Contract Pharma asked Paolo Magrì, senior vice president, business development at Advitech Advisory and Technologies and president of the Drug, Chemical and Associated Technologies Association (DCAT), to discuss the major challenges of the pharmaceutical industry as well as key trends in the market for small molecules and biologic-based drugs.

Mr. Magrì has over 28 years of experience in the active pharmaceutical ingredient (API) sector. Prior to joining Advitech, he served as vice president of corporate business development at Infa Group. During his tenure (2005-2016), Infa grew by acquisition to include sites in Italy and Spain, and a contract manufacturing division. Prior to Infa, Mr. Magrì served as marketing and sales director at Sicor and in Teva’s API division, after the acquisition of Sicor by Teva in 2004.

His strong track record in the industry also includes previous roles at Archimica/Pro.Bio.Sint. and Fordras. Mr. Magrì earned his master’s degree in chemistry and pharmaceutical technology from the University of Milan, Italy.

Contract Pharma: What do you see as the major issues facing the pharmaceutical industry today?

Paolo Magrì: The increasing complexity of the pharmaceutical supply chain and the ability to handle it by some of the players are two of the major issues we are currently facing in our industry. The management of supply-chain complexity is a clear differentiating factor; not every company is ready to cope with this new challenge, which at the same time, represents a great opportunity for growth for many industry players.

Pharmaceutical companies are managing the complexity of the supply chain through a combination of strategies with a few select business partners. The real issue is to understand and develop this partnership in the most efficient way. The quality of this partnership and the related interactions are the real challenge.

I like to think that the DCAT association is playing a key role in facilitating communication between decision makers in the pharma industry.

CP: Traditionally the industry has segmented providers into those providing services for the development and manufacture of active pharmaceutical ingredients (APIs) and those for drug products. But we’ve seen recent examples of some contract development and manufacturing organizations/contract manufacturing organizations (CDMOs/CMOs), through acquisition or otherwise adding capabilities, becoming end-to-end providers (i.e., providing both APIs and drug products). Do you see this “one-stop-shopping” approach continuing in the industry? How would you assess this recent activity?

Magrì: If we look back at the past five years, the number of mergers and acquisitions has been growing at an unprecedented pace and across business models and service capabilities, with a mix of consolidating and non-consolidating acquisitions.

In the CDMO/CMO market, if we just focus on drug-product development and production, looking for a “one-stop-shopping” service provider could be one of the risk-mitigating strategies to handle the supply-chain complexity but, of course, this is not the only reason behind this trend.

CMOs look at diversification of their business activities to increase sales and expand into new markets. Excellence in one specific business segment is very profitable, but also very risky, in the current pharma environment. The CDMO market sales performance may offer sharp growth but also unexpected sales decline. The most effective way to increase overall stability is a combination of business models, for example combining API and drug-product capabilities or, for an API-only company, combining generics and/or performance chemicals with a CDMO/CMO strategy.

I expect this trend to continue with more CDMOs/CMOs growing through acquisitions, but with one important caveat; a larger organization should not start diluting customer service through too many additional interactions. Everything comes at a price, and the newly formed, larger entities should carefully preserve the quality of the relationship between customer and supplier, which is the core value of the CMO world.  

CP: What do you see as major trends in the market for small molecules and likewise for biologic-based drugs?

Magrì: If we consider the top-selling 20 drug products, the ratio between small molecules and biologic-based drugs is almost 50:50. However, in terms of global sales, the share of biologics will probably increase, as most spending growth, particularly in developed markets, is expected to be fueled by innovations in oncology and autoimmune diseases, where opportunities exist for biologics.

In terms of technological innovation, most of the new investments focus on biologic-based drugs, but the future of small molecules is still very bright. According to the FDA’s latest report on New Drug Therapy Approvals, more than 70% of the novel drug approvals by FDA in 2017 were small molecules. This trend is also consistent with the growing interest in API production sites.  In other words, classic organic chemistry will still play a fundamental role in the development of new drug therapies.   

It is also important to note that small molecules are evolving. New APIs are very often based on more complex chemical structures, and the corresponding therapeutic effect is available at very low dose. So some small molecules are not so small anymore. Some API producers are adapting their sites to these new requirements by introducing new capabilities in terms of product handling and economy of scale. It is a kind of  “silent (r)evolution,” and it will soon be a clear differentiating factor in the CDMO/CMO arena. Quoting the Greek philosopher Heraclitus, “pantha rhei” or “everything is in a state of flux.  “We must be ready for the new challenge.

CP: Over the past several years the number of new drugs approvals for rare diseases or orphan drugs has increased. What do you see as the implications for a move to lower-volume drugs on the industry? 

Magrì: Patients with rare diseases often have few or no drugs available to treat their conditions. To provide fair access to treatment, legislation in the U.S. and the EU has provided economic incentives, including market exclusivity for developing and getting approval for a new orphan drug.

In 2017, according to the FDA, 18 of the 46 novel drugs (39%) approved by FDA’s Center for Drug Evaluation and Research (CDER) were to treat rare or orphan diseases, defined as diseases that affect 200,000 or fewer Americans. More than 70% of these novel drugs for orphan diseases are small molecules, and thus the need for extra-low volume capabilities is a potential issue.

In order to meet this new demand, a few API producers are investing in small-scale cGMP production lines or, sometimes, they are upgrading pilot plants to cGMP standards with the addition of dedicated areas for the final stages of manufacture. At the API level, the return on the investment is problematic due to the very low volume and the financial incentives at the drug-product level are not yet distributed along the drug-substance development chain.

This potential issue could be solved through the establishment of strategic alliances, ideally with partners able to handle the project from A to Z, spreading the return of investment throughout the entire project.