CDMOs Position Themselves for a Post-COVID World
Bikash ChatterjeeCEO|Pharmatech Associates—a USP company
Oral solid dosage (OSD) forms make up a very large portion of the world’s drug delivery formats, and solid dose manufacturing increasingly takes the lion’s share of global outsourcing capacity, in the pre-COVID era and now. Of the 50 novel drugs approved in 2021 by the FDA in the U.S. alone, 22 were either tablets or capsules.1 Oral solids continue to be the most commonly used dosage form ostensibly because they are cost-effective, relatively easy to manufacture, and are patient-friendly which, itself, translates to better treatment compliance. The global oral solid dosage pharmaceutical formulation market is expected to reach over $926.1B by the end of 2027, at a CAGR of over 6.5 percent during the forecast period 2020 to 2027.2
Outsourcing remains a key strategic component for both large and small pharmaceutical companies. The total global contract development and manufacturing market is estimated to grow to $117.3B in 2023 at a CAGR of 6.8 percent. Of this, small-molecule OSD manufacturing is estimated to comprise 91 percent of the commercial contract manufacturing market and will provide the largest share of absolute growth to 2023.3 While penetration into the contract development and manufacturing organization (CDMO) market is expected to be modest, increasing from 26 percent in 2019 to 28 percent in 2023, mergers and acquisition (M&A) activity is expected to remain high.
Trends and Drivers
A number of factors are driving growth in OSD manufacturing and the outsourcing markets. Some are in response to the COVID pandemic, or shored up by a renewed emphasis on oncology therapies, and a heightened focus on OSD dosage formulations that simplify compliance for the patient.
COVID-19’s Impact on Supply Chains
The pandemic exposed some weakness- es in the global supply chain, but it also spurred a movement to establish nation- alized supply chains for essential drug therapies. The U.S., Germany, India and other major pharmaceutical markets all have re-shoring initiatives underway. The immediate shock of supply-chain disrup- tion caused a cascade effect on com- mercial manufacturing, disrupting the flow of raw materials, components, and API supply. Amplifying these issues, clin- ical trials on all therapies that were not directly linked to COVID therapy paused during the earlier part of the pandemic. With increased access to COVID-19 vac- cines, clinical enrollment has resumed, although at a lower rate. A recent study revealed that, in the U.S., 60 percent of the clinical programs were enrolling at a lower rate; in Europe 85 percent, and in Asia, approximately 20 percent.4
Post-COVID, the industry faces long lead times coupled with ongoing security challenges. Developing multiple sources and verifying systems and processes reliability is more important than ever. Government initiatives from the United States Department of Health and Human Services (HHS) and the Defense Advanced Research Projects Agency (DARPA) are catalyzing activity by creating new and sustainable supply chains within the U.S. Yet capacity remains an issue for most CDMOs, meaning that drug sponsors still need to order materials and components earlier and forecast better, something pharma has been notoriously poor at doing. Drug sponsors and full-service CDMOs must take some risks and accept that they must buy material in advance to boost supply security.
Employee retention and recruiting will continue to vex in a tight labor market. While the Omicron variant has shown we can survive COVID-19, it will continue to impact suppliers, who are dealing with delays caused by large numbers of sick or absent employees. Lastly, drug sponsors must contend with higher prices, as inflation continues to drive costs in a world of limited CDMO capacity.
Oncology, Immuno Therapies and HPAPI
Immuno-oncology is one of the fastest growing therapeutic development areas globally. In the U.S. alone, this market is expected to grow from $63.9B in 2020 to $163B in 2027. Already, between 2015 and 2020, the number of clinical-stage cancer programs increased by 77 percent (from 1,642 to 2,911) and this trend continues to dominate the landscape, leading to roughly one-quarter of drugs currently in development worldwide being categorized as highly potent.5 This has created a shortage of qualified CDMOs, because many CDMOs lack the facilities, equipment, or specialized personnel to handle high-potency active pharmaceutical ingredients (HPAPI). Most commercial small-molecule CDMO facilities focus more on volume and capacity considerations than on the specialized containment and handling needs required for HPAPIs.
Smaller specialized CDMOs may have an advantage over large- volume commercial manufacturing. They can provide a higher level of expertise and attention to smaller early-stage drug sponsors. However, switching CDMOs when a drug program moves to late-stage clinical puts pressure on any drug sponsor because expertise and familiarity with the process must be relearned. The regulatory arguments also become more complex when trying to demonstrate comparability across each clinical stage and registration lot.
Today drug sponsors are more interested in a CDMO’s ability to shrink time-to-market than in cost savings. In the post- COVID marketplace, we will see a much broader adoption of time-to-market acceleration practices. These include decentralizing clinical trial protocols and adopting approaches like physiologically-based pharmacokinetic modeling (PBPK) to deal with clinical studies in more sensitive populations. Outsourcing strategies will reflect these sensibilities.
The demand for HPAPI manufacturing capability with drug development expertise will remain strong for the foreseeable future.
Patient Centricity and New Treatment Regimens
In the drug development world, patient centricity includes drug design and packaging that enhances a patient’s ability to comply with the treatment regimen. While tablets and capsules represent one of the easiest dosage formats to self-administer, complying with treatment regimens that require taking multiple tablets or capsules a day, at set intervals, remains problematic. In response, we are seeing a renewed interest in controlled drug release therapies—specifically, modified-release and sustained-release formulations—to deliver a drug over time. New formats for OSD drugs, such as bi-layer tablets, have gained popularity, enabling controlled delivery of different drugs with pre-defined release profiles. Drugmakers can control API release many ways—from using formulation solutions, and polymeric and enteric coatings that control the diffusion and timing of API release in the body, to processing solutions like Wurster coating that require specialized equipment for precision application of a film onto particulate materials such as powders, crystals, or granules, and other solid ingredients. The challenge with controlled-release tablets extends from the manufacturing process into the laboratory, as controlled- release tablets typically require highly specialized testing and greater care in analyst execution.
For drug sponsors, finding a CDMO capable of supporting both the development and commercialization of a complex drug therapy is critical as a drug moves into its later clinical stages. Any change between CDMOs requires a bridging clinical study, a consideration for both the drug sponsor and the CDMO. Even with such complications, the patient-centric benefits of controlled-release tablets will continue to bolster oral solid dose market share when compared with alternative dosage forms.
CDMO Investment Activity
While biopharma has grabbed the headlines through the global effort to manufacture and distribute COVID-19 vaccines, significant investment in small-molecule manufacturing has continued. Opportunities presented by oncology drugs (cited earlier) are driving this activity.
A good example of this investment phenomenon lies in the difference between the generic pharmaceutical and generic CDMO markets. In volume, generic products represent nearly 90 percent of drugs dispensed, but generate less than 20 percent of pharmaceutical market sales. However, for the CDMO sector, generics create a similar level of commercial revenue, with small-molecule originator products ($36.4B and $35.8B respectively) at similar market penetration comprising 46 percent of the commercial CDMO sector revenue. At this rate, generics could provide almost 40 percent or $12B of absolute market growth until 2023, driven by an expected loss of $71B in originator drug sales to generics and biosimilars as products come off patent. CDMO revenue from manufacturing depends less on the product’s end market, but volume demand for generics can be less stable. Product- switching resulting from bundling and price discounting can impact volume demand.3
The need for increased OSD manufacturing capacity remains. Although M&A activity has been slower here than on the biopharma side, significant interest remains in developing and acquiring OSD manufacturing capability and capacity. In 2019, GlaxoSmithKline’s acquisition of Tesaro—an oncology-focused biopharmaceutical company in Waltham, Massachusetts—was driven by their lead product, Zejula capsules, approved for use in ovarian cancer. Novo Nordisk bought a state-of-the-art manufacturing plant for an oral solid dose product from Purdue Pharma. The North Carolina facility enabled Novo to establish tablet production capacity in the U.S. to build a domestic supply chain for its oral semaglutide, the first glucagon-like peptide-1 (GLP-1) receptor agonist available in a pill form. Around the same time, Amgen paid Celgene $13.4B for the rights to Otezla (apremilast) tablets for treating psoriasis and psoriatic arthritis. India’s Piramal Pharma Solutions acquired an oral solid dosage drug product manufacturing facility from G&W Laboratories. In November 2021, Corden Pharma, a full- service CDMO of active pharmaceutical ingredients (APIs), excipients, drug products, and packaging services, announced the investment of €9.7 million for a new GMP clinical trial development (CTD) facility to manufacture oral solid dosage drug products near Heidelberg, Germany.
Conclusions About OSD Trends
Worldwide, market demand for small molecule manufacturing services will remain strong for the foreseeable future, propelled by HPAPI for new and existing oncology therapies, and by the renewed interest in controlled-release dosage formats. Capacity will remain an issue for innovators, and so will higher prices, as CDMOs grapple with both supply chain and labor force issues. Patient compliance will remain a focus for innovators as patient centricity continues to be a theme in the post-COVID healthcare paradigm. While biopharma has certainly made the largest gains in terms of M&A and investment activity, the level for investment in small-molecule manufacturing capability will remain strong. The impact of higher interest rates will likely be offset by lower overall valuations.
References
1. https://www.fda.gov/media/155227/download, US FDA CDER, Advancing Health Through Innovation: New Drug Therapy Approvals 2021, January 2022
2. https://www.futurewiseresearch.com/healthcare-market-research/ Oral-Solid-Dosage/10888
3. https://resultsig.com/wp-content/uploads/2021/09/Outsourced- pharmaceutical-manufacturing-Results-Healthcare.pdf Results Healthcare- Outsourced Pharmaceutical Manufacturing 2020
4. Upadhaya et al., Nature Reviews Drug Discovery, May 2020
5. https://www.researchandmarkets.com/reports/5309486/immuno-oncology-global-market-trajectory-and?gclid=Cj0KCQiA6NOPBhCP ARIsAHAy2zBACrtHT-R1wP3S2KMtqTSLIyhqC7lJ8Y5fJcWAIUfO1Gs 4BhbC9fEaAtTHEALw_wcB 6. https://www.cancerresearch.org/CRI/media/Files-for- download/2020-CA-Landscape-Slide-Deck-White.pdf