By Ken Congdon
As pharmaceutical manufacturing continues its shift from a volume-based business to being more specialized, pharma companies are attempting to reinvent themselves in this altered, and sometimes unfamiliar, landscape. While many core production objectives remain the same (i.e., bringing new therapies to market, maintaining GMP, ensuring quality assurance, and meeting supply demands), the means by which to accomplish these goals are more multifaceted than ever before. Therefore, as pharmaceutical companies enter 2016, they need to focus on making their operations more agile and flexible.
The pursuit of enterprise agility in pharma isn’t a new concept. It’s been a key topic of conversation at industry conferences for the past several years. However, many key stakeholders of manufacturing, quality, and supply chain efforts are calling 2016 “The Year of Agility” in pharma. To these leading minds, the trends that will have the most impact on the pharmaceutical sector in the coming year are either a direct result of this quest for added flexibility or will place added emphasis on the need for enterprise agility.
Pharmaceutical Consolidation Requires Facility Rationalization
M&A activity in the pharmaceutical sector was intense in 2015. It is estimated there were $221 billion in deals in the space during the first half of the year — three times the amount realized in the first half 2014. Among the biggest deals were Pfizer’s acquisition of Hospira for $17 billion and Teva Pharmaceutical’s purchase of Allergan’s Generics Division for $40.5 billion.
Most industry thought leaders expect this M&A activity to continue in 2016. In many ways, these acquisitions are part of Big Pharma’s strategy to become more agile through organizational synergy. For example, mergers allow pharmaceutical companies to inherit mature, proven assets without having to dedicate capital to R&D. They also are a quick way for organizations to secure the infrastructure necessary to enter new lines of business and meet growth objectives.
However, while often thought of as means to become more agile, a merger actually places more flexibility demands on a pharmaceutical organization. “We’ve seen companies merge that have very different manufacturing philosophies,” says Alison Little, advisory leader for life sciences at KPMG. “For example, one company is focused on manufacturing its products internally, while the other invests heavily in outsourcing. In these instances, the combined company needs to rationalize its facilities with an eye on reducing its overall costs and footprint. This involves deciding which plant locations best support the new organization’s overall strategy and which should be repurposed.”
Realizing a quick return on investment from late-stage assets gained through M&A activity also requires an extremely flexible manufacturing operation. “Following a merger, it’s important that the manufacturing and supply chain footprint that exists be able to turn on a dime to support the further development and commercialization of any acquired late-stage assets in order to have revenue expectations realized,” says Pravin Khandare, VP of procurement, Janssen.
Biologics Growth Impacts Scale
The pharmaceutical industry has historically been one built for volume. Manufacturing facilities were designed to efficiently churn out mass quantities of blockbuster drugs aimed at treating common conditions. This dynamic is changing. In recent years, an increased focus has been placed on specialty medicines and biologics aimed at rare diseases and smaller patient populations.
According to a June 2014 forecast from EvaluatePharma, biologic products account for only 4.7 percent of total sales in the top 100 drugs today, but they are poised to account for 52 percent of sales by the end of the decade. Similarly, BLAs (biologics license applications) make up more than 50 percent of the global pharmaceutical pipeline, and that figure is expected to grow to 75 to 80 percent by 2020.
“One of the consequences of this shift from blockbuster to specialty drugs is scale,” says Little. “Pharmaceutical manufacturers need to learn how to scale differently in a world where volume is no longer the primary driver. Much of the emphasis is now placed on running smaller, more frequent, batches. As a result, pharma manufacturers need to be flexible enough to quickly switch from producing one product to another.”
The rise in biologics is also likely to impact production cycle times, because these therapies are more apt to be designated for Fast Track, Breakthrough Therapy, Accelerated Approval, or Priority Review by the FDA. These designations help to speed the availability of drugs that treat serious diseases, but they also place additional pressure on pharmaceutical manufacturing organizations.
For example, in a traditional clinical trial, Phase 1, Phase 2, and Phase 3 are spaced out. As such, pharmaceutical manufacturers have ample time to develop and optimize manufacturing practices associated with the new drug. This helps ensure processes are consistent and reproducible and also gives stakeholders ample time to develop contingency plans. When a drug is fast-tracked, the clinical trial and approval timeline is accelerated, but the medication must still adhere to the same rigorous manufacturing and quality standards as every other product.
“In a fast-track scenario, you have to be ready to launch drugs in an accelerated fashion, which significantly reduces the amount of time a manufacturer can dedicate to process development, adjustments in scale, and stability studies,” says Maninder Hora, SVP of pharmaceutical development and manufacturing operations at Nektar Therapeutics. “Because of this, you need to have an all-hands-on- deck approach to manufacturing. You need to accelerate your internal timelines immensely to ensure your processes are ready when the expedited approval is granted.”
Continuous Manufacturing, Single Use On The Rise
The need for smaller, more frequent batches of specialized drugs will also impact production strategies in 2016 — all the way down to the way manufacturing facilities are designed. On the small molecule side, this means increased use of continuous manufacturing.
“The advancements being made in continuous manufacturing are amazing — particularly when you consider the modular manufacturing facilities some pharmaceutical companies are creating,” says Little. “Unlike the enormous, purpose- built facilities historically reserved for producing large volumes of small molecule drugs, modular manufacturing units are about the size of a standard living room. Furthermore, they can quickly be reconfigured and repurposed to produce different types of medications on the fly. We’ll see more pharmaceutical companies embrace this type of flexible manufacturing in 2016 and beyond.”
On the biologics side, the trend isn’t continuous manufacturing — it’s increased reliance on single-use technology. “As the industry moves toward higher-affinity proteins, smaller patient populations, and lower overall volumes, single-use disposable technology becomes more prevalent because it efficiently addresses smallscale demands,” says Lance Minor, VP of network strategy and business operations at MedImmune/AstraZeneca. “With single use, you have the ability to bring clinicalscale production to your commercial market for these low-volume products.”
For pharmaceutical companies like MedImmune/AstraZeneca that produce a wide variety of both small molecule and biologic therapies, the shift to smaller, more frequent batches is also expected to have a dramatic impact on demand variability. According to Minor, MedImmune is currently focused on performing more adaptive clinical trials that require testing a broader range of doses later in the development cycle. This approach can create huge swings in clinical demand overnight. To satisfy this highly variable demand, MedImmune/AstraZeneca has placed a premium on building more white space (open or unutilized manufacturing infrastructure) and shorter changeovers into specific sites within its network.
“Operating at less than 100 percent utilization means we may run fewer lots in a year should clinical demand not materialize,” says Minor. “To date, our swing space continues to be filled almost faster than we can free it up through process improvements. Planning for uncertainty with white space is necessary to ensure we are flexible enough to ensure opportunities to advance and accelerate our clinical programs.”
Managing Product Diversity, Capacity Requires CMO Support
With the rise of biologics, and even more recently, combination products (i.e., the pairing of a drug therapy and a medical device), the pharmaceutical industry is more diverse than ever before. This environment makes it increasingly difficult for pharmaceutical companies to handle everything in-house. As a result, more and more organizations are partnering with CMOs for support.
“As a midsize company with drug candidates across multiple therapeutic areas and drug classes, it’s inconceivable for us to build infrastructure for producing small molecule, biologics, and medical device operations,” says Hora. “This puts a lot of pressure on us to outsource judiciously and select CMOs with the required capabilities, capacities, and quality systems. We also must maintain these CMO relationships in a transparent, team-oriented way.”
Over the past few years, the accountability for ensuring the quality and accuracy of a prescription medication has shifted from being shared between the pharmaceutical company and the CMO to being more weighted on the sponsor. New regulatory guidelines have been implemented expecting the sponsor to be ultimately responsible for “ensuring that processes are in place to assure the control of outsourced activities and quality of purchased materials.” This increased responsibility makes it even more important for pharmaceutical companies to choose their CMO partners wisely and ingrain themselves in the outsourcing operation.
“Because the pharmaceutical company has ultimate responsibility for the final product, we have been placing more emphasis on shadowing the systems and operations of our outsourcing partners,” says Hora. “In other words, we are focused on ensuring they are manufacturing our product in a manner that meets our standards without being physically present at their facility at all times or owning their infrastructure.”
Coping with increased product diversity isn’t the only driver behind the rise in CMO partnerships. This is also a key strategy pharmaceutical companies are using to deal with capacity constraints. According to Minor, MedImmune/ AstraZeneca is planning two new product launches a year on top of the already highly variable demand it is experiencing. The capacity issues that arise from this type of environment can often lead to drug shortages. To protect against this scenario, MedImmune/ AstraZeneca is leveraging CMO partnerships to shore up capacity.
“Because our product forecasts are uncertain, we’re trying to get a better hold on our supply chain overall, our ability to build inventory, and improve our overall capacity through expansion,” says Minor. “Our CMO relationships are central to this effort. They help give us the flexibility we need to meet ever-increasing demand.”
Supply Chain Visibility Becomes Paramount
Increased reliance on CMOs means pharmaceutical manufacturing supply chains are becoming more and more extended. To ensure inventory, quality, and delivery objectives are met requires improved visibility into this external network.
“As pharmaceutical manufacturers add CMOs to the mix, more of the supply chain gets out of their normal bounds and often out of their line of sight and control,” says Khandare. “This introduces new and different risks that must be managed. Enhanced visibility into the external supply chain is imperative to success going forward.”
Determining the source of supply chain risk is a huge area of focus for pharma in 2016. This effort entails knowing where materials are coming from and how they are moving at all times. It also requires contingency plans be developed if there are delays with specific partners or intermediates.
According to Khandare, developing deeper relationships with external partners is crucial to gaining this visibility. “You need to know their shops as well as your own,” he says. “This requires collaboration across several different levels and functions — quality to quality, regulatory to regulatory, manufacturing planning to manufacturing planning, etc. This is the only way to make risks visible and ensure you can bridge any gaps. Moreover, this type of collaboration and risk management needs to be done proactively. If it’s reactive, then it may already be too late.”