Magazine Article | June 30, 2014

Outsourcing Trends In Small Molecule API Manufacturing

By Kate Hammeke, Director of Marketing Intelligence, Nice Insight

Lately, much of the enthusiasm in drug development is centered around large molecule API / biologics. However, the vast majority of drugs on the market, and in development, have a chemical-based, small molecule active ingredient. Considering the dominance of this type of medicine on the market, it is not surprising that one-third of the CMOs included in Nice Insight offer commercial-scale small molecule API and advanced intermediates manufacturing, as compared to 20 percent that offer biologic API manufacturing.

Respondents to Nice Insight’s annual survey, who will outsource commercial scale manufacturing (25 percent), reported small molecule API manufacturing at a lower frequency than large molecule API or finished dosage forms (28 percent vs. 37 percent, respectively). However, this likely speaks to the many existing outsourcing relationships that are based on small molecule API manufacturing, as the survey inquires about new projects that will be outsourced in the next twelve to eighteen months.

To gain greater understanding of outsourcing small molecule API and advanced intermediates, Nice Insight reviewed the buying behavior and outsourcing preferences among Big Pharma, specialty/midsize pharma, and emerging pharma companies. When looking at the buying market for outsourced small molecule API, it is not surprising to see Big Pharma comprises the majority, at 58 percent. However, when putting that figure into context, only 35 percent of Big Pharma companies that will outsource commercial-scale manufacturing projects will be engaging a CMO for a new small molecule API project, which amounts to 8 percent of all Big Pharma respondents to the survey. Emerging pharma will account for roughly one-quarter of the new small molecule API projects, and specialty pharma accounts for 18 percent of the buying market.

"Only one in 10 respondents indicated their company was not interested in forming new strategic partnerships."

Companies that are looking to engage a new supplier for small molecule API are markedly more likely to consider emerging market CMOs than the overall average (86 percent vs. 66 percent). Yet when it comes to actually offshoring API production, there is much less of a divergence. In fact, more projects are currently allocated to suppliers in Western Europe (21 percent vs. 12 percent) when compared to offshored projects overall. The percentage of small molecule API projects allocated to U.S. & Canadian suppliers is on par with the overall average (27 vs. 26 percent).

SMALL MOLECULE API OUTSOURCERS ALLOCATE MORE WORK TO STRATEGIC PARTNERS
Whether the CMO is local or overseas, buyers of outsourced small molecule API manufacturing services tend to outsource fewer projects to tactical service providers (27 percent vs. 31 percent) and a greater number to strategic partners than the average (36 percent vs. 32 percent). These buyers also tend to show greater interest in forming strategic partnerships with CMOs when it comes to new outsourcing relationships (59 percent vs. 48 percent). In fact, only one in 10 respondents indicated their company was not interested in forming new strategic partnerships. The key attributes that influence strategic partner selection among this group are not the traditionally clichéd qualities. In reality, flexible payment terms and discounted pricing arrangements ranked last, while operating procedures established collaboratively, a dedicated project manager, and long-term commitment were prioritized in the top three positions.

If your business is planning to engage a new supplier for small molecule API, identifying the right CMO may take a different approach than in the past. Four out of five respondents indicated that the first place they turn to identify suppliers is industry research, followed by referrals from colleagues (71 percent) and consultants (65 percent). And a company’s affordability or a discounted pricing arrangement is no longer top of mind when establishing a short list. Rather, quality and reliability — secured through collaboratively established operating procedures — lend more towards a mutually beneficial relationship between the buyer and contract manufacturer.

Survey Methodology: The Nice Insight Pharmaceutical and Biotechnology Survey is deployed to outsourcing- facing pharmaceutical and biotechnology executives on an annual basis. The 2013-2014 report includes responses from 2,337 participants. The survey is comprised of 240+ questions and randomly presents ~35 questions to each respondent in order to collect baseline information with respect to customer awareness and customer perceptions of the top 100+ CMOs and top 50+ CROs servicing the drug development cycle. Five levels of awareness from “I’ve never heard of them” to “I’ve worked with them” factor into the overall customer awareness score. The customer perception score is based on six drivers in outsourcing: Quality, Innovation, Regulatory Track Record, Affordability, Productivity, and Reliability. In addition to measuring customer awareness and perception information on specific companies, the survey collects data on general outsourcing practices and preferences as well as barriers to strategic partnerships among buyers of outsourced services.

 

If you want to learn more about the report or about how to participate, please contact Nigel Walker, managing director, or Salvatore Fazzolari, director of client services, at Nice Insight by sending an email to niceinsight.survey@thatsnice.com.