DCAT Week returned to New York City in full glory last month, with the Drug, Chemical & Associated Technologies (DCAT) Association’s first post-COVID event for companies engaged in the bio/pharmaceutical manufacturing value chain. There was tremendous excitement surrounding the private, high-level, strategic meetings that facilitate the development of global networks, and which allow the industry’s C-suites to keep pace with the ever-changing bio/pharmaceutical markets.
Inevitably, some of the hottest topics this year focussed on challenges caused by the pandemic and other recent geopolitical issues affecting supply chains, but there were also some fascinating insights into novel technologies, attitudes and plans for expanding and re-shaping capacities, and responses to increasing demands for greater sustainability.
Chimica Oggi-Chemistry Today spoke with representatives from some of the world’s leading companies in bio/pharmaceutical manufacturing, on a range of important topics driving developments in our industry.
SUPPLY CHAIN RESILIENCE
The recent past has been impacted by a number of adverse events: first the COVID pandemic, and more recently the conflict in Ukraine. It is easy to forget that real scrutiny into bio/pharmaceutical supply chains began following issues with some sources in China – even before the very first sniff of COVID, HSE deviations, data integrity issues, and the scandal of genotoxic impurities all spurred a rethinking of sourcing strategies. However, COVID and geopolitical tensions have certainly further increased awareness of supply chain resilience, and this is becoming even more important considering difficulties affecting logistics, raw materials and energy arising from the conflict in Ukraine. Against this backdrop, it is not surprising that supply chain issues continued to be one of the most hotly debated topics at DCAT Week 2022.
Pierfrancesco Morosini, Chief Executive Officer of ICROM: “Despite general difficulties with global supply chains, and a new wave of rising inflation, ICROM is pursuing its manufacturing program with no hassles, while minimizing the economic burden to clients worldwide.”
Of course, all companies are united in their determination to minimize disruptions. Pierfrancesco Morosini, CEO of ICROM, no doubt spoke for the whole industry when he said that ICROM has been doing its utmost to maintain a stable and secure supply chain with minimal disruptions to manufacturing and CDMO services, under challenging circumstances that have resonated worldwide over the past two years.
As DCAT Week itself shows, business is often about “who you know”, so a number of companies capitalized on their strong, established relationships with raw ingredient suppliers to weather the COVID storm. Aceto, KD Pharma, SK pharmteco, Univar Solutions and West Pharmaceutical Services all cited this approach as a key strategy for optimizing their supply chains over the past couple of years.
As a leading provider of innovative, high-quality injectable solutions and services, West Pharmaceutical Services was well aware of industry challenges arising from global shortages of fill-finish capacity last year. Bill Matakas, Vice President – Product Management, Elastomer and Container Closure Components at West said the company experienced unprecedented demand for high-quality components for the delivery of COVID-19 vaccines and therapeutics, as well as in diagnostic kits. West took proactive measures to ensure continuity of supply by maximizing the efficiency of its global manufacturing network, and shifting resources from one site to another to address gaps at different facilities.
Another obvious strategy was to broaden supply networks. Aceto pivoted to other suppliers when necessary, and Neuland has focused on rebalancing raw material sources geographically, adding sources from India, Europe and other parts of the world to their supply network. JRS Pharma and Bormioli Pharma also took this approach, but stressed a focus on developing stronger local presences to support industry needs. Ken Seufert, Chief Executive Officer of JRS Pharma, said that a long-held focus on regional markets – with each manufacturing region taking care of its own area – had prepared them for many of the disruptions caused by COVID. Likewise, BASF Catalysts has long been positioned globally while offering regional catalyst manufacturing and technical support. Hans Donkervoort, General Manager Precious Metal Powder Catalysts at BASF, believes that this kind of flexibility is important in a world where regionalized manufacturing and domestic sourcing is growing and, for BASF’s Precious Metal Powder Catalysts, the timing could not be better, as they see unprecedented demand for specialized catalysts in pharma. Andrea Lodetti, CEO of Bormioli Pharma, a leading brand in the world of pharmaceutical packaging, also said that a focus on regional markets had driven Bormioli’s investment in internationalization, opening new commercial branches in the US and China, and dedicated warehouses able to serve every industry need.
Andrea Lodetti, CEO of Bormioli Pharma: “Nobody wins alone. The COVID pandemic increased industry complexities and challenges, entering a new phase with higher added value solutions being requested. That’s why the winning path is a supply chain approach, redesigning the supplier–client relationship in a more horizontal and collaborative way.”
At the same time, Neuland created intermediate manufacturing capacities themselves. Elut Hsu, Senior Vice President – Business Development at Asymchem, pointed out that Asymchem had already doubled the company’s internal capacity for raw materials production following pre-COVID issues, so was well prepared to avoid many of the past two years’ disruptions. This strategy of becoming your own raw materials supplier was widespread and, now those capacities are established, might have some impact on the landscape for raw materials manufacturing over the longer term.
Dr. Reddy’s Rajesh Sadanandan agreed that it is important to re-assess supply chains to make sure medicines are available whenever and wherever they are needed. Dr. Reddy’s started some years ago with the backward integration of its APIs, and has always worked closely with local partners to supply raw materials and intermediates if they are not produced in-house. He said that the company’s ability to produce APIs and finished drug products gives better visibility and control of its supply chain.
James Peterson, Global Vice President of Pharmaceuticals Ingredients at Univar Solutions: “Wherever your business is located and whatever pharmaceutical ingredients segment you serve, business terms such as ‘risk mitigation’, ‘risk aversion’, and ‘contingency planning’ are stated more frequently than ever before.”
Using various combinations of strategies like these – producing their own raw materials, leveraging and expanding supply networks, and taking a proactive approach to addressing logistic issues – all of the companies that we spoke to at DCAT were able to overcome supply chain challenges when COVID struck.
However, James Peterson, Global Vice President of Pharmaceuticals Ingredients at Univar Solutions was keen to stress the continued importance of forecasting production needs, and the value in having multiple sources. Companies that can leverage their scale and line of sight across the raw material supply chain will be better positioned to foresee supply shifts or disruptions, and they will be able to use those insights to make better strategic and customer-focussed decisions.
DOMESTIC MATTERS
A trend that is driving opportunities for many CMOs, CDMOs and raw ingredients suppliers is on-shoring manufacturing and domestic sourcing. In particular, as Western pharma companies look for partners who are closer to home, competition from the East – which had been fierce for a while – is not as strong as it once was. The “made in the west” label has risen in value for many important stakeholders, based on the belief that reshoring may ensure the safety of supply chains, guarantees of quality, and sustainability of production technologies.
Although it is widely acknowledged that reshoring manufacturing was already a trend before the pandemic – perhaps especially in the US, following incentives under the Trump administration – COVID has made a lot of companies re-assess the global locations of their supply chains.
Dr Uwe Westeppe, Vice President of Sales at KD Pharma: “We have received a lot of inquiries from Western customers who are looking for Western suppliers to balance their geopolitical risk. We have meetings this week here at DCAT to discuss exactly these topics.”
As summarized by Stefano Togni, Chief Commercial Officer and Business Development Director at Indena, it makes sense that each country or region should retain a degree of independence, and the potential to manufacture certain essential API and drug products, in case of significant and unexpected disruptions. However, the most important aspect is not just on-shoring, but reliance on secure and stable sources, which have themselves adopted continuity and contingency programs.
Ken Seufert, Chief Executive Officer of JRS Pharma, a leading manufacturer of excipients, was one of many people reporting increased inquiries from customers who had been sourcing from overseas but are now looking for domestic supply, either for primary or second sourcing initiatives.
Ready to meet the demand arising from opportunities such as these in the European pharma landscape, at the end of 2021 KD Pharma announced further expansion to its CDMO capabilities in the UK. KD Pharma’s site in the UK has all necessary capabilities to be a full-service CDMO and API producer. The facility is highly automated, and the site has additional space for future capability expansions. Similarly, Saurabh Gurnurkar, Managing Director at Uquifa Sciences, believes that European companies like Uquifa are in a good position to benefit from the positive trends of reshoring supply chains of critical drug substance and drug product manufacture to the continent.
Dr Bill DuBay, Vice President – Global Research and Development, SK pharmteco: “There is little doubt that the recent global events will lead to a ‘correction’ in terms of the balance of supply of API from India and China to other geographies. We are in a good position to help forge that trend with our strong and expanding manufacturing footprint.”
On the other side of the Atlantic, SK pharmteco has been able to participate actively in the big push from the US government to set up more domestic manufacturing of essential generic medicines through a collaboration with Phlow Corp. Dr Bill DuBay, Vice President of Global Research and Development at SK pharmteco, said there is little doubt that recent global events will lead to a ‘correction’ in terms of the balance of supply of API from India and China to other geographies.
This is all good news for companies like W. R. Grace & Co, and Scott Martin, General Manager – Fine Chemical Manufacturing Services (FCMS) at Grace believes that they are particularly well positioned for the North American market. Referring to San Diego, San Francisco and Boston as the “three hot spots” for innovation in pharma, Scott thinks that Grace is in the right spot, in the right market, to be a North American solution for bio/pharmaceutical manufacturing companies looking for a CDMO partner.
Similarly, BIOVECTRA’s facilities are located across several Eastern Canadian provinces – an area rich in fundamental science and engineering programs, and highly supportive of the bioscience industry. This makes BIOVECTRA particularly well positioned in terms of North American supply and logistics, although the company’s regular audit history with Health Canada, the US FDA and Japan’s PMDA demonstrate its continued presence on the global market.
Redefining globalization
Certainly, the industry is still very much globalized, and it must be noted that not all companies are witnessing a trend for on-shoring. For example, while acknowledging increasing customer interest in on-shore manufacturing in response to perceived geopolitical risk, and the recently-announced acquisition of Snapdragon Chemistry, which jump-starts Asymchem’s expansion in North America, Dr Jim Gage, Chief Science Officer at Asymchem, is still convinced that Asia will continue to hold a prime spot in bio/pharmaceutical manufacturing, reflecting the region’s talent pool and access to the market for feedstocks.
Dr Jim Gage, Chief Science Officer, Asymchem: “Pharma partners are looking for capability: quality, innovation, agility, and sheer muscle to muster resources. The talent pool in Asia is very deep, and access to the market for feedstocks will continue to be unmatched for the foreseeable future.”
Philippe Clavel, Vice President – Innovative & Generic Pharmaceuticals at Seqens, also believes that pharma will continue to depend on upstream raw materials manufactured in Asia. He said that although pharma has entered a wave of on-shoring, with a clear objective to produce locally, relocation takes time and a significant share of chemicals manufacturing will remain in Asia. Therefore, in his opinion, globalization is not shrinking; it is simply being redefined.
Manoj Mehrotra, President – Pharmaceuticals at Hikal, believes that part of the ‘correction’ in the balance of supply will result in a significant shift from China to India. As an increasing number of big pharma companies are moving away from manufacturing intermediates and APIs themselves, and looking for reliable outsourcing partners, he says Hikal is in a good position to take advantage of those opportunities because, as companies look to de-risk from China, and as many European partners are already working to full capacity, more and more companies are turning to India for solutions. In preparation for this increased demand, Hikal built new production blocks at two of its facilities last year, adding almost 200 m3 of capacity. A further 200 m3 of capacity will be commissioned by the end of 2023.
Manoj Mehrotra, President – Pharmaceuticals,
Hikal Ltd: “Pharma companies are looking at India far more seriously than they did 5 years ago. They are looking for reliable partners, and we are in a good position to make sure that we make the most of every opportunity that comes our way.”
While the discussions surrounding on-shore manufacturing and domestic sourcing continue to evolve, Gilles Cottier, CEO of Aceto believes that the pharma supply chain is already too global for companies to accomplish complete on-shoring. The answer, in his view, lies in giving customers more choice when choosing their supply chains. On-shore and off-shore solutions can both come with their own advantages and disadvantages, but customers should have the chance to balance those options, and to make sourcing decisions that are most in their interest. In fact, this approach to ‘customer choice’ shaped the company’s recent acquisition strategy. Aceto’s operations now span ten countries including the US, Canada, China, India, France, Germany, Netherlands and Singapore, meaning that Aceto can now offer solutions that range from captive western production to outsourced solutions in the East.
Gilles Cottier, Chief Executive Officer of Aceto: “On-shore and off-shore solutions can both come with their own advantages and disadvantages, but customers should have the chance to balance those options, and to make sourcing decisions that are in their interest.”
Rising demand for contract services
Throughout the COVID pandemic, the bio/pharmaceutical industry thrived, as demand grew for new and existing products to treat and manage COVID. Now, as Dr Uwe Westeppe, Vice President of Sales at KD Pharma, Saurabh Gurnurkar, Managing Director at Uquifa Sciences, and Enrico Giaquinto, Chief Industrial Operations Office at Angelini Pharma all separately highlighted, rapid growth in the CDMO sector is being driven by demand for new molecules and increased screening of new chemical and biological entities. As bio/pharmaceutical companies focus on their own core competencies, and as spinouts from universities and other small organizations (without in-house manufacturing and development capacities) look for supporting partners, they are all turning to the CDMO sector.
Enrico Giaquinto, Chief Industrial Operations Officer at Angelini Pharma: “There is a big expansion in the number of small research organizations that are discovering very promising mechanisms of actions or new treatments. These companies need mid-sized CDMOs to help them structure and advance their drug development programmes.”
Saharsh Davuluri, Vice Chairman and Managing Director at Neuland Laboratories, pointed out that biotech companies are attracting a steady flow of venture money and private capital to develop new drugs, and they are becoming increasingly comfortable with outsourcing to reliable partners.
Prospects such as these provide a great many opportunities in the CMO/CDMO market, as more and more bio/pharmaceutical companies look to use the strategy of outsourcing. In fact, Grace’s Scott Martin said that throughout his long career, this is the strongest he’s ever seen the CDMO market.
Scott Martin, General Manager – FCMS at W. R. Grace & Co: “This is the strongest I’ve seen the CDMO market.”
Pierfrancesco Morosini, CEO of ICROM, also said the contract services landscape has never been so favourable. Referring to the global market for APIs, which is expected to grow at a CAGR of 9.1% this year, he expects many CDMOs to outperform this rate. Certainly, ICROM has shown a steady compound annual growth rate (CAGR) of 14% in recent years, reflecting a plan of aggressive investments aimed at enlarging the company’s capacity, extending its range of available technologies, and increasing digitalization and automation.
This growth potential is good not just for the CMOs/CDMOs themselves, but also for companies like JRS Pharma, a leading manufacturer of excipients. Similarly, Valeria Astuni, Executive Account Manager at BASF, notes that steady growth for the catalyst industry over the next few years will be driven in part by growing demand from Pharma.
Valeria Astuni, Executive Account Manager at BASF: “Analysts predict steady growth for the catalyst industry over the next few years, driven in part by growing demand from the pharma industry as (specialized) catalysts are required in so many pharma production steps.”
JRS Pharma’s CEO Ken Seufert views the contract services sector as a growing customer base, and he is very enthusiastic about this uptake, pointing out that CDMOs are much more nimble and flexible in their approach so they can move the drug development process along much faster.
TECHNOLOGICAL FOREFRONT
There is more investment flowing into pharma than ever before, as evidenced by the number of annual NDAs and an increasing number of new modalities, and many companies see this as a boom time for contract manufacturers. However, the current landscape also makes it challenging to remain at the technological forefront – this offers significant opportunities for specialist CMOs/CDMOs who can provide niche technologies and help address those challenges.
Part of the value in a CMO/CDMO will always come from new technologies and processes. As summarized by Uquifa’s Saurabh Gurnurkar, the inherent expertise of these service providers should enable a reduction in time-to-market and access to larger production capacities and novel technologies. Novel technologies can also offer significant cost benefits, as highlighted by Rajesh Sadanandan,
Head of Mature Markets – NA, EU, Mexico, who said that Dr. Reddy’s achieves its goal of accelerating access to affordable medicines by keeping up with technological advancements to lower costs.
Saurabh Gurnurkar, Managing Director at Uquifa Sciences SLU: “The inherent expertise of any CMOs and CDMOs should enable a reduction in time-to-market, significant cost-benefits, and access to larger production capacities and novel technologies.”
Companies are also partnering for innovation. West Pharmaceutical Services’ Bill Matakas agreed that bio/pharmaceutical companies are looking for solutions to support increasingly complex molecules, and regulatory changes. He shared one example of how West is addressing this, through a collaborative project with Corning, which will enable advanced injectable drug packaging and delivery systems. The project will create a truly integrated system that will de-risk customers’ drug development and manufacturing processes by providing a single product, one DMF and end-to-end support.
Rajesh Sadanandan, Head of Mature Markets – NA, EU, Mexico at Dr. Reddy’s: “We accelerate access to affordable medicines by working with local partners and distributors to make medicines available to as many patients as possible, and by looking at specific products (e.g. orphan drugs and COVID) where an impact will be made by bringing those products to low-income countries at an affordable price.”
Many bio/pharmaceutical companies are also keen to take advantage of niche technologies that specialist CDMOs offer, giving those companies access to cutting-edge technologies without having to make significant capital investments themselves. This strategy is reflected in many CDMO’s enthusiasm to talk about their new technologies and niche service offerings.
Grace’s Scott Martin, for example, highlighted the company’s key offering of improving processes and providing high quality solutions that accelerate speed to market, which he said comes simply from years of experience and expertise matched with talented staff, while BIOVECTRA’s Chief Commercial Officer, Heather Delage, said that BIOVECTRA thrives taking on the challenges that few other CDMOs would have the expertise or desire to address, and Dr Uwe Westeppe said KD Pharma is constantly enlarging its technology toolbox for chemical transformations, purification and separation, and encapsulation under cGMP. Meanwhile, Neuland Laboratories has created a state-of-the-art process engineering lab to study the physical attributes of an API, with an experienced group of process engineers to work on optimal processing. Neuland has also invested in a diverse pilot plant, which gives Neuland’s scientists and engineers a ‘playground’ to fully understand with the process before it gets to the plant.
Heather Delage, Chief Commercial Officer, BIOVECTRA: “BIOVECTRA thrives on continually developing its capabilities and inspiring its expert teams to support customers – often taking on the challenges that few other CDMOs would have the expertise or desire to address.”
HPAPI
Contract manufacturers need to adjust to market demands, investing in breakthrough technologies and cost efficiency plans. In particular, as more complex modalities are developed, and small molecules show higher specificity and biological activity, there is a growing requirement for high potency API (HPAPI) capabilities, said Philippe Clavel, Vice President – Innovative & Generic Pharmaceuticals at Seqens. Responding to such demands, Seqens in undergoing a 5-year program of development and expansion to bring its customers the technologies and capacities that they need, including €60 million for HPAPIs, as well as €15 million for flow chemistry, €15 for site modernization and €5 for R&D.
Saharsh Davuluri, Vice Chairman and Managing Director, Neuland Laboratories: “There is room for innovation in designing processes for API manufacturing. Not just in terms of engineering technologies like continuous flow, but also in leveraging modern ideas coming out of academic institutions. CMOs have to dig deeper by investing in process research and, where feasible, explore collaborations with universities and other research institutes.”
Angelini Pharma’s Enrico Giaquinto agrees that the market is embracing high potency, and he sees this as a particular opportunity for CDMOs. He pointed out that the development of HPAPI is a very capital-intensive asset, often making it an investment that is often too big for a company to make at an early stage of drug development. He said this is why more companies are turning to CDMOs with HPAPI capability.
Philippe Clavel, Vice President – Innovative & Generic Pharmaceuticals, Seqens: “As more complex modalities are developed (mAbs, ADCs, viral vectors, mRNA vaccines), and small molecules show higher specificity and biological activity, there is a growing requirement for HPAPI capabilities.”
Indena is another CDMO that has invested in facilities designed for HPAPI. Their latest investment program started in 2015, and is now under further expansion. As explained by Stefano Togni, Chief Commercial Officer and Business Development Director at Indena, these investments were driven by the market – an increase in demand for HPAPIs, reflecting the emergence of targeted and personalized therapies.
Flow chemistry
Flow manufacturing disrupted Pharma in the twenty tens, and it’s an area in which many companies have invested heavily. Flow chemistry can offer faster, safer reactions, with rapid reaction optimization, cleaner product, easy scale-up, and reaction conditions that are simply not possible using traditional batch methods. In addition, it is far more energy-efficient that large-scale manufacturing.
Elut Hsu, Senior Vice President – Business Development at Asymchem: “It’s important to not just be another pair of hands, but to actively contribute technical knowledge that develops practical routes that are economically feasible for scaling.”
Scott Martin, General Manager – FCMS at Grace, believes that there is tremendous opportunity for continuous manufacturing in Pharma, although in the rush to get to market many companies cannot afford to take the time to develop a continuous route. Angelini Pharma’s Enrico Giaquinto agreed that this was often an obstacle, because a novel route of synthesis implies a lot more study and justification. At the moment, people generally use flow to solve a particular chemistry challenge, but he suggested that the paradigm change should be that as soon as you have a molecule, you should start to enquire about flow chemistry.
Explaining why Asymchem sees flow chemistry as one of their key offerings, Dr Jim Gage, the company’s Chief Science Officer, stressed its role in synthetic options for hazardous reagents that simply are not feasible in batch processing. He cited a recent project, during which his team developed and implemented a flow process in a key step for a fast-moving program that enabled them to increase throughput into the range of tens of tons per month – something that could not have been done nearly as quickly in batch.
Hikal’s steady and ambitious investment programme also reflects a strong commitment to this type of technology. The company has earmarked a budget of more than $50 million for investment and expansion of R&D centres, which is already in progress, and there is further investment in new capacities for
