Several companies working in Oral Solid Dosage (OSD) outsourcing enjoyed a solid-to-spectacular 2012. Successful CMOs reached by Contract Pharma cited building on several years of focused attention to specific technologies, personnel issues, existing relationships and sound capacity management in realizing dramatic gains in the area. An optimistic forecast by several key players suggests opportunities should continue to present themselves as pharma companies of all sizes aggressively and more wholly engage focused outsourcing strategies.

Michael Valazza, vice president, Global Business Development — Oral Solids and Controlled Release Technologies at Catalent Pharma Solutions, told us that his company has continued to see significant increases in demand for their services in this area. To that end, Catalent has just announced a major expansion to one of its manufacturing sites for oral solids, as Mr. Valazza cited, “We’re in the final design of a major expansion of our largest facility for caplets and capsules. That expansion will break ground in April and be done by October 2014. This major expansion in that facility is in direct response to the increasing demand for differentiated oral solids.”

According to Mr. Valazza, Catalent’s growth has come from finding ways to differentiate clients’ products through proprietary technology. “What we’re seeing from our big pharma clients in terms of their demands is what we can do to help them differentiate their products,” he told Contract Pharma. “It used to be that life cycle management was the buzzword, but now we’re going back into the original dosage form design. We’re seeing a lot of interest in technologies like Optidose, a unique drug delivery system, because it allows companies to deliver drug release profiles they weren’t able to do with traditional caplets and capsules, whether immediate or controlled release. Optidose is essentially a differentiated tablet technology.”

Mr. Valazza said that Catalent’s focus on differentiation accrues benefits to the CMO by helping build a more rational capacity strategy, and by allowing Catalent to find additional ways to work with existing clients. While he noted that a future of big companies dropping all manufacturing capabilities via aggressive network rationalization never materialized, differentiation strategies give Catalent options preferable to keeping margins down across a high number of clients all seeking the same, basic, portable task. “There may be some opportunities in standard caplet and capsule manufacture, but not major ones,” he remarked.

He also noted that Catalent is seeing clients drawn to increased capabilities regarding technology. “We’ve made significant investments in adding hot-melt extrusion capabilities and partnering with leaders like BASF in the past year that’s driving additional business into Catalent ,” Valazza said. “It’s not just about adding capacity to facilities but inserting new technologies into existing factories. Differentiation plays to our strengths because it allows us to design our plant network to a smaller number of true opportunities. It helps us better manage our assets base.”

Catalent sees a desire to maximize available resources that from its smaller and virtual clients. “The smaller firms continue to outsource strategically rather than tactically. They have a molecule and they’re looking to maximize the value of that molecule. They tend to be a strategic player: ‘Do you have the toolkit to get me to my end point?’ That’s always the view with them. With smaller companies, it’s key for them to partner with the right people, whereas with big pharma, we’re an extension of what they’re already doing in-house,” Mr. Valazza commented. “If we’re seeing any trends at all, it’s that smaller companies are holding onto the molecule longer, and maybe considering launching the products themselves.”

Other companies in this area without major expansions to announce tended to highlight more quotidian improvements: personnel, strategic resource management, new capabilities in niche areas.

Vlad Spehar, Wellspring’s associate director, Business Development, noted that his company was one of several firms that described the core of its CMO solid dosage business as a marriage of area and client base. He said, “We have several small to medium and virtual  pharma clients in the controlled release solid dose segment. Our business has been growing, because we too are a small-medium company and we understand our customer’s business needs. There’s been a strong demand for that expertise in solid oral dose for a few years now.”

Brad Larson, vice president of Contract Services for PL Developments, also cited opportunities outside of big pharma. “The number of ‘virtual’ companies who are outsourcing their manufacturing is increasing,” he commented. For Mr. Larson, this suggests advantages for companies that can hold these companies’ hands through the entire process. “These are companies that need a ‘turnkey’ solution from a CMO that can manage the entire drug development process starting with drug evaluations and progressing through the various stages such as developing formulations, addressing regulatory issues, scaling up to commercial production, designing packaging and labeling, and distribution.” That market niche will be the focus of PL Developments moving forward.

Mr. Larson’s was one of several people to suggest that refinements in process and company culture were also having an effect in this relatively stable marketplace. “Another strength that we bring is our strong partnering philosophy. Our collaborative culture and communication skills enable us to partner effectively with our clients. We have an environment that fosters innovation and we are often able to come up with solutions that help our customers reduce their costs or improve their products. Because our internal team includes members from every phase of product development, we can take a holistic view on the product development process.”

Jeffrey Dopf is a professed fan of soft skills as a development strategy in addition to more standard technology and resource allocation tactics. In his role as director of Business Development at CMIC CMO USA Corporation, he told Contract Pharma that the approximately 50-person company, located in central New Jersey, has seen more recent adds on the development side of their business than on the manufacturing side. CMIC’s solid dosage business in 2012 was split between specialty pharma and the generic industry. While it continues to take on straight manufacturing contracts, Mr. Dopf said that CMIC CMO also hoped its formulation and development business will lead to more manufacturing work with those clients, helping differentiate the company from its peers.

Mr. Dopf cited personnel as a primary way for smaller companies to compete with larger ones. “One of the things we’re investing in is the right hiring. I think that’s a key.” He noted that they CMIC hires from a variety of client sources and from other contract providers: “It brings a wide breadth of experience — both in products and in management. Because we’re a smaller company, we tend to be more flexible and responsive. In the generics industry especially, this gives us an advantage where quick turnarounds and affordability are key.”

Pillar5 Pharma, the Ontario-based CMO built out of a former Pfizer facility, saw growth in 2012 from clients seeking back-up sites. The company’s sales and marketing manager, Jody Franklin, remarked, “It may be a client with a seasonal product, or one with a product where they simply can’t meet demands internally — perhaps they’d have to pay staff overtime or compromise other products.” Ms. Franklin also reported an increase in existing clients being driven to Pillar5’s analytical and packaging services, citing their comfort in “ease of use” fashion and traditional factors such as clients’ comfort with specific personnel at the company and with its on-time record.

Ms. Franklin noted that one area of growth in which her company has become more fully invested is in small-scale projects. “Not every contract manufacturer is willing to do smaller volumes, and that’s something we’re willing to explore,” she told Contract Pharma. This means that the company has to keep a wide range of equipment options to meet various scales, and that its overall technological expertise also has to encompass scaling up and scaling down. With that in mind, Pillar5 has added more than a half-dozen new hires in 2012, targeting engineering, packaging and operations. They company also added major equipment in its main facility.

As Mr. Larson at PL Developments indicated, taking on very limited stage work from any point in a company’s process can be advantageous as companies continue to settle their own in-house resource allocation strategies. “One of the changes we’ve seen is that there’s a demand now for CMOs that offer specialized services. Even large pharma companies may not have the flexibility or the capacity to keep all of their projects moving forward simultaneously — or a company may not have the entire skill set for a project on staff. They are looking for strategic partners who can handle some of the time-consuming and labor-intensive parts of the product development cycle such as pre-formulation and formulation development.”

Amerigen Pharmaceuticals celebrated its fifth year in the marketplace aggressively building a client list for its newly opened Suzhou, China facility. According to Oliver Mueller, president of Amerigen’s CMO unit, Suzhou Pharma Services, a potential, varied client pool has begun to take shape. “We found interest across the spectrum, but perhaps the greatest interest comes from the small-sized to mid-sized pharmaceutical companies, whether they be generic or brand-oriented, that don’t have a presence in China, that don’t have significant plants throughout the world.” He cited the cost-savings that his company could bring to the table, and also potential future access to those markets in China, despite the plant’s capabilities to manufacture for the domestic U.S. market.

In terms of larger companies that can already boast of a presence in China, Suzhou hopes to fill a specific niche for solid dosage fulfillment. Said Mr. Mueller, “The big multi-nationals’ factories are geared more towards the new chemical entity, the clinical trial side of things. What we find is that these large companies are interested in what we have to offer in finished dosage form development and manufacturing in China for the China market, where one of the advantages we bring to the table is our level of GMP compliance and quality requirements, comparable to what can be found in the U.S.”

Marc Finn, Suzhou’s senior director, Business Development at, added that he sees opportunities in potential partnerships with Chinese companies in addition to fulfilling a need for international companies already in that market as they move to manufacturing. “On the domestic front, there are virtual and smaller companies that are going to China for some of their early formulation work, and now they’re looking for additional partners, with facilities that their CROs can’t match, filling in the gaps,” he commented.

Most companies agreed that a stable regulatory landscape has helped in providing continuity. “From a regulatory perspective, I don’t see the FDA requirement committees getting any tougher — or looser,” Catalent’s Mr. Valazza told Contract Pharma. “They’ve been pretty consistent the last few years. A few years ago they were getting tougher, but I think it’s leveled off. The last three years have been pretty consistent.”

Mr. Dopf at CMIC noted, “Having an exemplary FDA compliance record is mandatory just to initiate discussion with a client.”
Mr. Spehar at Wellspring cited a similar concern: “We find during the CMO selection process, auditing and due diligence is much more stringent than it’s ever been. Potential clients now want two-day audits of CMOs as opposed to the single-day audits of the past. We certainly welcome those. We want to be as transparent as possible with our clients, so we certainly understand that the selection process will take a little longer.”

One advantage cited by companies operating outside of the U.S. is that meeting more than one set of regulatory standards may assist in attracting clients. Mr. Mueller cited as a significant milestone his company receiving additional and more stringent certification available from China’s SFDA 2010 GMP certification, as opposed to an earlier, less stringent option. “We were the first company in the Suzhou area to receive that certification,” he said. Both Mr. Mueller and Mr. Finn believe that this should lead to greater opportunities in the Chinese market and a greater attractiveness to clients as a result.

Pillar5, working with HealthCanada regulations in addition to those from the FDA, found that an additional set of inspections can only instill further confidence in potential clients. “They know we’re not under any scrutiny from a regulatory standpoint,” Ms. Franklin told Contract Pharma.

Oral Solid Dosage remains a dynamic marketplace, but one with distinct to overwhelming advantages for companies of all sizes that execute sound management strategies and build on previous successes. “We feel strongly about this part of our business,” said Wellspring’s Mr. Spehar. “Historically it’s been a stronger segment than our liquids and topical areas.. We continue to see a steady flow of RFQs and referrals from small to medium pharmaceutical companies in this area that are looking to us for partnership opportunities. We’re very positive about it.”