Several posts ago, I discussed an article on the ‘shifting sands’ of contract provider/pharma relationships, and how smart providers were responding to pharma’s needs, rather than establishing fixed models of business.
I wanted to expand on that a bit, since it recently came up in a discussion with a major pharma company exec who was just a wee bit exasperated at being told precisely how a relationship would be structured by what amounted to a secondary supplier.
Business & Relationship Models
As far as relationship models are concerned, at Neuland we’re very flexible, because the best model to apply depends on the project or product type.
For example, with life cycle extension of APIs, we find a conventional business model is favored in which contract pharma clients prefer to outsource the products to meet their quality and regulatory requirements while sourcing at a competitive price. This kind of business model is exclusive in nature, and historically offered a guaranteed volume uptake on an annual basis. Taking market dynamics in consideration, it’s clear that guaranteed annual volumes for procurement is a largely extinct model.
In fact, many of the models we encounter these days are geared more and more towards encouraging a CMO to improve cost in order to compete against generic pressures. This is becoming increasingly common in situations where innovator firms rely heavily on CMOs such as Neuland for better delivery at the most competitive pricing under standard quality norms.
Here are five more observations on what we’re seeing impact the provider-sponsor (or innovator) relationships:
- More Contract Pharma Sponsor Audits
One aspect of the relationship that has received some coverage is the increasing number of audits of CMO firms by the sponsor companies. While this may have its origins in the revised FDA standards assigning responsibility for manufacturing to the sponsor company, one particular positive consequence has been to help contract pharma providers improve their overall quality systems.
- QbD Drawing More Attention
Quality by Design (QbD) is standardizing across the industry in the development phase to ensure that manufacturing is done to meet consistent quality in deliveries of drugs. With the adoption of QbD, the processes relating to yield, quality and impurity profiling are increasingly drawing more regulatory attention. This has led pharma sponsors & innovator companies to seek out relationships with firms that are ‘QbD-enabled,’ for lack of a better term, in order to best address the regulatory concerns raised by the growing complexity of today’s drug science.
- Large Molecules Draw Innovation, Small Molecules Draw Competition
The innovator’s focus is – and has been, for some time – shifting towards large molecule development. In the interim, the small molecule space has become increasingly competitive. This is highlighted by the decreasing number of approvals for small molecules drugs over the last decade. The reduction in value for small molecules has led to market erosion, and is forcing CMOs to upgrade the technology platforms to remain competitive. It is also driving a restructuring of contract pharma-client relationships, with an emphasis on competitive processes & technologies. The innovators are stressing development in the areas of mAb and proteomics, as well as peptides
- Old Drugs Seek New Life
Pharma companies are looking for new indications for old drugs. There is a trend in replacing some of the active side elements with isotopes to enhance efficacy. It is also opening up new avenues for contract manufacturing as CMOs begin to work on drug repurposing on behalf of clients.
- The Growing Role of I.P.
Intellectual property has always played a major role in the contract pharma-drug company relationship. The importance of I.P. (and rights ownership) is taking on an even larger role with the passage of time. This is due – in large part – to the increasing complexity of drugs and their respective processes, which has led to highly-specialized CROs/CMOs with the ability to produce critical I.P. Relationships are now often structured around the presumed I.P. innovations that will emerge, and in many cases both parties work jointly to generate new IP innovations.
Just as every contract manufacturing project differs in its details, so – too – do the relationships between providers and clients. It is important to view the entire scope of the project, taking into account the variables that will have a bearing on the contract research or manufacturing agreement. Flexibility in designing the client relationship to meet the needs of the drug firm is the key to building a successful long-term alliance.