| In the past three-and-a-half years, Cedarburg Pharmaceuticals has learned enough about niche generic APIs to make the recent uptick in outsourcing a particularly welcome development.
The Grafton, Wis.-based company has shifted resource back toward serving biotech and virtual pharma, hired a West Coast business development manager, and sought a manufacturing partner in China to keep up with the rising tide of opportunity.
Founded in 1997, Cedarburg has always focused on process development and contract manufacturing. In 2003, however, the outsourcing market slumped, and the firm, like some peers, expanded its activities to include the manufacture of niche generics.
A diversified portfolio tends to smooth revenue, but the right mix isn’t always obvious, and in the case of generics, the learning curve has been steep and expensive.
“We have spent a lot of the company’s money and resources developing generics,” says Charles Boland, executive vice president. “Many of these generics have not been approved yet. It takes a lot more time than we gave for the regulatory approval process.”
In total, Cedarburg has developed eight generic APIs, all with DMFs in the US. Some are sold exclusively to a single customer.
Cedarburg’s own products include fentanyl base and fentanyl citrate, which have also received CEPs in Europe; exemestane; and remifentanyl and delta-9 THC, both close to the end of development.
Boland says that although Cedarburg had considered the commercial and technical risks involved in these generic APIs, it had not understood the regulatory hurdles.
“The regulatory risk is difficult to assess,” he says. “And there, the selection of the partner becomes critical. If the partner does not have the expertise to negotiate the FDA process and to anticipate innovator tactic—such as citizens’ petitions—and to understand those contingencies, then you’ve selected a partner that will not get you to the market at an appropriate time.”
Until the drug reaches market, the days spent waiting for a return on investment stretch into years, and if the timing is not right, the return may be small indeed, for a generic that is not the first to market is likely to be lost among a pack of competitors.
“We don’t want to be in that position again,” says Boland. “That’s the lesson learned. And just because we’re starting to see some sales from these products now, doesn’t change our conclusion. We really want to be focused on the development and custom manufacturing opportunities out there.”
The Right Balance
Those opportunities are apparently on the increase. In the past few months, Cedarburg has received 25% more requests for quotation (RFQs) than last year. Boland attributes the positive results to the improving financial position of biotech and virtual pharma companies. (See sidebar.)
“I think it’s a function of the availability of venture capital [and private equity] money that is making it a lot more feasible for companies to step up their outsourcing activities,” he says. “A lot of people are recognizing that major pharma’s pipelines are dry, and the way that they are going to grow is to acquire products in Phase II or III, so they’re looking at a biotech in terms of the M&A opportunity.
“So you’re starting to see the biotechs able to raise money through the stock market, issuing new shares, in addition to private equity and the venture capital funds. Having more money allows them to invest in these newer projects that maybe they would have put on the shelf.”
Cedarburg’s goal is to achieve a 25/75 split in revenues from generics and outsourcing by 2008, with the portion contributed by outsourcing with increasing over time. Its revenue target for 2009 is $30m.
To facilitate these ambitions, the company plans to add several R&D and analytical chemists to its staff of 47 over the next several months. Cedarburg will also be meeting with prospective Chinese manufacturing partners during CPhI China in June.
Raw materials, intermediates, and contract research programs will be the focus of the partnership, with Cedarburg retaining API manufacturing. The partner must, however, be able to make regulated advanced intermediates under FDA-approved GMP conditions, and the search has consequently been time-consuming, says Boland.
“If the client is okay with our working with a Chinese or Indian partner, we want to be able to access those resources,” he explains.
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Spreading the Wealth
Biotech executives are in an overall optimistic mood, at least if Ernst & Young’s 2007 Beyond Borders Global Biotechnology Report, published last month, is any indication. (For more on this, see p. 26).
One survey included in the study queried CEOS at over 400 companies on their sense of the present and plans for the future. Almost all of the respondents expected to hire over the next two years, and while half of the companies did not have a product on the market, over two-thirds expected to commercialize one within two years.
Solvency tends to be a source of good cheer, and indeed, Ernst & Young reports that biotech financing last year was a solid $15.3bn.
Every year since 2003 forward have provided comparable sums, roughly double the $7.9bn of 2001 and $8.7bn of 2002, though nothing like the $32,7bn of 2000.
Outsourcing may be one beneficiary.
The Ernst 7 Young survey found that while 65% of the respondents already outsource manufacturing, 77% expected to significantly increase their outsourcing of manufacturing within the next two years. Whereas 70% currently outsource research, 77$ expected an increase. While 56% now outsource clinical development, 71% expected a significant increase, and sales outsourcing, already pursued by 16%, was expected to rise by 36% of the respondents. |
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