OUTSOURCING - Drug Development | Foreign Outsourcing of Development has Pitfalls

By James Hamby, PhD, and Gary Baker, PhD

Domestic outsourcing has a number of advantages

IMAGE COURTESY OF ASH STEVENS INC.

Many contract manufacturing organizations handle challenging scale-up issues such as hazardous chemistry and must have tools such as barrier isolation systems that help protect workers and the environment from highly potent compounds.

A critical task for life science companies that are developing small molecule therapeutic agents is the identification and selection of the right contract manufacturing organization (CMO) to ensure successful development, delivery, and registration of their API on time and on budget. Ideally, the necessary manufacturing expertise and infrastructure would be available in house. In today’s pharmaceutical environment, however, only the largest companies generally have the wherewithal to shoulder the huge capital expenditures needed to maintain, operate, and staff a fully integrated chemical development and manufacturing facility.

This article looks at some common pitfalls encountered when outsourcing the development and manufacture of new chemical entity (NCE) active pharmaceutical ingredients (APIs), also referred to as innovator APIs, and examines the potential hidden benefits of outsourcing innovator APIs locally rather than going offshore.

For most small and mid-sized biotech companies, outsourcing drug development and manufacturing services is an integral part of the business plan. The biotech model allows companies to focus on core competencies and “strategic advantage,” while activities requiring capital-intensive infrastructure and leveraging outside expertise of highly trained professional staff are outsourced to conserve capital, maintain flexibility, and streamline the drug development process cost effectively.

Many large pharmaceutical companies have made significant investments in offshore research and development (R&D) and manufacturing facilities, mainly in Asia, to exploit the “labor arbitrage,” leverage offshore talent, and tap into these emerging markets. In the past, CMOs were used as stopgap measures to provide capacity during short-term peaks in production demand. With the risks of R&D costs, patent expirations, lean pipelines, and increased regulation, outsourcing now plays an increasingly important role in cost-cutting strategies to improve R&D productivity.

With the risks of R&D costs, patent expirations, lean pipelines, and increased regulation, outsourcing now plays an increasingly important role in cost-cutting strategies to improve R&D productivity.

Finding the Right CMO Partner

Once a life science company decides to initiate development of a small-molecule NCE drug candidate, securing API supplies and preparing the chemical and manufacturing controls section of the new drug application (NDA) filing are often outsourced to a CMO. The challenge for the sponsoring company then becomes identifying and selecting an ideal CMO partner for the project and managing the relationship to ensure successful, efficient, and cost-effective development of the drug candidate.

International Conference on Harmonisation guidelines and U.S. federal regulations mandate that the sponsor company assume responsibility for the accuracy of all data generated, documented, and reported. Therefore, the sponsor company must ensure that data generated by a third-party CMO is of the highest quality and that the integrity of the data can be defended to regulatory agencies. It is imperative that the sponsor company effectively manage the project.

The process of selecting a CMO begins at home: The development team must have a thorough understanding of the project. Implementing a good development strategy requires a clear understanding of the level of difficulty presented by the project.

The development team must consider many factors:

• material requirements;
• estimates of time required to resolve technical issues and secure deliverables;
• understanding of potential challenges, such as key material sourcing, process chemistry problems, analytical testing issues, and regulatory requirements; and
• understanding of the chemistry, manufacturing, and controls section (CMC) of the NDA.

Consideration of these matters at the onset of the project will help clarify what should be outsourced and why. It will also foster good decision making and understanding of the risks, benefits, and ramifications of tactical and strategic actions.

In earlier times in the pharmaceutical industry, when Big Pharma dominated the landscape, generous resources could be applied internally to ensure that the most challenging development projects moved forward. Given today’s climate of increasing costs and declining approvals, however, the landscape has been reshaped by the new biotech paradigm of outsourcing drug development and manufacturing. In today’s environment, most life science companies do not have the capital and time to sustain a difficult and protracted development project. Just as funding organizations—such as venture capital companies—are reluctant to fund risky early-phase discovery projects, some biotech firms are reluctant to fund projects that require the significant amount of uncertainty and expense associated with developing a viable current good manufacturing practice (cGMP) manufacturing process.

IMAGE COURTESY OF ASH STEVENS INC.

Kilo lab equipment for the intermediate scale-up of active pharmaceutical ingredients used by a contract manufacturing organization.

Don’t Underestimate the Difficulty

CMOs are also less inclined to take on such a project because it would tie up valuable resources for too long. Consequently, the sponsor company’s development team must understand, early in a project, the potential development challenges ahead and, if possible, must provide insight about those potential challenges.

Given the necessity for minimal staffing in many early-stage life science companies, it is not uncommon for a staff member trained in non-development-related disciplines to assume outsourcing manufacturing responsibilities as a project transitions into development. It is also not unusual for an inexperienced development team to underestimate the difficulty, cost, time, or scope of a development project, leading to unrealistic expectations for API delivery, costs, and timelines.

Most CMOs are accustomed to working with tight timelines; however, unrealistic expectations on the part of a sponsor company will undoubtedly lead to a stressful sponsor/CMO relationship, stifling the prospect for a productive win/win strategic outsourcing partnership. Moreover, quality CMOs may be reluctant to bid on projects with unrealistic requirements knowing that it will be impossible to meet deliverables; if this is the case, the sponsor firm loses the opportunity to work with a quality CMO.

Another bottleneck biotech companies often face is the scale-up of discovery synthesis to meet API demands for clinical trials and registration. It is rare, except in the simplest cases, that the discovery syntheses can be directly scaled to provide a robust cGMP process capable of meeting development, registration, and commercial API demands. The medicinal chemistry or discovery route and the cGMP development process are very different with respect to their goals and objectives. The medicinal chemistry route is designed to rapidly make iterative analogs to optimize biological activity and other drug attributes. The process route is designed to make a single compound in scalable quantities of high purity in a safe, cost effective, environmentally contained, and highly reproducible manner. The development of a cGMP process takes considerable effort, time, and money to develop and is mandated to comply with GMP regulations.

Given the cost, time, and effort required to develop a robust cGMP process suitable for registration and commercial manufacturing, it is not uncommon for biotech companies to try to force fit a discovery synthesis onto a manufacturing process in order to move a project ahead rapidly. With many small and virtual biotech companies currently cash strapped, there is an urgency to proceed to the proof-of-concept stage as quickly as possible to raise additional funding for the company.

Likewise, companies with challenging scale-up issues—such as hazardous chemistry, chromatography, low yields, and non-scalable reactions—may also look for ways to force fit a discovery synthesis to meet near-term API demands so that a project will quickly move forward. These companies are tempted to circumvent risky, time consuming, and expensive process research and development work. They want to hammer out enough API using the discovery synthesis to reach the proof-of concept stage and attract investors as quickly as possible.

This is a very risky strategy with many potential pitfalls that can lead to significant development issues down the road, however. For example, trying to make API for early-stage clinical trials by scaling a questionable or risky discovery synthesis may result in the inability to meet early API demands after much effort has been applied to the project. Furthermore, expensive, hazardous, wasteful, or inefficient steps may be locked into the process to avoid altering the impurity profile of the API.

The most efficient approach involves spending the necessary time, money, and effort up front to develop a scalable process amenable to cGMP manufacturing. An experienced CMO can usually help the sponsor company formulate an effective strategy that best fits the project’s needs and reduces risk at the same time.

Despite the potential for cost savings, many biotech companies in North America and Europe are choosing to outsource their API manufacturing to onshore CMOs.

Evaluating Potential CMO Partners

When a life science company evaluates potential CMO partners to entrust with its development project, multiple vendor attributes should be considered. The relative importance of these attributes varies from company to company and even from person to person within an organization. The regulatory affairs group may weigh some attributes differently than those working in process chemistry. Every outsourcing professional has his or her own set of biases about CMO attributes.

For this reason, it is wise to have several perspectives from development team members. In virtual and small biotech companies with limited development experience and staff contracting, consultants can bring in the expertise needed to help select the appropriate CMO vendor.

Quality, speed, and cost are often cited as the most important attributes for outsourcing professionals. Quality encompasses many attributes but, in general, refers to the ability of a CMO vendor to reliably develop and deliver API that meets all specifications and is fully compliant with GMP regulations. Speed includes the ability to develop and deliver API on schedule. With so much at stake, cost savings are rarely the driving force behind vendor selection. If competing CMO contractors are deemed equivalent in their ability to provide quality drug development and manufacturing services, as well as to deliver the requisite amount of API on schedule, then cost considerations weigh more heavily in the decision.

Despite the potential for cost savings, many biotech companies in North America and Europe are choosing to outsource their API manufacturing to onshore CMOs. Hard numbers are difficult to gather, but the perceived trend in the industry today is that more API manufacturing is coming back to North America and Europe from Asia. A number of factors are influencing this shift in manufacturing outsourcing. The pharmaceutical industry is trending more and more toward manufacturing in the general geography of targeted markets. Western pharmaceutical markets are highly developed and are typically the target markets for the commercialization of most biotech drugs. For this reason, it makes sense to outsource drug development to “local” CMOs experienced with developing, registering, and manufacturing APIs in the target markets. Costs may be somewhat higher than with offshore contractors; however, the potential for success also increases substantially due to ease of communication and solid project management.

The offshore outsourcing of the CMC development of a drug destined for first approval in the United States adds many more factors to the development equation. Many biotech companies are reluctant to take on the additional level of complexity, especially those companies that lack offshore development experience. To be confident of the success of this approach requires an experienced development team with a successful track record of developing APIs offshore. Biotech companies strive to build highly interactive strategic relationships with their outsourcing partners. Open communication is an essential part of establishing this type of relationship, leveraging the experience, knowledge, and expertise of both companies to facilitate problem solving and expedite the development process. This type of strategic relationship can be more difficult to achieve offshore, especially for companies that are unfamiliar with this approach or have an entrenched hierarchy that impedes open communication.

Costs Involved With Offshore Outsourcing

The long list of quality issues with materials from Asia has been examined over the last several years. These incidents have mandated that pharmaceutical companies undertake significantly more due diligence to prevent recurrence, including more sampling and testing to ensure that materials have not been adulterated. Firms are performing more overseas quality audits to ensure consistently high product quality.

With offshore outsourcing, the complexity of relatively routine logistical tasks can become significantly magnified. For example, long distance management necessitates travel to Asia several times a year for various team members, and routine teleconferences must occur during off hours. This adds time delays and expense to the project. Other logistical challenges include potential shipping and clearance issues in customs, resulting in long delays. Current world currency fluctuations are also trending in favor of western CMOs. When considering outsourcing drug development and manufacturing offshore, take into account these hidden costs in time and quality, in addition to full-time equivalent costs.

Drug development is a complicated and dynamic process that can last a number of years and requires careful management and interactive communication. The outsourcing process starts with a thorough understanding by the development team of the task at hand and potential challenges and pitfalls in the future. Currently, the outsourcing pendulum for CMC development appears to be swinging away from Asia and back toward western-based CMOs. When currency fluctuations and hidden costs (time and quality) are considered, offshore outsourcing of CMC development does not always equal low-cost drug development.

For the pendulum to swing back toward Asia, there must be a high level of confidence and trust in quality and the ability to deliver API on time, as well as substantial savings in total costs.