The day before the CPhI Worldwide trade show began in Frankfurt, Germany, in late October, several hundred people gathered for the day-long Pre-Connect Congress to learn about topics on the minds of many CPhI attendees: trends with API sourcing and contract manufacturing, biosimilars, new regulations and regulatory compliance and developments in emerging markets.
Biologics: Growing industry with growing uncertainty
The event started out with a CEO keynote address from Tae Han Kim, president and CEO of Samsung BioLogics. Kim has presided as CEO at Samsung since the group first got involved in the pharmaceutical business in April 2011.
Kim explained that biologics is a growing industry with growing uncertainty. On the plus side, he said, demand is growing. Demand growth factors include an ageing worldwide population and with that disease incidence and prevalence, increasing science knowledge and increasing wealth.
However, he identified many uncertainties including around demand, timing and competition:
- Big pharma is struggling with uncertain future demand and long lead times required to build a plant. It can take more than seven years to do the necessary engineering, procurement, construction and validation.
- Small biotechs lack resources. The manufacturing demand for their product may be too small to justify building a plant. In addition, there is uncertainty about the success/failure rates of their clinical trials.
- Contract manufacturing organizations (CMOs) have to deal with competition from other CMOs but also with the in-house manufacturing capabilities of pharma. For CMOs, margin pressure is another challenge; in-house sources do not need to make a margin but CMOs do. In order to be perceived as competitive with in-house resources, they can count only on a low margin. But low margin leads to low ROI. With a poor ROI it is difficult to get investment.
Kim explained that the industry has seen significant changes in capacity, driven at times by increased investment and at other times by other factors. The 2002 shortage of Enbrel capacity and the 2004 shortage of certain vaccines triggered an expansion boom in capacity. Capacity increased five-fold between 2002 and 2008, he said. As 80 plants were added, capacity went from 0.4 million liters in 2002 to 2.2 million liters by 2008.
The financial crisis in 2008 brought fewer new product launches and a lower demand for cell culture, he said. Meanwhile, we saw an increase in the cell culture titer from 0.2 g/L to 1.0 g/L. This led to oversupply (capacity utilization went from 100% to 50%), even though minimal capacity expansion occurred between 2008 and 2011.
Kim said future manufacturing demand is expected to increase but he cautioned the audience to expect uncertainty. There has been an increase in clinical trials and in the number of biosimilars programs. But process improvements, such as increases in in cell culture titer and improved purification yield, may reduce the need for additional production capacity. Over the next few years, he said he expects that capacity utilization will increase from 60% in 2016 to 70% in 2020, but it is difficult to predict what will happen after that.
Kim explained that it is possible to reduce the dilemmas that the industry is facing by shortening the time required to build a new plant or by finding ways to get more capacity out of a given investment.
Using Samsung as an example, he explained that the second plant the company built had five times more capacity than the first plant but required only twice the amount of capital expenditure.
The company managed to significantly reduce construction time by doing things like basic design, detail engineering, procurement, construction and validation concurrently, rather than in sequence.
He also emphasized the importance of having access to top talent. Samsung brought in 100 U.S. and EU expats with relevant knowledge and decades’ worth of experience in making products to the highest standards.
API sourcing and manufacturing update
In a breakout session focused on pharmaceutical ingredients, Kate Kuhrt, head of go to market – life sciences at Clarivate Analytics, provided an overview of the latest trends affecting API manufacturing and API sourcing in key markets such as India, China, the U.S. and Europe. She explained that the two are intricately intertwined. Anticipated demand drives manufacturing decisions, while availability of materials drives sourcing decisions.
Kuhrt pointed out that since 2006, there has been a significant growth in Indian and Chinese manufacturers capable of serving regulated markets, while the number of groups headquartered in Italy has decreased during that same time period. A restrictive supplementary protection regime was one of the contributors to manufacturing moving from Italy to India, she added.
While ultimately the introduction of the Bolar provision in Europe allowed European manufacturers to make development quantities of active ingredients, they are currently not allowed to make commercial quantities for export to markets where patents and exclusivities have already expired, Kuhrt pointed out.
But Kuhrt also showed a slide indicating that in India and China, the number of manufacturers hasn’t increased measurably since 2012. This suggests perhaps that in a crowded field, it’s increasingly difficult to break into regulated markets. These companies will need to continue to develop “the skill set and reputation” in order to ultimately succeed in regulated markets, Kuhrt said.
Sergio Napolitano, director, legal, trade & public affairs at Medicines for Europe, explained that to play in markets outside the continent, many European companies have been forced to outsource their manufacturing. Once they have set up manufacturing overseas, companies are not likely to bring it back to Europe when the exclusivities have expired, he said. This is costing Europe jobs both during the exclusivity protection but also after the exclusivity period. He added that there is renewed interest in bringing manufacturing back to Europe and explored how new legislation such as the SPC manufacturing waiver could stimulate production in Europe.
A study released by the European Commission in early October, “Assessing the economic impacts of changing exemption provisions during patent and SPC protection in Europe,” estimated that the changes could result in the creation of 2,000 new jobs and bring net additional sales to the EU-based pharma industry of €9.5 billion.
Napolitano argued that there would not be any negative impacts for originators from this rule change. In export markets, originators already lose out to Indian or Chinese manufacturers, so nothing would change for originators. In EU markets, originators still benefit from exclusivity. So, the SPC manufacturing waiver will not undermine or change existing IPR equilibrium in the EU nor will it reduce incentives to innovate, he said.
The European Commission has confirmed that the SPC manufacturing waiver is a key priority. Public consultation is open on the issue until Jan. 4, 2018. Following that, an impact assessment is likely to take a few months. Napolitano said he was hopeful that the new rule will be in place by 2019 or 2020.
Landry Le Chevanton, group leader, global regulatory affairs at DSM, speaking on behalf of APIC (the Active Pharmaceutical Ingredients Committee), explained that the implementation of the ICH Q3D guideline for elemental impurities has had a significant impact on many API and finished dose manufacturers.
Drug companies making finished dose formulations must comply with this guideline. While it does not apply to API manufacturers, API manufacturers cannot ignore ICH Q3D as they are expected to pass relevant information on to drug companies, he said.
Some dose companies request that API manufacturers confirm that they follow the ICH Q3D guidelines. APIC advises its members that this guideline does not apply to the API industry and therefore this confirmation cannot be provided, he said.
Other dose companies request that API manufacturers provide batch data for all 24 elements listed in ICH Q3D. APIC’s position is that the availability of such data is not required by ICH Q3D, Le Chevanton said.
The future of generics
Alan Sheppard, principal, global generics, thought leadership at QuintilesIMS, provided an overview of the pharmaceutical markets and reviewed the strategy challenges associated with that. Companies in the generics space need to figure out where to play in terms of products and geographies, he said. Also, they need to be ready for new technologies and devices. He emphasized that generics must keep an eye on where innovative pharma is going and develop future generic strategies that reflect that.
Sheppard said one third of global value and half of growth come from the top five therapy areas: oncology, diabetes, autoimmune, pain and respiratory. The pace of innovation has been increasing in developed markets, putting pressure on payers. Meanwhile, recent launches and the pipeline are less relevant in emerging markets. He said he anticipates that emerging markets will continue to be dominated by old brands and generics as pharma companies still haven’t figured out how to work successfully in a low margin environment. He added that in emerging markets, local players will have an advantage due to protectionist measures.
Sheppard predicted that global growth will be moderating to 3% to 6% CAGR by 2021. He said he expects that China’s growth will be much slower than in the recent past. Meanwhile, Africa and the Middle East represent a growing opportunity. According to Sheppard, the fastest growing “pharmerging” markets are Bangladesh, Egypt, Pakistan, Turkey and India.
In the area of over-the-counter (OTC) medicines, Sheppard said he anticipates that the growth will come from the developing regions. A key benefit of OTC products in those markets is that there is no need to travel to see doctors.
Biosimilar update in the U.S. and Europe
To discuss recent developments in biosimilars, Sheppard was joined on stage by Irina Chublukova, director, specialty care products, promotion and market access at Santo – Member of Polpharma Group, JSC Chimpharm; Claudia Palme, managing director at °55 East; and Florian Turk, head, global payor marketing, sales and relations at Sandoz Biopharmaceuticals.
Chublukova explained that to play in the Russian market, a company must be “a friend of the local economy.” That may mean doing secondary packaging in the region, doing fill and finish but also making ingredients locally. She said that it is very important to include Russian sites and Russian patients in clinical trials and to have local evidence to prove interchangeability.
Palme said that when Amgen acquired Mustafa Nevzat, the big biotech was very much interested in Mustafa’s manufacturing capabilities in the Middle East and made a conscious decision to take over market share with biosimilar products.
Turk explained that in order for a growing number of people to benefit from biosimilar medicines, it is critical to keep the process lean. He warned the audience that redoing clinical trials and excessive localization will drive up costs and delay access to affordable medicines.
For more insight, download the slides from “API Sourcing & Manufacturing Update,” the presentation delivered at the CPhI Worldwide Pre-Connect Congress by the author, Kate Kuhrt, Head of Go to Market – Life Sciences at Clarivate Analytics.
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