Let the right one in – outsourcing biological medicines

clear image that demonstrates the fact. A molecule of aspirin consists of 21 atoms; a molecule of Herceptin (trastuzumab), a monoclonal antibody used mainly to treat breast cancer, contains 25,000. With 900 biologics currently under development in the US alone, targeting 100 different diseases, the scale of molecular complexity will only grow.

It's no surprise, therefore, that the biologics manufacturing outsourcing market is growing too, as innovators look to divest what many consider to be a non-core aspect of their business. JZMed, a pharmaceuticals research firm, predicts that the global biologics outsourcing market will grow with a compound annual growth rate of 23% between 2015 and 2020, which would put the industry's value at $11.4 billion by 2020. In that year, 20 biological drugs, with global sales of $67 billion so far, will see their patents expire. This will almost certainly spur the rapid development of a biosimilars market - the biological equivalent of generic drugs - creating the need for even more manufacturing capacity.

Pharmaceuticals companies have long talked about the need to find the right manufacturing partner, one that will act efficiently, economically and with integrity. In the case of biologics, this search takes on a whole new level of difficulty. The volatility of the living molecules in question, the need for close-to-sterile conditions, and the intensity and complexity of testing leaves little margin for error, and requires manufacturers to post huge upfront investment. According to research by consultancy McKinsey & Company, a large-scale biotech manufacturing facility can cost $200-500 million to build, compared with $30-100 million for a similar-sized small-molecule facility.

Staying onside

Joe Tarnowski has spent years working in partnership with biologics CMOs, first with Bristol Myers Squibb and now as senior vice-president at GlaxoSmithKline, and his criteria for what makes a good partner is exhaustive. As well as the obvious, measurable factors, such as a manufacturer's first-batch success and failure rate, the robustness of its root cause analysis of batch failures, the sterility of the environment and the plant's readiness for inspection by regulatory agencies, he places a strong emphasis on less measurable, more human aspects.

What other contractual commitments does the CMO have? Does it work like an airline, in that it overbooks on purpose? To ensure the consistency of processes and practices, it is important that a CMO has a stable senior management team with strong individual track records. But Tarnowski also believes that workers who carry out everyday tasks need to be sufficiently incentivised and, ideally, will take a stake in the project beyond their own role. A stream of compounds flows into the factory and flows out the other end in the form of medicines primed for clinical trials - manufacturing biologics, or any drug for that matter, can feel like a Promethean task.

"When you speak to people who are doing the work on a day-to-day basis, they would like to participate in the ownership of the product in some way," Tarnowski says. "How did it turn out? Did it fail? Was it approved? What impact is it having on the patient? They [feel they] miss out on that because they just supply an intermediate bulk-drug substance to be turned into a product."

Tarnowski wants to see management actively encourage this engagement. He once took matters into this own hands by arranging a party for the CMO staff to celebrate the approval of a new drug and the role they played in getting it to the finishing line.

"The feedback was excellent," he says. "'These are the kinds of things we want and need because we don't feel like we are part of the success.' I find with a lot of people, that feeling wears on them after a while, and they start looking for a new opportunity. They tend not to go to the CMO space but to the innovator space."

A CMO with high levels of staff retention and good incentives in place is likely to engender a culture of trust and transparency, which will have a positive effect on CMO-innovator relations. This trust is a key component in ensuring an innovator's ideas and materials stay in the manufacturing plant and don't fall into the wrong hands. Whereas, with small-molecule pharmaceuticals, the priority was to protect intellectual property rights, the main aim in biologics is to prevent a CMO employee taking DNA from the master and working cell banks and selling it to a third party. Once the materials are out of the plant, the journey through to a bioproduction-scale reactor is a relatively easy one.

There are practical measures that can be taken. Rules could be put in place that prevent staff members from being left alone with the DNA, and the manufacturer could be given only enough DNA to make the product and nothing more. The CMO could willingly agree to have regular visits from the innovator's staff or even consent to having staff on site all the time. Also of vital importance is the CMO's ability to demonstrate a thorough reconciliation process - how many batches were handed over and how does this reconcile with the stated failure rate? Such measures are useful safeguards but hardly infallible. Once again, it comes back to the human element.

"I believe it's down to the integrity of the management, the philosophy and the culture of transparency," Tarnowski says, "and I think it's important to have good surveillance on the customer's part - just to be observant and watch what goes on. But it [an incident of theft] only has to happen once to a CMO and they are out of business, so there's a lot at stake for them. They try to make sure their systems are good, they respect the intellectual property, technology and trade secrets, and that's when you get back to retention - how do you incentivise your workers not to do something like this?"

New kids on the block

Testament to the potential of biologics is that, despite huge costs, the number of potential manufacturing suitors is growing. New players such as Samsung might not have a track record or the time to build trust, but they sell themselves on the back of their state-of-the-art facilities and proven record in other kinds of precision manufacturing.

It isn't easy to get a break. Large pharmaceuticals companies are generally uninterested in a manufacturer with no track record, no matter how good their facilities and personnel might be. In Tarnowski's view, some medium or small companies might be tempted to take the plunge, particularly if the feared capacity crunch gets more serious and the market pushes them in that direction.

"If there is a real squeeze on capacity right now, someone may have to take the first step even though it may not be what they want to do," he says. "It may be the only available capacity. But then I think the innovator company or the customer is going to have to put a little more oversight on it. People [from the innovator's side] have to be allowed in the plant so decisions can be made in real time - don't wait for a failure and then be forced to recreate everything. The new entry has to demonstrate some flexibility about having staff on site on a semi-regular basis."

Any crunch would reach its most severe point after 2020, when patents expire on 20 biological medicines. A flood of biosimilars is expected to hit the market with Chinese and Indian CMOs likely to play a big role in the manufacturing process. Tarnowski believes that a potential capacity shortage could lead large pharmaceutical firms to develop their own in-house manufacturing facilities.

The rise of biosimilars will present other challenges to large pharmaceutical companies. As others start to develop copies of some of their most successful biological drugs, differentiation will become more difficult and the financial rewards reduced.

The key, according to Tarnowski, is to focus on refining your own product, improving the molecule and trying to make its manufacture as cheap as possible to get it to a larger number of patients. He is confident that high barriers to entry will keep the biosimilars market from getting too large and help maintain quality levels.

"I don't think it will be the same as it is in generics because any company is going to have to put infrastructure in to build this or go to a CMO, and the capital investment is huge," he says. "You won't see that race to the bottom. I don't think they can do that and have a sustainable business."