PHARMACEUTICAL EXCIPIENT MARKET OVERVIEW AND OUTLOOK

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1 PHARMACEUTICAL EXCIPIENT MARKET OVERVIEW AND OUTLOOK NOVEMBER, 2017

2 INTRODUCTION Table of Contents COPYRIGHT AND USAGE GUIDELINES...4 INTRODUCTION...5 Methodology...7 How to Read this Report...9 Respondent Demographics and Qualifications...10 Respondent portfolio and pipeline drug product knowledge Visibility into pipeline and portfolio of drug products Major Sections...13 MARKET DYNAMICS...14 Primary Section Takeaways...15 Key objectives in excipient use...16 Department influence on excipient supplier selection Excipient supplier resources and sources...18 Sponsor influence on excipient source...19 Sponsor perspective...19 CMO perspective...19 Small molecule originator drug products Excipient use and proprietary excipient use by category Proportion of proprietary excipients by category...21 Proprietary excipient use by formulation...22 Generic drug products...23 Excipient use and proprietary excipient use by category...23 Proprietary excipients use by category...23 Proprietary excipient use by formulation Biologic drug products, including biosimilars Excipient use and proprietary excipient use by category Proportion of proprietary excipients by category...27 Proprietary excipient use by formulation Annual excipient expenditure Annual spend by company size Proprietary vs non-proprietary excipient expenditure...31 Excipient market growth drivers...32 SERVICE PROVIDER SELECTION, PERCEPTIONS AND LOYALTY...33 Primary Section Takeaways Top 5 excipient supplier selection attributes...35 Excipient supplier satisfaction drivers Excipient suppliers...37 Use of preferred providers Top suppliers by familiarity Small molecule originator drugs Excipient supplier consideration use, and loyalty Generic small molecule drugs...41 Excipient supplier consideration use, and loyalty...41 Biologic drugs, including biosimilars Excipient supplier consideration use, and loyalty STUDY DATA Excipient Usage Objectives Excipient supplier resources Most useful excipient supplier resources Excipient suppliers...47 Number of approved suppliers Difficulty in using a non-preferred vendor Excipient sources Sponsor influence on excipient source CMO perspective...51 Sponsor influence on excipient source Sponsor perspective...51 Excipient categories for small molecule originator drug products...52 Use of proprietary excipients in originator small molecule drug products by formulation...53 Proprietary excipient categories for small molecule originator drug products Percentage of proprietary excipients in small molecule drug products by category...55 Excipient categories for generic small molecule drug products

3 INTRODUCTION Use of proprietary excipients in generic small molecule drug products by formulation...57 Proprietary excipient categories for generic small molecule drug products Percentage of proprietary excipients in generic small molecule drug products by category Excipient categories for biologic drug products Use of proprietary excipients in biologic drug products...61 Proprietary excipient categories for biologic drug products Percentage of proprietary excipients in biologic drug products by category Visibility and excipient expenditure Proprietary vs non-proprietary excipient expenditure Excipient expenditure by category and formulation Excipient supplier selection attributes...67 Excipient supplier satisfaction drivers Supplier familiarity Excipient use by category Excipient providers considered for small molecule originator drugs...73 Excipient use small molecule originator drugs...75 Excipient supplier performance small molecule originator drugs...77 Excipient supplier loyalty small molecule originator drugs...79 Excipient providers considered for generic small molecule drugs...81 Excipient use generic small molecule drugs Excipient supplier performance generic small molecule drugs Excipient supplier loyalty generic small molecule drugs...87 Excipient providers considered for biologic drugs Excipient use biologic drugs...91 Excipient supplier performance biologic drugs Excipient supplier loyalty biologic drugs Excipient market growth drivers Department influence on excipient supplier selection DEMOGRAPHICS...97 Company size Headquarters location Office location Job title Decision-making responsibility Sponsors Decision-making responsibility CMOs Outsourcing influence Formulation activities and excipient responsibilities Sponsors Excipient responsibilities CMOs Respondent portfolio and pipeline drug product knowledge Visibility into pipeline and portfolio of drug products Years of industry experience ABOUT INDUSTRY STANDARD RESEARCH

4 INTRODUCTION COPYRIGHT AND USAGE GUIDE Thank you for your purchase of the Pharmaceutical Excipient Market Overview and Outlook report. Please read and observe the following articles associated with the use and distribution of the contents of this report. The purchase of a Single User License means that the report, either in whole or in part, cannot be distributed by any means to individuals or organizations beyond the original purchaser of the license. If at any point you wish to convert your Single User License to an Enterprise-wide License, Industry Standard Research will gladly do so. The purchase of an Enterprisewide License means that the report may be circulated, either electronically or via hardcopy, within but not beyond the company holding the Enterprise-wide License. Any license holder should feel free to include elements of this report in his or her own work products (i.e., reports and presentations), providing that the elements carry with them a citation stating: Source: Industry Standard Research, No advertising or other promotional use can be made of the information in this report without the express prior written consent of Industry Standard Research. For such consent, please contact Kate Hammeke, Vice President, Market Research at (919) or via at KateH@ISRreports.com. 4

5 INTRODUCTION INTRODUCTION Welcome to Industry Standard Research s Pharmaceutical Excipient Market Overview and Outlook report. Currently, inactive ingredients in drugs are gaining importance; excipients can improve process yield and decrease production risks, and offer competitive advantages over similar (or competing generic) medications with technologies like extended release or rapid release of the active pharmaceutical ingredient. Several trends are currently impacting the biopharmaceutical excipient market: the increased use of functional excipients to increase solubility, and/or bioavailability; increased demand for fit-for-purpose excipients, the use of modified release excipients to improve the patient experience by requiring less frequent dosing, thereby also improving patient compliance, and the development and use of multifunctional excipients that both improve the manufacturing process and impart functionality on drug delivery. Understanding how these trends will impact excipient use and buying behavior is essential information for excipient manufacturers and distributors. Understanding these trends is also valuable information for drug product developers at innovator biopharmaceutical companies and contract manufacturers. This report provides an overview of the current market dynamics in the excipients space as well as an outlook of what our survey respondents all of whom are influencers over excipient supplier selection or purchase decision at sponsor organizations or at the contract manufacturer organizations engaged to produce the finished drug product predict the marketplace will look like in Key statistics include excipient use objectives, excipient supplier resources, use of approved vendor agreements/preferred provider lists, and how much influence the sponsor versus the CMO has over excipient provider selection when drug product manufacturing is outsourced. ISR explores which excipient categories are used for small molecule drugs under patent, generic small molecule drugs and biologic drugs (including biosimilars), and the frequency of using branded (or proprietary) excipients compared to nonproprietary excipients by function as well as formulation. Additionally, we look at annual excipient expenditure, the proportion of spend on proprietary excipients and excipient expenditure by category (small molecule, originator, generic or biologic) 5

6 INTRODUCTION and formulation (oral solid dose, sterile injectable, semi-solids and liquids, and specialty dosage forms). ISR investigates which provider characteristics influence excipient supplier selection and what drives provider satisfaction. In this report, readers will find information on supplier awareness and supplier use detailed out by drug product category. ISR has asked recent users to rate their experiences with excipient suppliers and the results include loyalty metrics for the brands included in the report based on Overall satisfaction, Likelihood to recommend and Likelihood to use again. Lastly, ISR takes a look into market growth factors to better prepare suppliers and distributors for changes in future excipient needs and demand. The report offers readers the opportunity to gain insight into the biopharmaceutical excipient market and where it s heading. Remaining aware of market dynamics and expected changes will enable readers to better make key decisions regarding excipient use and to help identify where competitive advantages may be gained. 6

7 INTRODUCTION METHODOLOGY DATA COLLECTION IN Q3, MINUTE, WEB-BASED QUANTITATIVE SURVEY 100 RESPONDENTS FROM NORTH AMERICA,EUROPE, AND ASIA 7

8 INTRODUCTION Participant Criteria Respondents were required to pass several screening criteria to qualify and participate in this survey: Must work at a pharmaceutical or biotech company or a contract manufacturer Must have responsibilities in at least one of the following categories: executive management, clinical trial manufacturing, commercial manufacturing, drug formulation and/or drug delivery, outsourcing/purchasing management, or supply chain Must have significant influence over excipient supplier selection or excipient purchase decision Must have been involved in selection process, purchase or utilization of biopharmaceutical excipients for either in-house or outsourced manufacturing within the past 18 months 8

9 INTRODUCTION How to Use this Report Industry Standard Research s quantitative reports are designed to meet the different informational needs of various types of users. Depending on your needs, there are a few ways to approach this report. ISR s reports are divided into several major sections. The sections preceding the Study Data section consist of what one might think of as an executive summary in this report, the Market Dynamics and Service Provider Selection, Perceptions and Loyalty sections. The sections that compose the executive summary include the findings that apply most directly to the primary study objectives and a brief analysis covering the top-level data points. ISR s experienced analysts use their industry knowledge and market research expertise to develop the analysis. The tables, charts, and graphs in these sections often combine multiple data points from the charts in the Study Data section into a single visual and may relay the top five or top ten data points instead of the entire data set. Each of the major sections in the executive summary starts with a page titled Primary Section Takeaways. This page lists the most important findings of the section. If one needed to summarize the section for a busy, high-level executive or only had 10 minutes to familiarize themselves with the report contents, the Primary Section Takeaways pages are the findings on which to focus. The Study Data section includes the full data set from the market research effort. Responses to each of the questions asked in our survey are available here. This section is best for readers who like to view results from the entire data set and form their own conclusions. One can also visit the Study Data section to take a deeper look into a subset of data from the executive summary sections. One might think of the Study Data section as an appendix. 9

10 INTRODUCTION RESPONDENT DEMOGRAPHICS Scientist CMO, 7% President 6% Vice President 17% Director 30% JOB TITLE COMPANY TYPE Large (R&D $1B or more), 3 Manager 18% C-Level 24% Small (R&D less than $100M), 37% Mid-size (R&D $100M-$999M), 2 RESPONDENT LOCATION NORTH AMERICA 7 EUROPE 2 ASIA AND OTHER 6% *by office location 10

11 INTRODUCTION Respondent portfolio and pipeline drug product knowledge For each category of compounds/products in development and in your company s drug product portfolio, select the types of formulations for the medications. We will ask specifics about the types of excipients used in the formulations, so please limit your responses to the categories of which you are knowledgeable. Oral solid dose (tablets, capsules, etc) Injectable (IV, pre-filled syringe, cartridge, vials, ampoules) Semi-solid / liquid (drops, creams, liquid solutions) Specialty dosage form (inhaler, patch, etc.) Small molecule medications (originator, still under patent) (n=87) 68% 44% 2 17% Generic small molecule medications (n=59) Biologic medications (including any biosimilars) (n=68) 0% 20% 40% 60% 80% % of Respondents 11

12 INTRODUCTION Visibility into pipeline and portfolio of drug products Using your best estimates, how many compounds/products (both marketed and in development) does your company have in the following categories? Please indicate the degree of visibility you have into your company s product portfolio. By degree of visibility, we mean if your company has 100 small molecule medications and you have knowledge of 5 of them, you have visibility. Or, if you work for an emerging biotech that has one biologic compound in development, you would have visibility. Average # of Products Small molecule medications (originator, still under patent) in injectable formulations (n=38) 56% 13.9 Small molecule medications (originator, still under patent) in oral dosage formulations (n=59) 49% 13.5 Small molecule medications (originator, still under patent) in semi-solid, liquid formulations (n=20) 47% 4.8 Small molecule medications (originator, still under patent) in specialty formulations (n=15) 67% 5.0 Generic small molecule medications in injectable formulations (n=18) 40% 10.2 Generic small molecule medications in oral dosage formulations (n=37) 36% 30.0 Generic small molecule medications in semi-solid, liquid formulations (n=18) Generic small molecule medications in specialty formulations (n=13) Biologic medications (including any biosimilars) in injectable formulations (n=68) % 10% 20% 30% 40% 60% 70% 80% Degree of Visibility Degree of Visibility 12

13 INTRODUCTION 3 MAJOR SECTIONS 1. Market Dynamics 2. Service Provider Selection, Perceptions and Loyalty 3. Study Data 13

14 MARKET DYNAMICS 14

15 MARKET DYNAMICS Primary Section Takeaways 1. Aside from an excipients given functionality (solubilizer, filler, etc.) the most common objective for excipient use is to Ensure consistent product quality, as reported by 77% of respondents. 2. Manufacturing / Production, Scientists / Biologists / Chemists / Formulation, and R&D Management, hold similar influence over excipient supplier selection, controlling ~20% of the decision each. 3. An average of roughly 20% of excipients used by respondents are supplied internally. When requiring an excipient from an external supplier, respondents mentioned their Approved supplier list (26%) and known suppliers (but not on a formalized approved/preferred provider list) (19%) are the most useful resources. Only one-in-ten respondents mentioned Industry events/trade shows/ Conferences as a useful resource for excipient suppliers. 4. The majority of the time, the sponsor selects or recommends the excipient supplier (5) or provides in-house manufactured excipients to the CMO (18%). 5. Buffers (40%), Solubilizers (36%), and Solvents (34%) are the most common excipient categories used by respondents with small molecule originator drug products. 6. Across the four formulation categories, about two-thirds of excipients for small molecule originator drugs are non-proprietary and one-third are proprietary, on average. This shifts slightly higher for injectable formulations, where there is a 60/40 split. 7. Solvents (36%), Modified release agents (29%), Buffers (29%), and Acids (29%) are the most common excipient categories used by respondents for generic small molecule drugs, followed closely by Antioxidants (27%) and Coatings (27%). 8. Use of proprietary excipients by formulation for generics is similar to branded small molecule drugs, with approximately two-thirds of excipients used being non-proprietary. For semi-solid and liquid generic formulations, the proportion of proprietary excipients used is even lower, at Buffers, Preservatives, including antimicrobial agents, Surfactants and Solubilizers are the most common categories of excipients used by respondents with biologic drug products. Use of proprietary excipients follows the same pattern as observed in small molecule originator and generic drugs, with approximately two-thirds being non-proprietary and one-third proprietary for biologic drug products. 10. Annual excipient expenditure is predicted to rise over the next five years, with a slight uptick in the proportion of spend on proprietary excipients (+ points from 3 to 38% of annual excipient expenditure). 11. Use of advanced drug delivery technologies and Growth in the biosimilars market are predicted to be the greatest contributors to excipient market growth in the next five years; each captured 26% of respondents votes. 15

16 MARKET DYNAMICS Key objectives in excipient use The most common objective in using excipients beyond its given functionality is to Ensure consistent product quality, mentioned by three-quarters of respondents. Improving the safety profile of the medication (54%), Improving / increasing yields (48%) and Improving patient compliance (46%) are objectives of roughly half of research participants. Aside from an excipients given functionality (filler, solubilizer glidant, etc), select each of the objectives that correspond with your company s use of biopharmaceutical excipients. Select all that apply. (n=100) Ensure consistent product quality 77% Improve the safety profile of the medication 54% Improve / increase yields 48% Improve patient compliance / manufacture more patient-friendly products 46% Reduce development costs of new drug products 4 0% 10% 20% 30% 40% 60% 70% 80% % of Respondents 16

17 MARKET DYNAMICS Department influence on excipient supplier selection Three categories of decision-makers tend to carry similar influence when it comes to selecting an excipient supplier: Manufacturing / Production, Scientists / Biologists / Chemists / Formulation, and R&D Management, each with ~20% of the decision. Interestingly, The CMO engaged to manufacture the supply holds similar influence over the selection decision as the Supply Chain / Procurement department at the sponsor organization (1 vs 1 on average). Please allocate the amount of influence each department/party has on the selection of a new contract manufacturer for sterile injectable drug manufacturing. Please ensure your allocation totals. (n=100) Manufacturing / Production 20% Scientists / Biologists / Chemists / Formulation 19% Research & Development Management 19% Executive Management 16% The CMO engaged to manufacture the supply 1 Purchasing / Procurement / Outsourcing / Supply Chain 1 Regulatory Compliance 0% 10% 1 20% 2 % of Supplier Selection Influence 17

18 MARKET DYNAMICS Excipient supplier resources and sources While 70% of respondents mentioned Known suppliers as a resource, the most useful resource for providing excipients is a company s Approved supplier list (26%). When your company is in need of biopharmaceutical excipients, which sources do you use to refine your product search? (n=100) Which of these excipient supplier resources do you find to be the most useful resource for product searches? (n=100) Most Useful Resource All Resources Approved supplier list (Preferred provider list for excipients) 26% 54% Known suppliers (but not a formalized approved/preferred list) 19% 70% Databases (ie, FDA.gov inactive ingredient database, api-data.com, ema.europa.eu/ema, chemicalinfo.com) Excipient manufacturer / supplier websites 16% 1 46% 57% Industry events / Trade shows / Conferences 10% 4 Internet searches 9% 3 0% 20% 40% 60% 80% % of Respondents The majority of the time companies go to their approved supplier list to acquire excipients (59%), followed by manufacturers or distributors not on an approved list (2), and one-fifth of the time excipients are manufactured internally. What proportion of the time does your company acquire excipients from the following locations? Your answers should add up to. (n=100) Internal order from production department, 19% Directly from a preferred/approved manufacturer or distributor, 59% Directly from a manufacturer or distributor not on an approved list, 2 18

19 MARKET DYNAMICS Sponsor influence on excipient source Sponsor perspective Sponsors (5) and CMOs (58%) are relatively even in their estimation of how often the sponsor organization recommends which excipient supplier to use. *Note: very small sample size for CMO respondents. When working with a CMO, what percentage of the time does your organization select or recommend which excipient suppliers to use? (n=93) When working with a CMO, what percentage of the time do you provide in-house manufactured excipients? (n=93) Percentage of time the sponsor selects or recommends the excipient supplier 5 Percentage of time the sponsor supplied in-house manufactured excipients 18% 0% 10% 20% 30% 40% 60% % of Time CMO perspective What percentage of the time does the sponsor organization select the excipient supplier(s) or include a recommendation of excipient suppliers in the technology transfer package? (n=7) What percentage of the time does the sponsor supply in-house manufactured excipients? (n=7) Percentage of time the sponsor selects or recommends the excipient supplier 58% Percentage of time the sponsor supplied in-house manufactured excipients 38% 0% 10% 20% 30% 40% 60% % of Time 19

20 MARKET DYNAMICS Small molecule originator drug products Excipient use and proprietary excipient use by category The most common types of excipients used for small molecule originator drug products are: Buffers (40%), Solubilizers (36%) and Solvents (34%). Solubilizers (19%) and Buffers (17%) along with Bioavailability enhancers (20%) and Antioxidants (17%) are among the most common excipient categories where respondents purchase proprietary excipients, or ones that are manufactured exclusively by a single company. In fact, three-quarters of respondents whose companies have small molecule originator drugs use proprietary excipients in their drug products. Select each of the categories/types of excipient your company currently utilizes for small molecule originator drug products that are either marketed or in development. (n=87) For which categories of excipients for small molecule medications (originator, still under patent) is your company most likely to use/purchase proprietary excipients? Select all that apply. (n=64) Buffers Solubilizers Solvents Antioxidants Bioavailability enhancers Vehicles Surfactants Coatings Fillers/Diluents Binders Acids Emulsifiers Preservatives, including antimicrobial agents Lubricants Granulating agents Modified release agents Alkalis Colors Sweeteners Flavors Disintegrants Suspending agents / Viscosity imparting agents Glidants Chelating agents Thickeners Sorbents Flow aids Humectants Flocculating agents Antiadherants Other Small Molecule Medications (Originator, Still Under Patent) 9% 17% 20% 28% 14% 28% 14% 26% 1 26% 8% 26% 8% 26% 14% 2 8% 24% % 2 16% 20% 8% 17% 6% 17% 9% 16% 8% 16% 6% % 1 1 9% 8% 6% 9% 17% 19% 0% 10% 1 20% 2 30% 3 40% 4 % of Respondents 3 34% 36% 40% % who use excipients in the category % who use proprietary excipients in the category 20

21 MARKET DYNAMICS Proportion of proprietary excipients by category Among respondents who use proprietary Bioavailability enhancers, half of the bioavailability enhancers used are proprietary (5). Roughly one-quarter of Buffers (28%) and Solubilizers (27%) used by respondents who purchase branded excipients are the branded versions. This indicates that excipient buyers seek out the best match for the specific drug product, and do not form exclusive agreements with proprietary excipient manufacturers to singularly use their branded products across their portfolios. For excipients used in small molecule medications (originator, still under patent), please indicate the proportion of each excipient category that is proprietary vs non-proprietary? *Only categories with n=>3 are included below Small Molecule Medications (Originator, Still Under Patent) Chelating agents (n=3) Flocculating agents (n=3) Lubricants (n=3) Bioavailability enhancers (n=13) Granulating agents (n=5) Flavors (n=5) Modified release agents (n=10) Binders (n=5) Antioxidants (n=11) Sorbents (n=3) Surfactants (n=9) Coatings (n=7) Vehicles (n=9) Disintegrants (n=4) Acids (n=9) Solvents (n=6) Colors (n=4) Buffers (n=11) Preservatives, including antimicrobial agents (n=7) Solubilizers (n=12) Fillers/Diluents (n=5) Sweeteners (n=6) Alkalis (n=5) Suspending agents / Viscosity imparting agents (n=3) Emulsifiers (n=5) Flow aids (n=3) Glidants (n=3) Thickeners (n=3) Other (n=6) 1 88% 37% % 47% 5 Non-proprietary 49% 5 Proprietary 5 49% 58% 4 38% 6 37% 6 37% 6 36% 64% % 66% 3 67% 3 67% 30% 70% 28% 7 27% 7 27% 7 26% 74% 26% 74% 2 77% 20% 80% 18% 8 17% 8 10% 90% 97% 2 77% 0% 20% 40% 60% 80% % of Excipients 21

22 MARKET DYNAMICS Proprietary excipient use by formulation Injectable formulations for small molecule originator drug products are most likely to contain branded excipients when compared to other types of formulations, with 40% of medications requiring proprietary excipients on average. However, there are only marginal differences by the type of formulation when it comes to the proportion requiring proprietary excipients. There is only a 6%-point difference between the most likely injectables and least likely oral dosages, on average. What proportion of the excipients used for small molecule medications require proprietary excipients (i.e, those available from only one manufacturer, including fit-for-purpose or co-processed excipients developed for your drug product) versus excipients available from multiple manufacturers? Your figures should add up to. (n=59) Small Molecule Medications (Originator, Still Under Patent) Injectable formulations (n=38) 40% 60% Non-proprietary Proprietary Specialty formulations (n=15) 39% 6 Semi-solid, liquid formulations (n=20) 37% 64% Oral dosage formulations (n=59) 34% 66% 0% 10% 20% 30% 40% 60% 70% % of Excipients 22

23 MARKET DYNAMICS Generic drug products Excipient use and proprietary excipient use by category Similar to small molecule originator drug products, Solvents (36%) and Buffers (29%) account for two of the top three most commonly used excipients among research participants with generic drug products. Modified release agents (29%) and Acids (29%) tie with Buffers and account for the remaining top four. According to the 7 of respondents with generic drug products that use proprietary excipients, Antioxidants (2) and Solvents (19%) are the excipient categories for which these customers are most likely to purchase branded excipients. Select each of the categories/types of excipient your company currently utilizes for generic small molecule drug products that are either marketed or in development. (n=59) For which categories of excipients for generic small molecule medications is your company most likely to use/purchase proprietary excipients? Select all that apply. (n=43) Solvents Modified release agents Buffers Acids Antioxidants Coatings Surfactants Colors Binders Lubricants Alkalis Vehicles Glidants Solubilizers Emulsifiers Fillers/Diluents Bioavailability enhancers Flavors Preservatives, including antimicrobial agents Granulating agents Sweeteners Disintegrants Suspending agents / Viscosity imparting agents Sorbents Antiadherants Flow aids Thickeners Humectants Chelating agents Flocculating agents Other Generic Small Molecule Medications 7% 9% 8% 8% 8% 9% 9% 10% 10% 10% % 14% 16% 16% 16% 19% 19% 1 16% % 17% 19% 19% 0% 10% 1 20% 2 30% 3 40% % of Respondents 2 20% 2 24% % 27% 29% 29% 29% 36% % who use excipients in the category % who use proprietary excipients in the category 23

24 MARKET DYNAMICS Proprietary excipient use by category While Antioxidants and Solvents are among the most common excipient categories for respondents to buy proprietary excipients for generic drugs (data shown on the previous page), proprietary excipients account for less than half of the excipients used by respondents companies in these categories (36% and 4 proprietary, respectively)*. Whereas when respondents companies use excipients in the Flavors (6) or Coatings (60%) categories, the majority are proprietary. For excipients used in generic small molecule medications, please indicate the proportion of each excipient category that is proprietary vs non-proprietary? Only categories with n=>3 are included below. Generic Small Molecule Medications Flavors (n=3) 3 6 Coatings (n=6) 40% 60% Vehicles (n=7) 4 57% Non-proprietary Proprietary Emulsifiers (n=6) 4 5 Binders (n=4) 48% 5 Bioavailability enhancers (n=7) Modified release agents (n=7) 49% 5 49% 5 Solvents (n=8) 4 58% Buffers (n=7) 4 59% Lubricants (n=4) 40% 60% Acids (n=4) 38% 6 Antioxidants (n=9) 36% 64% Surfactants (n=5) 3 67% 0% 20% 40% 60% 80% % of Excipients *Note: small sample sizes 24

25 MARKET DYNAMICS Proprietary excipient use by formulation For Specialty, Oral dosage and Injectable formulations, roughly one-third of excipients used are branded excipients. For Semi-solid, liquid formulations, one-quarter of excipients used are proprietary. What proportion of the excipients used for generic small molecule medications require proprietary excipients (i.e. those available from only one manufacturer, including fit-for-purpose or co-processed excipients developed for your drug product) versus excipients available from multiple manufacturers? Your figures should add up to. Generic Small Molecule Medications Specialty formulations (n=13) 37% 6 Non-proprietary Proprietary Oral dosage formulations (n=37) 3 67% Injectable formulations (n=18) 3 68% Semi-solid, liquid formulations (n=18) 2 7 0% 20% 40% 60% 80% % of Excipients 25

26 MARKET DYNAMICS Biologic drug products, including biosimilars Excipient use and proprietary excipient use by category Buffers (5) are the most frequently used category of excipients among respondents with biologic drug products. Preservatives, including antimicrobial agents (3), Surfactants (26%) and Solubilizers (26%) account for the other categories in the top four for biologic drugs. Buffers and Preservatives also happen to be the categories with the highest proportion of proprietary excipients used, with 2 of respondents each using branded excipients in those categories. Select each of the categories/types of excipient your company currently utilizes for biologic drug products that are either marketed or in development. (n=68) For which categories of excipients for biologic medications (including any biosimilars) is your company most likely to use/purchase proprietary excipients? Select all that apply. (n=53) Buffers Preservatives, including antimicrobial agents Surfactants Solubilizers Vehicles Bioavailability enhancers Antioxidants Suspending agents / Viscosity imparting agents Fillers/Diluents Solvents Acids Alkalis Chelating agents Emulsifiers Binders Lubricants Antiadherants Sorbents Thickeners Modified release agents Flow aids Granulating agents Glidants Disintegrants Humectants Flocculating agents Other % 8% 26% 19% 24% 2 2 9% % 8% 19% 4% 18% 1 4% 1 8% 9% 4% 7% 7% 7% 4% 6% 6% 4% 4% 4% 4% 4% 9% % 20% 40% 60% % of Respondents % who use excipients in the category % who use proprietary excipients in the category 26

27 MARKET DYNAMICS Proportion of proprietary excipients by category The proportion of proprietary excipients used in biologic drug manufacturing by excipient category is greater than in small molecule originator or generic small molecule drugs. For excipients used in biologic medications (including any biosimilars), please indicate the proportion of each excipient category that is proprietary vs non-proprietary. *Only categories with n=>3 are included below Biologic Medications Fillers/Diluents (n=6) 29% 7 Bioavailability enhancers (n=11) 3 67% Non-proprietary Buffers (n=12) 36% 64% Proprietary Antioxidants (n=5) 36% 64% Surfactants (n=8) 38% 6 Vehicles (n=10) 40% 6 Suspending agents / Viscosity imparting agents (n=6) 4 59% Solvents (n=4) 4 5 Preservatives, including antimicrobial agents (n=12) 4 57% Solubilizers (n=4) 3 68% Emulsifiers (n=4) 2 0% % of Excipients 27

28 MARKET DYNAMICS Proprietary excipient use by formulation Just over one-third of excipients used in injectable formulations of biologic drugs are proprietary. This is similar to the proportion of excipients used in small molecule originator and generic small molecule injectable formulations. Select each of the categories/types of excipient your company currently utilizes for generic small molecule drug products that are either marketed or in development. Biologic Medications Injectable formulations (n=68) 6 37% Non-proprietary Proprietary 0% 10% 20% 30% 40% 60% 70% % of Excipients 28

29 MARKET DYNAMICS Annual excipient expenditure The majority of respondents are currently spending fewer than $5M on excipients annually (54%). However, spend is expected to increase over the next five years, with fewer than one-quarter of respondents anticipating a spend of <$5M in The upshift in spend will reflect growth in the percentage of respondents with a spend between $5M and $9.9M (from 14% up to 28%) and those spending between $20M and $49.9M (from 6% up to 2). For the areas that you have visibility into, what is your annual excipient expenditure? Your best estimate is fine. (n=94) Five years from now, what do you anticipate the annual excipient expenditure will be for the areas that you have visibility into? Your best estimate is fine. (n=92) $100M or more 4% Average Annual Expenditure Current: $15.5M In 5 Years: $23.3M $50M to $99,999,999 4% 9% $20M to $49,999,999 6% 2 $10M to $19,999,999 14% 16% Current 5 Years Out $5M to $9,999,999 14% 28% Less than $5M 2 54% 0% 10% 20% 30% 40% 60% % of Respondents 29

30 MARKET DYNAMICS Annual spend by company size One-quarter of respondents companies spend >$50M annually on excipients. Only respondents from large biopharma companies indicated annual expenditure in the top ranges. The majority of small biopharma respondents (86%) indicated their companies spend fewer than $5M annually on excipients. For the areas that you have visibility into, what is your annual excipient expenditure? Your best estimate is fine. (n=94) $100M or more 1 $50M to $99,999,999 1 Large Biopharma (R&D $1B or more) (n=33) Average Annual Expenditure: $31.5M $20M to 49,999,999 1 Midsize Biopharma (R&D $100-$999M) (n=21) Average Annual Expenditure: $8.7M Small Biopharma (R&D less than $100M) (n=36) Average Annual Expenditure: $3.6M $10M to $19,999,999 6% 24% 24% CMO (n=5) Average Annual Expenditure: $2.5M $5M to $9,999,999 9% 8% 3 Less than $5M 27% 38% 86% 0% 10% 20% 30% 40% 60% 70% 80% 90% % of Respondents 30

31 MARKET DYNAMICS Proprietary vs non-proprietary excipient expenditure The bulk of annual spend is on non-branded excipients, with roughly one-third of expenditure being towards proprietary excipients. Respondents predict a -point uptick in the proportion of expenditure spent on proprietary over the next five years. For the areas that you have visibility into, what percentage of your annual excipient expenditure is on proprietary vs non-proprietary excipients? Responses must add to. (n=100) Annual excipient expenditure in the past 12 months 3 67% Non-proprietary Proprietary Anticipated excipient expenditure 5 years from now 38% 6 0% 10% 20% 30% 40% 60% 70% % of Expenditure 31

32 MARKET DYNAMICS Excipient market growth drivers Respondents predict Use of advanced drug delivery technologies and Growth in the biosimilars market (both 26%) to be the greatest contributors to excipient market growth in the next five years, each capturing one-quarter of respondents votes. Novel excipients for biologic drugs and Excipients that mitigate biological production risks and improve process yield (both 1) are also expected to play significant roles in market growth, and are seen as the greatest contributors to market growth by roughly one-in-ten respondents. Select each of the factors below that you feel will contribute to excipient market growth over the next five years. Select all that apply. (n=100) In your opinion, which of these factors will have the greatest contribution to excipient market growth over the next five years? Select only one. (n=100) Use of advanced drug delivery technologies 26% 60% Growth in the biosimilars market 26% 54% Novel excipients for biologic drugs (new stabilizers, extend shelf life, improve potency, etc) 1 5 All Factors Excipients that mitigate biological production risks and improve process yield 1 37% Greatest Contributor Functional excipients that improve bioavailability, resulting in reduced API dose 8% 5 0% 20% 40% 60% 80% % of Respondents 32

33 SERVICE PROVIDER SELECTION, PERCEPTIONS AND LOYALTY 33

34 SERVICE PROVIDER SELECTION, PERCEPTIONS AND LOYALTY Primary Section Takeaways 1. Meets cgmp standards is considered the most important excipient supplier attribute by 28% of respondents and is included in the top 5 supplier attributes for 70% of respondents. 2. There is a lack of consensus on which excipient supplier characteristics have the greatest influence on driving customer satisfaction. Five different attributes earned a mean ranking within a half-point span from one another (5.6 to 6.1). 3. Respondents anticipate increasing the number of suppliers they purchase excipients from each year, increasing from an average of 8.2 to 11.1 over the next five years. 4. Roughly half of respondents (54%) reported their company uses Preferred Providers for biopharmaceutical excipients, and average 6.4 vendors on their preferred lists. 5. Not surprisingly, the bigger vendors with a wider offering of excipient categories are the bestknown companies to respondents: BASF, SAFC, Dow, EMD Millipore and DUPONT. 6. Respondents with small molecule drugs, both originator and generic, show favor for BASF s excipients. The company captured top rankings for Consideration, Use and Loyalty among respondents in both categories. 7. EMD Millipore captured the best rankings among respondents who are involved with excipients for biologic drugs, having secured first position for Consideration and Use and third position for Loyalty. 34

35 SERVICE PROVIDER SELECTION, PERCEPTIONS AND LOYALTY Top 5 excipient supplier selection attributes The most important selection criterion for an excipient supplier is to Meet cgmp standards. 70% of respondents included this attribute in their top 5, and 28% mentioned it is the most important attribute when selecting a supplier. Reliability of supply received top 5 mentions by half of respondents as an important selection criterion, and is the most important to 14% of respondents. One-in-five respondents reported that Expertise in developing fit-for-purpose excipients is part of their top 5 supplier selection criteria. If/when engaging an external provider for pharmaceutical excipients, which of the service provider attributes do you value the most when selecting an excipient supplier? Select five. (n=100) From these attributes, which one attribute would you value most if/when selecting an external excipient supplier? Select only one. (n=100) Most Important Top 5 Meets cgmp standards 28% 70% 14% Reliability of supply 9% GMP documentation on raw materials 44% 5 Expertise in developing fit-for-purpose excipients 8% 2 Industry reputation for doing quality work 7% 2 0% 10% 20% 30% 40% 60% 70% % of Respondents 35

36 SERVICE PROVIDER SELECTION, PERCEPTIONS AND LOYALTY Excipient supplier satisfaction drivers With the top ranked attribute, Quality management systems in place, receiving a mean ranking of 3.5, it is clear there is no single stand-out driver for excipient supplier satisfaction. Additionally, 5 different attributes earned mean rankings within a half-point span (5.6 to 6.1). This indicates there is a lack of consensus on which supplier attributes drive excipient provider satisfaction. In your experience with using external excipients suppliers, what usually drives/would drive your satisfaction with the provider s performance? Rank the following from most important (#1) to least important (#10). (n=100) Quality management systems in place Availability of GMP documentation on raw materials More important Order turn-around time 4.9 Safety audits performance when conducted by buyer 5.6 Has participated in a 3rd party audit / certification program (EXiPAT, IPEA, Rx 360, etc) 5.7 Flexibility in order quantities 5.8 Flexibility in contracting terms 6.0 Has a transparent supply chain 6.1 Availability of product samples for bench-scale experiments Provider billing practices Less important Mean Rank 36

37 SERVICE PROVIDER SELECTION, PERCEPTIONS AND LOYALTY Excipient suppliers One-third of respondents purchased excipients from 3-5 different suppliers in the past year, which is the most popular range of suppliers for research participants. Respondents predict an upward shift in the number of suppliers used five years from now, with ~10% of respondents shifting from 3-5 suppliers to 6-10 suppliers. 1 of respondents reported purchasing excipients from more than 21 suppliers in the past year. This bracket is also predicted to see some growth, with 1 of respondents purchasing excipients from 21+ suppliers five years from now. From about how many suppliers did your company purchase excipients in the past 12 months? (n=100) Five years from now, from how many suppliers do you think your company will purchase excipients? (n=100) Average # of Suppliers: Current 8.2 In 5 Years: suppliers 4% 7% Current suppliers 4% 7% 5 Years from Now 6-10 suppliers 20% 29% 3-5 suppliers 26% 36% 2 suppliers 16% 19% 1 supplier 4% 0% 10% 1 20% 2 30% 3 40% % of Respondents 37

38 SERVICE PROVIDER SELECTION, PERCEPTIONS AND LOYALTY Use of preferred providers More than half (54%) of respondents mentioned their company has approved suppliers or preferred provider lists for biopharmaceutical excipients. Respondents with preferred providers tend to have a good number of suppliers on their approved lists, averaging 6.4 overall. How many approved suppliers / preferred providers does your company currently have for biopharmaceutical excipients? (n=100) Preferred Provider Use Overall (n=100) Large Biopharma - R&D $1B+ (n=35) Midsize Biopharma - R&D $100M-$999M (n=21) Small Biopharma - R&D <$100M (n=37) CMOs (n=7) 29% 3 40% 46% 46% 54% 60% 67% 54% 7 Yes No 0% 20% 40% 60% 80% % of Respondents How many approved suppliers / preferred providers do you think your company will have for biopharmaceutical excipients five years from now? (n=54) # of Preferred Providers by Company Size Overall (n=54) Large Biopharma - R&D $1B+ (n=21) Midsize Biopharma - R&D $100M-$999M (n=14) Small Biopharma - R&D <$100M (n=17) CMOs (n=2) Current Years from Now # of Preferred Providers 38

39 SERVICE PROVIDER SELECTION, PERCEPTIONS AND LOYALTY Top suppliers by familiarity Five of the excipient providers included in the study are Very familiar or have been used by more than half of respondents: BASF, SAFC, Dow, EMD Millipore and DUPONT. Large companies with excipients in several categories captured the highest awareness. Please indicate your level of familiarity with each of the following providers of biopharmaceutical excipients. (n=100) BASF SAFC / Sigma Aldrich Dow EMD Millipore DUPONT Eastman Chemical Company Solvay Samsung Fine Chemicals Clariant Akzo Nobel Functional Chemicals Spectrum Chemical Evonik Corp Archer Daniels Midland Company FMC Colorcon Croda Ashland Asahi Kasei Chemicals Americhem Pharmaceutical Corden Pharma Gattefosse Avantor Fuji Health Science BioSpectra Cargill Europe Lubrizol Roquette SPI Pharma Brenntag Group DPL-US (dba. Dr. Paul Lohmann, Inc.) Wacker Chemical Corporation Chemical Solutions I have used this company's biopharmaceutical excipients. I am very familiar with the company's excipient offering but have not used them. I am somewhat familiar with the company's excipient offering but have not used them. I am aware of the company but know nothing about its excipient offering. I have never heard of the company. 34% 4 26% 3 17% 38% 29% % % 10% 27% 26% 1 17% 28% 1 17% 17% 2 8% 17% 3 16% 7% 2 26% % 17% 19% 16% 30% 8% 14% 14% 14% 1 9% 10% 16% 1 14% 1 7% % 8% 1 19% % 9% 19% 18% 9% 7% 1 1 6% 9% 14% 2 9% 2 27% 4% 9% 1 2 7% 28% % 4% 1 1 6% 27% 16% 6% 6% 18% 4% 6% 1 18% 7% 2 1 6% 4% 24% 17% % 26% 16% 1 28% 1 19% 1 7% 14% 16% 1 7% % 26% 2 16% 30% 28% 30% % 36% % 47% 34% 5 37% % 5 48% 0% 10% 20% 30% 40% 60% 70% 80% 90% % of Respondents 39

40 SERVICE PROVIDER SELECTION, PERCEPTIONS AND LOYALTY Small molecule originator drugs Excipient supplier consideration use, and loyalty Rank Consideration Use Loyalty (n>3) 1 BASF SAFC / Sigma Aldrich Gattefosse 2 DUPONT BASF BASF 3 EMD Millipore Dow EMD Millipore 4 Dow DUPONT Clariant 5 SAFC / Sigma Aldrich Spectrum Chemical Evonik 6 Solvay EMD Millipore Mutchler 7 Akzo Nobel Functional Chemicals Clariant Croda 8 Clariant Croda Ashland 9 Eastman Chemical Company (tie) Eastman Chemical Co., Colorcon 10 Lubrizol / Ashland (tie) Solvay, Evonik, Samsung Fine Chemicals, Ashland, Asahi Kasei Chemicals Cargill Europe *Loyalty is a combination of Overall Satisfaction, Likelihood to Recommend and Likelihood to Use Again. Only companies with 3 or more ratings from current and recent users are included in the above table. The full data set can be found in the Study Data section. BASF stands out among excipient providers for small molecule originator drugs for its high rankings in Consideration, Use and Loyalty. BASF has the highest percentage of current users, and the second highest percentage of respondents who have used the provider for small molecule originator drugs. EMD Millipore ranks third for both Consideration and Loyalty, and falls in sixth position for Use among respondents. Interestingly, Dow, DUPONT and SAFC / Sigma Aldrich rank in the top 5 for Consideration and Use but do not land in the top ten for customer Loyalty. Gattefosse a company that does not appear in the top ten for Consideration or Use lands in first position for Loyalty. This suggests that higher awareness among the excipient buying audience, coupled with messaging that includes customer testimonials could advance this company s position in the competitive landscape. Clariant captures top ten rankings for both Consideration and Use and shows an even stronger customer loyalty position, ranking in 4th position for Loyalty. 40

41 SERVICE PROVIDER SELECTION, PERCEPTIONS AND LOYALTY Generic small molecule drugs Excipient supplier consideration use, and loyalty Rank Consideration Use Loyalty (n>3) 1 BASF SAFC / Sigma Aldrich Gattefosse 2 Dow BASF Ashland 3 EMD Millipore Dow Dow 4 DUPONT Colorcon BASF 5 SAFC / Sigma Aldrich Roquette Clariant 6 Evonik Gattefosse Evonik 7 Akzo Nobel Functional Chemicals Ashland Colorcon 8 Solvay EMD Millipore EMD Millipore 9 Colorcon Croda SAFC / Sigma Aldrich 10 BioSpectra Clariant Roquette *Loyalty is a combination of Overall Satisfaction, Likelihood to Recommend and Likelihood to Use Again. Only companies with 3 or more ratings from current and recent users are included in the above table. The full data set can be found in the Study Data section. Similar to the results observed among the small molecule originator respondents, generic small molecule respondents showed a preference for BASF when it comes to Consideration (1st position), Use (2nd position) and Loyalty (4th position). Among excipient buyers for generic drugs, Dow captured higher rankings for Consideration and Use, and landed in third position for customer loyalty. This difference highlights how excipient buyers for small molecule originator drugs and excipient buyers for generic drugs have different expectations from their service providers. On the other hand, DUPONT, is considered by a high number of respondents with generic drug excipient responsibilities, but doesn t make the top ten for Use or Loyalty. Again, Gattefosse captured the top ranking for Loyalty, this time among excipient buyers for generic drug products. Gattefosse also ranked higher in Use among this audience, landing in sixth position. 41

42 SERVICE PROVIDER SELECTION, PERCEPTIONS AND LOYALTY Biologic drugs, including biosimilars Excipient supplier consideration use, and loyalty Rank Consideration Use Loyalty (n>3) 1 EMD Millipore EMD Millipore Ferro Pfanstiehl 2 BASF SAFC / Sigma Aldrich Croda 3 SAFC / Sigma Aldrich BASF EMD Millipore 4 Fuji Health Science DUPONT DUPONT 5 Dow Dow Avantor 6 DUPONT Croda Dow 7 Solvay Avantor SAFC / Sigma Aldrich 8 Samsung Fine Chemicals Ferro Pfanstiehl BASF 9 Croda Spectrum Chemical Samsung Fine Chemicals 10 (tie) Clariant, BioSpectra, Archer Daniels Midland, Akzo Nobel Functional Chemicals, Samsung Fine Chemicals (tie) Solvay, Samsung Fine Chemicals Solvay *Loyalty is a combination of Overall Satisfaction, Likelihood to Recommend and Likelihood to Use Again. Only companies with 3 or more ratings from current and recent users are included in the above table. The full data set can be found in the Study Data section. Respondents who purchase excipients for biologics showed favor to EMD Millipore. The company ranked first for Consideration and Use and captured third position for Loyalty. Larger companies such as BASF, SAFC, DUPONT and Dow showed dominance in the biologic excipients market, each capturing top ten positions across all three metrics. Croda is more likely to be considered or used by respondents who are involved with biologic excipients than those who are involved with small molecule originator or generic drugs. Croda captures second ranking with respect to customer loyalty, and lands in ninth position for Consideration and sixth position for Use. Both Samsung Fine Chemicals and Solvay landed top ten positions in all three metrics, Consideration, Use and Loyalty. Interestingly, Avantor does not appear in the top ten for Consideration but captures seventh position for Use and fifth position for Loyalty. 42