After 2020, trying to predict anything at all seems a bit reckless. Most of us are still trying to wrap our heads around last year — and hoping this year will follow a different trajectory. Looking back at the various trends outlined in January of last year, I think we can all be forgiven for not having seen the 800-pound gorilla named “COVID-19” sitting quietly by itself in the corner of the room.
COVID, of course, did happen. And while many predicted trends fell by the wayside, the industry has seen some significant changes.
- Global collaboration exploded.
- Supply chains were forced to become more robust, or at least to begin the transition to redundancy.
- Research — and later development and clinical — programs scaled up at speeds never before imagined.
Remarkable things happened, and continue to happen, that will have a lasting impact on the industry.
So what can we expect in 2021?
Here are seven trends (admittedly more modest than developing vaccine candidates for a novel virus in six months) we forecast for the small molecule pharmaceutical and contract manufacturing spaces.
1. Big Data & AI
Computers are still no match for the human brain. But there are many tasks they can perform faster or more efficiently — like sifting through vast amounts of data or keeping tabs on conditions in manufacturing facilities. And unlike us, they don’t need to sleep.
There isn’t enough paper in the world to record and store the growing tsunami of data in the pharma industry alone (not that we’d have the time to write, type, or print it all, much less make any use of it). Pharma manufacturers are already on the cutting edge of these technologies, using them to keep production lines moving at optimum efficiency, build models to predict drug effectiveness, and enhance clinical trials. Many manufacturers are watching this space for the industry’s next major technological breakthrough, and backing their bets with significant R&D funding.
It’s not just manufacturers that are getting into the act — regulators are starting to catch on to the potential for AI to help ensure compliance. And some firms are even using AI to guide merger and acquisition (M&A) choices. Which brings us to…
2. M&A activity
While pandemic shutdowns may have stalled some M&A activity, there are still plenty of big fish eager to gobble up smaller upstarts. This is true not only for pure pharma companies, but across contract manufacturing organizations (CMOs), contract research organizations (CROs), and contract development and manufacturing organizations (CDMOs).
Companies that have done well as a result of COVID-19 will be the most obvious targets, especially the mid-sized pharma and biotech firms that are playing key roles in the development of vaccines and virus testing. Digital firms also look attractive. The pandemic gave a significant boost to digital healthcare, and industry-watchers expect those trends to continue when things return to normal.
At the same time, many investors smell blood in the water among device manufacturers, pharma companies, and other firms not related to COVID-19. Many of these are struggling as a result of sharp declines in elective procedures, both from pandemic restrictions and patient fears of going anywhere near a medical facility. Bargain-hunters think many of these will be eager to deal once credit starts flowing more freely again.
3. Increased focus on impurities
In the last two years, the API world was turned on its head when genotoxic impurities (GTIs) were found in medications that had been approved years before. They were first discovered in a generic version of valsartan — even though the manufacturer had followed best practices to the letter — and later in ranitidine samples. (For more background, check out our recent blog post: “The Impact of Impurities on the Pharmaceutical Industry”).
Unsurprisingly, API manufacturers and their partners quickly scrambled to overhaul established practices and safety standards, and not just because global regulatory agencies started tightening the screws. After all, no sane company wants to negatively impact human health or lose a profitable product, much less face the fallout from a similar PR nightmare. Major investments in equipment and personnel are on track to continue well into the coming year, and probably beyond.
4. Deeper outsourcing partnerships
Big pharma companies continue to expand their reliance on CMOs, CROs, and CDMOs. That’s good for the business of these partners, but it also brings them under more pressure to deliver top performance. Big Pharma also wants to cut costs by not owning everything anymore, so they’re looking for partners who can routinely provide a diverse range of services, not just handle isolated projects on an as-needed basis.
These trends continue to reshape the way contract sector does business (not to mention driving some of the M&A activity we covered earlier). Contract organizations have growing incentives to expand their operations, boost efficiency, grow their reputations, and build long-term relationships with their clients. Expect more of the same in 2021.
5. Regulatory backlash?
For global regulatory agencies, “COVID-19” might just as well have been spelled “CATCH-22.” Practically overnight, the on-site safety inspections they’ve historically relied upon to keep the industry safe became a significant safety risk in and of themselves. Rather than risking even greater drug shortages or delays in the development of treatments for the pandemic, regulators gritted their teeth and permitted unprecedented accommodations to inspection practices (when inspections weren’t simply delayed indefinitely).
Most – if not all – of the resulting guidance documents prominently featured the word “temporary,” and there were attempts to get back to something more like business as usual in August and September. Regulators backed off a bit when new virus surges began running wild, but their willingness to let the industry police itself will evaporate overnight as soon as vaccines, the lifting of travel restrictions, and other measures make it safe to perform on-site inspections again. When that happens, you can expect to see a rash of international inspections by the FDA, EMA, and other leading regulatory bodies. Whether this will be a full-scale effort remains to be seen, but a significant backlog has piled up in 2020. Woe to any sites that are found wanting.
6. Supply chain security
The global rush to secure domestic supplies and production capacity — whether in Brussels, New Delhi or Washington DC — is expected to continue. The victory of Joe Biden in the US presidential election is likely to reduce nationalistic trade policies somewhat, which may ease some of the pressure. Even so, many industry players had a significant scare when supply shortages started to bite, especially those that relied on a single source for critical APIs.
Keeping costs at rock-bottom is still a top priority, but after the pandemic it won’t be the only one. You can’t make a profit if you have nothing to sell. Efforts to address supply vulnerabilities are just getting started, and will take years to fully implement. Watch for more reshoring in the long-term, and a focus on redundancy and supply chain security in the short-term.
7. More Generics
Patent expirations will continue to drive the growth of generics in the coming year. An estimated 37 drugs came to the end of their exclusivity periods in 2020 – or soon will in 2021 – opening the field to generic alternatives.
Major names on the list include the HIV drug Truvada, which came of age at the end of September, but is holding on for at least another year.
2020 also saw the expirations of Afinitor, Chantix, NuvaRing, and Forteo, to name just a few. In 2021, six drugs will lose patent protection in February alone. In order of appearance, they include Feraheme, Fortical, Crixivan, Prevantics Maxi Swabstick, Cysview Kit, and Northera. No doubt there will be challenges and stalling tactics to preserve the most profitable pharma cash cows, but these efforts will only serve to delay the inevitable.