Managing Volatility, Risk, And Innovation In The Outsourced Pharma Services Sector

By Derek Hennecke, MBA

The other day, I came across an article about Merck CFO Judy Lewent in which she stated, “Everywhere I look in the pharmaceutical industry today, I see increasing complexity and uncertainty.” She spoke about volatility and risk in the face of forces such as healthcare reform, the generic market, and currency fluctuations. She talked about the paradox of pharmaceutical success: The route to a steady flow of new and innovative medicines is to put more money at risk, not less. Volatility...risk...innovation. Though the article was written in 1994, these concerns resonate with us just as well today.

A significant change during the past 15 years has been an increase in the number of company touch points that occur to bring a molecule to market. Traditionally, drug development would have occurred within one pharmaceutical company. Most drug development candidates were discovered in-house, with the objective to take the molecule to market. When outsourcing development work, innovators sought global providers, one-stop shops to address capacity limitations and reduce development costs.

These days, innovators manage pipeline productivity through a variety of means. In-licensing and acquisition have become important strategies. Accordingly, today’s pipeline candidates may arrive with a history of multiple owners. The number of outsourcing partners has likely increased, as well.

In the multiple owner paradigm, more likely than not, virtual or emerging pharmaceutical companies seek to partner or sell at clinical proof of concept or phase IIa. They don’t require an “A to Z” model; they need a firm that can accelerate their drug development candidate to “J.” For these companies, everything rides on the success of their one or two development candidates. Their funding may be limited or milestone-based, they may be working with limited active pharmaceutical ingredient (API), or their compound may have challenging molecular properties (poor solubility, poor availability). The risk of failure is greater to these firms, and despite the inconvenience of working with multiple providers, choosing a specialist provider can significantly de-risk drug development.

De-Risking Formulation Development
Drug development is a nimble and arduous act; some situations require a specialist. De-risking formulation development begins with an understanding of the molecule. For an oral solid dosage form, the ideal drug candidate is water soluble, nonhygroscopic, stable, and crystalline, but few pipeline candidates represent this ideal. Because this is true, up-front compound knowledge can have a profound effect on subsequent drug development efforts, alleviating a host of downstream problems and significantly reducing time to market.

Intellectual property is also an important consideration. Comprehensive evaluation of the active pharmaceutical ingredient should be done to include all advantageous forms in your patent. The knowledge of the possible existence of multiple salt forms/polymorphs may help to strengthen your patent by including other forms in the application.

Proceeding with a suboptimal candidate can result in a number of pitfalls. A drug substance with poor solubility may impact analysis recovery. Selecting a suboptimal physical form may result in a host of formulation development and manufacturing obstacles and delays, including the need to repeat toxicology studies. Failure to address particle size and morphology concerns may impact manufacturability (flow, compression, batch uniformity) or result in costly bridging studies to ensure that clinical trial results are relevant to the commercial production batch.

In times of limited funding, product development teams must use their best judgment to determine the appropriate amount of compound knowledge that is sufficient to move them forward quickly to their next important milestone. Engaging a specialist provider has the ability to accelerate and de-risk drug development.

Derek Hennecke is president and CEO of Xcelience, a CRO that has been providing formulation development, preformulation, analytical, and clinical trial manufacturing since 1997. He was recognized as a 2008 CEO finalist, E&Y Entrepreneur of the Year.