‘You get what you pay for’ on API quality
The quality of active pharmaceutical ingredients (APIs) is a constant source of discussion within the industry.
During 2019, this was only heightened by the ongoing investigation of the contamination of sartan-based medications.
The sheer volume of APIs produced in China and India mean that a large proportion of companies getting into regulatory trouble over issues, including quality, were based in these countries.
However, on the other side of the fence is the suggestion that these fears have been played upon by Western manufacturers, according to an API expert at Lonza.
When in-PharmaTechnologist (IPT) spoke to CEO of C2 Pharma, Andrew Badrot (AB), about the API business, instead of an established-against-pharmerging company debate, he framed it as an issue based around a quality-to-cost ratio.
In the long-term, Badrot spelled out that he believes quality will win out.
IPT: Could you provide some background on C2 Pharma?
AB: We started five years ago when we acquired a broad portfolio of APIs from Boehringer Ingelheim, and that product portfolio was predominantly in ophthalmic indications. The first four to five years, we focused on taking those products, those APIs, basically out of Boehringer Ingelheim and putting them in a new home. Now, the company has matured, and we're moving into the next phase of our corporate history, because now we're finally able to move on from the initial product and develop this whole pipeline of APIs.
We have six APIs that are in tech transfer, meaning that are being tech transferred to a CMO, five APIs that are in development mode, and we have another 19 APIs in the pipeline. Those in tech transfer, you can expect that those products will be on the market this year. Some of them will maybe be in June and others will be in October, others towards the end of the year. Those are the six APIs. So, imagine we have five today and this is another six. So, this will double the number of APIs in our portfolio. We have another five that will basically come in about two years’ time.
IPT: What position is C2 Pharma’s currently in and how are you positioning the business?
AB: We have some unique strengths as business, and we have also some weaknesses. For instance, our product portfolio is rather weak – five or six APIs for a company of our size is not a sustainable model. That's why we're spending a lot of money and time on developing the portfolio as our priority.
The strength that we have is that we have awesome customer access. We have access to pretty much every big pharma, we have access to customers around the world. We have a network, and that network can absorb all those products. That's why for us it would not be so difficult to sell our new APIs. The marketing aspect of it will probably be the lesser problem, because we have this customer base. I cannot take credit for it, to a large extent those are the customers that we inherited in the original transaction in 2014. What we're trying to do with this portfolio is to leverage that baseline. And that's why, if you look at those APIs that we're working on, most of them are ophthalmic APIs. We're becoming the ophthalmic API manufacturer.
From there, you just expand the basket, which has a lot of value for the customer because they can reduce their supply base. If today you have 30 or 40 ophthalmic APIs on the market – today we deliver five, this year we will have seven or eight, the year after we will have 12 or 15. That way we will become the most relevant supplier and it reduces complexity for the customers.
IPT: What is the plan moving forward?som
AB: Coming from an M&A background, we're always looking at opportunities to acquire APIs, to acquire manufacturing sites, but that should be done in the future. All those options are on the table. We will always look at acquiring API portfolios. Beyond the APIs, we're looking into finish doses, as this is not our strength. But we are curious about those opportunities – non-pharma is not our strength but we're looking into it. Also, there are a few quite interesting manufacturing sites that we dream of owning.
IPT: How confident are you in your place within the API industry?
AB: The API business is a tough business. There is no short game in our industry. As a European virtual manufacturer, we are competing against very aggressive Indian companies, very aggressive Chinese companies. We cannot compete solely on cost. So, our cost structures are sometimes inadequate. If you look at a cost to quality ratio or cost to service ratio then I think it's valuable, but again, not everybody will appreciate that. Some people only want to look at costs. Today, I had a customer who was complaining that he just lost his supplier, because they got a warning letter. And he said, 'I want to buy from you, but your cost has to meet their costs.' But, I cannot meet their cost. If I meet their cost, I will eventually have a warning letter myself. It's not going to happen.
It happens to us that we lose customers in the short-term because they go for the cheaper option. But, eventually you get what you pay for. There is no free lunch in the long-term. In the short-term, yes, you can get away with it, but eventually it has to catch up. It's just a matter of time.
Andrew Badrot is the founder and CEO of C2 PHARMA, a Luxembourg-based pharmaceutical group that manufactures and distributes active pharmaceutical ingredients and complex chemical compounds obtained from natural and synthetic origins. He has more than 20 years of business experience across various industries.
