A Conversation With James Mullen, CEO Of Patheon
By Wayne Koberstein
During the recent JP Morgan Healthcare Conference, I spent a half hour speaking with Patheon’s relatively new CEO, biopharma veteran Jim Mullen. Patheon is a contract manufacturing and process-development organization that devotes an ever-increasing portion of its business to bioprocessing. In this brief interview, Mullen discusses his business and the future of biopharma manufacturing, especially for small companies.
YOU CAME TO PATHEON WITH A BIG PHARMA AND BIOTECH BACKGROUND (BIOGEN IDEC, SMITHKLINE) — IN THAT CONTEXT, WHAT IS YOUR VIEW OF THE COMPANY AND ITS BUSINESS?
MULLEN: We have two major pieces of business that complement each other. The largest is contract manufacturing of drug products, and most of that business is parenterals and solid-dosage forms. The other piece of the business is what we call PDS, the Pharmaceutical Development Services business, which takes compounds, whether new molecular entities or older entities in life cycle management, from early development through clinical trials, registration, and approvals with manufacturing of clinical trial material.
HOW BIG A PART OF PATHEON’S BUSINESS WILL BIOLOGICALS AND BIOTECH PRODUCTS BE IN THE FUTURE?
MULLEN: We already do a lot of biotech products in the parenterals part of the business. This was a little bit of a surprise to me when I came, but we’ve built more than 100 different molecules for biotech clients, and our share of the business has expanded in the wake of other companies’ problems with parenterals. So, we actually have a lot of experience, and very broad experience with proteins, peptides, and the whole range of biotech molecules, and we do see that as a growth segment, particularly in biosimilars.
PARENTERALS HAVE ALWAYS BEEN A TECHNICAL CHALLENGE IN TRADITIONAL PHARMACEUTICALS AS WELL.
MULLEN: The fact is, manufacturing has never been strategic to pharma. It will be even less strategic in the future, and there will be more and more pressure for pharma companies to outsource things that they’re not very good at. Manufacturing and supply chain are areas that are ripe for more and more outsourcing — areas where the opportunity to really improve the performance overall, measured by quality or cost or responsiveness to the market, is enormous. If you benchmark pharma to other manufacturing industries, pharma is still in the Dark Ages.
WHY AREN’T COMPANIES MOVING MORE QUICKLY TO ADOPT NEWER PRODUCTION TECHNOLOGIES?
MULLEN: That’s a good question. It is an industry that’s slow to change because of the regulatory and compliance barriers. You must have a compelling commercial reason to change to a new process, or even to change the site of manufacture. A company may have 70 different licenses attached to a single manufacturing facility for a single product. And to move it from here to there for every market you’re selling to in the world is at least a three-year project, assuming nothing goes wrong. So, it all breeds conservatism. Nevertheless, you will see a change for a couple of reasons. One is companies are in search of differentiation, whether with the payers or with physicians and patients. And the other is that the big volume growth will be in the emerging markets with the demographics and the wealth, but at a different price point. Some companies with a lot of emerging market business for big products have started to use that fact as a differentiating strategy to protect their higher prices in the western markets from the pricing pressures in India and China.
THERE SEEMS TO BE MORE OPENNESS TO NEW TECHNOLOGIES IN THE CLINICAL TRIAL MANUFACTURING STAGE, AS OPPOSED TO COMMERCIAL PRODUCTION.
MULLEN: We see it at both ends, for clinical trials and for new chemical and molecular entities. As long as the technology is not so novel that it requires big leaps for regulators, and it confers some advantage, companies will adopt it. We also see more products, particularly small molecules with poor pharmaceutical properties such as poor solubility or absorption, and we need to bring some knowhow and technology tricks to improve the molecule. Twenty years ago, we would have just thrown it away. Now there are good technology solutions. Then, at the other end of the spectrum, how do you protect your mature products that go off patent, how do you differentiate the space? New formulations, sustained release, extended release, new delivery forms — companies will use all of it.
MANY SMALL COMPANIES MUST DEAL WITH MANUFACTURING AT AN EARLY STAGE, FOR CLINICAL TRIALS — IT CAN BE QUITE A CHALLENGE, ESPECIALLY WITH NOVEL PRODUCTS.
MULLEN: We have spent a lot of time in the last six to eight months talking to the funders of those companies, the venture capitalists. And venture capitalists are quite interested in what we’re doing and where we’re going, because we’re trying to give them a broader set of solutions for those companies so they can outsource more of it. The VCs’ view is that the companies don’t create a lot of value in manufacturing; they create the value because they know the biology, have the molecule, have some patent positions. Manufacturing is something that has to be done. You can make lots of mistakes, you can spend a lot of money, you can dump lots of capital into it, and you get a lot of delays, but you’re not going to create a lot of value. So nobody’s going to pay you for that. You are better off saving your capital and hiring the technical resources from outside. And the VCs can make their capital more efficient and focus it on clinical trials, IP development, and so on. The VCs love that story. Their network is typically scientific, clinical, and medical people. They know just enough about clinical trial manufacturing to know it’s a headache and a problem.