In April, I met up with James (Jim) Botkin at INTERPHEX in New York City to ask him how the merger of Alkermes Inc. and Elan Drug Technologies, which took place last September, has changed the type of business opportunities they now seek. What emerged from our conversation was a deeper understanding of the company’s business model, the ‘fit’ of the merged entity and the importance now of their manufacturing expertise. With 40 years' experience in contracting services under his belt, Jim still passionately believes in the importance of fostering and maintaining deep and long-term strategic relationships with partners. —GYR
Contract Pharma: How’s the integration going, folding Elan Drug Technologies (EDT) into Alkermes?
Jim Botkin: The merger closed in September 2011, and I think it’s gone extremely well, for a couple of reasons. The purpose of the merger was to bring together two companies that were very compatible with like mindsets regarding drug development and manufacturing excellence. Both companies have a heritage of applying proprietary science and technologies to make innovative medications, which are now combined in a diverse portfolio of commercial products. Also, both companies have a track record for world-class manufacturing, which the company utilizes to produce its own key products as well as to serve as a contract manufacturer for other products.
CP: Why the focus on having your own pipeline?
JB: So we could gain more of an economic benefit from commercialization of innovative drug products using our proprietary science and technologies. With the merger, EDT brought the expertise in manufacturing oral solid dosage forms and the ability to develop tablets and capsules in formulation. This was complementary with Alkermes expertise in long-acting, injectable drug formulations. The combined company, Alkermes plc, is financially strong with revenues from more than 20 commercial products and the ability to invest in a growing late-stage pipeline of innovative drug candidates, focused on treatments for central nervous system (CNS) diseases.
CP: Do partners have issues with the new company developing its own pipeline?
JB: In this business, it all comes down to the customer service you can expect from a contract manufacturer. If you’re a pure contract service provider, then there’s a certain comfort for partners. On the other hand, I’ve been in the service business long enough to know that it’s the nature of the beast that larger partners get preferential treatment anyway, and the customer service you receive doesn’t depend on whether you work with a pure CMO or not; it depends on how much the service provider is relying on that partner for their business.
In our case, we had modern plants with excess capacity. In Athlone, Ireland, we have a plant that can manufacture two billion solid oral dosages (tablets/capsules) annually, and we were doing 500 or 600 million there.
If you look at our pipeline, we don’t have products with that sort of volume to sustain our operations. For compliance and other purposes, it’s a pretty heavy investment whether you make one capsule or two billion tablets.
Our goal with contract manufacturing is to leverage our infrastructure, our expertise and experience in tech transfer, scale-up and manufacturing and our quality record. We’re not in the business of doing five billion IR direct compression tablets, but we are in the business of providing capacity and have a proven track record of working with partners for over 40 years.
CP: How difficult is it to for large pharma companies to utilize their excess capacity through contract work?
JB: There are plenty of pharma companies out there that have excess capacity and decide, “We’re going to be a CMO for a while!” Well, a lot of my career was in operations at big pharma, and I can tell you, they are not set up to run a client-based business. They don’t have procedures for quoting for business, the mentality for service, the ability to juggle different customers, and on and on.
CP: What changes have you seen in your contract manufacturing business? Have you experienced any shifts in your focus?
JB: We see ourselves as a niche high-technology CMO. Increasingly, when we apply our technologies for a partner who needs a product manufactured, we put our emphasis on later-stage products. In some cases, it can be for lifecycle management of a well-established product. In other cases, the need relates to a novel product that has unique needs for formulation and manufacturing.
CP: What’s the partner base look like?
JB: We get big pharma that’s looking to outsource a late-in-lifecycle product and specialty pharma and mid-tier players that have a pipeline but who don’t have an emphasis on manufacturing. We don’t see much interest from generics, since they’re manufacturing-focused to begin with.
CP: What’s the target for the CMO business within Alkermes? Is there a particular percentage goal of capacity that they want to see in CMO vs. proprietary?
JB: I was just talking to a partner this morning and they brought up the same question. We haven’t set up a utilization target. You can’t put a number on it. No single product in the pipeline is going to need two billion tablets. We don’t see ourselves running out of capacity for a long time, so we’re in the services business for the long haul.
And it’s important to bring in new partners and new products. If you don’t have growth in operations, your expertise grows stale. So how do we keep our operations sharp? More contract pharma work. The thing about operations is, the more work you do, the more efficient you get. Staying busy keeps you up to date, and keeps the technology moving and that benefits our own products and partner products too.
CP: Are you seeing much interest from partners to be a secondary supplier?
JB: A lot of people want secondary sourcing. We’re close to signing a deal with a specialty pharma to be a second source for their product. They’re looking at their pipeline and think their own capacity might be full down the line.
Some companies have a strong second source philosophy, while others don’t. Secondary sourcing opportunities help our business, but it has to be a big enough product to make it worth going to multiple vendors.
The funny thing about secondary sourcing is that there’s always a weak link in the supply chain. Not everything is second-sourced. If you can’t get the red dye for your tablet, you’re out of business just as much as if you don’t have the API. You might have three API suppliers, but still run out of lactose. You can’t make every step second-sourced.
The other difficult and costly issue is that you need to make sure that the second source is active and producing occasionally, and you have to make sure your main plant isn’t changing things without the second site knowing about the changes. It’s a complex subject, requiring very deep risk analysis.
CP: How’s Alkermes’ pipeline progressing?
JB: We have a candidate in Phase III clinical trials for the treatment of schizophrenia, as well as a portfolio of other late-stage candidates.
CP: Is Alkermes looking to add any additional capacity?
JB: No, we’re not looking to add capacity at this time. The merger involved three plants, and they are uniquely different, with no overlap. The Alkermes Wilmington plant is a sterile microsphere, powder, vial filling, syringe filling plant: very specialized and sterile. The Gainesville, GA plant is focused on controlled substances, beads and capsules. Athlone, the largest, is a standard tablet/capsule multi-functional plant.
CP: Any geographical benefits to where the facilities are located?
JB: Well, because Gainesville handles controlled substances, it has to be in the U.S. For some of the large pharma clients, the Athlone plant’s location in Ireland is particularly appealing, because it provides us with a European foothold.
CP: What was your transition like, moving from large pharma to an outsourcing role?
JB: If you go back to when I started in the 1970’s, there wasn’t a need for contract manufacturing in pharma. Companies felt they could do it all themselves. With consolidation, it created opportunities for companies to start offering services. It was easiest in packaging, and that’s where Sharp, PCI and the like popped up. It evolved into manufacturing in niches like aseptic processing. Around the same time, pharma companies were first facing price pressure, and they asked, “Why do I have to do it all? Why do I have to keep all this capacity?”
The whole business has grown and become much more strategic. Just as large pharma doesn’t really have the infrastructure to be a CMO, I also think that, at first, they didn’t have the infrastructure to outsource. Someone in procurement would get told, “Go find us a contract manufacturer.” Now you have VPs of external manufacturing, and ex-ecutive directors of sourcing, and they’ve learned how to outsource. It’s been a big shift over the 40 years I’ve been in the business. And I think it was all driven by efficient manufacturing and cost.
Gil Y. Roth has been the editor of Contract Pharma since its debut in 1999. He can be reached at email@example.com.
James (Jim) Botkin, as senior vice president, Operations, oversees Alkermes Contract Pharma Services and Manufacturing Operations within Alkermes. Jim has plant oversight in the Athlone, Ireland, Wilmington, Ohio and Gainesville, Georgia facilities. Jim joined Alkermes upon completion of the merger between Elan Drug Technologies (EDT) and Alkermes, Inc. in September 2011, and from 2007 until the merger, served as Senior Vice President, Head of Operations at EDT. He has also held senior management positions in a number of pharma companies including Sharp Corporation, a pharmaceutical packaging company and Sandoz Pharmaceutical Corporation. Jim has over 40 years of experience in pharmaceutical industry operations and has a Bachelor of Science degree in chemistry from Miami University and a Master of Business Administration in finance and marketing from Illinois Benedictine University.