1. ISPE Central Canada Chapter Annual Meeting September 28, 2006 Yvon R. Tessier Pharmaceutical contract manufacturing challenges

2. Outline Traditional positioning of the CMO’s New trend in Contract Manufacturing Challenges –Opportunities –Threats Can we make the difference? Q & A

3. Traditional positioning of the CMO “Not so long ago, big pharmaceutical companies turned to CMOs solely to supply: cost efficiencies capacity time-to-market expertise not available in-house” Source: Pharmaceutical Technology, Feb, 2004 by Doreen R. CoppolaPharmaceutical TechnologyFeb, 2004Doreen R. Coppola

4. Product Life Cycle Curve Time to market Capacity Cost

5. Traditional relationship Pharmaceutical Cie. Owns the know-how Manages technology transfer Needs short term capacity: –Unexpected sales –Launch quantities –Limit risk on new technologies Contract Manufacturer Limited know-how Minimum involvement in transfer Provides manufacturing capacity: –Equipment –Labour –Specific technology

6. New trend in Contract Manufacturing “Companies are outsourcing to concentrate on marketing their products” “Spending less time in drug discovery and manufacturing” “Virtual companies exist by the simple fact that they can rely on the contract manufacturers and researchers” Source: RB-203 Pharmaceutical Contract Manufacturing and Research,RB-203 Pharmaceutical Contract Manufacturing and Research BUSINESS COMMUNICATIONS COMPANY, INC Published: April 2005

7. New business model Innovator (Virtual company) Contract Formulator Contract Analytical Laboratory CMO * Marketing Partner Regulatory Consultant CRO * Note: Some CMO’s offer more than one service such as formulation, analytical and regulatory expertise ►

8. Challenges Opportunities Threats

9. Opportunities “Worldwide revenue for contract manufacturing and research for the pharmaceutical industry was estimated at $100 billion in 2004 and is expected to rise at an average annual growth rate of 10.8% to $168 billion in 2009” Source: RB-203 Pharmaceutical Contract Manufacturing and Research,RB-203 Pharmaceutical Contract Manufacturing and Research BUSINESS COMMUNICATIONS COMPANY, INC Published: April 2005

10. Opportunities World-Wide Revenue of Contract Manufacturing and Contract Research Organizations, 2002-2004 and 2009 ($ Billions) Source: RB-203 Pharmaceutical Contract Manufacturing and Research,RB-203 Pharmaceutical Contract Manufacturing and Research BUSINESS COMMUNICATIONS COMPANY, INC Published: April 2005

11. Threats Emerging countries like India and soon China will provide low cost products that will meet cGMP’s The old business model will not sustain growth for North American CMO’s The new business model is more complex and requires different skills

12. Product Life Cycle Curve Time to market Technology available Technical expertise Proximity Quick reaction Proven quality system High capacity Low cost

13. Can we make the difference? The battle will be fought on the technical field: Technological Challenge Latest technology ? Scalable process equipment Validation Compliance to cGMP’s Documentation Project management Don’t forget SHE !

14. Technological challenges The need to keep pace with next- generation process technology becomes more challenging. In the case of many emerging pharmaceutical products, the challenge is to make viable commercial production possible at all. COM’s need to invest in technology and people

15. Latest technology ? We need to stay aware of new technology development Sometimes old technology is the best option… Staff from R&D, Validation, Production and Maintenance must be trained and have as much exposure to information about new technology as possible

16. Scalable process equipment New business often starts at lab or pilot scale Clients prefer to scale-up without having to change manufacturing site Equipment selection can improve chances of attracting new business

17. Validation The need for small scale cGMP batches has increased so R&D equipment needs to be qualified (IQ/OQ). Cleaning validation is one of the biggest challenges for a CMO since dedicating equipment is not economical. Change control procedures must be closely followed.

18. Compliance to cGMP’s Most clients intend to market product world wide Quality system must meet regulation in multiple markets plus clients internal standards Other clients rely on CMO’s quality system since they don’t have internal resources

19. Documentation New projects start at pre-clinical stage Process is improved along the way Batches are made for development, scale- up, stability, clinical trials and process validation PAI may occur years later Good documentation practices must be followed at all times (even if clients do not request it explicitly)

20. Project management New projects involve many organisationsorganisations All functions from all partners will get involved at one time or an other Project scope will evolve and scope changes must be managed carefully CMO’s are becoming technical expertise providers and they must behave accordingly

21. Safety Health and Environment must always be kept in mind: Clients may outsource hazardous processes Large firms have very strict SHE requirements The hazards of handling multiple processes involving new chemicals must be evaluated New drugs are more and more potent “No one can afford a serious SHE incident” Don’t forget SHE !

22. In conclusion Contract Manufacturing Organisations will have to adapt to a new business environment Successful CMO’s will be the ones with the strongest technical staff capable of participating in multidisciplinary project teams ISPE members will benefit from those opportunities

23. Questions ? Comments ?