What’s written on the wall for contract manufacturers in the wake of big-ticket acquisitions, restructuring and tightening cost controls? CMOs all over only stand to gain, notwithstanding the prevailing downturn in major formulations markets, industry analysts forecast.

The rather “insulated” CMOs, in fact, are finding newer opportunities, as top pharma players withdraw from manufacturing at an unprecedented rate, making outsourcing a critical component for reducing costs, increasing flexibility and streamlining the manufacturing process and supply chain.

Oral solids, with a projected market value of $12.3 billion for 2010, is the largest segment in $20.4 billion (2008) global pharmaceutical contract manufacturing market, according to estimates from Global Industry Analysts, Inc.

Naturally, oral solid dosage forms (OSD) are the mainstay and a major revenue spinner for Indian CMOs. With nearly 70% of manufacturers into OSD making, the segment is expected to grow by 7-8 times in the next five years. Growing at an annual rate of 34%, solid dosage formulation market is poised to cross $1 billion by 2013, from $152 million in 2006.

Indian CMOs do manufacturing services, mostly, for generic players and their share is expected to increase. “While the business opportunity for contract manufacturers of OSDs for patented products would decrease, there will be an increase in the market for contract manufacturers of OSDs for generics,” pointed out Yogesh Hede, associate vice president, Avendus Capital, an Indian investment bank.

New Molecules: Great Expectations

However, several expanding CMOs, which have started building additional capacities, feel the other way. They see a bigger opportunity in catering primarily to innovator companies as the trend gets stronger. “Even though outsourcing has begun with older, branded molecules and some specialized drugs, this trend will grow to include patented products and new molecules in the future,” said Anurag Bagaria, vice president, business development, Kemwell Pvt Ltd.

Kemwell, a mid-sized CMO from Bangalore, contract manufactures for several multi-national companies including Bayer, GSK, J&J, Novartis and Pfizer. Its oral solids facility at Bangalore can manufacture as many as five billion tablets and capsules recently received European Medicines Agency (EMEA) certification. Kemwell also offers services such as formulation development, analytical method development and validation, stability studies, clinical trial manufacturing, process scale-up, etc.

Mr. Bagaria would like to believe that Kemwell’s strong respect and adherence for IP rules has resulted in decades-long relationships with the innovator companies. Now his OSD facility is awaiting its FDA audit.

Global generic players also too keen to make use of India’s low-cost edge. Actavis is the latest addition to this list. The Icelandic generic major has three new manufacturing bases under construction in India. Its OSF facility at Alathur, Chennai (South India), which has completed the design phase, will reportedly be one of the largest within the group, capable of handling four billion tablets. Many of Actavis’ “goals for growth are tied to this manufacturing site,” stated a senior Actavis official.

Indoco Remedies and USV are among other Indian firms that recently built up new solid dosage capacities.

Machines: Far Cheaper But More Efficient

Evidently, cost is the prime driver behind the unflinching interest in India’s solid dose manufacturing base. But cost-efficiency is quite common for all outsourcing activities to India, so how is it different for OSFs?

One reason is, these non-sterile dosage forms are the least expensive as they use technologies that are known after 100 years of development. One can build an OSF facility at one-third of what it can cost to an injectables set-up.

CMOs also gain cost-efficiency through cheaper but highly efficient machines available in the Indian market. Tablet pressing and coating machines of the similar controls, speed and dependency can be procured at less than one-tenth of their usual prices in the west.

Besides, they have achieved high operational efficiencies too. “Indian machinery makers take every possible effort for process simplification and lesser manual intervention,” said Satish Rajkondawar, senior director, External Manufacturing Site, Aventis Pharma Ltd, the Indian arm of EU drug major Sanofi-Aventis. The production cycle times have also brought down to amazingly low levels – from 10-12 days to 2-3 days with least impurity profiles, noted Mr. Rajkondawar, who overseas Aventis’ sourcing activities from 13 local manufacturing firms.

Other major facilitators contributing to the trend are quality, regulatory compliance, more variety of APIs, forward and backward integration capabilities, skilled manpower, cGMP compliance etc. More than 70% of India’s 100-odd FDA-approved facilities make OSFs.

However, most of the CMOs are fairly new when coming to advanced online formulation development tools like process analytical technology (PAT). They are currently using all the sophisticated analytical equipment required for the measurement of critical process parameters (CPP) for critical quality attributes (CQA), but it is not online, explained Ravinder S. Singha, president, Generic Dosage Forms, Jubilant Organosys Ltd., a contract services provider from northern India.

“Currently the companies are gaining knowledge about this technology and with time it is expected that like other new generation practices they will gear up to implement this in their systems,” he hoped.

S. Harachand is a pharmaceutical journalist based in Mumbai.