Article

1. Emerging Markets
Shifting Sands
Although the contract services sector has been
Chantal Williams at RSA
recovering over the last few years, contract manufacturing
organisations haven’t been so lucky. The answer is far from
being ‘one size fits all’, as different market conditions in
each region means that each solution will require
a personal touch
Everyone in the pharmaceutical industry is aware of how the The trend towards smaller volume niche and orphan
balance in the global market is shifting. After all, it was back products, as well as branded generics, is opening up
in March 2010 that the Institute for Healthcare Infomatics the market to smaller CMOs. Technology advances are
(IMS) ranked 17 countries as high growth ‘pharmerging’ reducing capital and operating costs and lowering barriers
markets, forecast to contribute nearly half of industry growth to entry, making it easier for smaller CMOs to compete for
by 2013. Due to its size, China stands alone as the number commercial scale contracts. Faced with these challenges,
one pharmerging market, followed by Brazil, Russia and CMOs have had to review their business strategy and come
India as a second tier. Thirteen other countries including up with different ways of working in the evolving world of
Venezuela, Poland, Argentina, Mexico and Turkey make up contract manufacturing.
the balance.
Contract Manufacturing in
Since then we have seen how consumers in emerging the Pharmerging World
markets such as China, India and Brazil have been driving
increases in pharmaceutical spending and thereby offsetting Traditionally, many CMOs have been based in the
stagnation in traditional markets such as the US, Europe and emerging world, using a combination of focused skills,
Japan; how has this growth affected contract manufacturing lower labour costs and partnerships with licence holders
organisations (CMOs)? to deliver cost-effective production. On paper, being
based in any of the 17 pharmerging markets should unlock
The Contract Manufacturing Perspective new opportunities for these companies; however, in practice
they are being affected by a unique set of challenges.
Although the overall pharmaceutical contract services sector is Similar to CMOs everywhere, they are seeing margins
now experiencing something of a recovery after a lean couple squeezed by new smaller entrants at the bottom end
of years, the contract manufacturing segment is not doing so of the sector and investment by large pharma at the
well, according to Jim Miller of PharmSource. Presenting his high end.
annual keynote lecture at the Interphex exhibition in New
York in early 2012, Miller noted that the CMO sector is being This means they need to change and adopt new strategies
held back by the reluctance of the pharmaceutical industry to for growth, investing in new products (such as peptides), new
outsource new molecular entity production, as well as more markets, and business models (such as providing direct to
countries granting tax concessions to encourage investment market sales). All of these require new skills, many of which
in local production by large pharmaceutical companies (1). are in short supply in their existing organisations and within
This capital investment by large pharma is driving down the country itself. So, what are these new skills that are
the cost of producing drugs and thereby putting enormous required? What talent management strategies are companies
pressure on CMO margins. In some regions, manufacturing adopting to develop them? This article looks to three
costs must drop 30 per cent to match the tax savings that organisations in the emerging markets of India, Turkey and
pharmaceutical companies can receive. Brazil for their perspectives on contract manufacturing.
52 December 2012

2. Moving India Up The Chain and talent pool lies in the West and is still working for
Big Pharma. Strategic recruitment may well be the key to
Neuland Laboratories is a leading Hyderabad-based unlocking a more profitable future based around more
manufacturer of active pharmaceutical ingredients (APIs) complex products.”
and an end-to-end solution provider of chemistry-related
services to the pharmaceutical industry. It has some 1,000 Competing in Brazil
employees and its core competency lies in the application of
strong process chemistry to manufacturing in a regulatory Abhishek Banerjee is Director General of Accord
environment. The company’s philosophy has always been Farmaceutica Ltda of Brazil, which operates both through
to deliver high quality which is reflected in the fact that the contract manufacturing and direct presence. One of the
company’s plants all meet EU and US FDA quality standards fastest growing pharma marketing companies in regulated
and requirements. markets, Accord boasts a wide product portfolio in oncology,
biologicals, immunosuppression, cardiovascular, central
It faces increased competition in emerging markets for its nervous system, anti-diabetic, nausea, osteoporosis and
existing commodity products. Saharsh Davuluri, President of gastrointestinal drugs. Getting the right people on board to
Neuland Laboratories, explains, “If it’s a large volume product make the business successful does mean overcoming a skills
like the antibiotic Ciprofloxacin, for which we are the world’s challenge, as Banerjee explains: “For the local direct presence,
largest manufacturer, then we cannot really compete in India recruitment is not such a difficult exercise because you’re
despite having almost a 70 per cent market share in Europe basically modelling yourself like any other Brazilian company.
and North America combined. We have a negligible market So we can find the talent, in terms of sales force, logistics,
share in India for Ciprofloxacin because it is produced by regulatory and medical affairs. However when it comes to
several companies in India we really can’t compete on contract manufacturing, you need different skills. Looking at
the pricing.” business development you need a person who understands
the entire value chain. I think that is one area where there
Consequently, the business is changing as the company is a huge lack of talent, because of the simple reason that
looks to manufacture more complex products. One such you just don’t traditionally have cross-functional managers
example is Neuland’s decision to move up the global value within Latin America. That becomes a huge limiting factor
chain and start manufacturing peptides, which are more for staff who are extremely good at one thing but who don’t
complex with lower competition and consequently higher know anything about regulatory requirements for example.”
margins. The company’s existing plants were ideal for their
manufacture and capital was available to fund the move, but Language skills are a key necessity for staff operating
the key, qualified people required to make the business in a global market, rather than just a local one. For
work were not readily available. Portuguese-speaking Brazilian staff, this means
learning Spanish to communicate within Latin
Peptide specialists are a small subset of scientists America but, more importantly, also learning
and there was no one in India who could fill the role. English as it is the de facto business language
A specialised recruitment firm eventually found the of the global pharma industry. The cost of
ideal candidate; an Indian with about 30 years of learning a language is still high in Brazil, but
experience, working in the US, who was happy many companies, including Accord, have
to be repatriated to India. A team of 25 invested in English courses to retain and
people – a mixture of peptide specialists develop staff at specific levels.
and organic scientists – were placed in
positions reporting to him and have In an emerging market where
been delivering great results. regulators such as the Brazilian
equivalent of the US FDA are only
Looking ahead, Davuluri believes 10 years old and there is very active
that this model may well be the government intervention in the
way forward for the company, as market, other skills are in great
organisations look to outsource more demand. A group that Banerjee
and more complex products. “India has describes as ‘positive, business-
an economic advantage over Switzerland orientated regulatory managers’ has
in terms of costs, but the scientific skills the knowledge and experience to help
www.samedanltd.com 53

3. companies become more flexible in reacting to changing Taman to reach out directly to students. “I’ve been going to
regulatory conditions. universities to meet pharmaceutical and chemical engineering
students to give them advice at careers days, explaining what
Government intervention is also geared to developing people do in pharmaceutical production. They know what
local pharmaceutical capabilities. For example, the Brazilian people do in the registration department, they know what
government is offering long-term, low interest loans to they do in the laboratory, in quality assurance because this is
help local companies strike licensing deals, buy technology a common thing, but in production this information is missing
products or to help clinical trials, in a bid to create a self- and the industry needs to fill in the gaps.”
sustaining pharmaceutical sector. This can affect CMOs
compared to direct to market companies. According to Critical to retaining staff at PharmaVision is the company’s
Banerjee, “The Brazilian government is now offering a strategy of empowering them and giving recognition for
25 per cent incentive in the tender process. So if you are success. This means assigning staff to project teams where
quoting 100 and I’m Brazilian and I’m quoting 125, then the every member has a vital role, rather than in hierarchies
government is ready to pay 125. This has an impact on a lot which can demotivate staff.
of things including talent and manufacturing.” According
to Banerjee, the key to success for Brazilian CMOs is Looking to the Future
developing positive company cultures that encourage staff
to learn new, cross-sector skills, improve their English and While conditions in India, Brazil and Turkey are all very
reward them through performance-linked incentives. different, CMOs are facing similar talent management
issues that potentially hold back their ability to grow.
Turkey: Adding Skills to the Workforce Many governments have identified developing the
pharmaceutical sector as a key strategic goal meaning
Fatma Taman is General Manager at PharmaVision there is capital available for expansion to target
Pharmaceutical. The company produces around 102 million both growing local and international markets. Talent
packs of pharmaceuticals per year, which is about 9.5 per management is the missing link that needs to be addressed
cent of local pharmaceutical production. The company through training, education, language skills, new ways of
exports to over 20 countries, including some members of the working and recruiting international staff if CMOs in the
EU. One of the major changes in Turkey, common to many pharmerging economies are to realise their potential.
emerging markets, is the government’s desire to develop
local manufacturing capabilities, rather than relying on
importing key materials. In the case of Turkey this means Reference
that carbon molecules will have to be produced locally and 1. ‘What the New Bio/Pharma Business Model Means for CMOs
this affects the skills that are needed. Managers must have a and CROs’. Keynote presentation given by James Miller of
combination of good technical knowledge backed up by an PharmSource at INTERPHEX 2012, on 1 May 2012.
understanding of analytical and product processes in order
to successfully transfer production to other countries – skills
that are in short supply, according to Fatma Taman. “Even
when transferring a product from one company in Turkey to About the author
your research plant, it is difficult to find the correct person. Chantal Williams joined RSA Executive
They need to have a view of the whole picture, otherwise Search in 2007 and brings with her over
you would need a production person, an analytical person, 10 years of experience in Life Sciences
a regulatory person, a supply chain person and everybody Executive Search. She is a key member
would speak another language. I’ve had to train them by of RSA’s Manufacturing & Quality practice,
myself, on the job, in order to meet our needs.” working on a broad range of roles in
quality, manufacturing, supply chain,
Added to this is the fact that regulatory requirements compliance and regulatory CMC. Her career began in a
are becoming tighter in each country; while they may be small boutique consultancy before moving to a global
broadly similar across emerging markets, there are specific search firm. Chantal joined this firm as a Researcher and
differences from country to country. So for a CMO such as was shortly promoted to Head of Research, managing a
PharmaVision, this means either investing in regulatory team of eight across a variety of industry sectors, whilst
skills or partnering with a local licence holder to handle retaining a role as Senior Researcher within the Life
this area. Sciences practice. She was subsequently promoted to the
role of Consultant within the practice. Chantal has a BA in
Business Studies from the University of Central England.
Across the Turkish pharmaceutical sector there is also a
Email: chantal.williams@theRSAgroup.com
pressing need for good, experienced production managers.
Many entering the industry prefer to work in quality assurance,
R&D or even open their own pharmacies, which has led
54 www.samedanltd.com