The world’s top 100 pharma companies

Sponsored by

Pushing the lean agenda

Jim Botkin, Senior Vice-President of Operations

Q. This year has been very eventful for your company; can you tell Scrip 100 a little about what has happened and how this has affected the company’s offering?
In September 2011, the development and manufacturing business Elan Drug Technologies merged with Alkermes to form a global biopharmaceutical company under the name Alkermes plc. Employing over 1,200 staff, Alkermes is a fully integrated, global biopharmaceutical company that develops innovative medicines, with a diversified portfolio of more than 20 commercial products. One aspect of this is the longstanding capabilities for proprietary technologies and manufacturing expertise that Alkermes applies to produce its own proprietary medications, as well as drug products for partners.

My role is to leverage Alkermes’ product development and manufacturing know-how and resources to expand the ways we offer contract pharma services. We now have a broadened range of services from product development and optimisation, to full-scale commercial manufacturing from our US and Ireland facilities.

On the day of the merger, we also announced the signing of a multiyear, multimillion dollar manufacturing agreement with one of the world’s top 10 pharmaceutical companies. This agreement is expected to generate $15 million to $20 million in annual manufacturing revenues by 2016.

Q. Is this substantial deal a one-off, or is there a trend for outsourcing by big pharma that is gathering momentum?
I certainly believe that pharmaceutical contract manufacturing is emerging as a strategic option for many pharmaceutical companies and indeed in a report published earlier this year by Global Industry Analysts, it was forecast that the global pharmaceutical contract manufacturing market alone would reach US $40.7 billion by 2015.

The problems relating to pharma productivity trends have been well described at this stage and have in part fuelled pharma companies’ need to cut costs. One way to cut these costs is to outsource what is considered “non-core” – for many this is manufacturing and product/ process optimisation.

Q. Pharma companies always sought outsourcing solutions – what is so different now?
While it is true that pharma companies have routinely outsourced, in the past outsourcing was often undertaken on a project by project basis to manage gaps in pharma companies’ capacity, with contracts and relationships predominately tactical. However, as manufacturing processes become more complicated and regulatory requirements more complex, pharma companies are finding that developing longer term strategic arrangements are necessary.

Large pharma is becoming increasingly open to outsourcing more of its drug development and manufacturing work to Contract (Development and) Manufacturing Organisations (C(D)MOs) in order to improve efficiencies, cut costs and scale to production demands. As a result, pharma companies engage with fewer partners, but these providers need to deliver a full service offering to compete for business. The model whereby local pharma entities source CMOs to manage their capacity peaks is not sustainable and has, according to a number of commentators, caused many of the GMP compliance issues that have impacted directly on pharma sponsor’s business.

For a pharma company to achieve the greatest benefits, it must reinvent the relationship through persistent discussions with its preferred partners on key areas such as planning, common objectives and the responsibility of operating more effectively against key metrics.

At the recent CPhI World 2011 pre-show conference in Frankfurt, we participated in a session dedicated to strategic outsourcing, where big pharma highlighted the need for CMOs to step up and provide a full service offering that will fulfil their strategic needs. Once a pharmaceutical company can view its CMO(s) as an extension of its own organisation, it can include them in strategic decision-making processes and facilitate data transparency as partners.

Q. There is a trend by pharma companies to engage in contract manufacturing with suppliers based in Asia– has this trend affected your ability to win business?
It is true to say that pricing pressures have driven manufacturing contractors to establish operations in emerging markets such as India, China, Singapore, South Korea and more recently Malaysia. While there are many companies willing to consider outsourcing in Asia, many continue to remain closer to the more established territories of North America and Europe. Western-based facilities will remain competitive with an edge on quality, reliability, proximity and familiarity with proximal markets.

Andrew Witty, CEO of GSK, announced earlier this year that he was moving the manufacturing of a number of products back to Scotland from India. Mr Witty contended that high labour-cost countries can compete with low labour-cost countries if the provider works to a ‘lean’ agenda with minimal overheads, has a relentless focus on continuous operational and process improvements and is a (nearly) fully loaded production site.

Q. Andrew Witty says having a ‘lean’ agenda will allow western-based suppliers to compete, is this something that Alkermes is planning to pursue?
For the past five years or so, particularly in our facility in Athlone, Ireland, we have been pushing this lean agenda through our Operational Excellence (OE) programmes. We have found that the ability to demonstrate OE has been a key differentiator when pitching for business. In general, pharmaceutical companies and contract manufacturers have been historically slow to adopt the well established OE tools such as 5S and lean manufacture.

Many lean implementations have failed in companies for various reasons and/or have not been sustainable. According to an article in the Supply Chain Management Review, common problems across all industries, not just pharma, have been; the lack of leadership commitment, excessive cost reduction focus, improper project selection and suboptimal execution. However, OE and lean initiatives are arguably the foundation on which practically all other improvement tools and waste elimination initiatives rest.

The adoption of an OE culture throughout our organisation and the implementation of industry-recognised measurement metrics such as OTIF (On Time In Full) and RFT (Right First Time) have had a profound positive impact, I believe, on contracts won and also maintained by us. To me, it is surprising how many contract service providers have not yet implemented OE in their plants. For western-based service providers, where labour costs are, as a rule higher than Asian based operations, implementing such initiatives are imperative in order to compete on the finished cost and excel in areas such as quality, lead times and security of supply.

Q. Besides operational excellence, what else do you consider critical to winning and maintaining business?
Without a doubt, it has to be quality. Building efficiencies is worthless if the product you produce is of dubious quality. Again and again, pharma companies are looking foremost for quality and on-time delivery of product from their CMO partners. Look at Johnson & Johnson for example – 11 major FDA recalls with $900 million lost sales in 2010 from its McNeil division alone, all due to quality issues at its own or contracted plants. To be a supplier of choice, having a good quality record is a given. We have been audited by the FDA in our US and European plants since we first began supplying finished goods to the US market in the 1980s.

Since 2007, we have had 11 agency-based inspections from the FDA, EU regulatory authorities and others. There certainly is more industrywide interest in seeking the FDA to increase inspections both in the US and elsewhere, prompted in part by the high profile plant issues at J&J, Genzyme and others. Such audits are to be welcomed as a reassurance that processes and procedures are to the highest exacting standards.

Many observers are also concerned that inspections in high-risk regions like China and India are almost non-existent when compared with the US and Europe and that this lack of inspections poses a risk to public health. In addition to offering optimum quality, one of the most valuable skills I believe we have, as a service provider, is flexibility. Companies seeking a competitive edge for their pharmaceuticals require an ever-growing level of customisation from their contractors. We seek to provide this customised, customer-driven approach to ensure we maintain and win
long-term strategic contracts with our partners.

Q. You mentioned at the start of this interview, that you would offer expanded services as Alkermes – what services in particular?
As well as manufacturing services, we offer full formulation and analytical expertise covering a range of molecule types. With our expanded footprint in the US and Europe, we plan to offer broader knowledge and experience in product development, process optimisation, tech transfer and manufacturing. Our expanded workforce, with a wealth of experience in development and manufacturing, can only increase our attractiveness as an outsourcing partner of choice. With ever-increasing sophisticated products entering the market, it is important to offer a wider range of value-added services.

Being specialists in solid oral development, scale-up and manufacture of small molecules with facilities in both the US and Europe, we pride ourselves, through our expertise honed from our heritage in drug delivery, in providing a range of services from process development right through to commercial scale manufacture. Certainly for us, being able to offer this range of services has become more and more important for our partners. We have found that as companies are merging, closing plants and outsourcing non-core activities, they expect more functions to be managed externally – such as project management, regulatory expertise and product and process optimisation. Being able to offer a range and depth of services with expert scientific staff has, I believe, gone a long way towards winning contracts such as our previously mentioned manufacturing agreement announced in September.

Jim Botkin has recently assumed the role as head of operations responsible for contract pharma services at Alkermes.