BUSINESS
FINDING A FIT FOR CONTRACT RESEARCH Big pharma and biotech firms continually
EVALUATE THE BALANCE of in-house and outsourced assets RICK MULLIN, C&EN NEW YORK CITY
THE CONTRACT RESEARCH organiza-
tion, or CRO, emerged as a distinct service option in pharmaceutical R&D just as the drug industry’s blockbuster era was winding down. The research budget and laboratory staff cutbacks that followed during the past 10 years created a market for R&D services in drug discovery, clinical trials, and chemical process development. CROs in the U.S., Europe, and Asia emerged to offer services in one or all of these areas. But contract research services arose as more than just a support mechanism for downsizing at drug companies. Many small biotech firms depend entirely on contractors for research. And research managers at large drug and biotech firms say contract services have allowed them to focus in-house staff on emerging science while they shift workhorse chemistry outside. CROs have also allowed big firms to access expertise in new science from outside their own labs. The net effect is that outsourcing is no longer an elective option but a permanent fixture in drug R&D at a time when research requirements, laboratory assets, and the management of scientific research are in flux. Interviews with research and process chemistry leaders at drug and biotech firms reveal a complex balancing act in which companies seek to achieve and maintain the right mix of in-house and outsourced services.
executive-level position he now holds. The process chemistry group’s primary responsibility is ensuring that all of the company’s research programs, ranging from early toxicity studies to clinical trials, are supplied with the bulk active pharmaceutical ingredients (APIs) they need. Secondly, it is tasked with delivering commercial manufacturing processes to the Food & Drug Administration for approval. Over the past 10 years, Merck’s use of contractors in process development and chemical manufacturing gradually ramped up. But it wasn’t until Brands took his current position that the effort really crystallized. “We had some people completely dedicated to working with CROs, but we didn’t have anyone representing them on the senior leadership team,” Brands says. “We’ve started sourcing at the level where HIGH PLACES When contract there is such a massive amount research achieved critical mass, of work and deliverables we Merck’s Brands moved to a senior bring back to the corporation leadership position. that we thought the organization needed representation on senior leadership in process chemistry.” routine aspects of process development to Along with R&D outsourcing by Merck focus internal resources on “a more diffiand other drug firms has come globalizacult set of problems” in process chemistry. tion. Not surprisingly, given the amount of Brands leads a team of six chemists in manufacturing that has gone to the region, China and the U.S. Although Merck has Asia has seen rapid growth in the research contracts with U.S. service firms, “the qualservices sector. Brands, in fact, spends ity we get from Chinese CROs matches most of his time in Shanghai near WuXi what we get from the U.S.,” he says. PharmaTech, a top supplier of contract serChinese services can be lower in cost, vices to Merck and other firms. but Brands claims he doesn’t place great WuXi is among the CROs that have atemphasis on cost savings. “What we get tempted to amass a comprehensive offerfrom WuXi is an enormous amount of ing—a one-stop shop for contract research. flexibility,” he says. Because of the service Although Brands and others managing confirm’s size, it can move projects around and tractors are skeptical that one supplier can start and stop work quickly.
Jos Brands is in charge of external process chemistry at Merck Research Laboratories. Having spent more than 20 years in Merck’s process chemistry department, Brands witnessed a rise in research outsourcing that led the company in 2012 to establish the
MERCK
“Chemistry is not a commodity. It is a science.”
MERCK RAMPS UP USE OF R&D SERVICES
establish itself as equally competent at all aspects of drug research, WuXi’s size and varied capabilities fit with Merck’s strategy of limiting the number of CROs it works with, according to Brands. “In the past, we worked with many different CROs and found that a difficult model,” he says. “If you work with a lot of CROs, there is a lot of overhead.” Along the way, Brands has discovered some truths about outsourcing. “There are two general models for outsourcing research,” he says. “One is to generate a technical package, a doable proposition, and to hand it over to a CRO and ask them to execute on it and perhaps generate a kilo or whatever. “With the other model, which we adopted quite early, you do not solve problems internally first. You take the problem to the CRO and work with them shoulder-toshoulder. That is why we have people on the ground in China.” The primary benefit to this approach, Brands adds, is that it frees Merck from the
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research on key scientific problems, says Laurie Chipperfield, senior director of strategic sourcing. She describes an ongoing experiment in balancing in-house and external labs in Pfizer’s worldwide research network. “It’s hard to get people globally under one management regimen,” Chipperfield says. “It’s all about how things pull together into one end product with this mix of internal and external research. We continue to be curious about what can happen in that space.” Pfizer, like Merck, is open to contractBEYOND THE CORPORATE ing with Chinese service firms, despite the concerns some managers have about qualLAB AT PFIZER ity and rising costs. Regardless of contracAt Pfizer, contract research services are tor location, direct engagement is required, a means to enhance efficiency, access according to Chipperfield. research capabilities, and focus in-house “We are collaborative in everything we are doing from manufacturing to development,” she SHIFTING LABSCAPE Pfizer’s Chipperfield says. “We have highseeks the ly capable scientific appropriate level of staff internally that outsourced science provide some guidto accommodate a shifting R&D portfolio. ance up front. The rarity is when we hand something off and wait for the materials. We have weekly teleconferences with the providers and scientific staff. That’s the routine way we do business.” PFIZER
Although Merck, like most large drug companies, has downsized its research staff, it has not outsourced R&D reactively, Brands says. Rather, outsourcing is a strategy for research triage. “When you come from the perspective of doing everything yourself, you basically need to staff yourself for peaks in demand,” he says. “But R&D in a major pharma company these days is such that you don’t always need the peak capacity.”
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Pfizer’s new drug pipeline is evolving, Chipperfield says, and the company is on the lookout for external support in areas such as antibody-drug conjugates and high-potency APIs. “As our portfolio mix changes, we get into different technologies and expertise with our vendors,” she says.
STRIVING FOR SPEED AT GENENTECH Francis Gosselin, director of process chemistry at Genentech, describes his purview as supporting the company’s smallmolecule pipeline by developing processes and delivering APIs for clinical trials. “This is done through a combination of internal manufacturing and outsourcing,” he says. Finding an ideal service firm is a struggle, Gosselin says, as is achieving the right balance between in-house and external resources. “It’s a matter of using our internal resources on the most challenging chemistry and on high-priority projects where you need to move fast,” he says. Gosselin emphasizes speed as a prime consideration in selecting a service firm. Having a one-stop shop that can handle a job without needing to transfer technology to another service firm would be a definite advantage, he says. “But we are struggling to find a firm that can do the research fast, do the development fast, and do the manufacturing fast so that everything goes fast.”
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BUILDING FOR SPEED Gosselin has his
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Expertise varies regionally, Gosselin notes. “There are places in Europe with outstanding reputations in development and manufacturing, but they don’t necessarily move very fast,” he says. “China, in general, moves quite fast. But if you run into very sophisticated development problems, they lack a bit. India is not part of the equation other than for supplying starting materials.” As for the U.S., “we are struggling to find shops that can do all these activities very well so that we are not five or more time zones away,” Gosselin says. On the other hand, he acknowledges that 24-hour-a-day operation is a benefit of spreading research out to Europe and Asia. And as CROs become larger and more diversified, research services in areas such as hazardous chemistry and final-dosage formulation become available. “And I see more CROs coming up around catalysis and biocatalysis,” Gosselin says. “Not necessarily to the point of manufacturing. But in terms of research? Yes.”
HOLDING ON TO SCIENCE AT AMGEN At Amgen, outsourcing has ramped up rapidly since 2010, when the firm was still doing all research and small-scale manufacturing in-house, according to Matthew Bio, director of process development. “Since then, we have been building up a network of suppliers for our early-phase pipeline. We started with outsourcing API starting
materials, but since 2012, we have been outsourcing cGMP intermediates,” he says, describing intermediates made in keeping with FDA’s current Good Manufacturing Practices standards. Outsourcing advanced partly as a means of reining in R&D spending, Bio says. But it was also driven by advances in the company’s research pipeline. “We got to the point where we would have had to hire a lot more people or find a way to do our work differently,” he says. “The decision was to develop a network of suppliers.” Process development is still done internally, other than for a handful of specialized chemistries such as crystallization and enzymatic catalysis. Amgen wants to go further, but the path is rocky. “We’re looking at the cost-benefit of doing the entire first delivery up to the drug substance externally,” Bio says. “We have played around with that, done case studies and one-off experiments.” It’s not yet clear whether the approach is feasible. One challenge is keeping the number of suppliers to a minimum. Currently, Amgen contracts with Syngene in India, Norchim in France, and Sigma-Aldrich and Hovione in the U.S. Suppliers tend to work with the company at different stages of drug development. Bio agrees with others about the unlikely prospect of finding the perfect one-stop supplier. “I think there is a lot of interest in doing that from the business side of the house,” he says. But the complexity of pharmaceutical research is such that any one supplier is rarely good at everything. As Amgen moves forward, so does the CRO sector. Bio agrees with his peers that the trend toward outsourcing research is irreversible. “And that’s the great fear,” he says. “There are cases now where nobody internally has experience scaling up a chemistry that all of a sudden needs to move rapidly. The real danger is in the young staff who, in some places, have never done any scale-up work themselves.” Outsourcing, he says, can cut scientists off from critical training. “You see a real disconnect between the understanding of how things run in a plant versus the process development.” Amgen guards against this, according to Bio, by requiring chemists to be in the plant for the running of processes, even if confidence is high that they will be problemfree. “It might be their only opportunity to experience the impact of scale-up on their CEN.ACS.ORG
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