themselves for
supply chain is helping service acquisition of Hospira). In addition, strong growth, given that demand
providers attract projects from as mentioned above, many sponsor is expected to expand rapidly in
sponsors looking to be first to firms are looking to simplify their the coming years and the contract
market with differentiated products. CMO networks by working with service market is in its infancy in
A high percentage of respondents fewer CDMOs that can support these regions. It is also worth noting
(96 percent) also indicated that their projects from the development that increased competitiveness in
they have at least some interest in phase through clinical trials and on the contract service market will
forming outsourcing partnerships to commercial API production and ultimately benefit the survivors,
with service providers that adopt drug product formulation. who will see improved pricing and
state-of-the-art technologies to increased margins.
increase efficiency, safety, quality SLOWING AHEAD? IT DEPENDS
and traceability. In addition, the While increasing investments in pro- REFERENCES
level of technological innovation duction capabilities by drug manu- (1) Visiongain, Pharmaceutical Contract
at a potential outsourcing partner facturers may limit the potential Manufacturing World Market To Reach
influences the selection process growth of contract manufacturing $79.24bn in 2019, Press Release,
for survey respondents. The use of services to these traditional custom- Feb.10, 2015.
advanced technologies to enhance ers going forward, there still remain (2) Nice Insight, 2015 Pharmaceutical and
safety is most important, followed opportunities for CMOs and CDMOs Biotechnology Outsourcing Survey, Jan.2015.
by improving efficiency, security, to expand their businesses. (3) PharmSource, Contract Dose Manufac-
regulatory compliance, patient For those companies with truly turing Industry by the Numbers, July 2015.
compliance, speed, loyalty and integrated offerings and unique (4) J. Miller, Pharm. Tech. 39 (17), 26-211
traceability. See Figure 3. technical capabilities, there are (2015). By Nice Insight


2O16 Contract Pharma Trends www.pharmamanufacturing.com

Unlocking the Value of Supply Chain

An increasing focus on contract manufacturing can be expected
to drive the need for more advanced cooperation models

By Knut Alicke, Denis Fedoryaev and Patrick Oster, McKinsey & Company

SUPPLY CHAIN collaboration is underleveraged in the High tech: integrated planning, electronics
pharma industry. Although other sectors, such as con- manufacturers have successfully implemented
sumer and retail, have put more focus on managing their integrated planning spanning the entire supply chain.
supply chain, most of Pharmas collaboration efforts still
center on the commercial side. However, as the results Many large pharma companies embarked on creating
of a recent joint ECR/McKinsey collaboration survey supplier network platforms in the area of supply chain
indicate, in the near future industry executives anticipate information sharing, but both the depth of data exchange
an increasing focus on supply chain collaboration in such and the level of integration remain low. Better examples
areas as demand planning and fulfillment or supply chain of supplier collaboration have been seen with contract
flows and processes. Given the dynamics of client discus- manufacturing organizations (CMOs) established as
sions in health care, we expect this shift to take place in pharmaceutical plant spin-offs. Demand-and-supply
pharma as well. transparency is also weak within the sector. While
Today, less than half of the value chain in pharma is principles underlying supply chain collaboration in
externalized, which is considerably lower than in the other industries are applicable to pharma, additional
automotive or aerospace industries where it reaches constraints are imposed on the industry by the
70 to 80 percent. An increasing focus on contract uniqueness of the pharma supply chain. These constraints
manufacturing, however, can be expected to drive the need are numerous and start with pharmas stringent
for more advanced cooperation models. This trend will regulatory requirements that impose strict product
be further accentuated by regulatory actions, such as the availability requirements, long lead times associated
May 2013 U.S. FDA guidance for the pharma industry on with switching suppliers, and high complexity in change
quality practices in contract manufacturing arrangements. management because master data are extensive; they
The consumer and retail, automotive, and high-tech must be absolutely accurate at all times.
industries have already seen examples of successful
collaboration efforts, albeit each of them in its own CONSTRAINTS AND COMPLEXITY
distinct focus area: Most understand pharma supply chain networks are
Consumer and retail: large-scale supply chain increasingly complex. Pharmas specialized supplier
information sharing. base focusing on concrete therapeutic areas as well
Automotive: multi-tier demand and as particular production steps, combined with a frag-
supply transparency. mented network of manufacturing plants for different


2O16 Contract Pharma Trends www.pharmamanufacturing.com


SC collaboration could be a relevant source of bottom-line contribution:

industrywide EBIT potential at $5-10 billion

SC cost breakdown, range from top to
median pharmaco1 bottom quartile
Share of COGS




2.1% 2.0%

Reduction Supply Inventory Transportation Warehousing Supply Write-offs

potential from chain cost holding chain staff
SC collaboration
Baseline decrease 1020% 2040% 1020% 515% 510% 1020%

Improvement potential across all main cost areas of 1.53.5% in COGS

EBIT uplift in both Rx and Gxsegments estimated at $5 billion to $10 billion

1 SC cost COGS share and component breakdown vary depending on individual pharmaco SC performance;
provided is indication of median industry performance
SOURCE: McKinsey POBOS Supply Chain, Evaluate, BMI, McKinsey analysis and expert estimates

purposes (e.g., formulation, bulk, primary packaging, THREE DISTINCT OPTIONS

secondary/tertiary packaging for market access) FOR PHARMA
fuels complexity. The taxonomy of external-collaboration models for
SKU complexity is becoming more pronounced, pharma companies encompasses the following three dis-
with the average number of SKUs per packaging line tinct options: supplier collaboration, customer collabora-
increasing. Different technologies, dosage forms, tion and peer collaboration. Selection and management of
packaging sizes, and numerous country-specific suppliers can drive the performance of the entire supply
requirements are just a few parameters driving SKU chain down to end customers. As such, it should be a key
complexity. The growing trend toward more personalized topic for pharma external-supply departments, perhaps
medicine has become a contributing factor as well. even in the context of a broader cross-functional supplier
As opposed to the consumer and retail or high-tech development program.
sectors, where manufacturers most often deliver to retail Depending on the market size, regulatory
distribution centers, the immediate Pharma customers requirements and local-market specifics, the main
are predominantly wholesalers. These intermediaries customers of most pharmaceutical manufacturers
effectively impose another layer of uncertainty on the are likely a wholesaler, a pharmacy, a retailer or a
supply chain, making demand forecasting and logistics hospital, which can make supplier collaboration tough.
optimization more challenging. Intermediate warehousing and distribution points within
Long lead times in switching suppliers or strict product these networks could be managed via distributors or
availability requirements, for example, are all the more logistics services providers (LSPs).
reason to improve collaboration. The high product Customer collaboration in pharma is virtually
availability expectations that put increased pressure on nonexistent. The willingness to collaborate was also
the customer service levels would also be substantially dampened on the wholesaler end after industry players
improved via collaboration. In sum, we see no reason started switching to direct-delivery models on above-
why supply chain collaboration in pharma could not be average wholesaler mark-up products, resulting in
as successful as in other industries once prerequisites are wholesalers losing business to LSPs or having to offer less
in place. profitable LSP services.


2O16 Contract Pharma Trends www.pharmamanufacturing.com


Set of SC collaboration levers revolves around four key areas: planning, inventory
management, inbound and outbound processes, and logistics


1 Collaborative planning 1. Joint review and setting of 1 base planning parameters

2. Joint demand and replenishment planning (CPFR)
3. Data sharing on supply constraints and demand peaks
4. Integrated planning automation and end-to-end information flow optimization
5. Joint improvement initiatives on forecasting accuracy and plan adherence
6. Joint SC business plans and shared SC KPIs
7. Embedded planners at key partners
8. Multitier transparency of demand and supply

2 Collaborative 9. Vendor-managed inventory (VMI)

inventory 10. VMI peer collaboration
management 11. End customer demand segmentation and tailoring of replenishment schedules and levels and locations of
inventory (e.g., based on sales velocity and volume)
12. Joint definitions of SKU allocation rules for make-to-order vs. make-to-stock production modes
13. Consignment stock arrangements

3 Collaborative inbound 14. Packaging material optimization (improving handling efficiency)

and outbound 15. Standardization of packaging units, handling containers, label information
processes 16. Shipment and bundle size optimization
17. Serialization and traceability
18. Establishing information exchange processes for, e.g., advance ship notice, electronic invoices, smart

4 Collaborative logistics 19. End-to-end modeling of distribution network, including transportation routes, warehousing
20. Sharing of logistics facilities and transport (e.g., truckload split, backhauling)
21. Leveraging partner network and transport for
direct deliveries
22. Joint optimization of logistics operations (e.g., speed-docking, green trucks, energy efficiency) and
delivery modes (FTL/LTL freight optimization direct delivery, local and remote milk run, cross-docking)
23. Joint peer LSP management and setup
24. City logistics: better consolidation of deliveries to end customers and convergence of manufacturers and
wholesalers order quantities and frequencies

The primary example of peer collaboration is metrics, including service level (supplier and customer),
PharmLog in Germany, a joint venture set up by six major stockouts, order changes, forecast accuracy, production
Pharma companies. Joint venture activities include a wide planning accuracy, lead time, flexibility and agility.
range of shared distribution and warehousing functions While improvement of service level or product
including order and stock control, receiving and storage, availability generates significant value on its own,
picking and packaging, batch control, repackaging, etc. the financial benefit of collaboration can be expected
from reducing the five main supply chain cost buckets:
CASE FOR SUPPLY CHAIN inventory holding, transportation, warehousing, supply
COLLABORATION chain staff and write-offs (See Figure 1).
The value of supply chain collaboration already demon-
strated in other industries ranges from working capital COSTS
improvement and cost reduction to decreased spending Pharma supply chain costs vary depending on individual
and higher sales. It also fosters revenue growth through supply chain performance. McKinsey estimates that the
better on-shelf availability and flexibility to address de- full reduction potential from supply chain collaboration
mand changes. Collaboration can generally have a posi- across all main cost buckets could achieve around 1.5 to
tive impact on a wide range of supply chain performance 3.5 percent COGS improvement. This is especially rel-


2O16 Contract Pharma Trends www.pharmamanufacturing.com

evant for generics players that have a significantly higher particularly true for situations when value cannot be
cost share. Results of this magnitude require that prereq- directly attributed to the collaboration initiative or
uisites are in place, the right approach is chosen, and the when a performance metric improvement is difficult to
most critical levers are engaged. Given todays industry translate into the financial equivalent.
size of about $900 billion in the combined originator (Rx)
and Gx segments, as well as the current cost structure, 4. Performance tracking: Performance of the collaboration
the industry-wide potential impact of supply chain col- initiative should be tracked via jointly determined
laboration amounts to $5 billion to $10 billion in earnings metrics with clear measurement processes that are
before interest and taxes (EBIT) improvement. well understood and transparent to partners. The
Following a successful procurement transformation, performance-tracking system should feed the value-
a global pharma company launched a supplier sharing scheme.
collaboration program to deliver value-driven savings
beyond pure price reduction. Several supplier pilots 5. Program architecture: While the launch of a
were launched, with the following outcomes: 50 percent collaboration program can represent several pilots
reduction of inventory, 15 percent European transport with suppliers, customers and peers, in the end
cost decrease, 17 percent packaging-material cost there must be a structured project approach to each
reduction, and 20 percent capacity increase for filling collaboration initiative.
operations. Success was attributed to the careful design
of program architecture and approach, thoughtful Another important factor for success is selecting
selection of the right suppliers for the pilots, dedication the right partners. Unlike companies in many other
of company resources to supplier capability building, sectors, even the top players in pharma cannot claim a
and the drive for cross-functional collaboration. good understanding of their upstream and downstream
As mentioned earlier, full-scale customer collaboration strategic partners. Before launching any collaboration, a
programs have not taken off in the pharma industry. company should first run a comprehensive optimization
One recent noteworthy initiative is the launch of a global of both supplier and customer footprints and define its
forecasting excellence program by a major Gx player, which strategic partners in both pools.
includes a joint forecasting pilot with a select customer. The The set of potential supply chain collaboration levers
impact is yet to be shown. is broad and dependent on specific circumstances and
roles. There are, however, four main areas where supply
HOW TO MAKE COLLABORATION chain collaboration can deliver high impact: planning
INITIATIVES WORK and forecasting, inventory management, inbound and
To increase the odds of achieving significant benefit, it outbound delivery and handling processes, and logistics
is crucial to ensure, prior to launching an initiative, that setup (See Figure 2). Most of the levers described in each
the prerequisites for collaboration are in place and that area are applicable across all supply chain collaboration
the right approach is being applied. There are five critical models:
prerequisites that management should consider before Despite cultural and trust hurdles with external
launching collaboration efforts. parties and relatively long time-to-impact, supply chain
collaboration can clearly offer substantial benefits. This
1. Commitment and resources: Collaboration should be is particularly the case in the cost areas of inventory
positioned as a strategic priority with explicit senior- holding, transportation and warehousing, supply chain
level commitment and accountability from partners. staff, and write-offs. To achieve benefits, however, it is
There must be available resources to form a joint, important to ensure that the fundamental prerequisites
dedicated supply chain team, with involvement of such as commitment and resources, data exchange
other functions. mechanism and value-sharing scheme are in place and
that the most critical collaboration levers are engaged.
2. Data exchange mechanism: The sharing mechanism
should be realized by setting up an independent
clean team to ensure confidentiality. In later stages, it ABOUT THE AUTHORS
should be transformed into the IT interface with clear Knut Alicke (Knut_Alicke@mckinsey.com) is a master expert
governance rules. in the Stuttgart office. Denis Fedoryaev (Denis_Fedoryaev@
mckinsey.com) is an associate principal in the Copenhagen office.
3. Value-sharing scheme: The sharing of benefits, costs Patrick Oster (Patrick_Oster@mckinsey.com) is an analyst in the
and risks should be clearly defined up front. This is Wroclaw office.


Your product can be manufactured,
In an industry where regulatory compliance is just the starting point,
WellSpring is committed to quality beyond compliance. With WellSpring as
your formulation, development, manufacturing and packaging par tner for
solid, semi-solid and non-sterile liquid products, youll get the kind of
scientific expertise and technical support that result in consistently
high product quality and complete fulfillment of your to-market goals.

Learn how your

technology transfer projects can be

made better
Read the E-book
2O16 Contract Pharma Trends www.pharmamanufacturing.com

knows all the steps: from the minuet

of engagement, the foxtrot of clinical
trials, the Charleston commercial
scale up and the long Waltz associated
with commercial manufacturing
at scale to meet the demand for a
successful compound.
Last March DPx was created from
the merger of Patheon and DSM
Pharmaceutical Products, the life
sciences operations of Royal DSM in an
effort to launch a full-service, end-to-
end pharmaceutical contract services
provider. Privately owned by JLL
Partners (51 percent) and Royal DSM
(49 percent), DPx is a culmination of
the $2.65 billion deal between the two
companies, a deal first announced
late in 2013 and completed in March
2014. Led by CEO Jim Mullen (former
CEO of Patheon), DPx is operated as
an independent standalone company
and is parent to business units Patheon
Pharma Services, DSM Fine Chemicals
and Banner Life Sciences.
According to DPx, the Patheon

Belle of the Contract

business unit encompasses solid
and sterile commercial dose
manufacturing, pharmaceutical

Manufacturing Ball product development services and the

biosolutions and biologic businesses
formerly associated with DSM
DPx has been busy making itself Pharmas best CMO Pharmaceutical Products. DSM Fine
dance partner one that knows all the steps Chemicals main focus is centered
on custom synthesis services for the
Pharma and fine chemical industries.
By Steven E. Kuehn, Pharmaceutical Manufacturing Banner Life Sciences focuses on
R&D, in-licensing, out-licensing,
commercializing formulation
technologies and the production
of proprietary, over-the-counter
TRADITIONALLY CONTRACT development and manufacturing orga- (OTC) and nutritional products.
nizations (CDMOs) were Big Pharmas Cinderellas, working hard behind the Headquartered in Durham, North
scenes, working their niches, usually seeing to either chemical or biologic Carolina, DPx manages some 8,000
active pharmaceutical ingredient (API) manufacturing, final drug product employees at 20 locations globally
manufacturing, or early and clinical-stage development work. including the U.S. and Canada,
Eventually, even Cinderella was invited to the ball and CMOs are too, Europe, Latin America and Australia.
increasingly being asked to the dance and to take on more and more production But beyond the merger that created
and commercialization tasks for Pharmas innovators, as well as all those the worlds largest organization of its
companies, big and small, serving markets near and far with well-known type, the company continues to pursue
formulations and dose forms. Creating an organization that can serve the its hoped-for market leading strategy.
growing demands of drug owners and innovators large and small is no mean Last September, DPx completed
feat, and DPx Holdings B.V. has spent the last year creating a dance partner that the transaction to acquire Gallus


2O16 Contract Pharma Trends www.pharmamanufacturing.com

BioPharmaceuticals LLC, another contract manufacturing ing at outsourcing more work, but with companies with
company leader specializing in biologics. According to the broader capabilities.
Gallus presser, Patheons biologic drug substance business Mullen says the strategy is to shrink the network of
now spans four global facilities in Europe, Australia and suppliers and in the process make the supply chain more
North America and includes more than 550 employees. manageable. Mullen points to emerging drug product
At the time, DPxs Mullen declared confidently that with complexity as another strategy imperative served by a CMO
the Gallus acquisition his company was now more capable with robust technical capabilities. He notes a growing
than ever, able to provide customers with an even higher slice of products requires special, sophisticated processing
level of service with our expanded service offerings and capabilities and that includes both biological drugs and
dedicated biologics presence in the U.S. Mullen explained the drugs in development on the small molecule side. The
acquisition allows DPx to better serve the biologics segment estimate, says Mullen, is maybe a third of the pipelines
and that it aligns with the companys strategy to bring our out there that have solubility absorption issues. So what
customers an industry-leading, end-to-end service offering. does that mean, asks Mullen? They need more specialty
Patheon pharma services business provides commercial formulation technologies to solve these problems. And what
manufacturing, pharma product development services for a does that mean for DPx? We keep building our technology
full array of solid and sterile dosage forms, and biologic and base, citing the recent Agere Pharmaceuticals acquisition as
chemical drug substance development and manufacturing. a transaction exactly aimed at that problem.
With the Gallus acquisition, said the company, Patheon is Ageres Bend, Oregon, facility is expected to serve as
now a leading provider of process development as well as a solubility center of excellence and part of Patheons
clinical and commercial scale manufacturing of mammalian pharmaceutical development services (PDS) operations.
cell culture derived products. We see a growing need to offer customers an integrated,

Its been a challenging market to find high quality CMOs

with reasonable capacity and flexibility.
Jim Mullen, CEO, DPx Holdings B.V.

The deal sought to integrate two existing Gallus sites agnostic approach to address their development and drug
(St. Louis and Princeton, New Jersey) and complement delivery needs, said Patheons Michael Lehmann, president,
the two existing Patheon sites in Groningen, the global pharmaceutical development services and executive
Netherlands and Brisbane, Australia. Three of these four vice president global sales and marketing With this
global sites, said Gallus, have nearly three decades of acquisition, we strengthen our number-one pharmaceutical
mammalian cell culture experience, while the Brisbane development services position with a solution that
site, opened within the last year, is considered a facility integrates scientific acumen and design automation.
of the future for biologics, one which was covered This past March Patheon also announced it has reached
extensively in Pharmaceutical Manufacturings January a definitive agreement to acquire IRIX, a company that
2014 issue. specializes in difficult-to-manufacture API for drugs
At the end of the day, the enhanced capabilities from early and late development, through commercial
provided by the Gallus acquisition further supports launch. Patheon secures additional API development and
Patheons end-to-end integrated offering strategy by manufacturing services in the U.S., including high-potency
providing small-scale API and biologic drug substance (SafeBridge Class IV certified) and controlled substances
through to commercial manufacturing capabilities and (Schedule 1-4). IRIX, said the announcement, has a well-
the capacity to win more of this business going forward. established reputation for the optimization of chemical
processes and scale up for commercial API manufacturing
RESPONSE TO SUPPLY CHAIN COMPLEXITY at sites in Greenville and Florence, South Carolina.
According to Mullen (whom Pharmaceutical Manufactur- Through its IRIX acquisition, DPx says it is now able
ing encountered at DCAT Week 2015), whether its the to offer an array of cutting-edge process technologies,
big pharma guys or some of the smaller customers, those including biocatalysis, homogeneous catalysis and
companies want to outsource more, for one, because microreactors, and are better positioned to address an
supply chains are getting more complex. So theyre look- extensive range of supply chain issues for its customers.


2O16 Contract Pharma Trends www.pharmamanufacturing.com

Combining companies with shared

commitments to both scientific
excellence and customer service
drives industry excellence, and we
are excited to become part of the
Patheon network, said IRIX CEO
Guy Steenrod. This is a strategic
deal that allows us to help customers
solve complex challenges with
comprehensive, integrated solutions.


There are myriad market and com-
petitive drivers steering the strategies One of the things Mullen says facilities. Now we have conversa-
of drug owners hunting for business DPx is good at is being able to tions about [the] need to pool
success. Increasingly, this success re- offer its customers a shop that can resources to figure out how to make
quires obtaining strategic partners to get them through all the phases a more robust process and compare
acquire the necessary resources es- of development and right into best practices, says Mullen, so
pecially manufacturing capacity to commercial production. We do the nature of those conversations is
support the strategic aims of a given that all the time. So by the time you changing its a little less insular.
company and the market success of a get to the end of clinical [trials], Mullen notes that Big Pharma,
given therapy. Mullen points to inject- says Mullen, you are already in our historically, used to lead the
ables as a good example of where DPx commercial facilities. development and technological
has been shaping its strategy to help innovation associated with processing
companies span the gap. Its been a END-TO-END INTEGRATED and manufacturing operations, but
challenging market to find high-qual- DEVELOPMENT that focus has shifted to the contract
ity CMOs with reasonable capacity The preceding discussion serves to services community and companies
and flexibility, says Mullen, noting illuminate what Patheon and DPx like Patheon who, out of necessity,
that its a market thats been really have created to be successful and are introducing advanced processing/
stretched over the last few years. He support its customers of all sizes. manufacturing solutions as well as
explains that when one looks at the Last October DPx renamed its DSM technologies supporting operational
volume of biologics coming along, not Fine Chemicals business unit to excellence and compliance like
to mention biosimilars, theres a lot DPx Fine Chemicals. The change, advanced information technologies.
of pressure in the injectable space. said the company, aligns its business Our strategy if you look at
units with the name and strategy of what we have been trying to do
ONE FOR ALL DPx Holdings, further supporting over the last 12 months and what
Mullen says his company has been the integration of its businesses in weve put together is really about
focused on being responsive to all support of the companys end-to-end trying to read this market, which
sectors of the market and that includes development offering and a strategy is saying okay, were concerned
companies with orphan drug indica- that has been framed and branded as about supply chain complexity and
tions and other smaller scale, smaller OneSource. The offering, said DPx, that we want to do more business
batch production needs. He says this supports Pharma companies with with fewer companies with broader
portion of DPxs potential market fully integrated services based on capabilities. We moved to a strategy
reports theyre having trouble find- simplicity, speed and quality founded of saying, look, we want to be a
ing contract service providers who on industry-leading expertise. very broad provider, and we want
want to deal with their special needs. to be able to further [our customers
Weve organized ourselves [to accom- TOWARD TRUER business goals from] development
modate] small-scale and large scale, COLLABORATION through commercialization, API
says Mullen, explaining that DPx Mullen says that some of the com- through dose form development,
accomplishes this in different loca- panys customers theyve worked through to commercial dose form
tions and with different lines, but have more closely with over the years are packaging, so, says Mullen, we can
figured out how to meet the needs of actually starting to reach out and ask take as many of these hand-offs and
players across Pharmas diversity. for a technical assist with their own coordinations off your plate.




s a result of changing dynamics in the pharmaceutical industry, the availability of used pharmaceutical manu-
facturing equipment has increased. At the same time, the level of comfort with used equipment has grown.
While this trend is good news for pharma companies with surplus equipment, to maximize the potential for
investment recovery, it is important that asset owners develop a strategy for managing their recovery efforts.

There are generally three approaches to investment recovery:

1. Complete in-house management using an in-house team dedicated to investment recovery;
2. Outsourcing of all investment recovery services, typically arranged by the purchasing department; and
3. The use of an in-house program manager with support from outside used equipment service providers.

The choice of strategy depends on several factors, including the size of the company, the quantity of used equipment
that must be managed, and the resources that are available to support an investment recovery program.

For an in-house program to be successful, the pharmaceutical manufacturer must not only have appropriate
storage space (that often must be compliant with Good Manufacturing Practices), personnel, handling inventory and
sales management systems, and an advertising budget are required. Outsourcing shifts most of these burdens to the
service provider, but someone must take responsibility for overseeing the selection of the provider and for ongoing
management of the program at each of the companys locations.

It is also crucial for the investment recovery team whether in-house or external to understand the level of return
expected by the owner and weigh the other relevant factors important to each individual project, such as the location,
project timeframe, and removal costs. If done properly, a customized plan can be developed that maximizes the
firms goals. In addition, experienced teams will not only look for external sales opportunities, but consider internal
redeployment as a mechanism for avoiding unnecessary capital expenditures elsewhere in the company.

The purchase of pharmaceutical equipment is in fact a major investment, and access to used assets can benefit both the

When you
purchaser, who can save a significant amount, and the seller, who has the ability to recoup some of its original investment.
For pharmaceutical companies with limited experience selling surplus equipment and/or limited resources, used
equipment dealers can help facilitate the process. They can not only appraise the equipment, they have established
think equipment,
networks of potential customers and extensive marketing programs in place. In addition, they can help ensure that
all transactions are transparent and compliant with the various regulatory requirements that govern the sale of use
think Federal
pharmaceutical manufacturing equipment.
Federal Equipment has been a trusted source of pharmaceutical processing equipment for more than 50 years. We
are equally comfortable When
taking on management of the entire investment you process,
recovery need to upgrade your
or working facility
closely or reduce
in-house management. Our pharmaceutical team has extensive marketthe risk of equipment
knowledge, failure, Federal
and we consistently exceedEquipment
expectations with our extensive inventory, climate-controlled, gets you online
pharma-dedicated with
storage the right machinery
warehouses, and our in the
to complete fast, accurately appraised liquidations. shortest time. As a trusted source of processing
When you Weneed
sellto high-quality
upgrade your facility or reduce
machinery equipment for over 50 years, we have extensive
the risk of equipment failure, Federal Equipment
We buy surplus equipment industry expertise and a vast inventory viewable in
gets you online with the right machinery in the
Matt Hicks, Chief Operating Officer, Federal
pharma-dedicated Equipment Company.
shortest time. As a trusted source of processing
equipment for over 50 years, we have extensive
industry expertise and a vast inventory viewable in
pharma-dedicated warehouses.

+1 877 536 1538
WWW.FEdEQUip.COM For more information, email us at pharmaceutical@fedequip.com

+1 877 536 1538

For more information, email us at pharmaceutical@fedequip.com


2O16 Contract Pharma Trends www.pharmamanufacturing.com

There are essential supply chain

elements to consider when integrating
third-party providers, especially with
contract manufacturing organizations
(CMOs), as well as best practices to
improve information flow among
clinical, logistics, manufacturing and
IT teams.

Favorable clinical trials are those
having a positive effect on the tested
substance. Certainly, patient safety is
a key focus. Formulation of the inves-
tigational product, its stability and all
associated packaging aspects are es-
sential in this regard. Sometimes good
manufacturing practice (GMP) efforts
to finish a product are underestimated
by clinical R&D personnel. The only
appropriate response for CMOs is to
consistently educate sponsors and
CRO stakeholders. Implementation of
robust quality/technical agreements
should be a given.
Recognizing the highest impact

Mission Possible: and importance of quality within

the supply chain is a basic, but

Excellent Clinical Logistics

often neglected element. Without
an elaborated quality management
mindset that embraces the supply
chain, a clinical trial may not be
Insightful integration of Contract Manufacturing
successful. Quality does not start or
Organizations into clinical trial business finish with product manufacturing,
however, it is one essential part that
By Jens Mattuschka and Henriette Frangillo-Engler, should never be omitted. The final
Clinical Logistics Services, PAREXEL International
study result is valuable only when
all processes have been developed
well in advance and when all
possible known consequences have
been thoroughly considered. The
THE CLINICAL trial supply chain is a conglomerate of many individual, awareness of the field of work in
sometimes multifarious, links that must be reasonably assembled to form a which we are operating must be
stable chain. Its not simply a linear row consisting of a few simple tasks. omnipresent and repeatedly verified.
One significant supply chain challenge is properly incorporating third-
party providers, such as manufacturing companies, focused on primary BULLWHIP EFFECT
and secondary packaging of investigational medicinal products (IMPs) and Who has not experienced the bull-
other clinical trial materials (CTMs). Insufficient connections and non- whip effect in clinical supply chains?
existent manufacturing supply strategy could delay production timelines and Due to limited transparency of
potentially lead to considerable overspending. Inadequate product quantities demands along the supply chain
or manufacturing capacities when needed are often the result of an improper from the patient, investigator, clinical
planning process. This could increase costs along the entire clinical supply monitor, local depot, central distribu-
chain and raise the likelihood of study delays. tion center, CMO or third party ven-


2O16 Contract Pharma Trends www.pharmamanufacturing.com

CMO - Integral part of supply chain

Source: Mattuschka, Frangillo-Engler; PAREXEL International

dor involved in pre-production activities last-minute Biopharmaceutical R&D experts and CROs are wise
orders or misuse of available stock hinders trial continu- to integrate CMOs into planning stages. They can get
ity and produces considerable inventory swings. This can ahead even more if they implement a sales and operations
not only have dramatic cost implications, but may also planning (S&OP) model the gold standard in the
impact safety. Patients already enrolled into a clinical supply chain industry that fully loops CMOs and CROs
trial can be put at risk if not supplied with sufficient trial into that process. This type of collaborative business
medication on time. process may help drastically reduce planning cycle
To make clinical logistics more efficient, one must time and improve forecast accuracy. It can also help
understand the dependencies and evaluate and mitigate mitigate the risk of stock-outs along the full supply chain.
associated risks in advance. A single weak link in the Additionally, processes also become more standardized
chain can cause the entire ensemble to break. and lean across all parties.
Clinical supply planners are challenged with
evaluating several aspects during the start-up phase, MANUFACTURING
however, they often find themselves disconnected from Product formulation and stability, as well as IMP kit
the clinical team. Since CMOs are involved early in design be it a study-specific labeled blister, bottle
the supply chain stage of production, it is essential to or vial can significantly impact storage, distribu-
embed manufacturing experts into the clinical trial core tion and administration. We have seen projects with
planning structure. CMOs must know the expected relatively large blister packages shipped under cold
delivery time to sites and patients, as well as the required chain requirements of 28C. While this was obviously
quantity and availability of the initial IMP batch. a lower cost for production, especially for relatively
Likewise, they must have information about drug product small batches of over-encapsulated drugs, they heav-
shelf life and stability, which are essential for expiry ily affected transportation costs because air had to be
management and drug handling at sites/patients. transported in validated high-volume shippers. The
A forward-looking distribution strategy includes the same concept applies for the number of batches to be
entire manufacturing element as part of the overall plan, produced. At first glance it may seem less expensive to
forming a coherent, logical process long before packaging perform one larger production run than many smaller
is complete. Expiry date management and distribution ones. However, by taking into account expiry dates,
schemes should also be factored into the strategy. uncertain enrollment numbers and a high volatility in
Packaging and label design, plus the impact of product regional distribution demands, one large production
characteristics dosage form, temperature conditions can quickly become unusable while fresh batches are
must also be considered. desperately needed.


2O16 Contract Pharma Trends www.pharmamanufacturing.com

Clinical Supply Chain Journey

CMOs can be more innovative by steadily optimizing experts along the clinical supply chain. An enterprise
manufacturing and implementing better processes, resource planning (ERP) solution is considered the
including: small-batch IMP labeling, forecast ultimate S&OP tool for the clinical trial logistics business.
automation, production planning and resource This fosters straighter technology integration, supports
allocation. Additionally, investments in future logistics lean process management and creates reasonable
areas, such as e-Labeling, RFID and On-demand/Just calculation and more precise forecasts.
in Time labeling, can add value to clinical trials by Manufacturing is an ambiguous process, which is
supporting chain of custody. why associated technologies and supply logistics must be
Certain manufacturing process aspects can influence flexible and provident. Frequent adjustments to initial
distribution, handling and re-supply processes. Although assumptions must be included from the beginning
initial forecasts of product quantity are completed during and verified along the chain. If one link moves in an
the planning phase, the supply chain must be monitored unexpected direction, it weakens the chain and requires
closely to reduce potential disruption risks. The relentless modification. Minimal movements can adjust the flow so
review of planning parameters during the execution that the direction is realigned once again.
phase enables clinical logistics experts to adjust according Efficient planning and proper technologies along
to external factors that influence the flow. An elaborated the manufacturing chain can minimize overage,
plan at the outset helps simplify the drug development avoid product shortages and optimize production and
journey along the clinical supply chain, but in many ways packaging campaigns to support informed decision
the planning phase is a continuous activity. making. With the help of enterprise solutions, processes
can be further streamlined and automated, improving
TECHNOLOGY INTEGRATION operations and costs.
Combined with the elements outlined above, technol- An effective and non-disruptive end-to-end clinical
ogy plays an important role in the journey. Over the supply chain is possible if CROs, CMOs, logistics
years, clinical supply chain experts have instituted many providers and the broader biopharmaceutical industry
technical instruments, including interactive response act together as trusted partners. One only needs to
technology (IRT) solutions that streamline and simplify examine other business sectors such as the automotive
complex processes. These, in turn, enable more intelligent or semiconductor industries to find benefits of
and cost-effective in-time supply distribution within the collaboration. Having the CMO as a partner enables
highly global and volatile clinical trial environment. real communication and deeper cooperation that can
A key to success is tightly integrating enterprise lead to new and successful approaches to clinical trial
technology which combines manufacturing, storage, logistics. Holistic project management, combined with an
distribution, investigational site management and clinical intelligent supply chain strategy, can generate successful
trial management systems with CMO distribution outcomes at the end of the drug development journey.

Optimize your capability
Taking your processing capabilities to the next level is a strategy for
success; one that often demands upgrading equipment to meet new
production goals and future requirements. For immediate access to
the best technologies at the right price while maximizing returns from
surplus idle equipment, Federal equipment Company is ready to help
you optimize operations while recovering equipment value through
accurate appraisals, strategic liquidations and full logistical support.

When you think equipment,

think Federal Equipment

1.877.536.1538 > www.fedequip.com