Pharma Trend Outlook 2023

Pharma Trends 2023The essential outlook for the year aheadAn outlook on the market trends set to dominate the pharmaceutical manufacturing and outsourcing market in 2023Contents

Thank you for reading Pharma Trends 2022

The Outlook for 2023: Innovation, Resilience and Pharma 4.0

The global pharmaceutical industry has proved both resilient and progressive in 2022. In the midst of supply chain disruption, geopolitical challenges and soaring inflation and energy prices, the industry continues to move forward, with 32 novel drugs approved by the FDA in the past year.

The IQVIA Institute predicts the global industry to exceed $1.5 trillion next year – driven in part by digitalisation, an array of promising compounds currently in the latter stages of clinical development, and approvals in key therapy areas anticipated in 2023, and beyond.

In pharma, an industry where carbon emissions exceed that of the automotive industry, there is a rising consciousness of the need for sustainable practices industry wide. From reducing the environmental impact of manufacturing and production, to safeguarding workers and reducing plastic waste - working towards a greener future is very much on the agenda for 2023.

Innovation and disruption from start-ups and small and medium enterprises, will continue to be an important driver to the traditional pharma supply chain in 2023 – bringing fresh ideas, services, and technologies to the market.

ACG is proud to bring to you CPHI’s Trend Outlook for 2023, which gathers expert opinion and insights from across the pharma value chain, highlighting both emerging and continuing trends for 2023. As we enter a post-pandemic world and face new global challenges, the pharma industry must be applauded for its pursuit of new products, technologies and solutions which ultimately improve the lives of people worldwide.

Read on to discover expert predictions on the trends, opportunities and challenges defining the pharma market in 2023.

Best wishes!
Karan Singh, Managing Director, ACG World

The Data Revolution and Realities of Pharma 4.0

Excipients expected to incentivise biotechnological innovation

All eyes on APIs: sky-high price movements difficult to predict

Global events continue to disrupt supply chains - expect the unexpected

Pharmaceutical start-ups to penetrate the supply chain with new products and services

Cell and gene therapy: attracting Big Pharma and start-ups alike

Sustainable pharmaceutical industry practices for a greener future

Talent acquisition, development, and retention

Patient-centricity considerations for CDMOs

Reshoring of manufacturing and production: is this the end of Chinese and Indian dominance?

Mergers and acquisitions to boost CDMO portfolios for novel modalities

The potential of psychedelics in healthcare

Contributors

1. The Data Revolution and Realities of Pharma 4.0

Many in the industry are optimistic about transferring existing and emerging technologies to the pharmaceutical sector, an industry that unfortunately has lagged behind in comparison with other sectors, such as tech and chemicals. With clinical trials, post-surveillance marketing, and more drug and therapeutic programs in the pipeline, the industry is searching for a way to implement efficient and secure data storage, handling, and analytical methods.

Fausto Artico, Global R&D Tech Head and Product Director of Innovation and Data Science at GSK is enthusiastic about the value that critical technologies can add to biotech and pharma initiatives, identifying Blockchain as a gamechanger for its handling and visibility of complex supply chains and data storage. He states that “[Blockchain technology] will become a critical technology for tracking the provenance of materials and APIs. [Blockchain technologies] make it very difficult for malicious users to tamper with data. I hope to soon see capabilities for Low-Code Automation embedded in Blockchain products and services that will be easier, through drag-and-drop, to create applications that leverage Blockchain. This would make it possible to avoid weeks of wasted time in trying to spin up very nice capabilities at the top of existing Blockchain platforms

and would not require a massive need for expert help.”

Dave Malenfant of MDM Consulting echoes similar sentiments but highlights additional Industry 4.0 technologies that have yet to transfer to Pharma 4.0 as standard industry practices: “We will finally see Blockchain being used but more importantly, we have to look at A.I., machine-learning, robotic process automation, and other initiatives. We have to integrate the supply chain and use digital technologies to enable it to work. It is all about the people who build the processes where technology enables them.”

Strategic Solutions Leader at DPS Group William Whitford is equally interested in how heightened connectivity and information distribution can benefit the pharmaceutical industry, especially in driving it towards Pharma 4.0 and improved post-market surveillance: “I like to think such initiatives as smart manufacturing as living concepts. How do they improve pharma? They affect manufacturing, supply chain, operations, and distribution, as well as clinical trials 5.0 and post-market surveillance. Solutions in all of these areas for Pharma 4.0 are changing as they are seeing a heightened connectivity of information that is accurate,

immediate, and governed. We used to be very limited. For example, there are more and more real-time or near-real-time analytics for monitoring product and process development with high-throughput multiplex, digitalised, and automated activities that replace manual labour and limited cognition. This digital transformation, enabled by data science, AI, and Pharma 4.0, is revolutionising the way we incorporate multiplex data in analysis, reporting, and predictions.”

The consensus for the future of technology in the pharmaceutical industry is implementing that which currently exists into the supply chain to improve efficiency, security, and accuracy. Karan Singh, Managing Director at ACG World offers his views on how pharmaceutical partners will be transforming operations in 2023: “In 2022 alone, we recalled over 47,000 batches of drugs exported to the USA. For context, most manufacturing sites in India employ batch manufacturing methodology and are built on legacy processes, so have high start-up costs, quality consistency issues, and create a lot of wastage. These cost the industry millions of dollars every year in operating expenses. It is pertinent to note that these losses can be optimised with the use of Pharma 4.0 technologies. This digital transformation enables early detection of wear and tear of machinery lines, flexible tracking of a defective

Top Tech to Transfer to Pharma

batch in the event of a process failure, and even allows for timely intervention, thereby significantly reducing wastage.

Through integration of artificial intelligence (AI) and machine learning (ML) reams of data converts into actionable intelligence, improving several aspects of supply chain, such as inventory management, trend analysis, forecasting, predictive equipment maintenance etc.

For new manufacturing sites which are aided by government’s PLI scheme, the incentive should be utilized towards adoption of Industry 4.0, Internet of Things (IoT) and convert them to ‘smart factories.” CDMOs should also be prepared to meet the demands of their partners with the technical capabilities to support clinical and/or commercial drug development and manufacturing.

With the scaling of production, commercial levels involving tech transfers and different processes, CDMOs that can implement technology to streamline and deliver continuous development and manufacturing capabilities will position themselves at the forefront of the pharmaceutical supply chain.

Preparing for the future of pharma means preparing for Pharma 4.0.

2. Excipients expected to incentivise biotechnological innovation

Innovations in technology for 2023 will not be limited to the leveraging of existing technologies for the pharmaceutical industry and its processes. According to David Schoneker, President of Black Diamond Regulatory Consulting, LLC., innovation for new biotechnology itself can be incentivised if existing regulatory issues regarding the drug components themselves are addressed – namely, excipients.

“Biotechnology has unique needs that are way different than the solid oral dosage forms that we’ve had so much experience with in the past. If you look at the COVID vaccines, what really helped make them work was the novel lipid excipient. The nanolipid excipient that made it all work went through an expedited safety type of review to make [the vaccine] happen. It’s a great example of where innovation in vaccine technology was made possible because of a novel excipient.”

Excipients will continue to emerge as an area of intense focus as the US FDA’s Novel Excipient Pilot Program takes off in phase two as the selected candidate companies submit their data on their novel excipient to the FDA for a full safety review for their intended use. Schoneker hopes that the program will continue past its pilot phase, incentivising biotechnology innovation as well as all types of drug development:

It's a matter of giving excipient companies the incentive to want to innovate and work on these products with the belief that pharmaceutical companies may actually use them, rather than waiting for someone else to use the novel excipient first. Having a pathway to bring them forward and minimise risk to the pharmaceutical user of the excipient is the key"

David Schoneker, President of Black Diamond Regulatory Consulting, LLC

While the short-term might not see immediate results of the Pilot Program, Schoneker is confident that once the benefits of the program are demonstrated, “...you’ll see quite a number of companies getting involved to bring forward various types of novel excipients – that's really good for the industry in terms of opening up our ability to utilise many of these new materials in novel ways to solve a lot of problems.”

Schoneker adds that advanced manufacturing practices such as 3D printing and continuous manufacturing are key areas where there is a need for novel excipients such as co-processed excipients.

While he emphasizes that the technology to bring about novel excipients currently exists, in congruence with other experts, enhancing innovative drug development with these advanced manufacturing processes will bring about the need for more custom, co-processed excipients, driving novel developments in pharmaceuticals.

This cycle of utilising existing technologies to spur further drug development innovation is, as Schoneker states, “an ongoing story. I think [novel excipients] will get a lot of attention because, again, they are so tied in with innovation.”

3. All eyes on APIs: sky-high price movements difficult to predict

2022 saw the continuing rise in prices for APIs fuelled by both an energy crisis and supply chain tensions – however, opinions diverge on whether this rise in prices will continue into the next year. Some predict further increases in pricing – Malenfant expects a 20–30% increase in pricing unless manufacturers can quickly switch suppliers. Still, there are experts, such as Dr Reddy’s Head of Mature Markets API, Gunjan Singh, who states that they have managed cost escalations through long-term vendor contracts, the use of digital technology, and internal processes improvements.

Despite differing opinions as to whether prices are still on the rise for 2023 or if they have finally levelled off, most industry players agree that the pharmaceutical supply chain must be prepared for the unpredictable in 2023. “It is difficult to predict the future, but I think we need to be prepared that the situation won’t relax in the near-term,” Gunjan states. “API suppliers who are able to de-risk and realign their supply chain by backward integration and optimized and more efficient manufacturing processes will be in a better position to stay competitive in the market, and ultimately enable access to affordable medicines for patients worldwide.”

The diversification of API suppliers and manufacturing facilities remains a hot topic for the pharmaceutical industry as a method of mitigating unpredictable disruptions in the supply chain. “I believe that the upcoming years will bring us more news about the opening of new production facilities for APIs in Europe... It’s a feedback on the unstable situation in China these past years due to politics and the COVID situation,” comments Svitlana Havrylenko, Editor-in-Chief at the Pharmaceutical Industry Review. Global outsourcing to certain countries such as China and India may slow in the coming years, but experts warn not to see much change in the next year or so.

Check out Trend Report: The True Cost of API Price Rises to learn more about API price trends.

The effects of global events are not restricted to the API supply chain – the whole pharmaceutical supply chain will continue to feel the fallout of 2022 events.

An energy crisis fuelled by the Russian invasion of Ukraine in February 2022 has caused the prices of many raw materials, including aluminium and nickel, that are essential to the packaging and delivery of pharmaceuticals to skyrocket [i]. European pharmaceutical companies have witnessed reduced production throughout 2022, and though Europe has stockpiled 90% of the natural gas it will need for the winter months, it is likely continued deficits will be experienced as we enter 2023.

In addition, Asian countries that supply over 60% of the world’s APIs, and who service 74% of European pharmaceutical companies to the point of dependency, are struggling to navigate the energy crises and government-implemented austerity measures [ii]. Most notably, the People’s Republic of China have continued to enforce measures in their commitment to zero COVID, leading to mass lockdowns and disruptions in the export of pharmaceutical products and manufacturing.

Though events such as those that have plagued 2022 can be difficult to predict, many pharmaceutical industry leaders are adamant on the need for proper risk management processes. As Gunjan comments, “Amid changing geopolitical situations and major global events, risk management has become even more critical and important. Proper due diligence of potential risks and creating alternatives, both external and internal, to de-risk the supply chain will continue to play an important strategic role. Further global diversification of vendor bases and creating in-house capabilities will certainly help in the long run.”

4. Global events continue to disrupt supply chains – expect the unexpected

Thank you to our contributors:

Karan Singh, Managing Director, ACG World

William Whitford, Strategic Solutions Leader, DPS

Hanneke Later-Nijland, Attorney-at-law on life sciences, Genome Lawyers

Dave Malenfant, MDM Consulting

Where the traditional supply chain is struggling to return to the kind of normalcy before the COVID-19 pandemic, pharmaceutical start-ups are bringing about a fresh breath of air. Fausto expects such companies to take advantage of opportunities at every level of the industry.

“I see interesting opportunities in all the verticals (i.e., lead generation, early-stage drug discovery, clinical trials, supply chain, manufacturing, commercial and post-treatment journeys etc.) Even departments like HR would benefit from technologies like Artificial Intelligence and Machine Learning to source, hire, and retain the best talent worldwide,” Fausto comments. “Several of the new emerging technologies that start-ups can leverage to create new products and services are cross-functional technologies that can be transferred across sectors and benefit all of them.”

Many start-ups that are breaking through in the next year focus on connecting disparate sections of the pharmaceutical industry with novel platforms and technologies that have yet to be integrated into the industry [iii].

5. Pharmaceutical start-ups a key source
of new products and services

Karan Singh, M.D, ACG, further details what will be some of the top markets for start-ups to penetrate with innovative biotechnology and services:

“India has evolved into the third largest drug maker in the world in terms of volume. It now supplies pharma products worth $24.47 billion (FY22), to 200 countries across the world and generates an annual net trade surplus of $17 billion. While we have acquired a leadership position in the pharmaceutical generics sector, this an opportune time to stand for something beyond pharmacy. Beyond generics, our entry into biosimilars is fairly recent –the launch of a biosimilar to bust clots by Gennova Biopharmaceuticals was notable, and it was the second company in the world to launch that drug.

Now, the inception of digital technologies like AI, ML, IoT, AR and VR are further expected to improve R&D helping to conduct clinical tests in less time and add innovation to the products as well as improve compliance and efficiency in manufacturing.

Inclusion, Innovation, and Integration are the keywords – the emerging important areas are genome sequences DNA splicing CRISPR CAS (clustered regularly interspaced short palindromic repeats) are the fastest growing domains with development of nanorobotics, transgenic free varieties of genetically modified food will be common entity in the future.”

This space for start-ups, though exciting, is expected to be very competitive, but this should not deter those that can get their feet off the ground. Vicky Xia, Senior Project Manager at BioPlan Associates, remarks that “More start-ups are going to be founded in the next year, with competition on the rise, particularly in synthetic biology. The experts that I have asked about this topic say that it’s going to be more competitive in the next several years, but I don’t necessarily expect a lot of these start-ups to go out of business in 2023. It may be a bit too early to tell.”

Fausto offers some advice to start-ups looking to put themselves on the pharmaceutical map in 2023: “Start-ups need to understand very well what it means to work with Big Pharma. Without such knowledge, it will be difficult for biologists and tech savvy people to create products and services that will be adopted. The reason for this is that the Pharma environment is very complex from the regulatory point of view and many initiatives fail just because the start-ups’ leadership teams overlook financial, legal or cultural aspects during product or service creation. This is sad because there are situations where teams of people invested years of their life creating biological and technically sound products and services only to have them fail for reasons that do not have anything to do with performance.

So, start-ups out there, try to have in your leadership team at least one person who has worked in Pharma and, more importantly, in multiple business units and functions. Such a person or persons will help you to enter the Pharma space and to discover problems and challenges you need to solve in addition to the purely biological and technical ones. Such a person or persons will be invaluable for your success because they can easily allow you to adapt your financial models in ways that appeal to Big Pharma, help you to schedule and plan the whole sales cycle in ways that reduce your burn rate, and assist you in understanding the cultural dynamics that you will face when, as a small company, you will have to interact with organizations several orders of magnitude bigger than yours, such as Pharma companies.”

Start-ups need to understand very well what it means to work with Big Pharma. Without such knowledge, it will be difficult for biologists and tech savvy people to create products and services that will be adopted.

Fausto Artico, Global R&D Tech Head and Product Director of Innovation and Data Science, GSK

One therapeutic area with particular interest from both established pharmaceutical companies and start-ups is cell and gene therapy.

“The number of deals in the gene therapy market went up by approximately 20% in 2021 as compared to 2020. Furthermore, in 2021 the largest deal in genomic medicine was closed at USD $9.6 billion,” Hanneke Later Nijland, Attorney-at-law on life sciences at Genome Lawyers comments. With 60 CGTs expected to reach regulatory approval by 2030, many companies are looking to break into this area if they have not already done so. “It seems that this development is to follow through, although some say that the economic backdrop shall lead to more extensive due diligences and more tensions on agreeing on the valuation/price,” Nijland states.

20% - increase in cell and gene therapy deals in 2021

USD $9.6 billion - largest deal in genomic medicine in 2021

6. Cell and gene therapies: attracting Big Pharma and start-ups alike

Xia gives an overview of the current landscape of CGTs in China: “Cell and gene therapies have been trending for several years...there are a lot of cell and gene therapies coming around in China, but what they are doing now may not be considered that innovative by Western standards.

For example, there are many clinical trials for cell and gene therapies happening in China but their targets are more often than not established targets. There are many start-ups going after the same target and they are some of the more innovative ones. It’s just that the percentage [of start-ups] may be lower than in the United States.”

Despite this interest, CGTs are already experiencing the supply and manufacturing capacity crunch affecting all levels of the pharmaceutical industry due to supply chain tensions.

This may affect the incentive to invest in this area. Some experts anticipate that continuing mergers and acquisition announcements in 2023 for the pharmaceutical manufacturing sector will provide a strategy for increasing capacity, along with automation and A.I. technology [iv].

Tim Guilliams, CEO and Co-Founder at Healx, comments on the progress of rare disease therapeutic developments including cell and gene therapies: “Thanks to improvements in software and computing, the field of drug discovery is being completely reimagined with life-changing effects for the hundreds of millions of people living with rare diseases worldwide.

In 2023 we will increasingly see AI used across the entire drug discovery and development pipeline. From de novo design of molecules and treatment combination predictions, to preclinical validation, right up to the running of clinical trials for precision medicine.”

7. Sustainable pharmaceutical industry practices for a greener future

As ever, ESG practices within the pharmaceutical industry continue to be an ongoing issue. With the pharmaceuticals and life sciences industry producing more carbon emissions than the automotive industry [v], Senior Manager, Environment & Compliance at Novo Nordisk and Chair of the Pharmaceutical Supply Chain Initiative Victoria Stone-Bjarup comments that “the importance of sustainability within the industry and supply chain can’t be overstated. Pharma supply chains are getting more complex, and recent disruptions show how fragile they can also be. We are also seeing a surge in interest from key stakeholders such as customers, regulators, and investors who want to know how the industry is managing ESG risks and embedding sustainability throughout the value chain.”

Interim CEO at the Association for Accessible Medicines David Gaugh extends this interest in sustainable industry practices to patient access to essential medicines and biosimilars: “The COVID-19 global pandemic has tested and confirmed the resilience of the generic drug supply chain that continues to provide a bridge to vaccines.

At the same time, generic and biosimilar markets face significant challenges that threaten sustainable patient access to more affordable treatments and billions in annual savings for the U.S. health care system. Policymakers can address these challenges and ensure the sustainability of the generic and the emerging biosimilar medicines markets.”

Key markers of sustainability for pharmaceutical players in 2023 include those “bound up in responsible procurement programmes,” Stone-Bjarup states. “These programmes tackle the sustainability agenda from operational side and complement a company’s high-level strategy. Responsible procurement seeks to embed environmental, social, and ethical risks into standard procurement procedures and processes for engaging with vendors. These will include considerations around ethical sourcing of key ingredients, human rights standards, and plans for decarbonisation.”

Karan Singh, M.D, ACG, adds how the packaging industry will need to adapt, stating “Going forward, the packaging industry has an opportunity to drive sustainable alternatives and move towards greener adoption in the sector. Manufacturers will have an opportunity to display sustainability in a tangible way and prevent the use of plastics (majorly used in packaging as it provides a cost-effective, reliable material to pack) in the process of manufacturing medicines. Some of the largest and most developed countries and regions are taking significant steps to introduce regulations to drive sustainability, while others are still operating as per the status quo, with limited or no regulations in place.”

Gaugh includes key steps policymakers can take to ensure medical equality and accessibility, such as “supporting the Strategic National Stockpile to include essential medicines manufactured in the United States that are necessary for use in a public health emergency, supporting domestic manufacturers of essential medicines by ensuring the economic conditions exist to justify the use of currently existing domestic manufacturing capacity,” among others.

For partners of pharmaceutical companies, sustainability will continue to be a top priority in order to remain competitive as more customers look to reduce their environmental footprint. Global pharmaceutical companies will be closely monitoring their partners and suppliers, especially those with prominence in the U.S. and European pharma markets [vii].

2023 is set to continue the conversation for CMOs/CDMOs as to how sustainability is not only an ethical consideration, but also a business discussion: “While adding complexity to decision-making, these can lead to better buying decisions that affect a company’s ESG performance, which is a key driver and indicator of performance for many investors and being discussed in the Board room,” Stone-Bjarup appeals to the industry.

While [sustainability considerations add] complexity to decision-making, these can lead to better buying decisions that affect a company’s ESG performance, which is a key driver and indicator of performance for many investors and being discussed in the board room.

Victoria Stone-Bjarup, Senior Manager, Environment & Compliance at Novo Nordisk and Chair of the Pharmaceutical Supply Chain Initiative

8. Talent acquisition and retention

When discussing sustainability, it is not only the environment that pharmaceutical players are concerned about – sustainable talent acquisition and retention is a bigger issue now more than ever. After over 2 years of COVID-19 restrictions affecting the way the pharmaceutical industry operates, employers are witnessing a talent crisis as the world emerges from the pandemic.

Neil Kelly, Managing Director and Founder of Vector Partners, comments on the three main challenges affecting the supply and demand of talent within the pharmaceutical industry: “as new molecules are coming to market, there is an increase in demand for resources to service that molecule development and manufacturing.

That’s one piece driving it. The second piece is the pandemic. That’s driven a lot of movement in the market, which means a lot less people on the market. The third element is the technology itself – so the technologies used to produce the product on the market. For example, in manufacturing, you now need programmers sometimes to service the lines. You never had that 10 years ago. You’ve got roles such as mechatronics, which is a combination of programming and mechanical engineering.”

Kelly stresses the importance of not only safeguarding a company against a current labour shortage, but also emphasizing that “ultimately, every organisation needs a plan. They need a talent plan to understand how talent is moving and when they are moving. If an organisation does not know this, then it is very difficult to manage a workforce.

A second point is around the health and wellbeing of a workforce is paramount. If 30% of your workforce is vacant, that puts pressure on your existing workforce. If you are not addressing that, the health and wellbeing of your employees will suffer. If you get your talent acquisition right and your workforce is working well, then the health and wellbeing of your workforce will be stable.

One thing we looked at was the ‘buy or build’ model – are we going to ‘buy’ somebody from the market or are we going to build that talent? That is a decision that companies need to make. If you don’t, then you’re just freefalling.”

The health and wellbeing of a workforce is paramount. If 30% of your workforce is vacant, that puts pressure on your existing workforce.

If you are not addressing that, the health and wellbeing of your employees will suffer. If you get your talent acquisition right and your workforce is working well, then the health and wellbeing of your workforce will be stable.

Neil Kelly, Managing Director and Founder, Vector Partners

9. Patient-centricity considerations for CDMOs

As personalised medicine and home healthcare improve treatment options for patients, CDMOs are increasingly shifting from customer centricity towards patient-centricity. During a keynote session at CPHI Frankfurt, Stuart Needleman, CCO & Chief Patient Centricity Officer from Piramal Pharma Solutions appealed to CDMOs in taking “ownership of the responsibility that [we] all have to deliver medicines to patients. It’s not about profit… That’s a challenge – to change the mindset about delivery in monthly, financial milestones. It’s a balance between the two. It’s not just about making money, it’s about doing the right science, delivering the medicines to a patient, and eventually you get paid for doing that work.”

That's a challenge - to change the mindset about delivery in monthly, financial milestones…It's not just about making money, it's about doing the right science, delivering the medicines to a patient, and eventually you get paid for doing that work.

Stuart Needleman, CCO & Chief Patient Centricity Officer, Piramal Pharma Solutions

Karan Singh, M.D, ACG, links patient-centricity with areas of opportunity in 2023 for innovative start-ups and businesses to concentrate on: “I believe, there are three distinct areas where innovation can thrive in the healthcare industry:

1. Medical Devices

India, as an emerging economy and with the third highest start-up pool globally, is ideally positioned to be the leader of MedTech innovation. As of now, India continues to import over 75% of medical devices and this can be changed. The progress in the technology used in medical devices has enhanced the quality of the healthcare delivery, support systems thereby resulting in better clinical outcomes.

2. Pre/Post Consultation Care

With the growth of digital health tech and the increasing availability of information over the internet has led to the idea of the ‘informed patient’ has become prominent. Going forward, we must design appropriate practices and policies aligned with the understanding of our resources and existing/future needs. Using digital tech and software monitoring has improved the lives and healthcare remedies for people especially, senior citizens and chronic disease patients.

3. Telemedicine

The telehealth industry is quickly growing to be a quarter trillion-dollar sector. Covid-19 has accelerated the need to bridge the gap between hospitals and homes. With the help of advanced tech and the adoption of industry 4.0 technologies – device integration in the business and be able to perform even more complicated tests, like dialysis at home.”

Whether a company’s services are in innovative packaging, medical devices, CMO/CDMO services, or processing technologies, developing patient-centric solutions and implementing human-factors engineering that put patients at the heart of business decisions is only the beginning of this dialogue.

These considerations tie into all trending issues discussed so far – from sustainability, innovative therapies, and technological developments for pharmaceuticals, CDMOs must put patients at the heart of their business practices in order to remain a relevant option for their partners [viii].

Gunjan brings a pharmaceutical company’s perspective to the table when discussing partnership decisions. “Human rights, good governance, and ethical aspects are important aspects to de-risk the supply chains.

I believe companies need to look at sustainability from a holistic perspective – to address it not only within the company but along the whole value chain.” With high expectations for all stakeholders, “companies need to transform to minimize their environmental footprint and benefit society,” Gunjan appeals.

10. Reshoring of manufacturing and production: is this the end of Chinese and Indian dominance?

Many figures within the pharmaceutical supply chain expect China and India to remain dominant in supplying their manufacturing capabilities. However, some hint that a change in dependency will begin in 2023.

Gaugh states: “Generally, a continued price increase across the industry will be seen. In 2023, we will see companies further diversifying their product capabilities and locations.” While this shift toward diversifying product capabilities and locations is a welcome one, Gaugh emphasizes that this change will not be immediate: “This is a multi-year process due to strict regulatory requirements. We will not see the results/outputs from these diversifications for 3–5 years.”

Karan Singh, M.D, ACG, gives some background on how the industry has found themselves at a manufacturing crossroads in 2023: “Let’s look at the learnings here – when it comes to China, the largest enabler for them was the government which strategically supported its core industries. On the other hand, when India opened its economy in 1990, it allowed free imports of key active pharmaceutical ingredients (APIs) hitherto procured locally, based on economic viability.

Thus, by early 2000s, China became the largest supplier of key raw materials for manufacturing drugs. It took them 10 years to reach the position of the world’s leading API manufacturers. Cut to 2023, there is an emergence of large API facilities across the world. Most industrialized countries have massive investment plans in pipeline. Some governments much like India are supporting the ecosystem with Production Linked Incentives (PLI) etc.

As the drug security issue intensified during Covid, many pharmaceutical majors have planned for backward integration and foray into manufacturing of KSMs, API and other intermediaries.

Along with government, the industry has prioritized 53 APIs which cater to 41 bulk-drug products. Most of these material manufacturing units, require extensive resources – land, water, energy and if not managed properly can create effluents and pollutants.

As the gestation period for these manufacturing units is long, the time for India to leapfrog to zero defect solutions is now.

Integrating these connected facilities with state-of-the-art effluent management systems like the zero/minimal liquid discharge (ZLD/MLD) in the newly developed pharma-parks will pave a way for sustainable manufacturing, like it has in case of textile industry.

Along with centralized power, water consumption and management of effluents should be weaved into the ecosystem of the smart pharma parks to decrease burden on the industry. A view that I share with industry stalwarts is that the transition to environment positive protocols should not rest on voluntary actions of any private entity but should form the basis of creating long-term sustainable manufacturing in the country.”

Though the end may not be in sight for worldwide dependency on Chinese and Indian manufacturing capabilities, regional changes are occurring within these countries themselves.

China in particular is witnessing a type of ‘reshoring’ of their pharmaceutical supplies. Xia explains how numerous biotechnology companies within China have shifted the sourcing of biological APIs from multinational companies to domestic developers, impacting not only cost control but also supply chain management worldwide: “When you need to import from a lot of bioprocessing suppliers overseas, this means that during events like COVID there will be serious supply chain bottlenecks. Chinese developers are getting more cautious – they are more aware of possible supply chain challenges so they are making more procurement decisions within China.

This means shorter lead times, a better supply chain, and cost control – though certain things they will have to import from overseas.” The effects of these reshoring efforts by China remain to be seen in the next few years.

Interestingly, Havrylenko comments that Ukraine may prove to be an unexpected innovative partner for international companies in 2023 despite the struggles it has faced in the past year: “The geographical location of the country and the educational base contribute to [Ukraine’s] appeal as a site for contract development and the relocation of production.

Therefore, an investment flow into this industry was expected. Russia’s attack slowed these processes but Ukrainian plants are looking for partners in European countries to develop their market in this region.”

Chinese developers are getting more cautious – they are more aware of possible supply chain challenges so they are making more procurement decisions within China.

Vicky Xia, Senior Project Manager, BioPlan Associates

11. Mergers and acquisitions to boost CDMO portfolios for novel modalities

2023 will likely see more mergers and acquisitions for CDMOs looking to position themselves as trailblazers in manufacturing with innovative products, technologies, and services.

With more and more complex therapeutics looking to enter the commercial markets, acquisition and investment activities have seen over 200 publicly announced M&A agreements involving CDMOs from 2017 to 2021 [ix]. Many of these deals have been made within the space of cell and gene therapies, a move Nijland predicts will be one of the best ways for companies to leverage interest in CGT technologies for 2023, as well as one of the top manoeuvres CDMOs can take to increase manufacturing capabilities and efficiency. Since the beginning of 2022, almost 20 CGT CDMOs have been acquired by biologics or advanced therapy companies in a bid to break into the CGT space with the manufacturing capabilities required for such novel modalities [x].

This trend is set to continue into 2023 – at this year’s CPHI Frankfurt, SK Pharmteco’s CGT-specialist CDMO Yposkesi announced their expectation to complete the construction of its new manufacturing site in the first quarter of 2023.

Main accretion activities from M&As for 2023:

1. Increased capabilities in the value chain within a therapeutic modality [ix]

2. Incorporation of new modalities into a company’s portfolio

3. Expansion of services included with specific product/therapeutic offerings

Earlier in 2022, SK Pharmteco announced an investment of USD $350 million in the CGT CDMO Center for Breakthrough Medicines, based in Pennsylvania [xi]. Experts predict that to remain competitive with trusted partners, it is essential for CDMOs to demonstrate the specialty technical knowledge required to work with novel and innovative products and modalities.

Guilliams echoes this sentiment for all players in the pharmaceutical industry, claiming that “We will also see greater collaboration between industry, technologists, academics and patient groups to progress more novel rare disease treatments towards clinical trials.”

Though some had expected the contract manufacturing sector to remain largely fragmented in 2022, with more options for customers to choose from, 2023 may see the emergence of CDMO consolidation in order to reduce competition and increase efficiencies, not to mention increased profits [xii].

2023 may see the emergence of CDMO consolidation in order to reduce competition and increase efficiencies, not to mention increased profits [xii].

Mainstream interest and research into psychedelic substances is set to take off, with a new peer reviewed scientific journal, Psychedelic Medicine, to be launched in 2023 and an increasing optimism about the potential of psychedelic drugs for therapeutic use.

The last quarter of 2022 has seen the beginning of phase III trials for Compass’ COMP360 psilocybin, a psychedelic therapy aimed towards individuals suffering from treatment-resistant depression. The therapy had previously received the FDA Breakthrough Therapy designation and Innovative Licensing and Access Pathway designation [xiv].

12. The potential of psychedelics in healthcare

Interested in hearing more from our experts? Watch the full CPHI Frankfurt panel discussion here

At CPHI Frankfurt 2022, content sessions on psychedelic medicines addressed the specific supply chain challenges encountered when working with such ingredients.

Though research interest into psychedelics as potential therapeutics has been ongoing for the last 30 years, the realities of working with such substances presents significant challenges to companies looking to incorporate psychedelics into their portfolios as pharmaceutical ingredients. Regulatory discrepancies in different parts of the world (especially between North America and Europe) are amongst the largest issues facing the pharma industry, alongside dosing – in other words, balancing the safety and the therapeutic efficacy of a psychedelic drug [xiii].

A big trend within the pharmaceutical sector for biotech companies looking to incorporate psychedelics into their portfolios is investing in marketing authorisations or licensing these compounds to larger pharmaceutical companies in order to develop psychedelic drugs.

2023 may see state by state legal and medical frameworks come into place that will see access to psychedelic products in North America, but this trend may not extend to Europe. Currently, most European activity for psychedelics remains in pharmaceutical research with little consideration towards legal and regulatory steps, something that may not change in the next few years if psychedelics see the same journey as cannabis products in Europe [xiii].

Thank you to our contributors:

David Schoneker, President, Black Diamond Regulatory Consulting LLC.

David Gaugh, Interim CEO, Association for Accesssible Medicines

Victoria Stone-Bjarup, Senior Manager, Environment &Compliance (Novo Nordisk), Chair of the PSCI

Vicky Xia, Senior Project Manager, BioPlan Associates

References

[i] The supply of critical raw materials endangered by Russia’s war on Ukraine (oecd.org)
[ii] European energy crisis may portend US drug shortages | CIDRAP (umn.edu)
[iii] Endpoints News Announces the 11 Most Promising Biotech Startups of 2022 | Business Wire
[iv] CGT 2023 A Look Ahead (cellandgene.com)
[v] Sustainability in the pharmaceuticals and life sciences industry - PwC
[vi] How Sustainable is the Pharma Industry? | CPI (uk-cpi.com)
[vii] How Pharma Sustainability Commitments Are Affecting Contract Manufacturers | L.E.K. Consulting (lek.com)
[viii] Patient centricity in drug innovation and packaging design to take centre stage at Connect in Pharma in Geneva this September (bio-itworld.com)
[ix] CDMOs are becoming emerging technology leaders | EY - Global
[x] Who's Left to Acquire in CDMO Biomanufacturing? A Select Few. (pharmasalmanac.com)
[xi] SK Inc. becomes second-largest shareholder of the Center for Breakthrough Medicines, a U.S.-based Cell and Gene Therapy (CGT) CDMO, accelerating its growth as a global leader in the field | SK
[xii] Pharma Trends 2022 (turtl.co)
[xiii] Capsugel Belgium NV: Lessons from the Future: Cannabis and Psychedelic Industries (video) (cphi-online.com)
[xiv] Treatment-resistant depression (TRD) (compasspathways.com)

Thank you to our contributors:

Gunjan Singh, Head of Mature Markets API, Dr Reddy's

Tim Guilliams, CEO and Co-Founder, Healx

Svitlana Havrylenko, Editor-in-Chief, Pharmaceutical Industry Review

Fausto Artico, Global R&D Tech Head and Product Director of Innovation and Data Science, GSK

Neil Kelly, Managing Director and Founder, Vector Partners