Strategic outsourcing of manufacturing

The strategic outsourcing of the manufacture of active pharmaceutical ingredients, intermediates and reagents by the pharmaceutical industry during the last three decades of the 20th century was the key driver for the development of the Fine Chemical industry around the world. There have been periods when this trend was temporarily halted and in some individual company cases reversed, but overall the outsourcing trend has continued. This trend has been driven by the pPharmaceutical industry’’s need to focus on its key business drivers, firstly researching and finding new medicines and treatments and secondly the global marketing of their products. The cost, and to some extent expertise, of chemical manufacture, with its capital intensivecapital-intensive plant and equipment, is a burden that most medicine manufacturers can no longer afford to bear. Consequently partnering with reliable, quality driven and cost conscious fine chemical suppliers is of vital importance to modern pharmaceutical companies.

Over the last 30 years many small and medium sized fine chemical businesses grew on the back of the pharmaceutical industry’’s outsourcing opportunities. This growth in turn attracted several major chemical corporations who thought that this was an opportunity to move into higher added value intermediates. The bigger companies actively pursued and bought up many small and medium sized fine chemical units. However, it has become apparent in the 21st century that they often failed to recognise that the companies they had bought had built their reputation on speed of response, quick local decision making and flexibility that their customers demanded. These characteristics are not easy to manage in large corporations and more recently many of the businesses that were acquired have again been spun out, freeing themselves from the overhead burden and complex decision makingdecision-making processes of large conglomerates.

The Northeast of England has particular strengths in Fine Chemicals and companies in the region have histories that reflect the scene we have set out above. The North East of England Process Industry Cluster (NEPIC) has many small, medium and large company members that are able to work at all levels of the pharmaceutical supply chain. Companies with bases in this region can deal with the development of new molecules, the scale-up of processes, the delivery of clinical trial materials right through to full scalefull-scale manufacture and indeed into formulation and packaging. NGP have approached four significant NEPIC members to talk about their experiences supplying outsourced products to the Pharmaceutical sector – Aesica Pharmaceuticals, Piramal Health Care, Shasun Pharmaceutical Solutions and Fine Organics Limited, whose businesses in this region have are approaching 200 years of experience in this activity.

Aidan Walker, Site Manager at Piramal Healthcare - Pharma Solutions
Aidan Walker started his career in 1985 for BASF at their Nylon Intermediates facility at Seal Sands Teesside as a Process Engineer following attaining his degree in Chemical Engineering from Newcastle. He worked on a number of improvement and capital expansion projects before moving to MTM Fine Chemicals in 1990 as part of the construction and start up team for a new plant being built at the Teesport site. In 1992 Aidan moved to the Morpeth facility, then owned by GD Searle, as a Senior Process Engineer. Over the next 8 years he took on progressively more senior roles in Engineering and Manufacturing until in 2000 he was promoted to the Site Executive Leadership team as the Director of API Products. He continued through a number of leadership roles culminating in the position of Operations Director responsible for all manufacturing, technology and EHS functions on site. On sale of the Morpeth site to Piramal, Aidan was appointed Site Leader and has led the site through its transition from a supply site to a stand alone business unit within Piramal. In addition to the Morpeth site Aidan also has overall responsibility for Piramal's other UK operations.

Keith Payne, Sales & Marketing Director at Aesica Pharmaceuticals Ltd
Keith Payne joined Aesica in 2007 and became Sales and Marketing Director in July 2008. Prior to joining Aesica, Keith was Senior Vice President, Product Development Services at NextPharma and was previously Commercial Director (Asia and ROW) for Clariant Life Science Molecules (formerly Archimica Fine Chemicals). Keith graduated with a degree in Chemistry from Leicester University.

Kevin Cook, Operations Director at Shasun Pharma Solutions Ltd
Kevin is President of Shasun Pharma Solutions Ltd, responsible for operations in the U.S. and Europe and is based at the Dudley UK site. He has over 22 years experience in chemical and pharmaceutical manufacturing and has held a range of managerial positions in the areas of HSE, Supply Chain, Operations and New Product Introduction. Kevin is a graduate in Chemistry and Chemical Engineering and has an MBA from Newcastle University. Prior to joining Shasun Pharma Solutions in 1992 he served in various operational roles with Boots Pharmaceuticals.

Keith Hanson, Managing Director at Fine Organics Limited
Keith spent 28 years with Laporte and Evonik Degussa, latterly as General Manager of the Seal Sands, the largest and most versatile within the Exclusive Synthesis Business Line. From a mechanical engineering background Keith has managed most of the functions on site and in the process has acquired a practical understanding of the internal and external dynamics of the business. Keith completed an MBA in 2001, studying Strategy, Financial Strategy, Challenges of the External Environment and Performance, Measure and Evaluation. An acknowledged expert in change management and lean manufacturing he is well equipped for the challenges of serving the markets which we serve.

NGP. Life within the large corporate organisations clearly did not suit your business model. What was it that drove your organisation to its current business position?
Aidan Walker. Although the move out of  'bBig pPharma' wasn'’t one that the majority of staff welcomed at the time of transition, the ability to clearly make a real difference and, to a large extent, meaningfully influence their own futures is a change that many are now very positive about. The growing variety of business has also allowed us to capitalise on the wasted inherent capabilities that had previously lain dormant within many of the staff.

Kevin Cook. Speed, flexibility and service have always been the cornerstone of our offering at Dudley. The acquisition by Shasun has allowed us to become a more significant part of a more focused organisation, enabling faster decision making and greater responsiveness, with a common goal across the entire organisation of providing the highest level of service to our Pharma customers.

Keith Hanson. Our business model is driven by customer service, flexibility and rapid response, which ultimately adds value to our customer supply chain and minimises risk by reducing time to market. Being an independent company we are able to make decisions quickly and expedite solutions with minimal bureaucracy. Also the ability to freely explore a wider spectrum of market sectors increases our scope of business opportunities significantly.

Keith Payne. The need for more entrepreneurial and innovative thinking to adapt faster to market conditions and customer requirements.

NGP. Manufacturing for the global Ppharmaceutical mMarket as you do, what are the priorities that are being demanded by your customers?
KP. Globally pharmaceutical customers are looking for us to be reliable, resourceful, flexible and competitive.

KH. Security of supply, high standards for safety, health, environment and quality, technical innovation and optimum cost.

AW. On the whole the demands are the same as they have always been, on time delivery, at the right quality, at competitive prices. There is growing pressure on prices as would be expected and also a growing requirement to be able to demonstrate a secure supply chain.

KC. With the continuing trend towards outsourcing and a growing dependency on external manufacturing, assurance of supply remains a key priority for our customers with technical expertise, on-time delivery, right first time production and comprehensive quality, and HSE systems and controls being essential components of a successful supply chain. Within an ever more competitive landscape, this is very closely followed by cost.

NGP. Innovation has always been a key driver for outsourcing of products in the sector. How has this influenced your business strategy?
KC. At Shasun we recognise that innovation is a critical aspect of supplier selection, complementing the benefits of continuous improvement and operational excellence with the ability to deliver step changes in quality and cost. Innovation is a key element of Shasun’s offering and is delivered through two main platforms, (i) manufacturing innovation, with the application of new manufacturing techniques to deliver cost effective solutions to our customers, and (ii) combining dedicated R&D resources with regional collaborations and a world renowned Scientific Advisory board to drive the application of innovative technologies such as Shasun’s proprietary Fluorination, ABF and HKR technologies, and bring novel synthesis solutions to our customers.

KP. Our business strategy is driven by the goal of providing innovative services, approaches and special capabilities for synthesis and formulation of pharmaceuticals, which is responsive to our customers needs for outsourcing.

KH. We are a toll manufacturer of Pharmaceutical Intermediates and hence on many occasions the processes supplied are relatively fixed by registrations to the regulatory authorities. Innovation has to be looked at in the fullness of the supply chain, starting with the most efficient use of assets.

AW. Innovation for us has primarily been focused around developing our 'one stop shop' offering. With this in mind we have invested heavily in capabilities that extend the scope of our offering beyond traditional manufacturing. These include both development capabilities in API and formulations, as well as a brand new Clinical Trials Services Unit.

NGP. As productivity is key to effective cost control and pricing, how has your involvement in your regions improvements, through NEPIC and One North East, benefited your business?
KH. Our CI programme has been driven by the site management, supported by local expertise as and when needed, we have had tremendous support from One North East over the last 4four years. Our CI training programme was support by NEPA and NAC and latterly we are working with NEPIC to improve our business support mechanisms.

AW. We have received significant benefit from involvement in a number of these programs. Right now we are coming towards the end of our 'narrow and deep' intervention after which the whole workforce will have attained the skills necessary to ensure we can drive productivity improvements from shop floor level upwards on a sustainable basis.

KP. Aesica has certainly benefited from our staff participating in NEPIC and One North East seminars, which raise awareness on industry best practices, operational efficiency and other measures that improve productivity.

KC. Through NEPIC, Shasun has participated in a number of manufacturing and energy efficiency programs, sharing best practices and benchmarking across the cluster to deliver tangible benefits to our business.   
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There is an ever increasing pressure on the price of drugs arising from governments across the world. There is also a growing moral obligation to supply cheaper medicines to less economically developed countries. Furthermore, pharmaceutical companies have the strategic need to focus their management expertise on researching & developing the next generation of pharmaceuticals. All of this has given added intensity to the manufacture of cost effective pharmaceutical ingredients. Companies like Aesica, Fine Organics, Piramal and Shasun, by providing a range of outsourcing opportunities, and a service that is efficient, of high quality and flexible, have become key partners in the pPharmaceutical supply chain.

Within 1one hour drive time in the North East of England, there are companies working across the whole pharmaceutical supply chain. They represent over 33 %percent of the UK’’s pharmaceutical GDP. This sector is provided with a wide range of support services via the regional development agency ONEne North East, including world class activities such as T the Centre for Process Innovation and NEPIC.

For more information, please visit www.nepic.co.uk.