Successfully Managing Biopharmaceutical Manufacturing Outsourcing

Transcription

1 Successfully Managing Biopharmaceutical Manufacturing Outsourcing Pre-Conference Workshop IQPC 4 th Annual Contract Manufacturing Forum May 22, 2006 Patricia Seymour BioProcess Technology Consultants, Inc. Acton, MA

2 Introduction What is a Biopharmaceutical Developing Biomanufacturing Processes Developing a Manufacturing Strategy and the Availability of Bio-manufacturing Capacity Identifying and Qualifying the Right CMO

3 What is a Biopharmaceutical Product? Products made by or composed of viable organisms Natural & rdna Proteins, Monoclonal Antibodies Vaccines, Cell and Gene Therapy Blood and Blood Derivatives Traditional Biologics Defined by Manufacturing Process Difficult to demonstrate purity, identity, potency & consistency Early biopharmaceutical products included simple proteins, typically replacement for existing natural products, e.g., insulin, alpha interferon Today s biologic products more complex proteins with significant tertiary structure and post-translational modifications Current biologics can be manufactured, characterized, and assayed with drug-like control and resolution Tightly defined production processes with high-resolution analytical methods

4 Biopharmaceutical Development Timeline Product Concept Development Laboratory & Animal Studies IND/CTA Submission Preclinical Basic Research 30-Day Wait Clinical Development R&D Reg. Strategy Product & Mfg. Development Finalization Short Term Long Term IND Preparation Initial Review Supplemental Reporting & Review BLA Review Treatment IND Product Marketing Human Studies NDA-PLA/EMEA Submission Phase I Phase II Phase III Phase IV? RTF / Non-approval Drafting Review & Approval Supplements Manufacturing Benchtop Pilot Clinical Commercial Secondary Time 1-5 yrs 0.5-2yr 1-3yrs 1-5yrs 1-3yrs total 5-12yrs Costs $0.5-5 Million $ Million $ Million

5 Biologics vs. Drug Development: Mean Clinical Development and Approval Time Years Biopharms Drugs Reference: DiMasi, 2003

6 Cost of Manufacturing of Biopharmaceuticals Processes are fixed-cost driven Manufacturing costs typically 15 25% of COGs Basic cgmp background identical to chemical drugs Complexity of products results in demanding technical processes and high capital investments Factors influencing manufacturing costs Process design and plant capacity Operating Strategy Equipment and Facilities Costs Materials Costs Labor Costs Overhead Structure

7 Breakdown of Manufacturing Costs 100 kg/year 1000 kg/year Overhead/Indirect Labor 22% Utilities & Waste 9% Capital 40% Quality & Indirect 20% Utilities & Waste 6% Capital 29% Materials & Consumables 13% Direct Labor 16% Materials 29% Direct Labor 16% Typical mammalian cell culture monoclonal antibody process In collaboration with BioPharm Services, Inc.

8 Production Hosts Influence Manufacturing Costs Bacteria Yeast Mammalian cells Simple proteins No post-translational modifications Relatively simple fermentation Generally lower COGs Complex Proteins Post-translational modifications More complex fermentation Relatively high COGs Production host will determine Quantity of product produced Quantity and type of contaminants Post-translational modifications, i.e., glycosylation Economics & regulatory issues

9 General Considerations for Host Selection Overproduction may cause aggregation or degradation by host, toxicity to host cell, inaccurate or incomplete processing of product. For each product, it is necessary to evaluate source so that maximum amount of biologically active product can be obtained. Availability of appropriate expression vectors Inducible expression for potentially toxic proteins Proven technology for selecting cell lines with high expression levels Access to reasonable licenses for use of existing technology COGS analysis for production of clinical and commercial material consistent with predicted dose and price of final product

10 General Considerations for Host Selection Proven track record with regulatory authorities Untested production organism require higher burden of proof of safety and reproducibility Anticipated expression levels and ease of downstream processing Secreted product often easier to process than intracellular Approximate productivities Mammalian cell culture: g/l MAbs at high end (~1 + g/l); rproteins lower; Expression levels likely to rise to ~10 g/l by 2015 Microbial fermentation: 1-10 g/l dependent on product, formation of inclusion bodies, secretion of product, etc.

11 Bacteria Advantages Well understood molecular biology; Simple vector construction High intracellular expression levels; periplasmic secretion possible Simple cell bank characterization Rapid cell growth in inexpensive media Established regulatory track record Disadvantages Protein refolding & separation of incorrectly folded from properly folded product Proteins lack post-translational modifications Micro-heterogeneity, including N-terminal methionine Fusion partner may be required Removal of endotoxins from product (Gram-negative)

12 Yeast Advantages High expression levels & rapid growth Established large-scale fermentation technology; Low media costs Genetics well understood; natural secretor Proteins properly folded Lack endotoxins Disadvantages Heterologous proteins may be incorrectly glycosylated and folded; often over glycosylated Complex vector construction Difficult to lyse

13 Mammalian Cell Culture Advantages Correct post-translational modifications Properly folded proteins Easily secreted Good regulatory track record Disadvantages Expensive Require expensive media Slow growth & low production levels Potential oncogene contamination Extensive cell bank characterization

14 General Scheme for Biomanufacturing Working Cell Bank (WCB) Innoculum Preparation Production Bioreactor Primary Recovery Purification Polishing Drug Substance (API) Formulation (optional) Aseptic Processing Drug Product Formulation Drug Substance (API)

15 Drug Substance Manufacturing Innoculum preparation Thaw vial from Working Cell Bank Expand culture to desired production volume Production bioreactor Maximize cell density Maximize product expression Primary recovery Separate cells from culture media Concentrate and stabilize product for ease of handling Purification Removal of majority of host cell contaminants, media components, product-related impurities Polishing Removal of final traces of host cell contaminants, product-related impurities Formulation Transfer product to final storage conditions Prepare for Drug Product manufacturing

16 Drug Product Manufacturing Formulation Adjust protein concentration Add additional excicipients and/or stabilizers Aseptic Processing Most biologics can not be terminally sterilized Sterile filtration required to achieve sterile product Container/closure Considerations For early-stage clinical trials, glass vial with rubber stopper most common Lyophilization often required for stabilization Late-stage and commercial products, alternate container/closures for added patient compliance/ease of use Pre-filled syringes Dual chamber vials

17 Developing a Manufacturing Strategy and the Availability of Biomanufacturing Capacity

18 Developing a Manufacturing Strategy We will not get this perfectly right - Art Levinson, Genentech, SF Chronicle 12/21/03 What s the cost of being wrong? Excess Capacity Carrying Cost of Facility and Organization: Estimated carrying cost of a facility operating at 50% capacity: $2-3 M/mon Example: Synergen (Antril) Inadequate Capacity Cost of Lost Sales Estimated loss of operating profit (50% shortage): $40-45 M/mon Does not include other costs (reputation, competition, etc.) Example: Immunex (Enbrel) Estimating the range of probable outcomes is important See also: Mallik, A. et al, The McKinsey Quarterly, 2002 Special Edition: Risk & Resilience

19 Developing a Manufacturing Strategy Company pipeline Technology biased towards a certain product type or production technology? Development stage Does company require early stage, clinical, and/or commercial manufacturing capacity? Manufacturing technology/growth objectives Does company own or control proprietary manufacturing or process technology? Would internal manufacturing capabilities provide a competitive edge? Would ability to expand pipeline by in-licensing be enhanced by controlling manufacturing capacity? Manufacturing strategy must address needs throughout the product life-cycle from R&D through production of clinical trial materials to commercial manufacturing

20 Build, Outsource, or Acquire Capacity? Can we afford it? Will our needs justify the investment? Is supply risk critical? Is it a strategic investment for our company? Is a suitable facility available to acquire? Key Issues A Manufacturing Strategy Is not an All-or-Nothing approach but is based on sound evaluations of key issues and opportunities

21 Drivers for Build vs. Buy Decision Core Competency Assessment We re Good At It Not Many Others Are Is Buy an Option? Technology Requirements Scale Capacity Availability Supply vs. Demand Strategic Fit Pipeline Competitive Advantage Development Stage Risk Management Control Cost and Probability of Failure Financial Considerations Return on Capital Cost of Capital Operating Costs

22 Managing Risk

23 Mammalian Cell Culture Capacity Distribution by Company 2004 Contract Manufacturers Total installed capacity ~400,000 L Product Development Cos. Total installed capacity ~950,000 L

24 Capacity Utilization What is Full Utilization What is the current industry-wide level of capacity utilization Ref: BioPlan Associates, A Survey of Industry Capacity, 2003 Survey of 100 biopharmaceutical manufacturers

25 Future Availability of Biomanufacturing Capacity Named for the casinos of Monte Carlo, Monaco Mathematical simulation based on distribution of values for each input variable rather than single fixed value Calculates a probable range of output scenarios based on multiple iterative calculations using random values from within the defined probability ranges for each input variable Useful in identifying and quantifying risk in complex multivariable problems

26 Total Capacity Demand Distribution By Year 2003 projection 2005 projection 5, Reactor Volume ( 000 L) 4, , , , Ye ar See also: Brastow, and Rice, BioProcess Intl., 1 46 (2003)

27 Let s walk through the build or acquire scenarios

28 Mammalian Cell Culture Facility Costs Ref: Barnett International s BioManufacturing Conference, Boston, 2002

29 Cost of Capital vs. Return on Capital Can/will Return on Capital be shifted higher from more products higher throughput more efficient technology So that Cost of Capital is less than the Return on Capital? A company s Cost of Capital defines the scale of investment in capacity that makes economic sense

30 Typical Facility Staffing Levels Category Low Mid High Plant MGMT: Admin Reg Quality Plant controller MFG Ops Eng/IT TOTAL NOTE: Staffing Estimate example developed for intermediate scale late-stage clinical single-product manufacturing facility

31 Timing of Plant Construction vs. New Product Launch Phase I (12 months) Safety Plant investment decisions must be made long before product approval Phase II (24 months) Dose Finding First Efficacy Clinical Development Timeline (6-7 years) Phase III (24 months) Pivotal Trials Filing & Review (18 months) Lead-Time for Building a Commercial Plant (~4 years) Design (12 months) Construction (24 months) Validation (12 months) Product Launch Are product forecast data robust enough to provide confidence to follow Build strategy? Can organization support Build strategy if product fails?

32 Acquiring Existing Capacity As the biopharmaceutical industry matures, older manufacturing facilities may become available for acquisition Examples: Amgen acquires Synergen Primary motivator for acquisition not manufacturing capacity Centocor acquires plant from Wyeth Plant history: Invitrogen Centocor Chiron Wyeth Centocor Cephalon acquires Bio Science plant #1 Converts CMO capacity to captive capacity Cambrex acquires Bio Science and Marathon Allows Cambrex s entry into biologics CMO business

33 Acquiring Existing Capacity Additional examples: Dow acquires Collaborative BioAlliance Allows Dow s entry into biologics CMO business Dow has exited the CMO business; facility may be available Genentech acquires Porrino plant Establishes European manufacturing capacity Tanox acquires Biogen Idec Torreyana facility Allows shift from outsourced manufacturing to in-house supply Genentech acquires Biogen Idec NIMO facility Additional manufacturing capacity to support Avastin production

34 Let s walk through the outsourcing scenarios

35 Benefits of Outsourcing Capital Conservation Speed to Market Redundancy Available capacity/optimized technology Flexible production schedule to suit client s timing needs Qualified cgmp-trained staff Full documentation, regulatory and quality systems in place Captive technical and regulatory consultants; access additional expertise Maintain low overhead and minimize cash flow Release capacity required for other products Lower price of product Minimize risk

36 Risks of Outsourced Manufacturing Lack of Control Avoiding capacity crunches Monitoring remote site(s) Technology transfer Ensuring schedules Protecting technology Documentation Compliance Underestimating internal resource requirements

37 When Outsourcing Makes Sense Limited technical and monetary resources Product development efforts focused Product pipeline small and/or very diverse Need for Process Development assistance Need to meet milestones to obtain additional financing Availability of capacity/capabilities No in-house capacity Technology outside core competence and readily available

38 Let s walk through the trade-offs

39 Product Lifecycle Drives Make vs. Buy Decisions Primary Driver: Maximizing Control Make strategy during highest risk period to maximize control of supply Make Product Launch Make or Buy Manufacturing costs set at decision point Buy strategy may make sense once product lifecycle stabilizes, risk decreases, and control less important RISK Development Uncertainty Market Uncertainty Maturity Example: Genentech outsources Rituxan Easier to transfer mature process Minimize impact of know-how leaks Retain control of less mature process (Avastin) Product Life Cycle

40 Product Lifecycle Drives Make vs. Buy Decisions Primary Driver: Conserving Capital Buy Buy or Make Product Launch Buy strategy during highest risk period to conserve capital Manufacturing costs set at decision point Make strategy may be attractive once product lifecycle stabilizes, capital becomes more available, and risk reduced RISK Development Uncertainty Market Uncertainty Maturity Product Life Cycle Example: Imclone outsources through clinical supply and launch then switches to inhouse production Outsourcing minimizes capatial expense during risky development phase Following successful product launch capital is more available to build its own facility

41 Summary - Tying It Together Clear Make Technology requirement not available in marketplace Significant ROI High degree of control needed Clear Buy No in-house capacity Limited pipeline Limited access to capital Technology outside core competence and readily available It Depends... ROI on edge of economic sense Manage risk of product lifecycle Need for strict control unclear Mfg strategy directive

42 Summary Decisions related to manufacturing biopharmaceuticals are strategically significant and involve significant capital and resources A range of analysis should support a company s make vs. buy vs. acquire decision, including: Assessment of the company s pipeline and development stage Determination of strategic fit with business Risk assessment Evaluation of the industry environment for manufacturing capacity and external buy/acquire options

43 Identifying and Qualifying the Right Contract Manufacturer

44 Selecting a Contract Manufacturer Single most important decision to be made Make a detailed list of your requirements Prioritize and weight the requirements Rank each of your needs for each contractor Cost should not be the number one priority

45 Identifying Vendors for Process Development Experience in desired host organism i.e., Microbial expertise does not automatically mean capability in both bacteria and yeast Availability of proprietary host cell lines or cell line construction methodology that can enable more rapid progress toward clinical trials Review all applicable IP associated with proposed production system and determine fees in advance Ability to continue to develop manufacturing process Availability of manufacturing capacity at anticipated scale for the program

46 Outsourcing Process Development & GMP Production Ability to develop processes and availability of GMP compliant manufacturing facilities and quality systems Pre-selection compliance audit of candidate vendors recommended Track record in process development at similar scale and for similar product types For antibody products, previous antibody experience desirable GMP manufacturing capacity at anticipated scale and timeline Flexibility in scheduling desirable in case process development is delayed Supporting analytical capability to support process development and manufacturing

47 CMO Selection Process Define critical parameters and create list of suitable vendors Contact vendors to determine interest and availability Create short list of vendors and sign CDAs CMOs will insist on CDA prior to submitting proposals with timeline or financial information Prepare and circulate Request for Proposal (RFP) to vendors Compare proposals Site visits to top 2 3 vendors Selection Entire selection process takes 2-3 months per major activity

48 Example of Critical Parameters Definition Technical Mammalian cell culture experience, preferably including some non-antibody products Process Development and scale-up experience 500L clinical GMP manufacturing capacity Analytical development capability Other Location? Availability of PD and manufacturing capacity Perceived cost Responsiveness to customer inquiries and requests

49 Use Detailed RFP to Select and Evaluate CMOs RFP will ideally outline all activities for which a time and cost estimate is required Omission of desired SOW in RFP leads to proposals that are not easily comparable RFP should be sent to candidate vendors at same time, with same deadline for response Ability to meet the initial deadline indicative of future responsiveness of CMO Deadline must be realistic and allow time for CMO to prepare project-specific timeline and budget Decision making mechanisms should be in place and process and timing of final decision should be known

50 Biopharmaceutical Manufacturing Vendors Manufacture of Bulk Drug Substance (DS) GMP suites will contain bioreactors and harvesting equipment Downstream processing equipment in separate suite Analytical methods to support all stages of manufacture Manufacture of Final Drug Product (DP) Fill/finish facilities will contain compounding rooms for formulation (dilution, addition of excipients) One or more GMP filling lines for aseptically filling product into final containers (vials, syringes) Potentially will contain lyophilization capability Analytical Methods Development and Stability Testing Usually performed by the DS or DP vendor

51 Biopharmaceutical Manufacturing Vendors Formulation Development Must have strong analytical capability to support formulation decision making experiments Must have stability chambers for forced degradation and accelerated stability Packaging, Labeling, and Distribution May be provided by Drug Product CMO Offered by some vendors as separate service Capability to distribute within countries targeted for clinical trials or commercial license essential

52 CMO vs. In-house Manufacturing Availability and Capabilities Directory of Contract Services, Vol. II, H.Levine and J. Miller, eds. Pharmsource Information Services, Inc. (2001). S. Fox, American Pharmaceutical Outsourcing, 1: (2000)

53 Who Are The Contractors? Small R&D laboratories Small scale development companies Phase I/Phase II manufacturers Full service contract manufacturers Companies with excess capacity

54 Preparing a Request for Proposal Content of RFP depends on activity being outsourced and clinical development phase of program RFP for cell line and early stage program contains desired process yields, timelines, and scale RFP for clinical distribution contains complete description of clinical program for blinded labeling and coding RFP may be composite or single focus Analytical and formulation development often performed at same CMO Benefits to single RFP and proposal but may take more time to negotiate Fill/finish and distribution may be combined Vendor can provide quotation on those areas that are within the CMO s capability

55 Outsourcing Early Stage Activities for Drug Substance Production Construction of expression vector and isolation of production cell line Often performed in-house, prior to outsourcing May not be a strength of late stage manufacturing organizations Develop initial cell culture and purification process Benefit to outsource for platform products such as antibodies Utilizing a generic process at an experienced CMO often saves time and money For unique products with unknown performance, in-house early development activities can be more cost-effective

56 Outsourcing GMP Manufacturing of DS Cell line and process already developed in-house CMO and client often disagree on definition of a developed process Outsource GMP production Minimal development activities necessary at CMO Technology transfer through documentation and in-person transfer meetings Adapt process to run using equipment at CMO Different scale bioreactors Alternate instrumentation for HPLC, ph, etc. Deliverable is fully released active DS, ready for fill/finish

57 Analytical Methods Development Outsourcing Key component necessary to support process development and monitor product stability In process assays to monitor yield and performance critical for effective decision making during process development Determine key product release assays Analytical development usually initiated in-house with methods transfer to CMO for final development and qualification (or validation) Some methods are routine and CMOs have generic SOPs ph, osmolality, appearance, endotoxin, particulate matter Analytical methods different for different products Specific binding to therapeutic target Bioassay is essential to determine potency

58 Formulation Development Outsourcing Knowledge of protein properties essential to initiate formulation development Observed stability at various ph, temperatures, other conditions Tendency to aggregate, dissociate (multimers), oxidize, or degrade through proteolytic cleavage Stability analysis performed rigorously by CMO using existing knowledge as a basis for experimental design Prior formulation development experience essential Proper stability testing will insure selection of optimal formulation Analytical method development and execution essential

59 Drug Product Manufacturing Outsourcing Fill/finish is often outsourced even when DS produced inhouse Selection criteria based on desired presentation of final product Lyophilized or liquid Vial or pre-filled syringe Storage temperature Analytical capabilities essential for DP manufacturing CMO Deliverable is product in final configuration, ready for shipment to distribution facility or clinic DP vendors may provide packaging and distribution services, or this may be outsourced to a third vendor

60 Preparing an Effective RFP: A DS Example Expected deliverables When material needed and how much? Analytical methods development, qualification, or validation? Overall program timeline Desired scale of final process Process details More detail will enable vendors to provide accurate pricing and timelines Information about desired product and potential variants essential Yield and purity obtained thus far in process development, if known

61 DS Manufacturing Decisions Prior to preparation of RFP for DS GMP manufacturing services, customer must determine the following: Production host Different CMOs have experience in mammalian cell culture, microbial fermentation, or both Desired product quantity to support preclinical and clinical activities Determines scale and number of GMP runs; therefore determines which CMOs can meet the demand Timing of preclinical and clinical activities Customers often unrealistic about necessary development times CMOs often offer timelines that are difficult to achieve, in order to obtain the business

62 Effective Project Description Statement of work with specific tasks and goals outlined Prepare CHO production cell line using vector provided by client Deliverable: Fully characterized MCB (and WCB?) Develop cell culture process with yield of at least 1.0 g/l Deliverable: Master batch record defining process Develop purification process with acceptable viral clearance and >50% product yield Deliverable: Master batch record, results of scale-down viral clearance study Scale process to >200L scale; provide material from engineering run to client for tox studies Deliverable: 100 gm Bulk Drug Substance

63 Ineffective Project Description for Drug Substance Describe product and clinical approach in detail General statement of work with no delineated activities, deliverables or timelines: We need the product to support our pre-clinical tox studies in June 2007 and to support human clinical trials in Dec 2007 Is there a cell line? Desired (realistic) yield and purity of process? Analytical methods? Minimal process details: The product is produced in CHO cells and purified by a two column procedure Scale and yield thus far? Perfusion or fed-batch? Type of columns?

64 Sample RFP Table of Contents 1. Background and Objectives 2. Scope of Services Requested a. Analysis of Product Provided Material b. Construction of Expression Vector, Cell Line, and RCB c. Preparation of Master (and Working) GMP Cell Banks d. Development and Scale-up of Cell Culture Process e. Development and Scale-up of Purification Process f. Quality and Analytical Support Services g. Production of DS for Tox Studies and Phase 1 Trials h. Documentation Required 3. Project Estimates and Fee Schedule 4. Qualifications 5. Deadline for Submission of Proposals 6. Appendices

65 Process Information for RFP Production cell line Host cell system Current productivity and conditions in which that productivity is obtained (shake-flask, small bioreactor?) Factors known to influence productivity Purification methods Number and types of chromatography steps utilized Any information on viral clearance using existing process Filtration or other steps currently used Scaleability of filtration and centrifugation steps

66 Analytical Methods Information for DS RFP Lot release tests and specifications if known All methods and specifications should be listed Provide product-specific or unusual methods to help CMO provide accurate timeline and pricing Status of method development Will assays be transferred in only or is development needed at the vendor? Assays should be qualified or validated? Analytical methods for MCB testing Must meet regulatory guidelines Additional testing desired Known issues with chosen host cell (if unusual)

67 The Vendor Selection Process Consider at least 5 6 vendors Obtain a minimum of 3 competitive bids Request contract terms as part of bid response Talk to references Capture data for future reference

68 Sponsor Top Issues and Concerns Ref: Moving the Bioindustry into the Manufacturing Phase, Coopers & Lybrand Survey, 1996

69 Additional Sponsor Expectations Rapid turn around time On-time manufacturing Cost-efficient processes Up-to-date regulatory compliance Customized manufacturing processes Scale-up engineering

70 Sponsor Expectations: Need for Process Development Ref: Moving the Bioindustry into the Manufacturing Phase, Coopers & Lybrand Survey, None Required Sponsor Expectation Some Required CMO to develop entire process BPTC Experience

71 Selecting a CMO One Example

72 Typical CMO Timeline and Pricing Timeline (Avg.) Timeline (Range) Pricing (Avg.) Pricing (Range) Preclinical 9 months 3-30 months $600,000/batch $50,000 - $2,700,000/batch $6,000/g $750 - $12,000/g Phase I/II 13 months 3-30 months $772,000/batch $200,000 - $1,500,000/batch $6,000/g $500 - $15,000/g Phase III 18 months 6-66 months $160,000/batch $200,000 - $4,000,000/batch $1,600/g $200 - $5,000/g Commercial 18 months 4-84 months $1,650,000/batch $200,000 - $3,000,000/batch $450/g $100 - $1,000/g Ref: HighTech Business Decisions, Moraga, California

73 Examples of CMO Manufacturing Costs Costs listed are for process development and manufacture of early stage clinical trial material (Phase I/II) for mammalian cell culture

74 Essential Elements to Successful Outsourcing Business Terms Tie pay to performance Pay attention to signals and be proactive Establish the core team early Keep the group small Divide the key responsibilities Have clear expectations about deliverables and timelines Each relationship is unique

75 The Sponsor/CMO Relationship Finding the right match is key for success No ideal contractor for any one sponsor No ideal sponsor for any one contractor Not a traditional customer - supplier relationship Relationship is similar to a partnership Customer is always right adage does not apply exclusively to Sponsor Typically not a one-shot deal Each relationship is unique Must understand each other s culture

76 Effect of Negotiations on the Relationship Selection Negotiation Implementation

77 Why the Problems During Negotiation? Realization that this is not a partnership Fee for service relationship CMO puts up no money, assumes no risk CMO gets paid whether or not product is successful Switch from process to deliverables Focus on specific tasks to be performed, cost, and what Sponsor will receive Buying service not product Oh, you want us to do that too? You want it when?

78 Why the Problems During Negotiation? Risk avoidance becomes key objective Contracts deal with worst cases What-ifs breed distrust Excessive coverage/risk transfer demanded Sources of Risk Business loss No efficacy, safety, cash, sales Property loss Fire, loss/damage in transit, data destruction Contractor performance Batch failure, non-compliance Product liability Subject/patient adverse event

79 Major Contracting Issues Respective Obligations Detail mutual responsibilities Who, what, when, how Standards for performance Task and payment schedule Procedures for changes and deviations Resource allocation Procedures to remedy faulty performance Discussion, arbitration, litigation Refund vs. Rework Limitation of liability

80 Major Contracting Issues Intellectual Property Who is actually contributing knowledge and value vs. who happens to be around when it is created Ownership, right to license, right to negotiate, option Joint inventorship not as easy as it sounds! Patents vs. Trade Secrets Patent: utility, novelty, non-obviousness, full dislosure Trade Secret: kept secret, not generally known, commercial advantage

81 Major Contracting Issues Regulatory Compliance Performance guarantee and certification Contractor s QC and QA responsibilities Validation documentation and rigor Control of applications Reference rights Disclosure of FDA inquires and inspections Non-FDA obligations: EPA, OSHA, State, Federal, Foreign Post-contractual needs and obligations

82 Major Contracting Issues Warranties, Indemnifications, and Remedies Warranty promise on current or future status Indemnification coverage against third party action Remedies rights in event of breach Dispute Resolution and Enforcement

83 Development and Supply Agreements Purchase Order Cost per gram vs. cost per batch Development Agreement Cost Milestones Access to process and ownership of technology Supply Agreement Duration Market share and pricing Cancellation notice, take or pay, etc.

84 Goal: Successful Fee-for-Service Relationship Sponsor gets Fair price Deliverables that meet specifications and timelines Competence and quality Excellent service Vendor gets Reasonable margin No FDA problems or hazard losses Repeat business Good reference

85 Dos and Don ts of Successful Outsourcing Relationships Don t say it s urgent unless it really is Share your objectives Take advantage of the Contractor s experience and expertise Stick to your deadlines Don t assume things will happen just because you want them to Don t blame the Contractor for things it can t control Don t assume you are the Contractor s only client Don t be a serial shopper Don t be overly concerned about price Investigate significant differences before making decisions Don t change the project after it starts Don t destroy your relationship over an occasional error Remember the Golden Rule of Outsourcing: Treat your contractor the way you would like them to treat you

86 Conclusions Effective RFPs for any outsourced activity should generate proposals that can be compared Detailed description of desired service essential Use Scope of Work format in RFP and request line by line responses in proposal from CMO CMO not always cooperative in providing breakdown pricing Request quality/compliance history Formal pre-selection audit should be performed after receipt of proposals and before final choice All manufacturing activities can be outsourced Client has final responsibility for product quality, timeline, and budget

87 One final view of outsourcing

88 Thank you! BioProcess Technology Consultants, Inc. 289 Great Road, Suite 303 Acton, MA (o) (m)

89 Appendix

90 Success Rate and Turnover Data Turnover statistics (2003/2004) No BLA products remained in the same stage All either approved or rejected 60 65% of Phase III products remained in Phase III 40% moved forward or failed 61 67% of Phase II products remained in Phase II

91 Biopharmaceutical Production Objectives Quality Timeliness Quantity Cost Safe for humans Meets standards (GMP) Reproducible First to market launch Rapid material supply Adequate productivity to meet clinical supply & market supply Meet cost target Depends on dose and price Economics acceptable and predictable

92 Sample Final Product Specifications Purity >98 % Purity typically determined by two or more assays Potency As defined by assay Product-related Impurities Identified for >1% No single impurity >2% Host Cell Protein <100 ppm DNA <100 pg/dose Endotoxin <y eu/mg Based on dose & a limit of <50 eu/kg body weight

93 Biopharmaceutical CMO Market Growth Biopharma CMO $1 B Biopharma CMO $3 B Biopharma $29 B Biopharma $70 B Total pharma market $390 B Total pharma market $690 B Outsourcing of commercial manufacturing accounts for approximately 3.5% of biopharmaceutical product revenues CMO percentage of market to remain relatively flat through 2007 Sources for BPTC Estimate: IMS Health, Arthur D. Little, and Woods-Mackenzie

94 Biogen Idec NICO Facility Available Q Designed as a licensable, multi-product, clinical & launch facility Approx 70,000 sf located in Oceanside, CA 2 x 2,750L bioreactor capacity Supporting seed, purification and formulation train Approx 18,000 sf of clean-room space Manufacturing QC lab Warehouse Facilities support Engineering, MTS, Validation, QA Full plant wide data acquisition and automation: Emerson Delta V and Siemens Automation systems - linked

95 Success Rate and Turnover Data Turnover statistics (2003/2004) No BLA products remained in the same stage All either approved or rejected 60 65% of Phase III products remained in Phase III 40% moved forward or failed 61 67% of Phase II products remained in Phase II

96 Manufacturing: Outsource or Perform In-House? In-house Outsourcing Capital for design, land, structure, equip Utilize existing equipment & facilities Staffing & operating costs fixed regardless of utilization Validation cgmp infrastructure & regulatory compliance Impact on existing operations Finding, qualifying & negotiating w/vendor Monitoring, project management, inspection Technology transfer Economies of scale Access to proprietary technology Actual work/delivered materials Loss of control Improve time to market