1. What, in your opinion, is currently the single largest trend with respect to the outsourcing of formulation development?
XH: Outsourcing need of formulation development is usually assessed based on internal capacity and capability considerations. Small biotech and emerging pharma companies have historically outsourced most if not all of their drug product needs and this trend has not changed. Multinational pharmaceutical companies (big Pharma) have considered formulation development as one of their core competencies because the perceived risk of CROs failing to meet quality standards and delaying clinical trials is much greater than potential cost and time saving. If drug molecules require use of complex drug delivery technologies that are not available in house, formulation development and drug product manufacturing may be outsourced to specialty CROs that are often based in US and Western Europe.
Having said that, there is a trend that big Pharma starts experimenting outsourcing formulation development to emerging markets such as India and China. In the past, outsourcing to these markets has been limited to raw materials and advanced intermediates. It has gradually expanded to include more final APIs and will eventually lead to drug product outsourcing, particularly to support early clinical development. I think there are several reasons that drive this trend. Firstly, there is an increased level of comfort with CRO’s quality system and their adherence to cGMPs after big Pharma spends years working with them. Secondly, there are more qualified CROs offering integrated drug product development services at lower cost and much shorter development timeline than big Pharma does it internally. Thirdly, the emerging markets hold a significant lure in terms of patient access and market potential. Big Pharma is making a strategic decision to either establish R&D presence in this region or work with local CROs to support regional and global clinical trials.
Another interesting trend lies in “branded generics” in which branded firms work with a generic company to produce generic drug products post patent expiration. In this alliance, the generic company benefits from production experience of branded firms and lack of legal obstacles to launch at preferred time, whereas branded firms enjoy a potentially lower cost of production and a share of generic profits. This alliance can significantly reduce profits of independent generic producers, thereby affecting equilibrium in the generic market in the end.
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AN: The kind of work that is being outsourced is constantly evolving. Traditionally, the formulation work that was deemed suitable for outsourcing mostly included supportive work, which was less complicated and for which detailed instructions and protocols could be readily drafted. This was often also the work that was already conducted by the sponsor in some manner, with its performance and reproducibility established. Some examples of this kind of work include GLP/GMP manufacturing for toxicology or clinical study supplies, or packaging or repackaging operations. More recently, formulation work which is time and effort intensive, even though for which the outcomes are not as readily or well defined, is being outsourced. This includes formulation and process exploration studies to define design space and edges of failure for a quality-by-design formulation development. This work often forms the core of formulation development decisions and can be termed as ‘development-decision important’ work (Figure 1). Increasingly, the outsourcing effort is leaning towards exploration, mechanistic understanding, and trouble-shooting. This kind of work is critical to development decisions and may dictate the developability of an asset (Figure 1). The relative proportion of these kinds of work are illustrated in Figure 1 by the relative area in the corresponding parts of the triangle. In these evolving outsourcing strategies, the outsourced company is increasingly serving as a scientific partner in drug development rather than a service vendor.
SH: To meet the ever-increasing challenges and demands of drug discovery and development, pharmaceutical companies today constantly face the need to resolve capacity shortages, tighten development timelines of bringing new drugs to the market, and reduce processing costs. In this respect, pharmaceutical companies choose to outsource parts or even entire project to specialist companies with expertise in certain areas of the drug discovery and product development. It is evident that there is an increasing trend and need in pharmaceutical industry to outsource drug product development, especially formulation development and integrated platform of pharmaceutical development and manufacturing capabilities with the ultimate objective of accelerating the overall drug development. According to my experience, the single largest trend of formulation development outsourcing is the clinical supply manufacturing to support the early stage clinical studies such as first-in-human (FIH) and phase IIa. In recent years, many pharmaceutical companies including both big pharma and middle-sized have adopted the approach of using fit-for-purpose (FFP) formulation such as API in capsule or direct encapsulation of dry blend etc. to support early stage clinical studies.
This practice greatly promotes pharmaceutical companies to outsource the labor-intensive FIH formulation development and clinical supply manufacturing batches to CROs for the purpose of reducing the cost, accelerating the drug development speed and focusing on more innovative work.
JM: There are a number of trends which are increasingly evident. However, if pushed to choose just one, I would probably identify the trend that formulation development is no longer seen as a core in-house activity for "big Pharma" and is a discipline that will be increasingly outsourced.
RT: With NCEs in pipelines becoming more and more challenging from bioavailability, development and differentiation POV there is rising need to partner with external experts on overcoming these challenges and getting more products to market faster. This leads to partnering on formulation development with companies that offer broad-based formulations technology experience and platform options to optimize product differentiation faster with lower risk.
2. How, in your mind, has the landscape of formulation development outsourcing services shifted post-recession?
XH: I do not think that Pharmaceutical industry is particularly sensitive to recession because people will need healthcare regardless how short on cash they are. Since the drug product is one step closer to patients than API, the perceived risk of losing control to external suppliers outweighs potential cost saving. As a result, recession has not caused a significant shift in outsourcing of formulation development.
One may argue that we do witness major layoff in pharmaceutical industry since the inception of great recession. I think this is mainly due to the increasing pressure to reduce development cost to deal with impending patent cliff, tough regulatory environment and diminished return on R&D spending. We will probably see more interest in outsourcing formulation development to lower cost provider, especially for APIs that lack of technical challenge and are still early in the development program.
AN: Recession has indeed added to the mix of factors leading to evolving changes in outsourcing strategies and work processes. In this era, when organizations are looking to increase their portfolio, outsourcing is frequently explored as a viable option over increasing headcount. Outsourcing is also considered a viable option to increase employee productivity and to re-orient employee time to work that is higher value-driven with respect to strategic organizational priorities. These changes have led to a closer look on the kind of work that is being outsourced. In the triangle shown in Figure 1, the top two areas are increasingly expanding with time. Consequently, the expectation on the scientific and technical depth of collaboration in an outsourcing relationship has increased significantly. This has also led to an added dimension for the comparison between different outsourcing services providers. The providers with greater scientific depth are clearly gaining an edge over the competition.
SH: Many CROs, especially those in formulation development, have grown very quickly, evolving from "an extra pair of hands" into strategic business partners and purveyors of novel technology development and innovation. To stay competitive, many CROs continuously assess the changing needs of its current and potential clients and position themselves to address these needs. The larger CROs have begun to offer virtually every component of the drug product development, from early stage phase definition and preformulation to clinical formulation development and clinical supply manufacturing.
JM: Pre-recession outsourcing of formulation development was driven by a large number of smaller virtual companies. Whilst these companies are still continuing to outsource formulation development, the growth we are seeing in outsourcing of formulation development is being driven by a smaller number of “mid-cap” and “big Pharma” companies who place a greater emphasis on preferred provider agreements.
RT: The recession has placed added pressure on payer reimbursement systems. There is an increased focus on consideration of how drug delivery technology can improve patient compliance and outcomes, thereby lowering overall cost to payer systems. In addition the downturn put pressure on internal resource availability, particularly for highly specialized skills leading to increasing need for more collaborative R&D processes.
3. What country/region, in your opinion, is currently leading the way in formulation development testing/manufacturing and why?
XH: CROs in US and Western Europe clearly lead the way in providing outsourcing services in formulation development and manufacturing. Specialty CROs that offer advanced and patented drug delivery technologies are doing particularly well since increasing number of APIs present challenges to achieve adequate bioavailability. In Asia Pacific region, India is leading the pack given its cost advantage and long history in generic product development and production. China is also gaining business in formulation CRO services due to its growing economy, good infrastructure and access to a large talent pool.
AN: The current scenario in formulation and process development outsourcing represents a dynamic environment where the type of work being outsourced is changing with shifting paradigms. Greater financial edge definitely drives a lot of work to India and China. At the same time, close partnership with companies in other continents is often not easy because of time-zone differences and relatively infrequent site visits or face-to-face meetings. This definitely affects the kind of work that is outsourced when compared to outsourcing companies in geographic proximity, especially in the United States. The kind of work outsourced overseas is often the more traditional, readily instruction- and protocol-driven, or similar. This includes, for example, conduct of long term stability studies. The work outsourced geographically closer is more of development-decision critical and not easily instruction- and protocol-driven work, that requires frequent technical interaction and discussion to drive the direction of the project. This is also illustrated by an arrow in the triangle in Figure 1.
SH: Currently North America is still the leader in formulation development outsourcing because most formulation scientists and formulation CRO companies are based in USA and Canada. However, China and India are developing extremely fast. Because of the low labor and operating cost in China and India, more and more multinational pharmaceutical giants want to move the drug product development especially preclinical and early stage clinical formulation development work to this region following the step of API outsourcing. By now, there have already been many CRO companies established in China and focused on preformulation, early stage clinical formulation development and supply manufacturing and analytical. This trend will be further enhanced by Western trained expatriates returning home, a situation that has accelerated in recent years with the consolidation and contraction in the pharmaceutical industry in North America and Europe. Initially, many Chinese CROs were started by returnees or had these expatriates serve as senior executives. Today more and more returnees left large pharmaceutical companies and joined local CROs running projects and interacting with their previous western employers. With the fast economic development in China, the most recent trend is that many foreigners who had experience in western pharmaceutical companies are joining Chinese CROs and are commuting or relocating to China. Indeed, this strong injection of Western influence into Chinese CROs has given the region a definite advantage in attracting the more complex and higher value outsourcing projects and more customers.
JM: Europe and the East coast of the US are still leading the way in formulation development. It’s hard to pick a specific country within Europe - Ireland continues to do well with product development centers for both small molecule and biopharmaceuticals based there, the emergence of spin-outs from companies such as Elan and a growing contract services sector. Germany & Switzerland also remain particularly strong with some of the larger Pharma companies balancing their outsourcing activities with investment in new formulation development facilities and technologies.
RT: It has become more global with US, Western Europe and Asian companies active in new formulation development with the majority of new molecular entities being launched from these regions, as well as with existing block buster drugs in need of lifecycle management, formulation options for increased differentiation earlier in development, sometimes even prior to product initial launch.
4. If things progress as they have the past five years, what can we expect in the next five years, with respect to formulation development outsourcing?
XH: I expect to see more interest in outsourcing formulation development to emerging markets, as more and more GMP qualified CROs are emerging in these regions. If the local government makes it easier to conduct clinical studies and strengthen patent protection, drug product outsourcing will become more widespread, perhaps even at the expense of cutting internal capacity at client companies.
AN: I would expect outsourcing to become a parallel industry. A combination of environmental forces that the biopharma industry is facing today is expected to lead to outsourcing companies as partners in drug discovery and development. These forces include (a) economic and logistic pressures that lead to reduced expansion of the biopharmaceutical companies; (b) regulatory and scientific pressures that lead to increased demand for mechanistic, QbD/DoE, and process understanding studies; and (c) shareholder and productivity pressures that lead to pipeline extension and expansion. These environmental constraints make the industry to look for external partnerships beyond the routine work. This trend has been evident in the recent past, and is expected to grow in the coming years.
SH: As the pharmaceutical industry landscape evolves and pharmaceutical companies need to adapt, the trend of outsourcing drug product research and manufacturing capabilities by pharmaceutical companies will be continuing in the future. As more and more pharmaceutical companies take this preferred route, it will lead to entire outsourcing market expansion and talented professional growth with outsourcing set to play a pivotal role in the healthcare improvement. The significant growth in outsourcing will continue to be fuelled principally by the demand for R&D enabling technologies such as genomics, high through-put screening and proteomics, all of which facilitate the discovery of more and more new targets, thus reinforcing the need for further clinical testing and hence formulation development outsourcing to support clinical trials.
With outsourcing trends on the rise, most large pharmaceutical companies are seeking long term strategic collaborations with CROs,wherein one vendor could supply all of the segments necessary to get a drug to market. This has led that larger CROs have begun to provide almost every component of the drug development. Another area with the increasing need for outsourcing is reformulation or product value enhancement (PVE) from life-cycle management perspective which is different from NCE formulation development. When formulation is likely to influence clinical efficacy, an existing drug may undergo reformulation or combination with other drugs to appear as a new drug. It becomes apparent that this reformulation based service is very attractive as it becomes more and more difficult to develop the first class new drug to the market.
JM: More outsourcing, more investment in process investigation experiments driven by QbD initiatives, a continuation of the trend of more potent drugs requiring high containment and more focus on age specific formulations.
RT: Payer models are changing to cost sharing and outcomes driven models. There will be an increased focus in drug delivery optimization during formulation at earlier stages of drug development, in addition to the historic focus of drug safety and efficacy to improve treatments.
There will also be an increase in branded generic drug delivery formulation options, as the hurdles for reimbursement and physician/patient utilization increase.
Lastly, there will be a vertical integration in the form of partnerships with not just CRO, but formulation and drug development experts to bring more products and better treatments to market. Collaborative and open innovation approaches will continue to spread.
5. In your opinion, what research field currently benefits the most from formulation development and why?
XH: Therapeutic area does not significantly influence outsourcing behaviors of formulation development.
AN: In the current paradigm, the greatest benefit from the formulation development outsourcing work is realized in the development support region, followed by the development-decision important region, and the least in the development-decision critical region. This is also indicated by the relative areas of these three in Figure 1. These benefits are primarily volume driven, and in the amount of time and effort savings realized. Increasingly, however, the trend is towards greater expansion of the top two regions in the Figure 1 triangle, leading to the potential realization of greater benefits in development decisions. This benefit, however, is still on a steep slope due to the learning curve involved and the paradigm shift that is needed in the decision-making process.
SH: Driven by financial constraints and pipeline productivity objectives, pharmaceutical companies are under great pressure to achieve critical milestones faster in spite of many challenges under current circumstances. The ability to work smarter has become an important survival skill in order to move drug product candidates forward in a faster speed and to maximize the possibility of success. Under this environment, the early stage clinical study, especially clinical phase 1 and phase II a have gained the greatest benefit from the formulation development/manufacturing outsourcing. The outsourcing practice significantly lowers down the early stage formulation development and clinical manufacturing cost and makes many clinical studies quite affordable to pharmaceutical companies. Without outsourcing strategy, many these clinical studies would never occur because of financial constraints and lacking resource to develop formulation and manufacture clinical supplies.
JM: Formulation development is beneficial to all research fields.
RT: Our industry is facing significant bioavailability, solubility, and drug release plasma profile challenges across therapeutic pipeline areas. Solutions to these are complex due to limited proven technology options, reduced R&D budgets and constrained pharmaceutical company internal capabilities to explore multiple formulation options quickly and efficiently. There are also added pressures from payers to improve patient outcomes. These require sophisticated formulation and drug delivery solutions with expertise, innovation and broad capabilities.
6. What recent improvements/methods have been implemented to make the outsourcing of formulation development a viable option?
XH: Adoption of partnership philosophy has made it possible to ensure product quality, meet project timelines and establish a longer lasting relationship between client companies and CROs. In addition, advances in IT and communication system (e.g. secure data transfer, teleconference, videoconference) have made it possible to shrink time zone and geographic distance and make it easier for client companies to manage outsourcing activities.
AN: The recent changes and improvements that make outsourcing of formulation development a viable option include establishment of broad-based partnerships between organizations that lead to contracting out of individual projects easier compared to a case-by-case scenario. Another factor that contributes to making outsourcing a viable option is the adoption of one platform as a preferred approach over several competing and scientifically more-or-less equivalent approaches to a frequently encountered formulation development problem. This allows establishment of best practices and outsourcing routines that can be preferentially explored over others.
JM: Formal implementation of QbD and the use of DoE in formulation development have been useful. Applied correctly these tools help the formulation development efforts to remain as patient centric as possible whilst also considering the scalability and robustness of manufacturing processes.
RT: Catalent has recently signed an exclusive global licensing deal to provide new controlled release technology formulation options: OSDrC® OPTIDOSETM optimized dose delivery technology offers the broadest range of controlled release, delayed-release, combination (tablet-within-a-tablet) products, and orally disintegrating tablets to optimize dosing, therapeutic, and plasma release profiles to meet patient needs in a high quality, one step manufacturing process. Technology capability expansions are underway at Catalent’s Somerset, Winchester, and Schorndorf Germany facilities.
We have also recently acquired OPTIFORM® technology from GSK. - a state-of-the-art solid-form screening service that can efficiently and effectively address all of these objectives. It combines industry-proven workflows and an experienced scientific workforce with high-throughput platform technologies to provide customers with a rapid and material-efficient route to solid-form discovery and selection.
Finally, we have been advancing work on Vegicaps® Capsules, our unique technology that helps solve bioavailability challenges for a broader range of APIs with animal-byproducts free formulations.