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Stephanie Morris is scientific and marketing support for protEcol Services at Hospira
Four reasons why outsourcing may be the best option, and key factors to consider when selecting a provider.
The global pharmaceutical market is set to double in coming years, reaching $1.3 trillion by 2020.1 Although small-molecule development declines, the global biopharmaceutical market is anticipated to continue to grow by double-digit percentage rates. Revenues from the global biopharmaceutical market are forecasted to generate $100 billion by as early as 2010.2
Consequently, big pharmaceutical companies are becoming more interested in the biologics arena, as evidenced by the continuing increase of mergers and acquisitions within the biopharmaceuticals industry.3 Pfizer, Wyeth, and Bristol-Meyers Squibb are just a few exemplifying this trend by announcing acquisitions of small biotech companies and heavy investments in biopharmaceutical manufacturing facilities.
Additionally, blockbuster biologics worth over $16.4 billion annually are facing patent expiration by 2011. The biogenerics drug market is expected to boom, inciting enormous pressures on biopharmaceutical companies to keep prices low to remain competitive. This pressure will drive companies to find methods to further lower the cost of goods (COGS) sold, something the traditionally not very important for biopharmaceutical manufacturers.
In this context, biopharmaceutical companies can no longer afford to ignore the manufacturing savings that can result from achieving excellence in process development. Here, we examine why process development is a critical component of biotherapeutics manufacturing, the benefits of outsourcing process development, and the criteria used by companies when selecting a contractor.
Recent pharmaceutical industry critiques reiterate the need for industry to reduce the COGS to remain viable. Profitability, productivity, and improved speed of development have been identified as primary targets for refinement. Although these concepts are nothing new, it is apparent an entire paradigm shift is now needed to address these issues adequately.
The key to any successful business stems from the fundamental economic principle: "The efficient use of limited resources for the purpose of attaining maximum satisfaction for the production of goods and services."4 This basic principle is applicable to both tangible and non-tangible resources. All resources are limited and must be rationalized.
It has long been conventional for organizations to outsource non-core business functions as a matter of workload management. However, increasing pressures on return on investment (ROI), resulting from the factors described above, means organizations today must be even more business savvy than ever and attain operational excellence across all functional units.
Organizations are becoming increasingly aware that they do not have all the specialized skill sets they need in-house and that often, outsourced contractors can do certain tasks better. As a result, biopharmaceutical companies are turning to outsourcing knowledge, instead of simply outsourcing tasks.5 A key example of outsourcing know-how is outsourcing process development.
Consider the manufacturing streams for biologics expressed in E. coli: plasmid construction, cell transformation, fermentation, protein recovery, refolding, purification, analytical evaluation, validation, engineering, and regulatory compliance (Figure 1). Each of these areas requires specific expertise and professional skill sets, although not necessarily equally nor concurrently. How does a company manage this quandary, retaining both professionals and supporting infrastructure?
Figure 1. Throughout the manufacturing steps (plasmid construction through regulatory compliance) involved in manufacturing a biologic expressed in E. Coli, specific expertise is required at a number of varying stages during the manufacturing strategy. The skills sets such as molecular biologist, process engineer, and regulatory manager are needed for shorter, definite intervals, whereas the collective skill sets (shown in ovals) are required on a more lengthy basis, possibly even throughout the entire duration of the manufacturing program (depending on the program).
By outsourcing, an organization can gain access to an entire complement of skill sets like these, as well as to new generation or proprietary technologies, all the while reducing overall developmental risk. Outsourcing offers flexibility, allowing the organization to refocus asset utilization on its own core competencies, saving time, money, and potential heartache.
At Hospira, we have identified important factors that organizations contemplate when determining whether their operations will benefit from outsourcing process development.
Economic Efficiency and Opportunity Cost
Resource mismanagement and production inefficiency can have long-term, detrimental effects on investor confidence. Maximum economic efficiency is key to a healthy ROI.
Economic efficiency embodies both allocative and production efficiency. Allocative efficiency is the allocation of resources to the products most desired, and production efficiency is the adoption of least costly production techniques. Operating outside the realms of maximum efficiencies, and thus comparative advantage, is damaging and unsustainable. Opportunity cost is therefore an important consideration when deciding whether to outsource.
Reduction in COGS
Compared with the manufacture of small molecules, the manufacture of biologics is eminently labor intensive, very technical, more costly, and inefficient.6 At Hospira, we have determined two key elements that drive the COGS for biologics: molecular complexity and quantity required.
Protein length and sequence affect yield and purification efficiency whereas quantity requirements affect the scale of production. Each factor ultimately determines the choice of production systems, e.g., chemical synthesis or recombinant manufacture, or bacterial or mammalian-based expression systems. Production processes will also inevitably evolve as developmental requirements change.
A company needs to decide if it is capable of supporting the necessary production systems, taking into consideration compliance issues. Process development contractors are using innovative, state-of-the art manufacturing technologies to expand production capabilities and efficiencies. As such, the industry is seeing an array of new proprietary technologies, particularly those having significant effects on production yields and protein purities. Amateur production is no longer realistic.
Technical and Operational Capabilities
The accreditation of an external contractor provides assurance of its quality systems and implies operational expertise. A vigilant company may also perform its own quality audit and validate technical competencies.
Consideration should be given to the range and depth of complementary services the external contractor can offer. For example, can the contractor supply material for both clinical studies and commercial requirements? Does the contractor have fill/finish capabilities? There is a growing trend toward dealing with only one company for an array of services, which can result in numerous benefits and considerable savings. Not only does the company's bargaining power increase ("the more you buy, the more you save"), it also avoids the need for multiple technology transfers. The contractor also becomes more familiar with the developing product, encouraging a stronger affinity with the developmental program.
Strategic Fit and Developmental Risk Mitigation
Risk management can be critical to a biologic's developmental success. Biopharmaceutical development is considered one of the more formidable risk management climates to be operating in.7 Drug development is highly regulated, costly, and lengthy, particularly given the low success rates.
By outsourcing, the company can leverage the contractor's experience, significantly reducing developmental risk. Because many regulatory bodies now dictate that risk-management strategies be implemented, a prudent company may opt to collaborate with relevant, experienced experts to formulate a robust and successful risk management strategy.
Criteria for Selecting an External Contractor
Many have surveyed organizations worldwide to ascertain the attributes sought when selecting an external contractor. At Hospira, we continue to survey clients as part of our real-time performance management. Our respondents exemplify current opinions as reported by commercial market reports. Although the exact order of criteria varies, the following issues are repeatedly regarded as the most important.8–12
1 Technical Ability and Reputation of the Contractor. A significantly weighty criterion is the contractor's technical ability, experience, and reputation. This extends not only to biotechnology capabilities and expertise of staff, but also includes experience and familiarity with regulatory agencies and similar policies. 8,9
Figure 2 summarizes how a range of manufacturing services align with a particular phase of a typical development strategy. A proven background of providing pertinent assistance is important, demonstrating excellence, quality, and technical aptitude.
Figure 2. Alignment of contractor services with a development strategy
Intellectual Property (IP), novel technologies, and healthy patent portfolios owned by the contractor confers competence. Such IP can also be leveraged by the developing organizations to augment their own IP position, provided that access to IP is relatively simple and transparent. A simple way to address this question is to examine past case studies, noting a track record in excellence and quality, technical aptitude, and use of modern technologies.
2 Price and ROI. The manufacture of biologics is a customized undertaking. It generally requires more time and financial commitment earlier in the development cycle than traditionally seen in the manufacture of small molecules. However, not only does price reflect project complexity, it is also representative of a contractor's expertise, capacity utilization, and the bargaining position of both contracting parties. Commonly, a contractor is selected because it has demonstrated the cost effectiveness of its services.
Some contractors are now offering an alternative approach to full-scale process development studies for recombinant biologics. Contractors divide process development into sequential modules, each incorporating a defined "go–no go" end point. With this approach, an organization need only undertake one module at a time, offering a more flexible and cost-effective development program.
3 Schedule Compliance and Flexibility. A portion of survey respondents indicated that time management and schedule compliance are critical when selecting an external contractor. Meeting deadlines and milestones can be imperative to a program's success; therefore, a contractor must be capable of keeping timeline commitments. It requires that the contractor be a well organized, flexible service provider with optimal infrastructure administration.
4 Program Management. In the current competitive climate, managerial competence is equally significant as technological competence. Poor program management can cause a technologically sound process development project to underperform. Respondents emphasized the importance of communication, transparency, proactive partnership, and confidentiality.8 An apparent lack of transparency and communication can be enough to instigate distrust and lead to the breakdown of a client–contractor relationship. This can disqualify the contractor for future projects.
A contractor should appoint a designated project manager responsible for all aspects of the process development project and reporting progress on a weekly, fortnightly, or even monthly basis. Depending on the client's needs, communications can be as simple as email updates or may involve more comprehensive systems such as video conferencing or site visits.
Process development projects should be treated as partnerships, with a focus on developing communicative relationships with clients. This encourages a strong collaboration and assists in solving technical problems, meeting deadlines, and remaining in budget.
5 Other Criteria. Other criteria of lesser importance highlighted in the studies include:
Availability of capacity
With the increasing interest in biologics comes an increase in demand for manufacturing services. Survey respondents expressed a fundamental concern about facing a situation in which their provider does not have sufficient production capacity available when needed. Clearly, a lack of available resources hampers the delivery of program objectives on time and in budget, and can eliminate time and cost advantages.
Realistic lead-times to include process development and technology transfer
Technology transfer can appear simple on paper, but in practice, it can be difficult to execute. Technology transfer is often regarded as a process that just happens. However, whether it is a case of an in-house scale-up or a transfer to a third party manufacturer, technology transfer can confer a competitive advantage if it is given due planning and attention. Significant reductions in both time and cost can be realized.
Cultural fit and overall attitude
Cultural fit and overall attitude are questions of confidence and trust. If one company has misgivings about the other, it can be to the detriment of the developing biologic. A strong focus on communication and transparency can go a long way to bridge cultural gaps and build successful client–contractor relationships.
Surprisingly, close proximity of the contractor repeatedly rates low. It appears companies are far more interested in the contractor's technical capability. If real synergism exists, there is an overall willingness to deal with contractors afar.
In conclusion, biopharmaceutical companies are becoming more sophisticated and flexible in their business operations so that they can remain competitive. Because industry trends indicate the need for reduced COGS, a key competitive advantage lies in process development. Companies are becoming increasingly aware that a more pragmatic way to keep pace with new technologies and platforms is to access them through outsourcing rather than attempting to build these capabilities internally. Under-used in-house resources are costly, and it simply does not make strategic sense to have resources idle when capacity and expertise can be purchased through outsourcing. Instead, the biopharmaceutical company can refocus asset use on core competencies.
Outsourcing process development is becoming a rational long-term strategy that is integral to biomanufacturing. A thorough screening of prospective process development contractors can result in a highly beneficial contractor–client partnership with handsome dividends for the process development investment.
Stephanie Morris is scientific and marketing support for protEcol Services at Hospira, Adelaide, Australia, +61 8.8234.2660, firstname.lastname@example.org
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