CPhI Worldwide, which will be held in Frankfurt from 24 to 26 October 2017, has announced the findings of part i of the fifth edition of the CPhI Annual Report, which focuses on the immediate and long-term trends in pharmaceutical outsourcing. The exhibition is a key bellwether of global trends and the industry’s overall strength. This first part of the report features the contributions of four industry experts – Gil Roth President, PBOA; Vivek Sharma, CEO at Piramal Pharma Solutions; BSV Prasad, Senior Vice President & Head, Small Molecules Business, Biocon; and Sam Tadayon, Executive Director & Dr Minzhang Chen, CEO at STA Pharmaceutical.
The overall findings in the CPhI report reveal that the trend towards the integration of pharmaceutical outsourcing continues, with single source providers in terms of development increasingly sought. However, acquisitions in the future will not be dominated by big deals and large mergers, but rather smaller commentary services and niche technologies to fill specific technology asset gaps. Furthermore, the industry is anticipating a large increase in the use of flow chemistry and fermentation technologies – but resistance to change may slow adoption significantly. The new US Government administration, the longer-term implications of drug pricing, and big pharma income repartitions are highlighted as the key unknowns and risks for CDMO sector.
Gil Roth, President of the Pharma and Biopharma Outsourcing Association, suggests that the consolidation expected of the CMO/CDMO sector to improve the efficiency of outsourcing has not yet panned out in 2017 [this was written prior to Catalent’s purchase of Cook Pharmica]. The only large merger with the intention of creating a more integrated outsourcing model was the Lonza acquisition of Capsugel. However, Roth predicts that smaller scale buys to expand their current capabilities are far more likely by CDMOs, whilst ‘ex-US CDMOs’ may try to boost their US presence by acquiring an existing provider or an available pharma facility.
Roth explained at length the relative unpredictability of the current pharmaceutical climate, considering the unclear plans of the current US administration. For instance, there has been a keen political desire in the Unites States to reduce drug prices, but with very little indication of policy, leaving pharma companies and ‘CDMOs in the dark as to decisions that may very well disrupt their entire business model’. Another knock-on industry effect could result from a ‘tax holiday’ in which big pharma reinvests large amounts of repatriated capital in its own domestic facilities, particularly biologics sites, with negative connotations for the growing CDMO industry. He added, "Given the focus on reducing legal immigration in the US, there is additionally the strong possibility of a shift in the talent pool of pharma employees to other more welcoming nations, which may impact the domestic wages".
Vivek Sharma, CEO at Piramal Pharma Solutions, forecasts that the long heralded one-stop-shop CDMO is now coming to fruition in the industry, with biotechs a clear beneficiary of this trend. Echoing Roth’s perspective, he argues that over the next few years we will see ‘CDMOs in niche areas forward and back integrate’, offering more integrated value chains to customers. In fact, by simplifying the supply chain CDMOs enable VCs to have a longer runway for investments, and the potential for faster returns, whilst also reducing risk.
"From pharma’s perspective, this enables them to concentrate on broadening the number of drug discovery programmes they work on simultaneously and should expedite new drugs to market. In fact, over the next two to five years we will increasingly see more symbiotic relationships between pharma and CDMOs – with even capital and risk sharing deals" added Sharma. He concluded that in terms of specific products classes, in the immediate future, oncology continues to grow quickly as pharma and biotech see medium term potential success. It is therefore likely that CDMO’s will invest in parallel areas such as high potency API manufacture, lyophilized/injectable pr...
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