WWW.PHARMAMANUFACTURING.

COM

CONTRACT
PHARMA
TRENDS
Power Moves:
Contract Services
Success Strategies
P.2

Strong Growth Ahead for

Contract Manufacturing
P.6

Unlocking the Value of

Supply Chain Collaboration
P.10

Belle of the
Contract
Manufacturing Ball
P.14

Mission Possible: NEXT PAGE u

Excellent Clinical Logistics
P.19

SPONSORED BY
 2O16 Contract Pharma Trends www.pharmamanufacturing.com

POWER
MOVES CONTRACT SERVICES
SUCCESS STRATEGIES
By Steven E. Kuehn,
Pharmaceutical Manufacturing

t PREVIOUS PAGE 2 NEXT PAGE u

 2O16 Contract Pharma Trends
Pharmas Top CMOs are playing to their
strengths, toning operations and flexing
their technical muscles in an effort to compete
CONTRACT SERVICES ORGANIZATIONS are
pursuing a number of strategies to be successful, com-
petitive and relevant to their customers. To get there, this
important Pharma sector is driving manufacturing and
process innovation at an impressive pace. Critics may
argue that compared to other industries this is all just so
much catch-up, rather than true innovation. But that
would be selling way short the direction CMOs are taking
the industry strategically, tactically and operationally.
Its becoming very clear todays Pharma contract
services providers are preparing themselves to compete
for their spot in an increasingly sophisticated and
multifaceted supply chain. Attracting customers in this
environment is predicated on fielding the technologies
and techniques to meet capacity and processing needs,
but keeping those customers for the long haul and
maintaining the stable, long-term revenue streams they
bring, is another thing entirely.
ONE RULE, OVER ALL
Operational excellence is the rule, with no exceptions,
especially as it relates to regulated, GMP-delivered phar-
maceutical manufacture. But excellence is the desired
end; the result: a goal to measure, achieve and sustain.
Ultimately its the expression of an organizations overall
competence and internal ability to execute its business
plans and roll out product, manufacturing and organiza-
tional strategies via its people and resources effectively.
From the point of view and a recent study of 2,000
companies by the Council of Supply Chain Management
Professionals (CSCMP), supply chain performance in
Pharma has not been as strategically important in this
high-margin sector as it has been in other industries. To
effectively respond to the many changes in the industry,
CSCMP explains pharmaceutical companies (Branded
Pharma primarily) will need to build better end-to-end
supply chains. Well, no kidding, and certainly driving the
demand for competence among supply chain partners.
t PREVIOUS PAGE
www.pharmamanufacturing.com
Nice Insights Nigel Walker (See Strong Growth Ahead
for Contract Manufacturing p. 6) notes that contract
service providers that wish to attain a similar level of
growth going forward will need to find ways to provide
measurable added value something that sponsor
organizations cannot realize on their own. Emerging
markets, value-added generics (so-called supergenerics),
and biosimilars provide other potential opportunities for
growth, says Walker, but only if contract manufacturers
have the global reach and technical capabilities necessary
to capitalize on them.
According to Nice Insight analysis, some 30 CMOs
account for more than half of the industrys revenues
(PharmSource), and more than 18 acquisitions in the
CMO space (including only CMO-CMO deals) have
taken place in the last three years.
Current dynamics point to the contract services
industry readying itself to play its increasingly important
and primary role contributing to the global supply of
pharmaceuticals. Many members of this Club of 30
are well known and increasingly visible to the industrys
highly professional observers. Visiongain, in its pursuit
of market intelligence, recently released Pharma Leader
Series: Leading Pharmaceutical Contract Manufacturing
Organizations (CMOs) 2014-2024, which analyzes 30
leading companies in the space.
Jonathan Weymer, a senior analyst for Visiongain,
said: There is a historic trend in the pharma
industry of outsourcing activities such as drug and
API manufacturing. Recent years have been lean for
a number of the big players in the pharmaceutical
contract manufacturing market, with M&A activity
a core driver of revenue growth. However, the ability
to deliver high-quality, flexible production will drive
business to the leading firms in coming years. Amen to
that Mr. Weymer.
Visiongain forecasts strong revenue growth for CMO
market leaders between 2014 and 2024. Their analysts say
3 NEXT PAGE u
 2O16 Contract Pharma Trends
DPx Holdings and other leaders like Lonza and Catalent
will experience the greatest increase in revenue between
2014 and 2024. Bottom-lining it, Visiongain notes CMOs
with specialist expertise, proprietary technology and
flexible production facilities will experience market-
beating growth rates over the forecast period.
Whos the hottest? Visiongain singled out Vetter and
Lonza as two of the best-placed companies for high
revenue growth during the forecast period. Visiongain
analysts also called out Catalent and Lonza in particular
as two companies that have placed considerable
investment into high potency API and antibody-drug
conjugate facilities, a couple of high value competencies
that, at least according to just about anyone observing the
industry, will help fuel revenue and growth.
These areas are predicted to experience long-term
growth in demand over of the next 10 years, says Weymer,
and will drive growth for firms with experience and
production capacity. Similarly, say Visongain and others,
competency with complex processing such as lyophilisation
and pre-filled syringes will win increasing business from
biopharmaceutical companies seeking partners that can
demonstrate their ability to deliver such capabilities.
Patheon announced recently the appointment
of Gilles Cottier as president of the companys
pharmaceutical development services (PDS) division
effective immediately. According to Patheon, Cottiers
appointment is part of a larger realignment effort by the
company to create three distinct business segments
drug product services (DPS), drug substance services
(DSS) and PDS. Patheon says the structure will help
forge deeper relationships with clients and employ new
business models to help clients simplify their supply
chain management activities and support the expanding
number of new business opportunities and increasing
complexity of client relationships.
Deeper relationships with customers are at the core
of Patheons go-to-market strategy called OneSource.
Its under one roof that Patheon customers can combine
drug substance and drug product development and
manufacturing into a single customized solution to
simplify your supply chain and accelerate your discovery
to proof of concept. Patheon claims customers will be
able to develop small molecules 8-12 weeks faster than the
industry-standard 15 months and large molecules 14-20
weeks faster.
Lifecycle management is also a niche that Patheon
chooses to pursue publicly, and its literature online
identifies areas of formulation, dose form and associated
attributes that the companys operations can deliver for
customers looking to extend the commercial lives of their
products and part of Pharmas kit of tactics to wring more
revenue out of existing product lines.
t PREVIOUS PAGE
www.pharmamanufacturing.com
LONZA
A key to the development of highly targeted therapeu-
tic approaches for a range of diseases, Antibody drug
conjugates (ADCs) are an increasingly popular tool and
the bio/pharmaceutical industry sees it as an important
capability. Lonza, the preeminent Swiss biopharmaceuti-
cal CMO, recognized the potential and positioned itself
accordingly. In an item covering the emerging value of
ADCS, PharmSource consultants explained in one of its
newsletters that because of their complexity, ADCs offer
unique opportunities and challenges for CMOs and bio/
pharmaceutical companies seeking CMO partners for
their ADC candidates. PharmSources Tom Ransohoff,
explains: There are some real technical challenges in
producing ADCs. It is not an easy thing to attach a drug
to a monoclonal antibody (MAb). There are four main
elements to manufacturing ADCs: bulk production of
the monoclonal antibody; bulk production of the small
molecule drug; coupling of the monoclonal antibody and
the small molecule drug via the use of a chemical linker;
plus a fill/finish operation to put the product in the final
dosage form for the patient.
Its recognized that one of the major technical hurdles
has to do with the fact that the antibody and the drug
retain their viability after the components are chemically
attached. Tom Rohrer, senior director, Lonza (Basel,
Switzerland) offered this to PharmSource subscribers:
The union of the antibody, a biological compound,
and the drug coupled to the linker, a small molecule
compound, must be made chemically, with the ADC
retaining the binding activity of the antibody as well as
the biological activity of the drug.
SMALL/LARGE MOLECULE COMPETENCE REQUIRED
The production of ADCs requires small molecule and bio-
logic manufacturing acumen within an HPAPI processing
high-containment environment. PharmSource says this
limits the number of CMOs that can participate in the
process. Rohrer illuminates the task at hand: Perhaps
one of the greatest technology challenges associated with
ADC manufacturing is the design and construction of an
aseptic biological manufacturing environment that allows
safe manipulation of highly toxic drugs. ADC manufac-
turing requires manipulation of cytotoxic drugs with very
low occupational exposure levels, in the 10-9 gram/M3
range. The linkers are chemically synthesized and require
traditional small molecule technology for production.
Analysts say Lonza comes closest to offering a single
source CMO option. It offers ADC conjugation services at
its Visp, Switzerland, facility, where it fields manufacturing
operations for highly potent APIs. Lonza manufactures the
monoclonal antibody at production sites in Slough, UK;
Portsmouth, NH, USA; and Tuas, Singapore.
4 NEXT PAGE u
 2O16 Contract Pharma Trends
More recently Lonza announced the expansion of
mammalian production capacity at its Slough operations.
According to Lonza, Based on the increased demand
for biopharmaceutical development and clinical
manufacturing services, two 1000L single-use bioreactors
have been installed at the site. This expansion will
significantly increase the existing single-use manufacturing
capacity. Lonza says the Slough cGMP facility is the center
of excellence for this kind of development and clinical
supply. The site provides cell line construction, process
development and clinical manufacturing services for
mammalian-derived biotherapeutics.
Capacity to meet customer demand is at the heart
of it as is the companys investment and commitment
to competing in this lucrative segment. The increase
in bioreactor capacity continues the implementation
of single-use technologies at the Slough site and
complements existing single-use equipment for both
seed train systems and downstream processing,
including chromatography, filtration and ultrafiltration
unit operations. The new reactors are equipped with
controllers that enable parallel reactor operations,
expanded process capabilities with flexible operating
scales and bioreactor types. The last line of their press
release says it all: Use of these technologies supports
Lonzas ability to accommodate a variety of customer
projects and processes across scales and clinical phases.
CATALENT
Contract Service providers must demonstrate absolute
competence regardless of the drug category. However, like
Lonza, the advances in biopharmaceutical science require
some next-level strategery to win and keep business in the
coming years. Case in point is Catalent Biologics recent
news announcing its research collaboration with Roche
on Catalents SMARTag technology. Through its wholly
owned subsidiary Redwood Bioscience Inc., Catalent has
embarked on a collaboration with Roche to develop next-
generation molecules coupling different therapeutic mo-
dalities using Catalents proprietary SMARTag technology.
According to Catalent, Roche will gain non-exclusive
access to the SMARTag platform and will have an
option to take commercial licenses to develop molecules
directed to a defined number of targets. Use of SMARTag,
Catalents programmable protein-modification
technology, combined with the highly stable Hydrazino-
Pictet-Spengler (HIPS) conjugation platform, will permit
evaluation of alternative sites of drug conjugation so that
Roche may develop molecules optimized for efficacy,
safety and stability.
For its part, Catalent receives an up-front fee of $1
million and additional research funding during the initial
phase of the collaboration. If Roche pursues commercial
t PREVIOUS PAGE
www.pharmamanufacturing.com
OPERATIONAL COMPETENCE
AND TECHNICAL ACUMEN ARE
ESSENTIAL AND FUNDAMENTAL
TO A CMOs SUCCESS.
licenses and all options are exercised, Catalent says it has
the potential to receive up to $618 million in development
and commercial milestones, plus royalties on net sales of
products. Naturally both companies are pleased with the
arrangement. Our goal is to combine our differentiated
SMARTag technology with Roches expertise to create new
transformational treatments, says Mike Riley, Catalent
Biologics vice president/general manager.
VETTER
Last September Vetter announced it was embarking on
a 300 million (Euro) investment strategy to develop its
manufacturing sites. Vetter says the move was in keeping
with its commitment to manufacturing high quality drug
products for its customers. Vetter says the investment, to
take place over the next five years, is intended to expand
and upgrade its portfolio of manufacturing facilities.
Vetter is continuously developing its manufacturing
sites and techniques to prepare them for future needs
and requirements. The upgrades are being driven by a
changing healthcare market that is affected by issues such
as ever-more complex molecules, smaller batch sizes and
increasing regulatory requirements.
Facility expansions are already underway at several
of the companys locations in Germany, including its
Ravensburg Vetter West center for visual inspection
and logistics. According to Vetter, structural work for
the facility enlargement, which will more than double its
capacity, is complete with the site being on schedule to
become fully operational in 2017. In general, Vetter says
all of its site expansions will result in additional capacities
for drug product manufacturing and logistic services.
BETTER CONTAINMENT, BETTER OUTCOMES
A central technology element of the planned upgrades,
says Vetter, is the implementation of an internally engi-
neered restricted access barrier system (RABS) concept
which the company says will contribute to increased
operational excellence in aseptic manufacturing. For
decades Vetter says it has relied on RABS and isolators to
assure sterile conditions for its aseptic processes. To bet-
ter meet future industry trends, Vetter created a corporate
project team to develop an Improved RABS concept by
combining the advantages of isolator and RABS technol-
ogy. The core of the approach, says Vetter is a uniquely
5 NEXT PAGE u
 2O16 Contract Pharma Trends
fast, by todays standards, three-hour cycle and fully auto-
mated decontamination of the cleanroom using hydrogen
peroxide (H2O2), resulting from an extremely high level
of process innovation. Following a successful pilot, the
company says it intends to roll the concept out to all of its
cleanrooms within the next few years.
Naturally Vetter has its customers in mind and echoes
the sentiments of the industry of late. Managing director
Peter Soelkner put it like this: We are continuously
monitoring and reacting to a changing marketplace and
are pleased that we are in the position to be able to make
these strategic investments to further develop our sites
and meet these challenges. Individually and collectively,
they will help us keep pace with the market... Managing
director Thomas Otto notes that, As trusted partners
Strong Growth Ahead
FOR CONTRACT MANUFACTURING
Markets robust in 2015, but for how much longer?
By Nigel Walker, Managing Director, Thats Nice LLC / Nice Insight
CONTRACT MANUFACTURING organizations
(CMOs) of small- and large-molecule drug substances
and formulated drug products have had profitable busi-
nesses in recent years, including 2015. Growth rates for
contract manufacturing have been much higher than that
of the market for the pharmaceutical/biopharmaceutical
industry due to several factors:
Increasing consumption of medicines around the
world, both in emerging markets as incomes rise and
mature markets due to aging of the population.
A more robust pipeline of drug candidates and an
increasing rate of FDA NDA/BLA approvals.
The growing number of biologic drugs in development,
many by traditional pharma companies that lack
biotech expertise.
The entrance of numerous small, virtual startups into
the market that have no manufacturing capacity.
The rise in patent expiries and increasing generics
competition, which is driving a greater need for
t PREVIOUS PAGE
www.pharmamanufacturing.com
for drug product development and manufacturing, it is
our intent to always get each customers job done right.
In order to reach this level on a continuous basis, these
investments are the right step, at the right time.
Its nearly universal that operational competence
and technical acumen are essential and fundamental
to CMO success. Granted, the Top 30 CMOs have the
weight and momentum to preserve their share, but
there are hundreds of companies out there preparing
to compete in similar ways, carving out niches, playing
to their strengths, and investing in their operations to
answer customer and market demands. Big, small or
in-between, contract service companies are readying
themselves to make the power moves they need to be
successful.
cost efficiencies and access to novel, proprietary
technologies for achieving product differentiation.
And the increasing complexity of both small- and
large-molecule drugs, such as antibody-drug
conjugates (ADCs) and highly potent compounds that
require specialized skills and capabilities.
There are questions, however, as to how long such
strong growth can continue. Merger and acquisition
activity has been rampant among both sponsor
companies and contract service providers, leading to real
consolidation within both sectors. Several pharma firms
have also acquired contract service providers to achieve
vertical integration. Others have elected to invest in
their own in-house capabilities often smaller, flexible,
multiproduct facilities designed to meet the dynamic
needs of todays marketplace.
Both strategies are designed to limit the need for
outsourcing. As a result, contract service providers that
6 NEXT PAGE u
 2O16 Contract Pharma Trends www.pharmamanufacturing.com

wish to attain a similar level of growth going forward

will need to find a way to provide measurable added Recent, notable CMO
value that sponsor organizations cannot realize on their mergers and acquisitions
own. Emerging markets, value-added generics (so-called
supergenerics), and biosimilars provide other potential Merck KGaA acquisition of Sigma Aldrich
opportunities for growth if contract manufacturers have Pfizer acquisition of Hospira, including its contract
the global reach and technical capabilities necessary to parenteral drug manufacturing operations
capitalize on them. Albany Molecular Research acquisitions of Cedarburg
Laboratories and Oso Biopharmaceuticals
STRONG MARKET GROWTH EXPECTED FOR YEARS Merge of Patheon and DSM and the subsequent
The global contract (bio) pharmaceutical manufactur- acquisition by the newly formed DPX Holdings of Gallus
ing market is predicted by Visiongain (February 2015) Biopharmaceuticals.
to reach $79.24 billion in 2019, increasing at an average Par Pharmaceuticals acquisition of JHP Pharmaceuticals
annual rate of 7.5% from $54.54 billion in 2013 (1). The Merger of Cambridge Major Laboratories
market research firm also expects strong revenue expan- with AAIPharma
sion to continue through 2025. Key drivers identified by Siegfried Group acquisition of Hameln Pharma
Visiongain include growth of biologic drugs and biosimi- Consort Medical acquisition of Aesica
lars, including the growing demand for novel therapies Pharmaceuticals Limited
such as antibody-drug conjugates, treatments based on Piramal Enterprises purchase of Coldstream Laboratories
highly potent active pharmaceutical ingredients (HPAPIs) WuXi PharmaTech acquisition of XenoBiotic Laboratories
and regenerative medicines. Recipharm acquisitions of Corvette Pharmaceutical
The healthy growth of the contract services market Services Group, a Flamel Technologies facility in Pessac,
isnt surprising in light of the trends identified by Nice France and Lusomedicamenta
Insights annual Pharmaceutical and Biotechnology
Outsourcing survey of more than 2,300 outsourcing- companies spend more than $50 million on outsourcing
facing pharmaceutical and biotechnology executives has remained fairly stable over the last three years
(2). While the percentage of survey participants whose (23 to 24 percent), the percentage of respondents
whose companies spend $10 million to $50 million on
Figure 1. outsourcing has increased dramatically from 38 percent
to 62 percent, while the percentage of participants whose
Average Number Of Services companies spend less than $10 million has decreased by
Outsourced By Company Type slightly more than half (43 to 16 percent). In addition,
the average number of services outsourced by survey
2013 2014 2015
participant companies increased from 2014 to 2015,
9
8.2 regardless of the buyer group or budget size. See Figure 1.
7.6
6.7
6.04
5.4 5.6 HEIGHTENED M&A ACTIVITY TO CONTINUE
4.9 5
A continued high level of M&A activity is expected by
Visiongain over the next five years, leading to further
consolidation of the contract services market (1). The key

driver: the desire of contract manufacturers to provide
Biotech Emerging Specialty integrated service offerings across the entire pharmaceu-
Biotech Pharma tical development cycle from discovery to commercializa-
tion (APIs and formulated drug products) and lifecycle
8.8 management. The number of contract manufacturing
7.28 7.4 organizations (CMOs) transforming themselves into
6.38
5.7 5.5
6.3 contract development and manufacturing organiza-
4.7 tions (CDMOs) reflects this trend, as does the rise in the
4
number of primary contract manufacturers that have
expanded into secondary (finished dose) manufacturing
(and vice versa) through mergers or acquisitions.

In fact, according to PharmaSource, just 30 CMOs
Big Emerging / Overall
Pharma Start-Up account for more than half of the industrys revenues

t PREVIOUS PAGE 7 NEXT PAGE u

 2O16 Contract Pharma Trends
(3), and more than 18 acquisitions in the CMO space
(including only CMO-CMO deals) have taken place in the
last three years alone (3). Acquisitions of facilities from
sponsor pharmaceutical and biopharmaceutical companies
also continues, but at a slower pace than in the past (4).
There are several reasons CMOs are acquiring one
another: to gain a more global footprint to meet client
needs for global partners and large-scale capabilities
for greater cost efficiencies; to expand into service areas
(development, final formulation); and to gain access to
advanced technologies. Overall, CMOs are looking to
become CDMOs in order to develop extensive networks
of capabilities similar to what sponsor companies have
access to in-house, but with cost, productivity and
technological advantages.
The internal investments being made by CMOs and
CDMOs add up to quite significant sums and are too
numerous to mention. Leading the pack is Catalent,
which also recently acquired several companies
(Pharmapak Technologies, Redwood Bioscience and
Micron Technologies). Both Catalent and Patheon
announced initial public offerings to raise capital for
further expansions.
THE VALUE OF INTEGRATED SERVICES
These activities seem to indicate that the CDMO concept
has been well established. They also underscore the re-
cent trend toward the formation of strategic partnerships
with a few preferred suppliers that have the expertise to
support fully integrated capabilities and culture, systems
and processes necessary for the development of collab-
orative relationships.
This approach allows drug manufacturers to meet
aggressive development times while realizing greater
efficiencies in their own supply chains. According to the
Nice Insight survey results, sponsor companies look for
strategic partners that have the capability and willingness
to collaboratively develop operating procedures, use
Figure 2. Rank Of Industry Drivers
20122013 20132014 20142015
Quality 1 1 1 GREATER ROLE FOR ADVANCED TECHNOLOGIES
Reliability 2 2 2 Candidate drugs today are more complex and challenging
Productivity 5 4 3 high bioavailability, efficacy and safety. Many of these
Affordability 4 5 4 through therapy, and/or fast track designations from the
Regulatory 3 3 5
Innovation 6 6 5 patients are requiring demonstration of value, and the
t PREVIOUS PAGE
www.pharmamanufacturing.com
dedicated project managers, demonstrate a clear
willingness to make long-term commitments, and the
ability to customize protocols for different projects (2).
It remains to be seen, however, whether the newly
formed CDMOs resulting from the frenetic M&A
activity can actually provide fully integrated services
that meet the expectations of pharmaceutical and
biopharmaceutical sponsor firms.
COST NO LONGER THE MAIN
SELECTION CRITERIA
The focus on cost reduction initially associated with the
growth of outsourcing no longer seems to exist today.
Quality has supplanted cost savings as the key criterion
when sponsor companies are seeking contract service
partners. For three years in a row, respondents to Nice
Insights survey have indicated that quality and reliability
are the top two priorities, while affordability has dropped
in priority as one of the drivers for selecting an outsourc-
ing partner (2). See Figure 2. Poor quality also remains
the top source of dissatisfaction for survey respondents,
followed by a lack of timeliness in resolving problems and
unexpected charges.
Its also worth noting that FDA in 2015 opened its
Office of Pharmaceutical Quality, which is anticipated
to aid the agency in more effectively addressing quality
management issues in the pharmaceutical industry.
Respondents of the Nice Insight survey that work
for sponsor companies are also keenly interested in
contract service providers that have track records of
success, financial stability and an industry reputation
for doing quality work (2). Partners with operational,
methodological, and therapeutic experience to meet a
wide range of project needs and the ability to be adaptable
and flexible are also preferred. Clearly demonstrated
communication skills, a willingness to be transparent
and a deep understanding of customer needs are also
important to survey respondents, as are a reputation
for being responsive, willingness to go the extra mile to
ensure success and implement sponsor methodologies,
and an eagerness to foster good rapport among project
team members.
to formulate, often requiring unique solutions to ensure
complex drugs are also granted orphan drugs, break-
FDA and must be commercialized in half the normal time.
At the same time, payers, governments, physicians and
shift to evidence-based medicine is placing additional cost
8 NEXT PAGE u
 2O16 Contract Pharma Trends
and performance pressures on drug
manufacturers. Generic competition
is fierce, and the need to gain ad-
ditional profits through the extension
of product lifetimes is becoming an
additional necessity.
In many cases, sponsor companies
do not have access to all of the
state-of-the-art technologies that
are necessary to develop and
commercialize the complex APIs
and formulated drug products in
their pipelines. Outsourcing is an
efficient and cost-effective way to
gain access to the most advanced
technical solutions. As a result, CMOs
and CDMOs that can offer the most
advances in technical capabilities, and
more importantly novel, proprietary
technologies, have the greatest chance
of attracting the attention of sponsor
firms. As sponsor firms continue to
pare down their vendor numbers
and establish strategic partnerships
with fewer, integrated suppliers,
technological capabilities will only
become greater differentiators.
According to the results of the
Nice Insight survey, the introduction
of innovative, new technologies to
the lab, manufacturing plant and
supply chain is helping service
providers attract projects from
sponsors looking to be first to
market with differentiated products.
A high percentage of respondents
(96 percent) also indicated that
they have at least some interest in
forming outsourcing partnerships
with service providers that adopt
state-of-the-art technologies to
increase efficiency, safety, quality
and traceability. In addition, the
level of technological innovation
at a potential outsourcing partner
influences the selection process
for survey respondents. The use of
advanced technologies to enhance
safety is most important, followed
by improving efficiency, security,
regulatory compliance, patient
compliance, speed, loyalty and
traceability. See Figure 3.
t PREVIOUS PAGE
Figure 3.
Categories Of Technological Innovation
That Influence Outsourcing Partner Selection
1 2
Safety Efficiency
5 Patient 6 7
Compliance Speed
SPONSOR COMPANIES MAKING
THEIR OWN INVESTMENTS
Currently, CMOs account for
approximately 33 percent of the
pharmaceutical industrys cost of
goods (COGs) for drug product
manufacturing (4). That number isnt
likely to change, particularly given
that sponsor companies, in response
to their more robust pipelines and
strong cash positions, have begun to
invest in additional internal manu-
facturing capabilities.
According to PharmaSource,
spending on plant and equipment
by the 25 largest bio/pharma
companies grew 13 percent in 2013,
and 11 percent more in 2014 to $19
billion. Some drug companies are
also acquiring CMOs (e.g., Pfizers
acquisition of Hospira). In addition,
as mentioned above, many sponsor
firms are looking to simplify their
CMO networks by working with
fewer CDMOs that can support
their projects from the development
phase through clinical trials and on
to commercial API production and
drug product formulation.
SLOWING AHEAD? IT DEPENDS
While increasing investments in pro-
duction capabilities by drug manu-
facturers may limit the potential
growth of contract manufacturing
services to these traditional custom-
ers going forward, there still remain
opportunities for CMOs and CDMOs
to expand their businesses.
For those companies with truly
integrated offerings and unique
technical capabilities, there are
9 NEXT PAGE u
www.pharmamanufacturing.com
3 4 Regulatory
Security Compliance
8
Loyalty Traceability
opportunities for collaborative
capacity management and long-term,
multi-project relationships. The
expanding biosimilars and biobetters
markets will create additional
demand for contract development
and manufacturing support,
particularly from service providers
that can offer both quality and cost
advantages. Similarly, there is a
real need for lifecycle management
support of off-patent, small-molecule
drugs through the development of
modified generics with uniquely
enhanced properties from technically
advanced contract service providers.
Finally, CMOs/CDMOs with the
ability to establish manufacturing
facilities in emerging market
countries can position themselves for
strong growth, given that demand
is expected to expand rapidly in
the coming years and the contract
service market is in its infancy in
these regions. It is also worth noting
that increased competitiveness in
the contract service market will
ultimately benefit the survivors,
who will see improved pricing and
increased margins.
REFERENCES
(1) Visiongain, Pharmaceutical Contract
Manufacturing World Market To Reach
$79.24bn in 2019, Press Release,
Feb.10, 2015.
(2) Nice Insight, 2015 Pharmaceutical and
Biotechnology Outsourcing Survey, Jan.2015.
(3) PharmSource, Contract Dose Manufac-
turing Industry by the Numbers, July 2015.
(4) J. Miller, Pharm. Tech. 39 (17), 26-211
(2015). By Nice Insight
 2O16 Contract Pharma Trends
Unlocking the Value of Supply Chain
COLL ABOR ATION
An increasing focus on contract manufacturing can be expected
to drive the need for more advanced cooperation models
By Knut Alicke, Denis Fedoryaev and Patrick Oster, McKinsey & Company
SUPPLY CHAIN collaboration is underleveraged in the
pharma industry. Although other sectors, such as con-
sumer and retail, have put more focus on managing their
supply chain, most of Pharmas collaboration efforts still
center on the commercial side. However, as the results
of a recent joint ECR/McKinsey collaboration survey
indicate, in the near future industry executives anticipate
an increasing focus on supply chain collaboration in such
areas as demand planning and fulfillment or supply chain
flows and processes. Given the dynamics of client discus-
sions in health care, we expect this shift to take place in
pharma as well.
Today, less than half of the value chain in pharma is
externalized, which is considerably lower than in the
automotive or aerospace industries where it reaches
70 to 80 percent. An increasing focus on contract
manufacturing, however, can be expected to drive the need
for more advanced cooperation models. This trend will
be further accentuated by regulatory actions, such as the
May 2013 U.S. FDA guidance for the pharma industry on
quality practices in contract manufacturing arrangements.
The consumer and retail, automotive, and high-tech
industries have already seen examples of successful
collaboration efforts, albeit each of them in its own
distinct focus area:
Consumer and retail: large-scale supply chain
information sharing.
Automotive: multi-tier demand and
supply transparency.
t PREVIOUS PAGE
www.pharmamanufacturing.com
High tech: integrated planning, electronics
manufacturers have successfully implemented
integrated planning spanning the entire supply chain.
Many large pharma companies embarked on creating
supplier network platforms in the area of supply chain
information sharing, but both the depth of data exchange
and the level of integration remain low. Better examples
of supplier collaboration have been seen with contract
manufacturing organizations (CMOs) established as
pharmaceutical plant spin-offs. Demand-and-supply
transparency is also weak within the sector. While
principles underlying supply chain collaboration in
other industries are applicable to pharma, additional
constraints are imposed on the industry by the
uniqueness of the pharma supply chain. These constraints
are numerous and start with pharmas stringent
regulatory requirements that impose strict product
availability requirements, long lead times associated
with switching suppliers, and high complexity in change
management because master data are extensive; they
must be absolutely accurate at all times.
CONSTRAINTS AND COMPLEXITY
Most understand pharma supply chain networks are
increasingly complex. Pharmas specialized supplier
base focusing on concrete therapeutic areas as well
as particular production steps, combined with a frag-
mented network of manufacturing plants for different
10 NEXT PAGE u
 2O16 Contract Pharma Trends www.pharmamanufacturing.com

FIGURE 1.

SC collaboration could be a relevant source of bottom-line contribution:

industrywide EBIT potential at $5-10 billion

Performance
SC cost breakdown, range from top to
median pharmaco1 bottom quartile
Share of COGS
15.0%

4.0%

3.8%

3.1%

2.1% 2.0%

Reduction Supply Inventory Transportation Warehousing Supply Write-offs

potential from chain cost holding chain staff
SC collaboration
Baseline decrease 1020% 2040% 1020% 515% 510% 1020%

Improvement potential across all main cost areas of 1.53.5% in COGS

EBIT uplift in both Rx and Gxsegments estimated at $5 billion to $10 billion

1 SC cost COGS share and component breakdown vary depending on individual pharmaco SC performance;
provided is indication of median industry performance
SOURCE: McKinsey POBOS Supply Chain, Evaluate, BMI, McKinsey analysis and expert estimates

purposes (e.g., formulation, bulk, primary packaging, THREE DISTINCT OPTIONS

secondary/tertiary packaging for market access)
fuels complexity.
SKU complexity is becoming more pronounced,
with the average number of SKUs per packaging line
increasing. Different technologies, dosage forms,
packaging sizes, and numerous country-specific
requirements are just a few parameters driving SKU
complexity. The growing trend toward more personalized
medicine has become a contributing factor as well.
As opposed to the consumer and retail or high-tech
sectors, where manufacturers most often deliver to retail
distribution centers, the immediate Pharma customers
are predominantly wholesalers. These intermediaries
effectively impose another layer of uncertainty on the
supply chain, making demand forecasting and logistics
optimization more challenging.
Long lead times in switching suppliers or strict product
availability requirements, for example, are all the more
reason to improve collaboration. The high product
availability expectations that put increased pressure on
the customer service levels would also be substantially
improved via collaboration. In sum, we see no reason
why supply chain collaboration in pharma could not be
as successful as in other industries once prerequisites are
in place.
FOR PHARMA
The taxonomy of external-collaboration models for
pharma companies encompasses the following three dis-
tinct options: supplier collaboration, customer collabora-
tion and peer collaboration. Selection and management of
suppliers can drive the performance of the entire supply
chain down to end customers. As such, it should be a key
topic for pharma external-supply departments, perhaps
even in the context of a broader cross-functional supplier
development program.
Depending on the market size, regulatory
requirements and local-market specifics, the main
customers of most pharmaceutical manufacturers
are likely a wholesaler, a pharmacy, a retailer or a
hospital, which can make supplier collaboration tough.
Intermediate warehousing and distribution points within
these networks could be managed via distributors or
logistics services providers (LSPs).
Customer collaboration in pharma is virtually
nonexistent. The willingness to collaborate was also
dampened on the wholesaler end after industry players
started switching to direct-delivery models on above-
average wholesaler mark-up products, resulting in
wholesalers losing business to LSPs or having to offer less
profitable LSP services.

t PREVIOUS PAGE 11 NEXT PAGE u

 2O16 Contract Pharma Trends www.pharmamanufacturing.com

FIGURE 2.

Set of SC collaboration levers revolves around four key areas: planning, inventory
management, inbound and outbound processes, and logistics
(NOT EXHAUSTIVE)

MAIN COLLABORATION LEVERS

1 Collaborative planning 1. Joint review and setting of 1 base planning parameters

2. Joint demand and replenishment planning (CPFR)
3. Data sharing on supply constraints and demand peaks
4. Integrated planning automation and end-to-end information flow optimization
5. Joint improvement initiatives on forecasting accuracy and plan adherence
6. Joint SC business plans and shared SC KPIs
7. Embedded planners at key partners
8. Multitier transparency of demand and supply

2 Collaborative 9. Vendor-managed inventory (VMI)

inventory 10. VMI peer collaboration
management 11. End customer demand segmentation and tailoring of replenishment schedules and levels and locations of
inventory (e.g., based on sales velocity and volume)
12. Joint definitions of SKU allocation rules for make-to-order vs. make-to-stock production modes
13. Consignment stock arrangements

3 Collaborative inbound 14. Packaging material optimization (improving handling efficiency)

and outbound 15. Standardization of packaging units, handling containers, label information
processes 16. Shipment and bundle size optimization
17. Serialization and traceability
18. Establishing information exchange processes for, e.g., advance ship notice, electronic invoices, smart
labels

4 Collaborative logistics
19. End-to-end modeling of distribution network, including transportation routes, warehousing
configuration,
20. Sharing of logistics facilities and transport (e.g., truckload split, backhauling)
21. Leveraging partner network and transport for
direct deliveries
22. Joint optimization of logistics operations (e.g., speed-docking, green trucks, energy efficiency) and
delivery modes (FTL/LTL freight optimization direct delivery, local and remote milk run, cross-docking)
23. Joint peer LSP management and setup
24. City logistics: better consolidation of deliveries to end customers and convergence of manufacturers and
wholesalers order quantities and frequencies

The primary example of peer collaboration is
PharmLog in Germany, a joint venture set up by six major
Pharma companies. Joint venture activities include a wide
range of shared distribution and warehousing functions
including order and stock control, receiving and storage,
picking and packaging, batch control, repackaging, etc.
CASE FOR SUPPLY CHAIN
COLLABORATION
The value of supply chain collaboration already demon-
strated in other industries ranges from working capital
improvement and cost reduction to decreased spending
and higher sales. It also fosters revenue growth through
better on-shelf availability and flexibility to address de-
mand changes. Collaboration can generally have a posi-
tive impact on a wide range of supply chain performance
metrics, including service level (supplier and customer),
stockouts, order changes, forecast accuracy, production
planning accuracy, lead time, flexibility and agility.
While improvement of service level or product
availability generates significant value on its own,
the financial benefit of collaboration can be expected
from reducing the five main supply chain cost buckets:
inventory holding, transportation, warehousing, supply
chain staff and write-offs (See Figure 1).
COSTS
Pharma supply chain costs vary depending on individual
supply chain performance. McKinsey estimates that the
full reduction potential from supply chain collaboration
across all main cost buckets could achieve around 1.5 to
3.5 percent COGS improvement. This is especially rel-

t PREVIOUS PAGE 12 NEXT PAGE u

 2O16 Contract Pharma Trends
evant for generics players that have a significantly higher
cost share. Results of this magnitude require that prereq-
uisites are in place, the right approach is chosen, and the
most critical levers are engaged. Given todays industry
size of about $900 billion in the combined originator (Rx)
and Gx segments, as well as the current cost structure,
the industry-wide potential impact of supply chain col-
laboration amounts to $5 billion to $10 billion in earnings
before interest and taxes (EBIT) improvement.
Following a successful procurement transformation,
a global pharma company launched a supplier
collaboration program to deliver value-driven savings
beyond pure price reduction. Several supplier pilots
were launched, with the following outcomes: 50 percent
reduction of inventory, 15 percent European transport
cost decrease, 17 percent packaging-material cost
reduction, and 20 percent capacity increase for filling
operations. Success was attributed to the careful design
of program architecture and approach, thoughtful
selection of the right suppliers for the pilots, dedication
of company resources to supplier capability building,
and the drive for cross-functional collaboration.
As mentioned earlier, full-scale customer collaboration
programs have not taken off in the pharma industry.
One recent noteworthy initiative is the launch of a global
forecasting excellence program by a major Gx player, which
includes a joint forecasting pilot with a select customer. The
impact is yet to be shown.
HOW TO MAKE COLLABORATION
INITIATIVES WORK
To increase the odds of achieving significant benefit, it
is crucial to ensure, prior to launching an initiative, that
the prerequisites for collaboration are in place and that
the right approach is being applied. There are five critical
prerequisites that management should consider before
launching collaboration efforts.
1. Commitment and resources: Collaboration should be
positioned as a strategic priority with explicit senior-
level commitment and accountability from partners.
There must be available resources to form a joint,
dedicated supply chain team, with involvement of
other functions.
2. Data exchange mechanism: The sharing mechanism
should be realized by setting up an independent
clean team to ensure confidentiality. In later stages, it
should be transformed into the IT interface with clear
governance rules.
3. Value-sharing scheme: The sharing of benefits, costs
and risks should be clearly defined up front. This is
t PREVIOUS PAGE
www.pharmamanufacturing.com
particularly true for situations when value cannot be
directly attributed to the collaboration initiative or
when a performance metric improvement is difficult to
translate into the financial equivalent.
4. Performance tracking: Performance of the collaboration
initiative should be tracked via jointly determined
metrics with clear measurement processes that are
well understood and transparent to partners. The
performance-tracking system should feed the value-
sharing scheme.
5. Program architecture: While the launch of a
collaboration program can represent several pilots
with suppliers, customers and peers, in the end
there must be a structured project approach to each
collaboration initiative.
Another important factor for success is selecting
the right partners. Unlike companies in many other
sectors, even the top players in pharma cannot claim a
good understanding of their upstream and downstream
strategic partners. Before launching any collaboration, a
company should first run a comprehensive optimization
of both supplier and customer footprints and define its
strategic partners in both pools.
The set of potential supply chain collaboration levers
is broad and dependent on specific circumstances and
roles. There are, however, four main areas where supply
chain collaboration can deliver high impact: planning
and forecasting, inventory management, inbound and
outbound delivery and handling processes, and logistics
setup (See Figure 2). Most of the levers described in each
area are applicable across all supply chain collaboration
models:
Despite cultural and trust hurdles with external
parties and relatively long time-to-impact, supply chain
collaboration can clearly offer substantial benefits. This
is particularly the case in the cost areas of inventory
holding, transportation and warehousing, supply chain
staff, and write-offs. To achieve benefits, however, it is
important to ensure that the fundamental prerequisites
such as commitment and resources, data exchange
mechanism and value-sharing scheme are in place and
that the most critical collaboration levers are engaged.
ABOUT THE AUTHORS
Knut Alicke (Knut_Alicke@mckinsey.com) is a master expert
in the Stuttgart office. Denis Fedoryaev (Denis_Fedoryaev@
mckinsey.com) is an associate principal in the Copenhagen office.
Patrick Oster (Patrick_Oster@mckinsey.com) is an analyst in the
Wroclaw office.
13 NEXT PAGE u
Your product can be manufactured,
TRUST CANT.
In an industry where regulatory compliance is just the starting point,
WellSpring is committed to quality beyond compliance. With WellSpring as
your formulation, development, manufacturing and packaging par tner for
solid, semi-solid and non-sterile liquid products, youll get the kind of
scientific expertise and technical support that result in consistently
high product quality and complete fulfillment of your to-market goals.

Learn how your

technology transfer projects can be

made better
Read the E-book
 2O16 Contract Pharma Trends www.pharmamanufacturing.com

knows all the steps: from the minuet

of engagement, the foxtrot of clinical
trials, the Charleston commercial
scale up and the long Waltz associated
with commercial manufacturing
at scale to meet the demand for a
successful compound.
Last March DPx was created from
the merger of Patheon and DSM
Pharmaceutical Products, the life
sciences operations of Royal DSM in an
effort to launch a full-service, end-to-
end pharmaceutical contract services
provider. Privately owned by JLL
Partners (51 percent) and Royal DSM
(49 percent), DPx is a culmination of
the $2.65 billion deal between the two
companies, a deal first announced
late in 2013 and completed in March
2014. Led by CEO Jim Mullen (former
CEO of Patheon), DPx is operated as
an independent standalone company
and is parent to business units Patheon
Pharma Services, DSM Fine Chemicals
and Banner Life Sciences.
According to DPx, the Patheon

Belle of the Contract

business unit encompasses solid
and sterile commercial dose
manufacturing, pharmaceutical

Manufacturing Ball product development services and the

biosolutions and biologic businesses
formerly associated with DSM
DPx has been busy making itself Pharmas best CMO Pharmaceutical Products. DSM Fine
dance partner one that knows all the steps Chemicals main focus is centered
on custom synthesis services for the
Pharma and fine chemical industries.
By Steven E. Kuehn, Pharmaceutical Manufacturing Banner Life Sciences focuses on
R&D, in-licensing, out-licensing,
commercializing formulation
technologies and the production
of proprietary, over-the-counter
TRADITIONALLY CONTRACT development and manufacturing orga- (OTC) and nutritional products.
nizations (CDMOs) were Big Pharmas Cinderellas, working hard behind the Headquartered in Durham, North
scenes, working their niches, usually seeing to either chemical or biologic Carolina, DPx manages some 8,000
active pharmaceutical ingredient (API) manufacturing, final drug product employees at 20 locations globally
manufacturing, or early and clinical-stage development work. including the U.S. and Canada,
Eventually, even Cinderella was invited to the ball and CMOs are too, Europe, Latin America and Australia.
increasingly being asked to the dance and to take on more and more production But beyond the merger that created
and commercialization tasks for Pharmas innovators, as well as all those the worlds largest organization of its
companies, big and small, serving markets near and far with well-known type, the company continues to pursue
formulations and dose forms. Creating an organization that can serve the its hoped-for market leading strategy.
growing demands of drug owners and innovators large and small is no mean Last September, DPx completed
feat, and DPx Holdings B.V. has spent the last year creating a dance partner that the transaction to acquire Gallus

t PREVIOUS PAGE 15 NEXT PAGE u

 2O16 Contract Pharma Trends
BioPharmaceuticals LLC, another contract manufacturing
company leader specializing in biologics. According to the
Gallus presser, Patheons biologic drug substance business
now spans four global facilities in Europe, Australia and
North America and includes more than 550 employees.
At the time, DPxs Mullen declared confidently that with
the Gallus acquisition his company was now more capable
than ever, able to provide customers with an even higher
level of service with our expanded service offerings and
dedicated biologics presence in the U.S. Mullen explained the
acquisition allows DPx to better serve the biologics segment
and that it aligns with the companys strategy to bring our
customers an industry-leading, end-to-end service offering.
Patheon pharma services business provides commercial
manufacturing, pharma product development services for a
full array of solid and sterile dosage forms, and biologic and
chemical drug substance development and manufacturing.
With the Gallus acquisition, said the company, Patheon is
now a leading provider of process development as well as
clinical and commercial scale manufacturing of mammalian
cell culture derived products.
Its been a challenging market to find high quality CMOs
with reasonable capacity and flexibility.
Jim Mullen, CEO, DPx Holdings B.V.
The deal sought to integrate two existing Gallus sites
(St. Louis and Princeton, New Jersey) and complement
the two existing Patheon sites in Groningen, the
Netherlands and Brisbane, Australia. Three of these four
global sites, said Gallus, have nearly three decades of
mammalian cell culture experience, while the Brisbane
site, opened within the last year, is considered a facility
of the future for biologics, one which was covered
extensively in Pharmaceutical Manufacturings January
2014 issue.
At the end of the day, the enhanced capabilities
provided by the Gallus acquisition further supports
Patheons end-to-end integrated offering strategy by
providing small-scale API and biologic drug substance
through to commercial manufacturing capabilities and
the capacity to win more of this business going forward.
RESPONSE TO SUPPLY CHAIN COMPLEXITY
According to Mullen (whom Pharmaceutical Manufactur-
ing encountered at DCAT Week 2015), whether its the
big pharma guys or some of the smaller customers, those
companies want to outsource more, for one, because
supply chains are getting more complex. So theyre look-
t PREVIOUS PAGE
www.pharmamanufacturing.com
ing at outsourcing more work, but with companies with
broader capabilities.
Mullen says the strategy is to shrink the network of
suppliers and in the process make the supply chain more
manageable. Mullen points to emerging drug product
complexity as another strategy imperative served by a CMO
with robust technical capabilities. He notes a growing
slice of products requires special, sophisticated processing
capabilities and that includes both biological drugs and
drugs in development on the small molecule side. The
estimate, says Mullen, is maybe a third of the pipelines
out there that have solubility absorption issues. So what
does that mean, asks Mullen? They need more specialty
formulation technologies to solve these problems. And what
does that mean for DPx? We keep building our technology
base, citing the recent Agere Pharmaceuticals acquisition as
a transaction exactly aimed at that problem.
Ageres Bend, Oregon, facility is expected to serve as
a solubility center of excellence and part of Patheons
pharmaceutical development services (PDS) operations.
We see a growing need to offer customers an integrated,
agnostic approach to address their development and drug
delivery needs, said Patheons Michael Lehmann, president,
global pharmaceutical development services and executive
vice president global sales and marketing With this
acquisition, we strengthen our number-one pharmaceutical
development services position with a solution that
integrates scientific acumen and design automation.
This past March Patheon also announced it has reached
a definitive agreement to acquire IRIX, a company that
specializes in difficult-to-manufacture API for drugs
from early and late development, through commercial
launch. Patheon secures additional API development and
manufacturing services in the U.S., including high-potency
(SafeBridge Class IV certified) and controlled substances
(Schedule 1-4). IRIX, said the announcement, has a well-
established reputation for the optimization of chemical
processes and scale up for commercial API manufacturing
at sites in Greenville and Florence, South Carolina.
Through its IRIX acquisition, DPx says it is now able
to offer an array of cutting-edge process technologies,
including biocatalysis, homogeneous catalysis and
microreactors, and are better positioned to address an
extensive range of supply chain issues for its customers.
16 NEXT PAGE u
 2O16 Contract Pharma Trends
Combining companies with shared
commitments to both scientific
excellence and customer service
drives industry excellence, and we
are excited to become part of the
Patheon network, said IRIX CEO
Guy Steenrod. This is a strategic
deal that allows us to help customers
solve complex challenges with
comprehensive, integrated solutions.
CAPACITY FOR FLEXIBILITY
There are myriad market and com-
petitive drivers steering the strategies
of drug owners hunting for business
success. Increasingly, this success re-
quires obtaining strategic partners to
acquire the necessary resources es-
pecially manufacturing capacity to
support the strategic aims of a given
company and the market success of a
given therapy. Mullen points to inject-
ables as a good example of where DPx
has been shaping its strategy to help
companies span the gap. Its been a
challenging market to find high-qual-
ity CMOs with reasonable capacity
and flexibility, says Mullen, noting
that its a market thats been really have created to be successful and
stretched over the last few years. He
explains that when one looks at the
volume of biologics coming along, not
to mention biosimilars, theres a lot
of pressure in the injectable space.
ONE FOR ALL
Mullen says his company has been
focused on being responsive to all
sectors of the market and that includes
companies with orphan drug indica-
tions and other smaller scale, smaller
batch production needs. He says this
portion of DPxs potential market
reports theyre having trouble find-
ing contract service providers who
want to deal with their special needs.
Weve organized ourselves [to accom-
modate] small-scale and large scale,
says Mullen, explaining that DPx
accomplishes this in different loca-
tions and with different lines, but have
figured out how to meet the needs of
players across Pharmas diversity.
t PREVIOUS PAGE
One of the things Mullen says
DPx is good at is being able to
offer its customers a shop that can
get them through all the phases
of development and right into
commercial production. We do
that all the time. So by the time you
get to the end of clinical [trials],
says Mullen, you are already in our
commercial facilities.
END-TO-END INTEGRATED
DEVELOPMENT
The preceding discussion serves to
illuminate what Patheon and DPx
are introducing advanced processing/
support its customers of all sizes.
Last October DPx renamed its DSM
Fine Chemicals business unit to
DPx Fine Chemicals. The change,
said the company, aligns its business
units with the name and strategy of
DPx Holdings, further supporting
the integration of its businesses in
support of the companys end-to-end
development offering and a strategy
that has been framed and branded as
OneSource. The offering, said DPx,
supports Pharma companies with
fully integrated services based on
simplicity, speed and quality founded
on industry-leading expertise.
TOWARD TRUER
COLLABORATION
Mullen says that some of the com-
panys customers theyve worked
more closely with over the years are
actually starting to reach out and ask
for a technical assist with their own
17
www.pharmamanufacturing.com
facilities. Now we have conversa-
tions about [the] need to pool
resources to figure out how to make
a more robust process and compare
best practices, says Mullen, so
the nature of those conversations is
changing its a little less insular.
Mullen notes that Big Pharma,
historically, used to lead the
development and technological
innovation associated with processing
and manufacturing operations, but
that focus has shifted to the contract
services community and companies
like Patheon who, out of necessity,
manufacturing solutions as well as
technologies supporting operational
excellence and compliance like
advanced information technologies.
Our strategy if you look at
what we have been trying to do
over the last 12 months and what
weve put together is really about
trying to read this market, which
is saying okay, were concerned
about supply chain complexity and
that we want to do more business
with fewer companies with broader
capabilities. We moved to a strategy
of saying, look, we want to be a
very broad provider, and we want
to be able to further [our customers
business goals from] development
through commercialization, API
through dose form development,
through to commercial dose form
packaging, so, says Mullen, we can
take as many of these hand-offs and
coordinations off your plate.
NEXT PAGE u
 ADVERTORIAL

Capital
FACILITY AND OPERATIONS INVESTMENT

UpgradE
A
s a result of changing dynamics in the pharmaceutical industry, the availability of used pharmaceutical manu-
facturing equipment has increased. At the same time, the level of comfort with used equipment has grown.
While this trend is good news for pharma companies with surplus equipment, to maximize the potential for
investment recovery, it is important that asset owners develop a strategy for managing their recovery efforts.

There are generally three approaches to investment recovery:

1. Complete in-house management using an in-house team dedicated to investment recovery;
2. Outsourcing of all investment recovery services, typically arranged by the purchasing department; and
3. The use of an in-house program manager with support from outside used equipment service providers.

The choice of strategy depends on several factors, including the size of the company, the quantity of used equipment
that must be managed, and the resources that are available to support an investment recovery program.

For an in-house program to be successful, the pharmaceutical manufacturer must not only have appropriate
storage space (that often must be compliant with Good Manufacturing Practices), personnel, handling inventory and
sales management systems, and an advertising budget are required. Outsourcing shifts most of these burdens to the
service provider, but someone must take responsibility for overseeing the selection of the provider and for ongoing
management of the program at each of the companys locations.

It is also crucial for the investment recovery team whether in-house or external to understand the level of return
expected by the owner and weigh the other relevant factors important to each individual project, such as the location,
project timeframe, and removal costs. If done properly, a customized plan can be developed that maximizes the
firms goals. In addition, experienced teams will not only look for external sales opportunities, but consider internal
redeployment as a mechanism for avoiding unnecessary capital expenditures elsewhere in the company.

The purchase of pharmaceutical equipment is in fact a major investment, and access to used assets can benefit both the

When you
purchaser, who can save a significant amount, and the seller, who has the ability to recoup some of its original investment.
For pharmaceutical companies with limited experience selling surplus equipment and/or limited resources, used
equipment dealers can help facilitate the process. They can not only appraise the equipment, they have established
think equipment,
networks of potential customers and extensive marketing programs in place. In addition, they can help ensure that
all transactions are transparent and compliant with the various regulatory requirements that govern the sale of use
think Federal
pharmaceutical manufacturing equipment.
OPTIMIZE YOUR CAPABILITY
Equipment
Federal Equipment has been a trusted source of pharmaceutical processing equipment for more than 50 years. We
are equally comfortable When
taking on management of the entire investment you process,
recovery need to upgrade your
or working facility
closely or reduce
with
in-house management. Our pharmaceutical team has extensive marketthe risk of equipment
knowledge, failure, Federal
and we consistently exceedEquipment
clients
expectations with our extensive inventory, climate-controlled, gets you online
pharma-dedicated with
storage the right machinery
warehouses, and our in the
ability
OPTIMIZE YOUR CAPABILITY
to complete fast, accurately appraised liquidations. shortest time. As a trusted source of processing
When you Weneed
sellto high-quality
upgrade your facility or reduce
machinery equipment for over 50 years, we have extensive
the risk of equipment failure, Federal Equipment
We buy surplus equipment industry expertise and a vast inventory viewable in
gets you online with the right machinery in the
Matt Hicks, Chief Operating Officer, Federal
pharma-dedicated Equipment Company.
warehouses.
shortest time. As a trusted source of processing
equipment for over 50 years, we have extensive
WHEN YOU THINK EQUIPMENT, THINK FEDERAL EQUIPMENT
industry expertise and a vast inventory viewable in
pharma-dedicated warehouses.

WWW.FEdEQUip.COM
+1 877 536 1538
WWW.FEdEQUip.COM For more information, email us at pharmaceutical@fedequip.com

+1 877 536 1538

For more information, email us at pharmaceutical@fedequip.com

tPREVIOUS PAGE 18 NEXT PAGE u

 2O16 Contract Pharma Trends www.pharmamanufacturing.com

There are essential supply chain

elements to consider when integrating
third-party providers, especially with
contract manufacturing organizations
(CMOs), as well as best practices to
improve information flow among
clinical, logistics, manufacturing and
IT teams.

QUALITY
Favorable clinical trials are those
having a positive effect on the tested
substance. Certainly, patient safety is
a key focus. Formulation of the inves-
tigational product, its stability and all
associated packaging aspects are es-
sential in this regard. Sometimes good
manufacturing practice (GMP) efforts
to finish a product are underestimated
by clinical R&D personnel. The only
appropriate response for CMOs is to
consistently educate sponsors and
CRO stakeholders. Implementation of
robust quality/technical agreements
should be a given.
Recognizing the highest impact

Mission Possible: and importance of quality within

the supply chain is a basic, but

Excellent Clinical Logistics

often neglected element. Without
an elaborated quality management
mindset that embraces the supply
chain, a clinical trial may not be
Insightful integration of Contract Manufacturing
successful. Quality does not start or
Organizations into clinical trial business finish with product manufacturing,
however, it is one essential part that
By Jens Mattuschka and Henriette Frangillo-Engler, should never be omitted. The final
Clinical Logistics Services, PAREXEL International
study result is valuable only when
all processes have been developed
well in advance and when all
possible known consequences have
been thoroughly considered. The
THE CLINICAL trial supply chain is a conglomerate of many individual, awareness of the field of work in
sometimes multifarious, links that must be reasonably assembled to form a which we are operating must be
stable chain. Its not simply a linear row consisting of a few simple tasks. omnipresent and repeatedly verified.
One significant supply chain challenge is properly incorporating third-
party providers, such as manufacturing companies, focused on primary BULLWHIP EFFECT
and secondary packaging of investigational medicinal products (IMPs) and Who has not experienced the bull-
other clinical trial materials (CTMs). Insufficient connections and non- whip effect in clinical supply chains?
existent manufacturing supply strategy could delay production timelines and Due to limited transparency of
potentially lead to considerable overspending. Inadequate product quantities demands along the supply chain
or manufacturing capacities when needed are often the result of an improper from the patient, investigator, clinical
planning process. This could increase costs along the entire clinical supply monitor, local depot, central distribu-
chain and raise the likelihood of study delays. tion center, CMO or third party ven-

t PREVIOUS PAGE 19 NEXT PAGE u

 2O16 Contract Pharma Trends
CMO - Integral part of supply chain
dor involved in pre-production activities last-minute
orders or misuse of available stock hinders trial continu-
ity and produces considerable inventory swings. This can
not only have dramatic cost implications, but may also
impact safety. Patients already enrolled into a clinical
trial can be put at risk if not supplied with sufficient trial
medication on time.
To make clinical logistics more efficient, one must
understand the dependencies and evaluate and mitigate
associated risks in advance. A single weak link in the
chain can cause the entire ensemble to break.
Clinical supply planners are challenged with
evaluating several aspects during the start-up phase,
however, they often find themselves disconnected from
the clinical team. Since CMOs are involved early in
the supply chain stage of production, it is essential to
embed manufacturing experts into the clinical trial core
planning structure. CMOs must know the expected
delivery time to sites and patients, as well as the required
quantity and availability of the initial IMP batch.
Likewise, they must have information about drug product
shelf life and stability, which are essential for expiry
management and drug handling at sites/patients.
A forward-looking distribution strategy includes the
entire manufacturing element as part of the overall plan,
forming a coherent, logical process long before packaging
is complete. Expiry date management and distribution
schemes should also be factored into the strategy.
Packaging and label design, plus the impact of product
characteristics dosage form, temperature conditions
must also be considered.
t PREVIOUS PAGE
www.pharmamanufacturing.com
Source: Mattuschka, Frangillo-Engler; PAREXEL International
Biopharmaceutical R&D experts and CROs are wise
to integrate CMOs into planning stages. They can get
ahead even more if they implement a sales and operations
planning (S&OP) model the gold standard in the
supply chain industry that fully loops CMOs and CROs
into that process. This type of collaborative business
process may help drastically reduce planning cycle
time and improve forecast accuracy. It can also help
mitigate the risk of stock-outs along the full supply chain.
Additionally, processes also become more standardized
and lean across all parties.
MANUFACTURING
Product formulation and stability, as well as IMP kit
design be it a study-specific labeled blister, bottle
or vial can significantly impact storage, distribu-
tion and administration. We have seen projects with
relatively large blister packages shipped under cold
chain requirements of 28C. While this was obviously
a lower cost for production, especially for relatively
small batches of over-encapsulated drugs, they heav-
ily affected transportation costs because air had to be
transported in validated high-volume shippers. The
same concept applies for the number of batches to be
produced. At first glance it may seem less expensive to
perform one larger production run than many smaller
ones. However, by taking into account expiry dates,
uncertain enrollment numbers and a high volatility in
regional distribution demands, one large production
can quickly become unusable while fresh batches are
desperately needed.
20 NEXT PAGE u
 2O16 Contract Pharma Trends
Clinical Supply Chain Journey
CMOs can be more innovative by steadily optimizing
manufacturing and implementing better processes,
including: small-batch IMP labeling, forecast
automation, production planning and resource
allocation. Additionally, investments in future logistics
areas, such as e-Labeling, RFID and On-demand/Just
in Time labeling, can add value to clinical trials by
supporting chain of custody.
Certain manufacturing process aspects can influence
distribution, handling and re-supply processes. Although
initial forecasts of product quantity are completed during
the planning phase, the supply chain must be monitored
closely to reduce potential disruption risks. The relentless
review of planning parameters during the execution
phase enables clinical logistics experts to adjust according
to external factors that influence the flow. An elaborated
plan at the outset helps simplify the drug development
journey along the clinical supply chain, but in many ways
the planning phase is a continuous activity.
TECHNOLOGY INTEGRATION
Combined with the elements outlined above, technol-
ogy plays an important role in the journey. Over the
years, clinical supply chain experts have instituted many
technical instruments, including interactive response
technology (IRT) solutions that streamline and simplify
complex processes. These, in turn, enable more intelligent
and cost-effective in-time supply distribution within the
highly global and volatile clinical trial environment.
A key to success is tightly integrating enterprise
technology which combines manufacturing, storage,
distribution, investigational site management and clinical
trial management systems with CMO distribution
t PREVIOUS PAGE
www.pharmamanufacturing.com
experts along the clinical supply chain. An enterprise
resource planning (ERP) solution is considered the
ultimate S&OP tool for the clinical trial logistics business.
This fosters straighter technology integration, supports
lean process management and creates reasonable
calculation and more precise forecasts.
Manufacturing is an ambiguous process, which is
why associated technologies and supply logistics must be
flexible and provident. Frequent adjustments to initial
assumptions must be included from the beginning
and verified along the chain. If one link moves in an
unexpected direction, it weakens the chain and requires
modification. Minimal movements can adjust the flow so
that the direction is realigned once again.
Efficient planning and proper technologies along
the manufacturing chain can minimize overage,
avoid product shortages and optimize production and
packaging campaigns to support informed decision
making. With the help of enterprise solutions, processes
can be further streamlined and automated, improving
operations and costs.
An effective and non-disruptive end-to-end clinical
supply chain is possible if CROs, CMOs, logistics
providers and the broader biopharmaceutical industry
act together as trusted partners. One only needs to
examine other business sectors such as the automotive
or semiconductor industries to find benefits of
collaboration. Having the CMO as a partner enables
real communication and deeper cooperation that can
lead to new and successful approaches to clinical trial
logistics. Holistic project management, combined with an
intelligent supply chain strategy, can generate successful
outcomes at the end of the drug development journey.
21
THINI
Upgrade
Optimize your capability
Taking your processing capabilities to the next level is a strategy for
success; one that often demands upgrading equipment to meet new
production goals and future requirements. For immediate access to
the best technologies at the right price while maximizing returns from
surplus idle equipment, Federal equipment Company is ready to help
you optimize operations while recovering equipment value through
accurate appraisals, strategic liquidations and full logistical support.

When you think equipment,

think Federal Equipment

1.877.536.1538 > www.fedequip.com