Staying ahead in a competitive field

With massive expansion in Asia and beyond, how can European pharma manafacturers adapt to survive? One solution is to expand core business to become a one-stop shop; the other is to focus on research and marketing.

The challenge for specialist outsourcers is to beat rivals, often from emerging market countries, who compete largely on price. NextPharma, which started its corporate life as a specialist manufacturer believes that its answer to the challenge is distinct, and that it adds value for its customers by becoming a one-stop shop. ‘We have three core businesses: development, production and logistics,’ explains Frédéric Kahn, NextPharma’s executive vice president for marketing and sales. ‘Our aim is to be a one-stop shop across a very wide range of technologies.’

The company’s stategy is to offer its customers, which range from big pharma companies to biotech companies, a service that can take their products through the final phases of development to launch, and then manufacture, packaging and finally distribution.

Set up in 2000, NextPharma has nine manufacturing sites spread across Belgium, France and Germany. In 2004 the company had sales of E140m. ‘Our organic plan calls for us to grow to sales of E175m by 2008,’ Kahn states. The company is privately owned, its principal shareholder being Credit Suisse First Boston Private Equity.

Its strategy calls for the company to stick to the developed markets, though it does not rule out forging partnerships in fast-growing areas of the world, such as Asia. ‘The E175m figure does not include growth from acquisitions. We envision an acquisition in the USA,’ adds Kahn. NextPharma is also seeking FDA approval of its manufacturing facilities, so that it can manufacture for the US market. ‘NextPharma is focusing on areas such as cytotoxins (powerful anti-cancer drugs), hormones, antibiotics and reformulations,’ Kahn explains.

‘We’re also looking at developing our own intellectual property,’ adds Kahn. ‘Line-extension (through reformulations of existing therapies) is a growing part of what we do.’ The intellectual property NextPharma generates is through the techniques it uses to reformulate existing therapies. ‘The idea is that we could license this IP when the line is extended,’ says Kahn. The licensees would, inevitably, be those companies that developed the original treatment. They are always looking for ways to extend the market-life of their products.

A new development for NextPharma is its growing involvement in clinical trials and development. From the point of view of its customers, it is often cost-effective to outsource the final phases of clinical trials which involve larger-scale manufacturing of both active ingredients and placebos. By handling the clinical trials stage, which requires what is in effect small-scale manufacturing, NextPharma obviously puts itself in a good position to land the manufacturing contract if the drug or treatment is approved by regulators. This sort of manufacturing is, by definition, of the higher-value patented drugs. The staple business for most contract manufacturers in Europe has been generics, and it is for this business that competition from cheaper manufacturing locations is fiercest.

‘The growth in the drug development part of our business is going to be significant in the next few years,’ Kahn says. ‘Our expertise in cancer drugs means that we are well positioned to help biotechnology companies develop new therapy areas.’ Kahn explains that NextPharma usually gets involved at stage three of the clinical trials, when the trials are scaled up – ‘We also envision getting involved at earlier development stages.’

The bet is that the pressures in the pharmaceutical and biotechnology industries across the world will force companies to focus on the their strengths. ‘For big pharma, this is research and marketing,’ Kahn states. For all but a handful of biotechnology companies, it is just research. NextPharma believes that its unique mix of manufacturing and development expertise, plus its logistics business, can help companies cut down on the time it takes to get new products to market or to take older products into new markets.