Industry consolidation, urgency to file INDs, pandemics, and  global political tension create new industry challenges

Each year, experienced leaders in every industry anticipate the trends, challenges and opportunities for businesses. These predictions and assessments are a great way to proactively plan for the year ahead.

After working in the biotech and pharmaceutical industry for well over two decades, I am very optimistic about what lies ahead in 2023. At the same time, however, the pressures for many in the pharmaceutical field, including biotechnology companies, emerging pharmaceutical companies, and the manufacturing sector, are more complex than we’ve seen in the last 25 years.

Below are five trends that will impact the industry in 2023:

1. Consolidation will continue. Consolidation is driven by larger pharma companies snapping up smaller players to access new therapies recently approved by the FDA or in clinical development. The good news is the acquiring company will be able to provide additional funding to move the asset from clinical development to commercialization. But be aware! In some cases, new ownership could mean a change in the current supply chain to include the new owner’s preferred manufacturers. Keeping this in mind, always do your research to avoid costly delays and unplanned expenses.

2. Increased urgency to file INDs. Private equity firms are taking a stake in ownership while also funding biotech and emerging pharmaceutical companies. Many are requiring multiple INDs to be filed in less than a year. Once sufficient data supports significant valuation of the therapeutic programs, the companies are quickly sold (often to major pharmaceutical companies). The winners will be those who understand that outsourcing isn’t a commodity business.

In order for companies to ensure their small molecule Chemistry, Manufacturing and Controls (CMC) programs have every opportunity to be successful, it is important to:

  • Leverage Contract Research Organizations (CROs) and Contract Manufacturing Organizations (CMOs) that have good scientific alignment regarding the project at hand. In other words, always make sure they have extensive experience with the technical requirements specific to your project.
  • When it comes to timelines and pricing, make sure all proposals are realistic. Again, do your research. Take time to understand why each contractor believes what they have outlined is a realistic projection. Also, be sure that each step is analyzed thoroughly to ensure every challenge has been addressed up front.
  • Know that, even though you’ve done due diligence with your contractor, there can always be challenges along the way regarding projected budgets and timelines. Always include a ‘fudge factor’ in every budget to account for delays in timelines and budgetary overruns. Until the prospective contractor has experience running your project, there is always an element of uncertainty with every project.
  • As part of due diligence, evaluate the contractor for good communication and project management skills.
  • Always be sure to evaluate the prospective contractor’s regulatory track record for FDA compliance in late-stage clinical manufacturing.
  • Establish weekly updates with your prospective contractor (either written or video conferences, or both). This should be a requirement that is contractually agreed upon early in the contract discussions.
  • Leverage relationships with external or internal colleagues when possible (i.e., ask if they have worked with a particular manufacturer in the past). As well, seek out colleagues internal to a CMO to leverage those relationships.

3. One-stop shops in contract manufacturing space multiply but may not be the right answer. Consolidation has also been ongoing at an accelerated rate among CMOs. Larger CMOs have been on a quest to acquire smaller drug product manufacturers. They want to expand their technology offerings with microbial transformations, antibody drug conjugates, antibody manufacturing, RNA manufacturing, and flow chemistry (among others) to provide a “one-stop shop,” spanning the entire research and development continuum. Unfortunately, in some cases, the sheer size and breadth of these larger manufacturers has resulted in slower response times due to multi-decision makers and limited capacity.

When possible, establish individual relationships within the organization to efficiently begin the process of CDAs and technical discussions regarding the project.

4. The need for redundant sourcing remains. The new year is proving that the “tripledemic” – COVID, flu and RSV – is still prevalent. These illnesses, coupled with issues arising from the Russian-Ukraine war, continue to add immense challenges to supply chains.It’s important that companies understand the ‘risk-versus-budget’ dynamic and consider diversifying sources, including locations, to minimize the likelihood of delays. Some may want to deal mainly with onshore companies to facilitate oversight control. Others may decide to stockpile raw materials or APIs. The cost and management complexity of redundancy is important to avoid delays. (This could certainly be a challenge for the generics sector, since typically they don’t have the margins to take on additional costs.)

5. Unintended consequences of FDA regulatory and safety issues affects supplier. A number of suppliers have been shut down or have been cited for improper and unsafe waste disposal and cleaning protocols. Also, delays in satisfactory FDA responses to these citations have resulted in a reduction of suppliers that can support raw materials, API and drug product manufacturing.Companies need to stay abreast of the latest FDA requirements and should conduct audits or subcontract to auditing firms or consultants to conduct thorough audits of their suppliers, closely reviewing client references and regulatory histories. Simply stated, working with good project managers and consultants will be crucial to any project’s success.

It’s a new year, offering many opportunities for pharmaceutical companies, biotechnology companies and their manufacturing partners. By anticipating the challenges and developing a plan to address them, companies can successfully capitalize on those opportunities to make 2023 a successful year and one to remember.

Deborah Minor
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