Outsourcing Strategies of Emerging Pharma

Contract research organizations (CROs) and contract manufacturing organizations (CMOs) play an important role for small and emerging pharmaceutical companies. These companies typically require CROs and CMOs to fill a larger portion of their drug-development and manufacturing needs than larger pharmaceutical companies. Driven by these greater outsourcing needs, small and emerging pharmaceutical companies also represent a significant client base for CROs and CMOs.

Patricia Van Arnum, Imagezoo/Images.com (getty images)

Market perspectives

Industry players point to a generally healthy outsourcing market when working with emerging and smaller players. "Since most emerging pharmaceutical companies are focused on product development rather than facilities, they are forced to outsource much of their work when the GMP process comes into play," explains Jeff C. Basham, vice-president of marketing and sales with Metrics (Greenville, NC), a drug-development and contract manufacturer. "Most funding sources for emerging pharmaceutical companies are forgoing the facility build and requiring proof of concept and milestones in development to continue funding. This requirement by funding sources bodes well for this market to continue to be robust for outsourcing suppliers."

Big Pharma versus emerging pharma

CROs and CMOs point to the different needs of small and emerging pharmaceutical companies compared with larger pharmaceutical companies. "The outsourcing rationale for emerging pharmaceutical companies, as opposed to that for large pharmaceutical companies, exists on polar opposite ends of the outsourcing needs continuum," says Randall H. Guthrie, vice-president of Xcelience (Tampa, FL). Xcelience is a CRO specializing in preformulation, formulation development, analytical services, and clinical supplies manufacturing. "The drivers for large pharma most often relate to either the need to access technology or to manage capacity overflow. They may need to access a unique technology or piece of equipment that they do not have available in house or they may seek an outsourcing provider that can lessen the burden for their own in-house capabilities. In the latter scenario, the majority of outsourced services operate under a simplistic model: most of the science has already been developed and fine-tuned in house," he says. "The relationship in most cases begins as a simple fee-for-service model and may potentially build from there based on performance, quality, and responsiveness. In the former scenario, the need to access technology usually requires a high level of scientific collaboration; the relationship begins as a scientifically orchestrated feasibility study to apply the technology to the needs of large pharma and can build from there. Regardless of which scenario, outsourcing from large pharma typically involves many decision-making layers, and they are extremely sophisticated buyers, requiring input from procurement, purchasing, quality assurance, scientific teams and in some cases, the legal department."

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Virtual or emerging pharmaceutical companies represent the other side of the outsourcing continuum. "Faced with the backdrop of burn rates and funding, emerging pharmaceutical companies' outsourcing needs focus on speed to a specific endpoint," says Guthrie. That endpoint could be filing of an investigational new drug (IND) application, acquiring early pharmacokinetic results from an initial first-in-human study or achieving a milestone under a licensing deal. "Whatever the case may be, they typically either do not have in-house capabilities or have limited in-house capabilities at their company," says Guthrie. "They are looking for a relationship built on trust, flexibility, commitment, and speed. Quality and regulatory understanding are of course givens. Because these virtual or emerging companies may have only one or two candidates, the contract organization has to adapt to a 'hurry-up-and-wait' relationship. The wait could be for early preclinical or toxicology data or simply additional funding. It is not uncommon for a contract organization to have dealings with only one to two people and getting a project launched could be as quick as one week from initial inquiry."

Others point to the need for a broader set of services for small or emerging pharmaceutical companies. "The small or emerging pharmaceutical company has a leaner development team in terms of skills, so this company will need the supplier to fill in these areas of expertise relative to advising as well as executing the work," says Basham. "We supply pharmaceutical dose formulation expertise to emerging companies from initial formulation to contract manufacturing. Most emerging company contracts are full-scale development to manufacturing proposals that include analytical methods, stability, and dosage-form development as well as manufacturing."

In contrast, larger pharmaceutical companies typically have narrower needs. "The larger pharmaceutical company usually comes to us with all the details of the plan in place as it has many more skilled people in place to develop and execute the plan," says Basham. "The larger company usually needs more hands to move projects along. Metrics becomes a resource filling in the missing pieces for the larger client. Sometimes this means pharmaceutical finish dose development and sometimes contract manufacturing only."

Best practices at work

Flexibility is a key to a successful outsourcing relationship, particularly with emerging and small pharmaceutical company. "Changes can occur overnight and can be driven by anything from the availability of the active pharmaceutical ingredient to waiting for funding to directional shifts in the development to good or poor results in preclinical or toxicology studies," says Guthrie. "These are the types of changes that would drive a rigid, contract organization to failure, so for us, our agility is key to our success. Having a superior project management team in place is the key for any contract organization."

He offers examples in which flexibility is critical to a project's success. "Often, we support drug-development companies with several compounds in their pipelines. Their workflow has high and low periods, which has a tendency to create scheduling challenges in maintaining a core team to handle the flow," explains Guthrie. "One solution is to devise a full-time equivalent (FTE) program that maintains a core group throughout the process and maintains the flexibility to increase headcount on the project during peak periods, while maintaining the same core team throughout the low periods. This assists us with our scheduling and provides the client with a true extension to its own in-house capabilities as well as almost eliminating lead times for new project launches."

When working with small or emerging pharmaceutical companies, Guthrie again emphasizes the need for a CRO's agility and responsiveness to changing development demands. "We have been approached on more than one occasion where a timetable has slipped due to overbooking of resources or the inability to successfully develop a formulation or analytical method, and the client faces a looming IND filing deadline. We have been able to mobilize project teams to put in place a step-by-step plan to meet that deadline."

The reliance of emerging pharmaceutical companies on their outsourcing partners for the success of their business models necessitates a strong working relationship. "For the emerging company with one or two products or even a platform technology, the key is trust. They are putting a significant portion of their future in the supplier's ability to perform," says Basham.

Project management is important to ensure success. "The best method of optimizing the working relationship is to set up specific communication practices so that all parties know how the project is proceeding, when bumps are hit, and how they will be corrected and that the schedule is being met," says Basham. "One way that we accomplish this is to assign key personnel to each project/customer."

Basham offers an example of using a series of performance contracts for a single project as a way to alleviate the initial concerns of a virtual pharmaceutical company. "We broke a full-scale development proposal into separate performance contracts," explains Basham. "After a year of clear communication and successful goals, we have rewritten the contract so that baseline work can continue with normal work in process while new changes can be implemented with typical change-order management. Of course, these types of special arrangements are dependent on the project size."

Perspectives from emerging pharma

Zhengming Chen, PhD and vice-president of chemistry and pharmaceutical process research and development with DOV Pharmaceutical (Somerset, NJ), explains the various needs that an emerging pharmaceutical company may have throughout the drug-development cycle. DOV Pharmaceutical is focused on the discovery, acquisition, and development of novel drug candidates for treating disorders of the central nervous system. The company principally operates in the United States but also conducts preclinical and clinical studies abroad. DOV has drug-development programs that are at the preclinical, Phase I and Phase II clinical stages, including "DOV 21,947" (in a Phase II clinical trial for depression), "DOV 102,677" (which has completed a Phase I clinical trial), and a preclinical discovery program in reuptake inhibitors and GABA modulators. The company has sublicensing agreements for the development and commercialization of certain product candidates with XTL Biopharmaceuticals (Valley Cottage, NY) for bicifadine, with Blue Note Pharmaceuticals (Troy, NY) for DOV diltiazem, and with Neurocrine Biosciences (San Diego, CA) for indiplon.

In outsourcing a medicinal chemistry project, Chen points out the key considerations that the company makes internally and in its requests for proposal (RFPs). "Internally, we decide what is our available budget for a project, and we evaluate how we can maintain, control, or reduce costs," he says. "In RFPs, we clearly define our needs in terms of target compounds, amounts, purity, and timelines. We also have to define our contribution in terms of resource and technology such as information on starting materials, synthetic procedures, reference papers, and reference compounds."

Before sending a RFP to prospective CROs, Chen says the company first performs certain key steps, including:

• Having a confidentiality agreement in place
• Evaluating each CRO's track record, references, website, and other publicly available information
• Identifying the location of the CRO and determining whether distance will have an impact on the project timelines and deliverables.

In terms of the contract, Chen points to other key issues to consider such as specifying clear definitions. "For example, in defining guidelines for the use of 'expensive reagents,' it is important to define what is meant by expensive and then provide the CRO with the guidelines for purchasing the reagent," he says. The contract should also provide mutual agreements on numbers, quantities required or expected, analytical requirements, methods, purities, and electronic file submission. It also is important for the sponsor or pharmaceutical company to own intellectual property from the project and to have a backup plan in place if preliminary chemistry fails.

When evaluating CRO's quotes, Chen refers to value, quality, and speed as "the magic triangle" in the evaluation process. Intellectual property security and innovation are also important criteria. As a sponsor company, Chen says that DOV is looking for competitive prices, a good understanding of chemistry, a reasonable timeline, a track record of past performance, flexibility, and confidence from a prospective CRO.

Once the contract is secured and the CRO is selected, Chen says it is important to put into place communication vehicles between the sponsor and the CRO. This communication involves weekly updates, which include conference calls as needed, which provide details of the project's status and timelines as to how the CRO is meeting the objectives set forth in the RFP.

A final report should be made in a format agreed upon by a joint operating committee of representatives from the sponsor company and CRO. The report should include synthetic schemes, procedures, yields, and analytical results. "In evaluating the success or quality of the project," says Chen, "numbers are important, but number-driven metrics alone will distort the objectives from quality, which is more challenging to define and measure."

A small pharmaceutical company may also use several contract players in meeting the needs of a particular project, a point illustrated by Chen in a recent example of a process development project that DOV Pharmaceutical had for an active pharmaceutical ingredient. "In the route-scouting stage, we selected a US CRO, which has proven ability to quickly work through a variety of different synthetic routes. One industrially viable route was developed," he said. For scale-up on a kilogram scale, the company selected an European company with expertise in screening hydrogenation reactions, which was a key step in the process. For further scale-up and potential manufacturing, the company consulted experts in chemistry, manufacturing and controls (CMC) and collaborated with CMOs on a global basis.

Chen outlined the various players that were involved at each stage in the project. For raw materials, building blocks, scaffolds, and libraries, the company works with CROs on a global basis with the selection process driven by price. At the next stage, hit-to-lead and lead optimization, the company works with a preferred set of CROs. For process research, polymorph screening, salt screening and selection, the company worked with specific CROs with expertise in those given areas. For non-CGMP intermediates (i.e., intermediates early in the synthesis and not required to be manufactured under current good manufacturing practices (CGMPs), the company used a pool of select CMOs. In the final stages, once the project advances to Phase I-III development requiring CGMP material, the company works with a group of preferred CMOs.

These examples reflect the network of suppliers and skill sets needed to serve small and emerging drug companies and the opportunities for CROs and CMOs to meet those needs.

Patricia Van Arnum is a senior editor at Pharmaceutical Technology, 485 Route One South, Bldg F, First Floor, Iselin, NJ 08830 tel. 732.346.3072, pvanarnum@advanstar.com