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    Features

    R&D Outsourcing Trends

    Highly specialized drug products and capacity needs drive increased reliance on contract service providers.

    R&D Outsourcing Trends
    Kristin Brooks, Managing Editor, Contract Pharma10.14.20
    Beginning with research and ending with final drug approval, the research and development (R&D) journey is inherently long, complex and costly. According to researchers at the Tufts Center for the Study of Drug Development, on average it costs $2.6 billion to develop one new medicine, including the cost of failures, and only 12% of new drug candidates that enter clinical trials win U.S. FDA approval. Drug developers large and small are partnering with Contract Development and Manufacturing Organizations (CDMOs) and Contract Research Organizations (CROs) earlier in the development process to help overcome critical challenges and achieve greater efficiencies across the drug development continuum.

    In addition to reducing drug development timelines and costs, there are several pharma and biopharma trends contributing to increased outsourcing of R&D activities. Among them, increasingly complex small molecules and biologics requiring highly specific drug technologies and expertise to handle highly potent and targeted therapies, namely, cell and gene therapies, cytotoxic/Highly Potent Active Pharmaceutical Ingredients (HPAPIs), and antibody drug conjugates (ADCs).  

    Demand for HPAPI development and manufacture continues to grow driven by targeted medicines in the oncology field. Outfitting facilities to handle HPAPIs is an extensive undertaking for pharma companies lacking in-house capabilities and outsourcing to CDMOs is on the rise. As such, there have been continued and substantial investments by CDMOs to expand capacity in this area, such as Lonza, Piramal, MilliporeSigma, and Cambrex, to name a few.

    According to Grand View Research, the global biologics contract development market size was valued at $5.6 billion in 2019 and is expected to grow at a compound annual growth rate (CAGR) of 8.8% from 2020 to 2027.1 The associated services include cell line development, upstream and downstream processes, analytical/bioanalytical methods, formulations and quality assessment, and regulatory assistance.

    The growing number of biologics in development is driving demand for high-tech development and manufacturing solutions. Most biologics are exceedingly complex and cannot be fully distinguished by science alone, and as such, are often characterized by their manufacturing processes.

    The same can be said for manufacturing cell and gene therapies, which is complex and expensive. There are many challenges that must be overcome to ensure a therapy is safe, effective, and scalable. Unlike traditional drugs, the manufacturing process itself is essentially the product. With a shortage of available manufacturing capacity in the cell and gene therapy space, CDMOs have made substantial investments in bolstering manufacturing capabilities. For example, Lonza built a 300,000-sq.-ft. facility near Houston, TX in 2018 dedicated cell and gene therapy manufacturing—among the largest in the world. 

    The FDA anticipates receiving more than 200 regenerative INDs in 2020 and predicts that they will be approving 10 to 20 cell and gene therapies a year by 2025, based on an assessment of the current pipeline and clinical success rates of these products.2

    Additionally, ADCs are an emerging class of drugs designed to target and destroy cancer cells while preserving healthy cells. While there are only nine ADCs currently approved globally, the market is growing and is expected to reach $15 billion by 2030.3 Unsurprisingly, they too present a unique set of challenges. Their development is complex, requiring stringent containment infrastructure, expertise in several different technologies for small and large molecules, as well as analytical capabilities. Due to these challenges, more than 70 percent of ADC projects are outsourced to CDMOs.4

    The following offers perspectives from CDMOs and CROs embedded today’s R&D landscape, from sourcing APIs to drug development, clinical services and manufacturing. Inevitably, the impact of COVID-19 further plays a role in shaping current drug development strategies and outsourcing.

    Pharma & Biopharma Trends
    Partnering earlier in the drug development process as part of an effort to create efficiencies is growing trend. Dan Bowles, Senior Director, Chemical Development, Cambrex said, “Over time, contract research and manufacturing organizations feel the effects of trending markets, specifically the willingness (or aversion to) for clients to source R&D activities for assets earlier in the development cycle.
    Examples of activities that might be investigated earlier in the API process development cycle include: structural elucidation of key impurities, removing class I and II solvents, hazards analysis, removal of column chromatography, and efforts toward overall cost reduction and process efficiency. Additionally, CRO/CDMOs have observed a significant increase in the number of partnerships, licensing agreements, and M&A activities associated with programs in early development over the last few years.”

    For service providers, addressing pharma/biopharma drug development challenges across various platforms is at the core of their existence. Wilbert Frieling, Corporate Senior Vice President, Global Discovery Services, Charles River, said, “Biopharma companies are having to differentiate their pipelines and diversify into multiple modalities with ever increasing complex science – in addition to the demand to reach clinic as fast and as safely as possible. Now more than ever, the CRO industry must closely align with clients, have greater technical depth to understand the complexities they face and begin to introduce new innovative technologies to speed up the delivery of the all-important robust clinical therapeutics.”

    Further contributing to the surge in outsourcing, COVID-19 and the ensuing restrictions it placed on the pharma industry necessitated extra capacity and capabilities on a global scale. Dr. Frieling added, “Unsurprisingly, many of the changes that we’ve seen in the biotech and pharma industry this year have been related to COVID-19. We are seeing strategic outsourcing trending upward and now with a global pandemic in the picture, we’re seeing a requirement for more diversification. A more diverse model, ideally with a global footprint, helps mitigate costs and protect the business from any bottlenecks that could result from a risky situation, such as COVID-19.”

    New therapeutic modalities, including those to fight COVID-19, require unique discovery and development strategies that go beyond traditional approaches. According to Dr. Frieling, “Advanced medicines, including cell and gene therapy, gene editing, CAR-Ts, and second-generation oligonucleotides, require scientists to rethink previous drug development models and consider a path from target validation to the clinic that is unique to each program.”

    During this critical time, it has become essential to leverage expertise, specialized capabilities, know-how and technologies to help advance these programs in a fast paced and rapidly changing environment.

    August Bioservices recently completed a survey of pharma and biopharma professionals that procure outsourced R&D services. According to the company’s Vice President of Marketing, Cary Martin, “Respondents conveyed a strong desire for potential partners to have deep clinical expertise in their areas of inquiry – for example, with specific proteins, disease states and oncology tumor types. We’re also seeing a rapidly increasing demand for expert-driven fragment-based drug discovery (FBDD) methods. This approach has gained traction in recent years because, while the affinities of potential hits from a fragment screen are lower compared to those achieved with drug-like molecules, the incidence of a hit is orders of magnitude higher.” 

    He added, “On the contract manufacturing side, we’re seeing increased demand for flexible project plans and manufacturing schedules. With the uncertainties introduced by COVID-19, customers want to make sure they choose a partner that can flex with them.”

    Motivators for Outsourcing in Today’s Market   
    Drug complexity that requires specialty drug product capabilities, access to capacity and expertise are among the major motivators behind outsourcing today. According to Wilbert Frieling of Charles River, the biggest motivators are speed, flexibility and risk reduction. “Each of these help pharma companies achieve their goal of getting a therapy to market as fast as possible, without driving up the cost or sacrificing patient safety. Pharma companies that are working with CROs rely on the expertise and breadth of resources that they supply. As they continue to expand and diversify their pipelines, working with a proven partner can open the opportunity to continue to engage with them in other ways,”  Dr. Frieling said.

    Some sponsors, small and large, lack the internal capabilities in early development. Dan Bowles at Cambrex said, “Many of our large pharma clients do not have the infrastructure to handle all their early development work in-house, so much of that work can be handled in an outsourced partner’s facilities. Furthermore, many small to mid-pharma clients are choosing to navigate the drug development process virtually, completing the majority of their work almost exclusively through outsourcing. These clients rely on their partner’s expertise and resources to build a robust product portfolio. A significant portion of clients have returned their programs back to domestic suppliers based on the global economy and political landscape.”

    As the science of drug development has become more complex, so too has conducting clinical trials. Sponsors increasingly rely on CROs for guidance throughout the development process. According to Costa Panagos, President, Research and Development Operations at IQVIA, “The explosion of scientific innovation has a profound impact on how to execute clinical trials, including careful protocol design, as well as logistics and site operations considerations, for example. As a service provider, you need specialized skills to operate successfully in these new models. Obviously, drug development experience is critical, but scientific expertise and a consultative mindset are increasingly important when constructing novel trial designs. Many sponsors only work on several of these types of trials a year, while we deliver these services hundreds of times a year.”

    Sponsors increasingly value expertise as well as scalable processes and technologies. For example, in the cell and gene therapy space, running clinical trials requires coordinating cell collection, therapy manufacture and therapy infusion. CROs also have the ability to make near real-time modifications to aspects of the design based on data from subjects. 

    Additionally, sponsors are outsourcing to help mitigate increasing drug development costs by leveraging flexible service models. Costa Panagos of IQVIA added, “Sponsors are increasingly embracing evolving engagement models such as functional service provision (FSP) and so-called full-service/FSP hybrids to deliver new medicines to market. An FSP partnership in particular allows the sponsor to maintain better control of resourcing and managing the ebb and flow of demand as a program or portfolio progresses through its lifecycle.”

    Leveraging the latest technologies is also a key factor in outsourcing, whether the R&D or manufacturing stage, and beyond. Cary Martin of August Bioservices said, “It all comes down to this – on a micro level, are you the partner who can successfully advance me to the next step in the process, and, on a macro level, can you get me from initial idea to ownable, druggable IP in the most efficacious way possible? Our clients have told us they really value our data-driven approach and ability to be both proactively planful and nimbly responsive on the drug discovery and drug development path. Whether we are using SPR, ITC, MassSpec or other leading-edge technologies, we keep our clients informed up-to-the-minute and we’re quick to report hits, misses and recommended next steps. In short, customers truly appreciate our ability to think alongside them and think ahead for them.” 

    Manufacturing and packaging support is also key. Cary Martin added, “When it comes to our cGMP non-sterile and bulk manufacturing, customers appreciate the services we can offer in addition to our aseptic fill and finish, such as labeling, packaging and kitting, product storage, as well as support services that include regulatory support, supply chain management and quality assurance and validation.”

    For pharma/biopharma companies, getting products to market is the end game, an undertaking fraught with challenges. Timelines need to be shorter and efficiencies met. Scott Carpenter, Vice President, Marketing & Partner of Innovation at Formulated Solutions, LLC said, “Outsourcing continues to grow as brand owners seek companies that can deliver new product innovation along with high quality finished goods, both with increasingly shortened production lead times. In today’s R&D space, the standard models of yesteryear are no longer applicable and abbreviated lead-times are often becoming just as valuable as cost effective, reliable supply. Those that can deliver on these needs, while maintaining a spotless regulatory record, will find themselves in high demand.”

    Sought After Services
    Service providers are seeing increased demand for drug development services across the gamut, from target identification to lead optimization and IND studies to manufacture of clinical trial materials, and from all sectors, from big pharma/biopharma, to small pharma and virtual companies.

    According to Dan Bowles at Cambrex, “We have noticed a surge in requests from a portion of our client base for later phase analytical methods for early clinical development targets, i.e. ‘buying-up’ the analytical package at-risk. We are also seeing more requests for final-form crystallization studies and polymorph screening, as well as a high demand for fully vetted safety profiles, as well as a push for flow chemistry alternatives to complex batch chemistry problems.”

    With capacity at larger CDMOs increasingly limited as a result of COVID-19, smaller pharma/biopharma companies are competing in the market for services. According to Cary Martin of August Bioservices, “We are seeing a surge in requests for drug manufacturing services and, almost as strongly, for custom drug development services. Nearly 60% of responses from our survey are coming from self-identified small pharma/biotech and start-up/ventures. This stands to reason given the perceived trickle-down effect of less capacity being available at the larger CDMOs due to COVID-19. In turn, the smaller and start-up companies are having a harder time finding a partner that fits their parameters. This is a terrific opportunity for CDMOs that have expertise in drug discovery, custom drug development and available capacity to accommodate clinical manufacturing programs in a variety of formulations – injectable liquids, creams, ointments.”

    In the CRO space, data analytics has become an indispensable tool and the impact of COVID-19 has necessitated greater adoption of patient-centric clinical trials, the digitalization of data collection, and remote trial execution. Costa Panagos of IQVIA, said, “The services are matching the trends we see. They are looking for technology and analytics (e.g., AI/ML) to accelerate and improve their trials. And now, with COVID-related challenges, we are seeing a spike in virtual and decentralized trials, telehealth, supply chain, and direct-to-patient and other services that will keep development going across all therapeutic areas. We strongly believe patient-centric technologies and approaches will be a viable solution beyond this global crisis.”

    Global Marketplace
    With respect to R&D outsourcing there continues to be a need for CDMOs and CROs to have a global presence, however we’re also seeing a return to local and/or established markets as well. Wilbert Frieling of Charles River noted, “With COVID-19 not yet behind us, companies are reevaluating risk and the ways they can mitigate it for a second wave, or another global issue that may arise. We see a continued desire to outsource research, but are finding that a big component of this assessment is the geographic footprint of the partners that pharma companies are choosing to work with.”

    Quality concerns have long been cited as a concern of global sourcing propelling a trend to return to domestic providers. The pandemic is further fueling the push to procure drug substance closer to home. Dan Bowles at Cambrex said, “We have observed an increased number of clients returning to domestic suppliers over recent years, and that seems to have further escalated over the last two years in particular. Many have experienced poorer than desired service on previous campaigns abroad and most are willing to pay a domestic premium to avoid many of the pitfalls associated with doing business in a global market. Additionally, many clients push to source raw materials manufacture domestically because of COVID-19 related supply chain issues.” 

    In the face of restrictions placed on industry as a result of the global pandemic, CDMO support has never been more crucial. Scott Carpenter of Formulated Solutions said, “As major pharma labs are either closed or subjected to reduced on-site staffing protocols, we are seeing a rapid increase in R&D outsourcing. In some cases, we are seeing major pharma companies looking to co-develop new products with an external CDMO chosen to supplement the efforts or their own internal R&D team. Concurrently, we are seeing marked increases in the utilization of external innovation teams, where CDMOs are being approached to provide full turn-key product ideation, development, and manufacturing support. This is an exciting time for the CDMO model, and a time we are uniquely and deliberately designed to support.”

    COVID-19 is further driving the domestic trend as an important consideration for sponsors. According to Cary Martin of August Bioservices, “We are seeing an increased interest in bringing manufacturing back to the U.S.  In our survey, 81% of respondents said they are either actively looking or will be looking for a new CRO/CDMO partner within the next 12 months. That tells me there are specific outsourcing needs that are not being met. I believe companies with U.S.-based clinical manufacturing capabilities, drug discovery and development expertise and responsive clinical teams, are well positioned to successfully address those needs in a meaningful way.”

    In summary, specialty drug product capabilities are in great demand in today’s R&D realm. Reliance on service providers with the necessary expertise will likely continue to grow. For CDMOs and CROs, adapting, innovating and providing support services is what they do. 

    References:
    1. https://www.grandviewresearch.com/industry-analysis/biologics-contract-development-market
    2. https://www.fda.gov/news-events/press-announcements/statement-fda-commissioner-scott-gottlieb-md-and-peter-marks-md-phd-director-center-biologics
    3. “Antibody-Drug Conjugates Market to Be Worth $15bn by 2030.” European Pharmaceutical Review, 30 Aug. 2019, www.europeanpharmaceuticalreview.com/news/98037/antibody-drug-conjugates-market-15bn-2030/
    4. Roots Analysis Private Ltd. ADC Contract Manufacturing Market, 2015-2025. August 2015, www.adc.expert/2mNns33
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