Managing manufacturing network capacity has been a major challenge for bio/pharmaceutical companies for more than 10 years. As industry economics change and products lose patent protection, companies have been faced with the problem of reducing or eliminating the costs of underutilized facilities. Further, because of their heightened attention to risk and the need to conserve capital for licensing deals and acquisitions, bio/pharmaceutical companies want to avoid making manufacturing investments whenever possible.

Typically, companies have pursued two paths for dealing with their capacity utilization problem: closing or divesting unnecessary facilities, or going to into the CMO business as a way of absorbing the capacity. 

Facility closures are the most direct approach and are relatively straightforward to accomplish in North America, but they are more difficult in Europe because of social regulations and negative publicity. In both Europe and North America, divesting the facility to another bio/pharmaceutical company or to a contract manufacturer has been a viable alternative. This approach has its drawbacks: the sale process can be long and drawn out, and in a few extreme cases, the bio/pharmaceutical company has been forced to take back the facility when the CMO option has proven not to be viable to safeguard product supply. 

Where an underutilized facility still has strategic value, the bio/pharmaceutical company may seek to sell the excess capacity in the contract manufacturing market. This typically has marginal benefit, however, as the bio/pharmaceutical company seldom allocates the necessary resources to the business and is so selective about the projects it will take that it signs very few deals. 

In recent months, two bio/pharmaceutical companies have announced a new and more innovative approach that may be a much better alternative to closure, divestiture, or contract manufacturing. Eisai and Biogen Idec have established a strategic partnership that they believe can serve as a model for manufacturing capacity management for the bio/pharmaceutical industry. Under the terms of the agreement, which became operational on Feb. 1, 2013, Biogen Idec is leasing part of an Eisai solid-dose manufacturing facility in Research Triangle Park, N.C. (RTP), and is manufacturing oral solid-dose products for itself and for Eisai in the leased facility. In a parallel arrangement, Eisai will fill and finish Biogen Idec biologics products at its injectable manufacturing facility in RTP, as well as package the oral solid-dose products. 

The 10-year lease agreement gives Biogen Idec the option to purchase the Eisai solid-dose facility. Approximately 50 Eisai personnel have moved to Biogen Idec to support the solid-dose manufacturing. 

The partnership grew out of the confluence of challenges that the two companies were facing. Eisai had to address the utilization problem at its solid-dose facility as its Alzheimer’s treatment Aricept approached loss of exclusivity, said Lou Arp, general manager of Eisai’s RTP manufacturing site and president of global oncology manufacturing. For its part, Biogen Idec needed to bring small molecule capability in-house and add more capability to its supply chain to reduce risk, according to Machelle Sanders, vice-president of manufacturing and general manager of its RTP manufacturing site. Solid-dose products are new territory for Biogen Idec, which has traditionally focused on biologics. 

The two companies were familiar with each other’s capabilities and culture well before their discussions began. For one, their two facilities are located in close proximity to each other in RTP. In addition, both have been involved in a manufacturing group within The North Carolina Biosciences Organization and have benchmarked each other’s best practices as part of that group. 

Both Sanders and Arp say that their partnership is truly strategic and different from a traditional CMO deal. They describe it as a “reciprocal and co-dependent relationship,” in which issues that arise will have to be handled consistently for both parties. So, for instance, the way in which Biogen Idec resolves a problem in the manufacture of an oral solid-dose product for Eisai will be reflected in (or reflective of) how Eisai handles a similar problem in the manufacture of injectable products for Biogen Idec. The sometimes-adversarial relationship that can arise in a traditional CMO-client relationship can’t be tolerated in their partnership, they contend. 

As one might expect, governance will be a key to success in the partnership. The two companies have established a joint steering committee consisting of three representatives and director-level leadership from each. Manufacturing, engineering, and quality professionals are included on the committee. 

Both Sanders and Arp maintain that the compatibility of their corporate cultures will be the central factor for the partnership’s success. “Finding the right partner with the right values” was crucial in establishing the relationship, and the fact that they are both mid-size companies able to be flexible and nimble is also important. 

For both Biogen Idec and Eisai, the new manufacturing partnership is part of a sourcing strategy in which both internal capacity and CMO relationships are key components. Biogen Idec has traditionally outsourced its fill-and-finish requirements while maintaining its own large molecule API manufacturing facilities. While it will manufacture its own products at the leased Eisai facility, it has also outsourced the manufacture of a new solid-dose product in its pipeline.Eisai plans to continue to invest in its injectables capabilities to support its own pipeline, and sees the additional volume from Biogen Idec as helping to justify the additional investment. However, Eisai will use CMOs where appropriate: it recently announced a three-year master supply agreement with DSM Pharmaceutical Products for manufacture of eribulin mesylate (Halaven) at DSM’s Greenville, N.C., injectables manufacturing facility. 

Whether the partnership between Biogen Idec and Eisai is just a one-off event or becomes a model for the industry remains to be seen.  It may be that unique factors like geographic proximity, interpersonal dynamics, and complementary needs facilitated an innovative approach that may be hard to duplicate. Or it may be that having seen this example of a new partnership approach, other bio/pharmaceutical companies start looking for innovative alternatives to addressing their manufacturing requirements. 

Articles

Outsourcing

Eisai and Biogen Idec pursue an innovative approach to capacity management.

Strategic Partnering for Manufacturing

The International Federation of Pharmaceutical Manufacturers & Associations (IFPMA) and the Biotechnology Industry Organization (BIO) report that  a newly published paper on vaccines provides a set of pragmatic actions to improve global access to and use of high quality, safe and effective vaccines. Published in Vaccine, the peer-reviewed paper, “Delivering the Promise of the Decade of Vaccines: Opportunities and Challenges in the Development of High Quality New Vaccines,” was authored by vaccine experts with support from IFPMA and the BIO (1). 

Launched in 2010, the Decade of Vaccines (DoV) Initiative assembled key global health stakeholders in an effort to reduce vaccine-preventable illnesses by achieving 90% global vaccine coverage by 2020. The paper provides the perspectives of the research- based vaccine industry on how to advance the DoV’s objectives and support vaccine uptake by addressing availability, affordability, adoption, and alliances, as outlined by IFPMA in an Apr. 18, 2013 press release. 

The DoV was introduced at the World Economic Forum in Davos, Switzerland in 2010 with a pledge by the Bill & Melinda Gates Foundation to dedicate $10 billion to the overall goal of researching, developing, and delivering vaccines to developing countries (1). In December 2010, the World Health Organization, the United Nations Children’s Fund (UNICEF), the National Institute of Allergy and Infectious Diseases (NIAID) and the Bill & Melinda Gates Foundation formally launched the DoVthrough a pact to create the Global Vaccine Action Plan (GVAP). Following input from DoV stakeholders, including IFPMA and BIO, a final draft of the GVAP was presented and endorsed at the 65th World Health Assembly in 2012. 

 The consultation received input from governments, policymakers, civil society, healthcare professionals, global development organizations, academics, private sector players, including vaccine manufacturers, and other key stakeholders involved in immunization, health, and human development, The DoV action plan included a key role for these research-based companies to participate by continuing to innovate, develop, produce and supply high quality vaccines. Some specific actions suggested by the action plan for manufacturers are as follows: to participate in open dialogue with countries and the public sector to ensure sustained access to current and future high quality vaccines; advance innovation in R&D and manufacturing; support rapid vaccine adoption as new or improved vaccines become available; develop partnerships that support increasing manufacturing capabilities, supply and innovation work in coordination with other partners on vaccine and immunization advocacy.

According to the authors, accelerating vaccine access and innovation, especially in the developing world, requires a mix of “push and pull” mechanisms. Examples of “push” mechanisms that stimulate R&D are grants and investment tax credits while “pull” mechanisms can include donor guarantees of vaccine purchases and government programs to promote vaccine uptake through increased awareness of vaccines' health benefits.

 “Global health stakeholders share responsibility for achieving the goals of the Decade of Vaccines," says Eduardo Pisani, IFPMA Director General, in the IFPMA release. “This report applies industry learnings and expertise that contributed to several past health successes such as dramatically reduced measles-related deaths and eradication of smallpox. With greater public awareness and access to innovative vaccines, great strides can be made toward preventing other leading communicable and non-communicable diseases.”

CSR and Sustainability Forum

The Global Vaccine Action plan maps out a strategy to increase access and R&D for vaccines.

Pharma Industry Participates in Vaccine Initiatives

Despite overall manufacturing rationalization in the pharmaceutical/biopharmaceutical industry, the large pharmaceutical companies continue to invest in biologic-based manufacturing. The author provides an update in recent investment activity among the pharmaceutical majors in biologic-drug substance, vaccine, and parenteral drug manufacturing. 

 Restructuring and manufacturing rationalization have been the order of the day for the large bio/pharmaceutical companies during the past several years. Small-molecule and solid-dosage operations have been the largest target for such cost-cutting, but there are bright spots on the manufacturing investments. Several Big Pharma companies are investing in biologic drug-substance, vaccine, and parenteral drug finished product manufacturing. 

 Bristol-Myers Squibb is investing approximately $250 million to expand its large-scale biologics manufacturing facility in Devens, Massachusetts. The expansion will introduce biologics development and clinical-trial manufacturing capabilities to the site while adding approximately 350 employees to the Devens workforce over time. The Devens site is home to the company’s large-scale bulk biologic manufacturing facility. Construction of the Devens site was completed in 2009. It represented the company’s largest single capital investment ($750 million) and provided Bristol-Myers Squibb with large-scale bulk biologics production capacity. In May 2012, the company received FDA approval to manufacture its arthritis drug Orencia (abatacept) at the Devens facility.

The new $250-million investment will be used to construct two new buildings on the 89-acre Devens campus: one building for process development and one for clinical manufacturing. Together, the two buildings will add approximately 200,000 ft 

 of laboratory and office space to the Devens site, which is now comprised of six major buildings in a 400,000-ft

Global Feature

Bristol-Myers Squibb, Novartis, GlaxoSmithKline, Sanofi, and Roche are among the companies expanding biologic-based manufacturing capacity.

Big Pharma's Investment in Biologics

 will support a Center for Green Schools Fellow in New Jersey who will work with leaders from the state’s 586 public school districts to provide direction, training and resources toward greening school buildings. The Fellow, who will be employed by the Center for Green Schools at the US Green Building Council and placed with the New Jersey School Boards Association (NJSBA), will work with NJSBA staff to address opportunities involving facilities, curriculum, and professional development for school board members. The fellowship will focus on helping school board members improve the environmental aspects of New Jersey’s schools and increase awareness about the importance of building sustainable communities. Following a nationwide search, the Fellow is expected to begin work in June 2013. A pilot effort during the 2013-2014 academic year will concentrate on the New Brunswick and Trenton school districts, urban districts that are located near Bristol-Myers Squibb’s five campuses in Middlesex and Mercer counties in central New Jersey. The project will later expand to include districts statewide. Bristol-Myers Squibb’s grant to USGBC funds the first of three years of the fellowship. 

 celebrated National Volunteer Week April 21-27 by sending off the first of 200 volunteers who will serve in impoverished communities throughout 2013. They are part of Connecting Hearts Abroad, Lilly's global employee volunteer program launched in 2011. Volunteer teams went to Lima, Peru, and Kilimanjaro, Tanzania. Through Connecting Hearts Abroad, Lilly has sent more than 400 employees from its operations worldwide on two-week service assignments in communities throughout Asia, Africa, Eastern Europe and Latin America. In 2013, about 200 Lilly employees from 45 countries will volunteer in impoverished communities in Brazil, Costa Rica, Ghana, Guatemala, India, Morocco, Peru, South Africa, Tanzania and Thailand. 

 has announced the deployment of an FDA-developed Counterfeit Detection Device (CD-3) as part of a public–private partnership to identify counterfeit or substandard antimalarial medicines, including falsified products in Africa and parts of Southeast Asia. FDA has partnered with the Skoll Global Threats Fund, the US Pharmacopeia (USP), the National Institutes of Health (NIH), the Centers for Disease Control and Prevention (CDC), and the multi-agency President’s Malaria Initiative (PMI), led by the US Agency for International Development (USAID).

FDA also announced it has signed a letter of intent with Corning Incorporated to refine and improve the CD-3 tool for eventual manufacture on a larger scale. The CD-3, developed by scientists at FDA’s Forensic Chemistry Center in Cincinnati, Ohio, is a handheld, battery-operated tool that illuminates a product with a variety of wavelengths of light to provide a visual comparison of an unverified product with an authentic sample, allowing inspectors to identify suspect products and remove them from the supply chain. According to FDA, the effectiveness of the tool in detecting counterfeit or substandard versions of two common anti-malarial therapies will be tested in Ghana in 2013 and 2014, and information obtained from the test in Ghana will guide a second testing program. 

 will provide a funding injection of up to GBP 5 million ($7.85 million) from the Wellcome Trust to support its open approach to discovering and developing new treatments for diseases of the developing world. The funding will move early-stage research to the next level, to find new medicines for diseases such as tuberculosis, malaria, leishmaniasis, and sleeping sickness. Scientists will work in collaboration with GSK drug discovery experts at its facility in Tres Cantos, Madrid, where GSK’s work researching diseases of the developing world is focused,  with the overarching goal of developing two high-quality experimental drugs over the next five years. GSK has been committed to an open approach to discovering new treatments for diseases of the developing world since 2010, when it created its Open Lab at a dedicated facility at Tres Cantos, Madrid. Since its establishment, the Open Lab has hosted 27 external researchers, who have worked alongside and been supported by GSK scientists on early-stage projects to identify compounds that are active against diseases affecting the developing world. 

At the Global Vaccine Summit held in April, the 

Global Polio Eradication Initiative (GPEI) 

 presented a six-year plan to eradicate all types of polio disease,  both wild poliovirus and vaccine-derived cases, simultaneously. Global leaders and individual philanthropists pledged approximately three-quarters of the plan’s projected $5.5 billion cost over six years. They also called upon additional donors to commit up front the additional $1.5 billion needed to ensure eradication. The new plan’s budget includes the costs of reaching and vaccinating more than 250 million children multiple times every year, monitoring and surveillance in more than 70 countries, and securing the infrastructure that can benefit other health and development programs. Bill Gates, co-chair of the 

, announced that his foundation would commit one-third of the total cost of the GPEI’s budget over the plan’s six-year implementation, for a total of $1.8 billion. The funds will be allocated with the goal of enabling the GPEI to operate effectively against all of the plan's objectives. To encourage other donors to commit the remaining funding up front, the Gates funding for 2016-2018 will be released when the GPEI secures funding that ensures the foundation’s contribution does not exceed one-third of the total budget for those years. The Polio Eradication & Endgame Strategic Plan 2013-2018 was developed by the GPEI in consultation with a broad range of stakeholders. The plan incorporates the lessons learned from India’s success becoming polio-free in early 2012 and knowledge about the risk of circulating vaccine-derived polioviruses. It also complements the tailored Emergency Action Plans being implemented since last year in the remaining polio-endemic countries (Afghanistan, Pakistan and Nigeria), including approaches in place to vaccinate children in insecure areas.

 Novartis and Malaria No More, a global charity focused on ending malaria deaths, are joining forces on the 

 campaign to help close the treatment gap and accelerate progress in the fight against malaria. Over the next three years, Novartis will support the campaign financially and also donate up to three million full courses of its pediatric antimalarial drug to match the treatments donated by the public, doubling the impact of these donations. 

will officially launch in the fall. Until then and to mark the announcement of this campaign, the first 10,000 people to sign up and register their interest on the Power of One website (www.Po1.org) will help provide a treatment to a child with a confirmed case of malaria in Africa. 

 program announced the launch of the large-scale production line of semisynthetic artemisinin at Sanofi’s Garessio site in Italy, according to an April 11, 2013 Sanofi press release. Global demand for artemisinin, the key ingredient of artemisinin-based combination therapies (ACTs), has increased since the World Health Organization identified ACTs as the most effective malaria treatment available. This semisynthetic route will allow a more consistent supply compared to the botanical supply of artemisinin.

Development of a new, commercial-scale alternative manufacturing process to produce artemisinin started nine years ago. The partnership is led by OneWorld Health, a nonprofit drug-development organization that established PATH’s Drug Development program and is funded by the Bill & Melinda Gates Foundation. The project built upon synthetic biology work by Dr. Jay Keasling at the University of California, Berkeley and involved a team of public and private partners, including Sanofi and synthetic biology innovator Amyris. 

The no-profit, no-loss production model helps maintain a low price for developing countries. In the commercial process, Huvepharma in Bulgaria produces artemisinic acid through fermentation, followed by a synthetic transformation of the artemisinic acid into artemisinin via photochemistry, which will be performed at Sanofi’s Garessio site. Sanofi plans to produce 35 tons of artemisinin in 2013 and, on average, 50 to 60 tons per year by 2014, which corresponds to between 80 and 150 million ACT treatments. 

 Drugs for Neglected Diseases initiative (DNDi) 

, an independent not-for-profit foundation, announce that on the occasion of World Malaria Day, more than 200 million treatments of ASAQ Winthrop have been distributed in Africa since the medication became available in 2007. ASAQ Winthrop treatment combines artesunate and amodiaquine in a fixed-dose combination, and was developed in a partnership between DNDi and Sanofi, and manufactured by Sanofi in its Zenata plant in Morocco, ASAQ Winthropis now available in most malaria-affected countries, and 90% available in Africa. It is easy to use (once-a-day dose) and is available at a price of less than $1 for adults and $0.50 for children, for three-day treatment. 

, the vaccines division of Sanofi, will provide 1.7 billion doses of oral polio vaccine (OPV) to support the Global Polio Eradication Initiative’s (GPEI) strategy to eradicate polio in this decade. The doses of OPV will be delivered through 2017 for GPEI polio-vaccination program. In addition to OPV campaigns, the World Health Organization’s expert group on immunization (SAGE) recommends that all countries introduce at least one dose of injectable inactivated polio vaccine (IPV) in routine polio immunization programs. Sanofi Pasteur is responding to this strategy with the expansion of production capacities of IPV. 

A roundup of developments in global health and sustainability from the bio/pharmaceutical industry, its suppliers, and other public and private organizations.

Pharma News in Global Health and Sustainability

The global biotechnology industry showed mixed results in 2012, according to a recent analysis by Ernst & Young. On the plus side, companies in the industry’s established biotech centers in the US, Europe, Canada, and Australia experienced revenue growth in 2012. Net income also increased among companies, in part due to cutbacks in R&D, which helped to improve the bottom line.  Also, funding from debt, initial public offerings (IPOs) and venture-capital declined in 2012. In this more difficult funding market, mergers and acquisitions activity increased in 2012. 

 Companies in the industry’s established biotech centers (the US, Europe, Canada, and Australia) achieved revenues of $89.8 billion in 2012, an 8% increase from 2011. Revenues of publicly traded biotech companies in the US were $63.7 billion, an 8% increase but down from the 12% growth rate in 2011and the 10% increase in 2009 and 2008 (on a megadeals-adjusted basis), according to the Ernst & Young analysis. Part of the decline in revenue growth was the result of a few sizeable firms from the list of US biotech companies. Amylin Pharmaceuticals and Gen-Probe were acquired by large non-biotech entities and Jazz Pharmaceuticals relocated to Ireland. More importantly, notes the report, the drop in revenue growth appears to be indicative of other trends, such as an increasingly competitive marketplace and greater scrutiny from payers and providers and a subsequent impact on revenues. Revenues of European public biotechs grew 8% in 2012 to $20.4 billion. 

 On a global basis, R&D spending by public biotech companies grew by 5%, well below the 9% growth rate achieved in 2011, according to the Ernst & Young analysis. Although expenditures remained strong at commercial leaders, precommercial entities substantially reduced R&D spending. In the US, R&D spending increased by 7% in 2012, slightly below the 9% growth rate in 2011. In 2012, commercial leaders increased expenditures by 18%, but other companies cut spending by 5%, reflecting the R&D pressure at many medium-sized and small biotech firms. In 2011, a third of biotech companies had reduced R&D spending. In 2012, that number climbed to 41%. In Europe, R&D expenses decreased by 1% in 2012, an indication that many European firms remain in cost-cutting mode. 

 R&D cutbacks, combined with solid revenue growth resulted in a record high in net income for the biotechnology industry in established markets (US, Europe, Canada, Australia) of $5.2 billion, a $1.4-billion increase from the previous year. Net income of US biotech companies increased 34% from $3.3 billion in 2011 to $4.5 billion in 2012. In part due to R&D cost-cutting, the European biotech industry reached aggregate profitability for the first time in its history in 2012, according to the Ernst & Young analysis. 

The report further showed that the “new normal” funding environment continues. Since the global financial crisis in 2008, biotechnology industry funding totals have been on an upward trend, according to the Ernst & Young analysis. Although most companies faced a challenging funding environment, capital raised increased with every subsequent year, fueled by large debt offerings by the industry’s largest firms. “In 2012, this trend came to an end, as capital raised in North America and Europe fell for the first time since 2008. The decline was due to the same factor that had driven the sharp increases in the first place: debt,” according to the Ernst & Young report. “In every year since 2008, funds raised in public equity offerings and venture capital have remained fairly steady while large swings in the amount of debt raised have driven year-to-year fluctuations in total capital raised. Although a few large companies have benefited from these funds, the amount of capital available for the vast majority of smaller, venture-backed entities has remained frozen at amounts below pre-crisis levels.” This situation, which Ernst & Young calls “the new normal” continued to hold in 2012. In 2012, biotechnology companies in North America and Europe raised $28.2 billion, a drop from the $33.3 billion raised in 2011. This decrease was driven by a reduction in debt funding, which fell by almost a third, from $20.3 billion to $14.1 billion. The IPO market remained weak, with aggregate proceeds of only $805 million, down from $857 million in 2011. “Innovation capital,” defined as the amount of capital raised by companies with less than $500 million in revenues, remained virtually unchanged between 2011 and 2012, increasing only from $15.2 billion to $15.3 billion. 

Venture funding across North America and Europe declined 5% to $5.4 billion in 2012, a much slower decline than was expected given the fundraising challenges encountered by many venture firms in recent years. In 2012, there were 130 venture rounds in the US that had net proceeds equal to or greater than $10 million, with a median amount raised of $21 million, both flat relative to 2011 (when there were 127 rounds and a median value of $22.5 million), according to the Ernst & Young analysis. In both years, these deals represented about 85% of total venture capital invested. Both years were virtually identical in terms of the number of Series A rounds that raised $10 million or more, a measure of new company formation. There were 25 such deals in 2012 and 27 in 2011, with a median deal size of $20 million to $25 million each year. 

 In 2012, the innovation capital raised by companies in North America and Europe held steady at $15.3 billion, practically unchanged from the $15.2 billion raised in 2011. Innovation capital has been consistent over the last four years, averaging $15.2 billion between 2009 and 2012, although lower than the 2004-2007 average of $19.6 billion. “This is significant because, unlike the commercial-stage leaders, companies raising innovation capital require funding to sustain their operations and fund R&D,” notes the Ernst & Young report. 

 On the deal-making side,  the total value of mergers and acquisitions involving European or US biotechs equaled $27.4 billion, an increase of 9% from 2011 (when setting aside the two megamergers in 2011 in excess of $10 billion) and the highest non-megadeal total since 2008. Mergers and acquisitions involving US-based biotech companies increased 5% in 2012 to $23.8 billion (after adjusting for the two megadeals in 2011). In Europe, the value of mergers and acquisitions declined 28% to $2.9 billion, with the number of deals with announced terms falling to 13, the lowest level since at least 2005. 

Biologics

Financing to biotech companies in North American and Europe declined in 2012 as debt funding decreased and the IPO market remained weak.

PTSM: Pharmaceutical Technology Sourcing and Management-05-03-2013

Strategic Partnering for Manufacturing

Pharma Industry Participates in Vaccine Initiatives

Big Pharma's Investment in Biologics

Pharma News in Global Health and Sustainability

The New Normal in Biotech Financing