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Article / Sep 23, 2003

Sticking to your knitting...

CPhI 2003, 23 September 2003

Hovione for CPhI 2003

Sticking to your knitting... When the going gets tough, Guy Villax, CEO of Hovione, argues the importance of keeping your business focused

Business conditions are tough. The pharmaceutical fine chemicals sector is now heading South, the largest players -even the Rolls-Royces of the industry- have announced lay-offs and issued profit warnings. Two years have not elapsed since CPhI was throbbing with the excitement of billion dollar acquisitions: BTP, Catalytica, Chirex... A time when the exuberant optimism of the stock-markets made anything possible. This was a period of major re-structuring not just for the fine chemical sector but also of the pharma sectors.

Relentless focus on their core-business of prescription medicines led Pharma Giants to spin-off a number of big businesses: non-prescription medicines, chemicals, fragrances, etc… and overnight new multi-billion dollar companies appeared. Large pharma concentration was driven by both a desire to grow sales forces and to address R&D pipeline issues (whether for lack of innovation or to address a block-buster patent expiry calendar). During this time the Biotech sector had a tough time getting funding, the IPO markets dried up and the private equity firms, unfairly, looked at drug development with the biased look of someone who just got burnt by a dot.com. Generics were quietly booming.

As a result for those making APIs the short term horizon looks grim, except for those that serve the generics industry.

Over the past 5 years most fine chemicals company invested in GMP facilities. In addition to billions spent in mergers and acquisitions, there was also a genuine expansion in capacity. If there is now a cycle in this business, then 2003 is clearly in the downward slope. No one talks of growth. Those with empty vessels offer very aggressive, and in my mind unsustainable, prices - this is particularly noticeable of smaller firms that were taken over by chemical giants.

In exclusive manufacturing - is the problem structural or cyclical?

  • There is certainly a structural part to the issue: in the past 7 years the number of compounds in Phase I and II have grown at a CAGR of 9 and 6% respectively - whereas Phase III compounds are unchanged at 500, with zero growth. Approved genuine NCEs numbered only 17 last year, but averaged about 30 in the previous years. Sir Michael Rawlins who chairs the UK government body that monitors the cost-effectiveness of medicines recently told a conference that the cost of development of new medicine was becoming “unsustainable”, and that unless regulators backed-off "by the year 2015 we will not have any new NCEs".
  • There is also a cyclical component - capacity has to adjust. In addition to the lay-offs there will be plant closures. At least one European based multinational is looking to close half its primary plants in its home country. On the other hand we can be sure that capital expenditure will be dramatically cut this year and for the next few years, and we all know that without investment a GMP primary plant goes out of compliance in just a few years. Indeed nothing causes obsolescence faster than GMP design.
    Where does this leave us?

I think that those that are totally dedicated and committed to pharmaceutical APIs will plough through. These are usually private companies, well capitalized and well-entrenched in preferred supplier lists. But especially they are not subjected to the pressure of quarterly reports or stock-markets, as such they will weather the storm better than those that have to tack to short term winds. Customers know only too well that cut-throat pricing is not a good indicator of long-term survival, and although they will take advantage of it, they will not burn bridges with the suppliers that were there over time, solved problems and delivered the occasional miracle.

The other advantage that the private firms have is that they walk on two legs - they serve both the exclusive manufacturing sector as well as the generic sector, and they benefit from the manufacturing synergies offered by the combination. Generics are up - a significant number of products will come off patent from over the next few years. Now to the companies that discovered that getting into exclusive manufacturing was an expensive mistake, I would say they should be just as careful if they think they will find a quick fix in the generic API business.

Hovione's generic development methodology sets as rule Nº1 to start early - this means that from the start of a development program you will have to wait at least 7 years for your first invoice. About the same time as going from Phase I to launch - and in generics there are no development fees!

It is all a question of sticking to your knitting; a question of focus.

Guy Villax
Chief Executive

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Continuous Tableting (CT) is defined as continuous manufacturing of oral dose drugs, specifically tablets. As per ICH's Q13 definition1, a continuous manufacturing process in the pharmaceutical industry comprises at least two unit operations integrated from a mechanical and software perspective. There is a wide combination of possible CT process configurations that are dependent on the needs of the intended product formulation and each of the individual unit operations that constitute the process train can be continuous, semi-continuous, or batch processes. The typical manufacturing processes for tablet formulation are direct compression (DC), dry granulation (DG) and wet granulation (WG)2 - details on these manufacturing processes are beyond the scope of this article, so the interested reader is directed to relevant literature. The actual implementation of CT technology in a facility can broadly vary depending on the level of desired integration and automation. Process trains can be designed to be flexible and converted between multiple configurations (e.g. continuous DC, DG and WG), controlled by the end user from one single software and within a single clean room. The other possibility would be for subsections of the CT process to be divided into multiple clean rooms where inprocess materials are transferred between suites via a bin-to-bin approach (e.g. a granulation suite to prepare granules from raw materials followed by continuous DC (CDC) to blend the granules and produce tablets). The level of automation and instrumentation designed into the CT process (typically involving Process Analytical Technologies, PAT) can open the possibility to implement sophisticated control strategies. Key components of a control strategy that need to be considered for CT are material tracking and genealogy, knowledge of the residence time distribution (RTD), and in-process controls (spectroscopic and/or soft sensors based on process parameters). Holistically, these control strategy elements enable the implementation of a material diversion strategy to automatically divert out of specification material from the process. In their most advanced form, control strategies may also enable real time release testing (RTRt) of the final tablet drug product and reduce the off-line analytical burden and the number of operators needed to manage the process.   Read the full article at gmp-journal.com  

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