Small molecules remain a key driver for biopharmaceutical sales and account for approximately 67% 1 (CHF 770 billion) of an estimated CHF 1.15 trillion global market 2. We see continued underlying global market growth of approximately 5% for drugs based on small molecules 3. Demand drivers include increased global access to medicine as well as new drug launches, which employ small molecules for improved patient therapies.
The continuing role of small molecules is apparent as they account for an estimated 60% of the overall clinical pipeline and 75% of the New Molecular Entities (NME) approved by the Food and Drug Administration (FDA) in 2020 4. Growth in drug candidates based on chemical synthesis averaged 10% CAGR for the period 2014-2020 5, more than twice the rate of the preceding six-year period. With a record number of small molecules in early development phases, we expect this approval trend and overall strong growth to continue.
The trend towards specialty medicines, a segment growing at four times the rate of traditional drugs, continues to drive overall biopharmaceutical market growth 6. Specialty medicines can generally be described as more patient-centric, higher cost and typically higher complexity versus traditional drug products, with the developed markets of Europe and the US accounting for more than 80% of the global consumption 7. Oncology research is a dominant factor, representing more than one-third of total specialty sales growth 7. Though often associated with biologics, small molecules account for more than half of the specialty drug development pipeline.
Small and emerging companies continue to drive innovation in biopharmaceuticals, holding approximately two-thirds of early stage candidate compounds and accounting for half of drug approvals 8. This represents a significant increase on 2011 when only 31% of approvals came from these companies 9. Small and emerging companies typically utilize development and manufacturing service providers, including contract development and manufacturing organizations (CDMOs) like Lonza, to advance and commercialize their molecules.
We see several key drug development and manufacturing challenges facing biopharmaceutical companies:
Source: DCAT Pharma Industry Outlook 2020, Bio vs Non-Bio by IQVIA
Source: IQVIA Market prognosis 2019-2023
Source: Evaluate Pharma (2020/07), Small Molecule Forecasts consolidated 2020-2026
Source: FDA 2020
Source: Citeline #PC molecules 2014-2020 vs 2007-2013
Source: DCAT Pharma Industry Outlook 2020: Specialty vs Traditional by IQVIA
Source: DCAT Pharma Industry Outlook 2020: IQVIA MIDAS (Q4 2019)
Source: DCAT 2020: Emerging from the pandemic, based on IQVIA; FDA & Clarivate Analytics Cortellis data
Source: IQVIA – June 2020 (MIDAS and Pipeline Intelligence)
Source: FDA SM NCE approvals 2020 combined with internal potency analysis
Source: PharmaCircle Solubility Analysis
FDA SM NCE approvals 2020 (67%)
We support our customers across all aspects of design, development and manufacturing with our ability to offer integrated drug substance to drug product solutions, including particle engineering and drug product packaging. Particle engineering (using our technologies such as particle size reduction and spray drying) is often required to meet today’s drug delivery challenges such as addressing poor bioavailability. This integrated service offering provides substantial value to our customers as it simplifies interfaces, reduces costs and accelerates timelines across the entire drug development pathway.
Pre-clinical and Clinical Small Molecules 1
Commercial Small Molecules 1
Including active pharmaceutical ingredients (API), highly potent API (HPAPI), dosage form and delivery systems and particle engineering
We offer world-leading expertise and capabilities for the safe and efficient development and manufacture of HPAPI for oncology and other targeted therapies. With more than 20 years of experience in HPAPI, we have progressed more than 30 drug products to commercialization. Our specialized capabilities include handling HPAPI to exposure levels as low as 1ng/m3 across all manufacturing scales, as well as specific expertise in rapidly scaling up drug substances for commercialization. Our HPAPI handling capabilities include contained processing for particle engineering to enhance bioavailability, improve processing, and enable effective drug delivery. We also provide specialized encapsulated drug products.
Particle engineering is a key component of our integrated services offering across drug substance and drug product development and manufacturing. Our particle engineering technologies include particle size reduction, spray drying, hot melt extrusion and melt-spray-congealing which are all used for addressing a range of formulation challenges. We provide customized and fit-for-purpose particle engineering for feasibility studies, clinical studies and commercial scale manufacture. Our technologies are employed to manage a wide range of formulation challenges, from addressing poor bioavailability, controlling drug release, and optimizing particle size distribution for effective drug delivery to the lung. Phase-appropriate assets are in place for our particle engineering technologies to support accelerated timelines to clinic and commercialization.
We are an established partner in early development programs (pre-clinical through to Phase 2) for drug products. The majority of early development is associated with addressing bio-availability and drug delivery challenges as well as accelerated development for clinical trials. Our integrated services include late stage and commercial supply of drug products, providing an accelerated pathway from concept to commercialization.
Our industry-leading bioavailability enhancement services portfolio includes all primary technologies for handling solubility, dissolution rate and/or drug delivery challenges. It also includes proprietary capabilities developed over 25 years.
We have predictive modelling tools for rapid technology selection, specialized processing techniques and phase-appropriate equipment. These all complement our product development teams’ experience in meeting required bioavailability targets for new compounds or improving existing drug product performance.
With a global network of eight sites in Europe, USA and China covering drug substance, particle engineering and drug product development and manufacturing, we are geographically aligned with the major growth markets for the biopharmaceutical industry. These key markets account for more than 60% of overall global pharmaceutical growth.
Our Small Molecules business successfully managed any potential impacts from the pandemic, by maintaining a robust approach to supply chain planning while adapting quickly to virtual customer engagement. We delivered high single-digit sales growth, as well as reporting a margin increase over the last year 1.
Throughout 2020, we have benefited from a solid project pipeline in the market. Forecasts for 2021 anticipate double-digit sales growth, resulting from new customer contracts. Looking to the future, we are confident that we can significantly outperform the market to deliver on average 9% to 10% 2 annual growth rates (versus 4% to 5% for the market) 3 for the next three years.
Consistent with market trends, our growth has been driven by oncology products and other indications driving industry growth inclusive of antidiabetics, autoimmune and respiratory therapies. An additional growth driver is the broader need for specialized enabling technologies to advance more challenging molecules and meet more precise target product profiles.
Our forward order book for commercial products remains strong with commitment typically between two and five years. We continue to gain new customers and programs with a significant year-on-year increase in 2020. Moreover, our customer mix continues to diversify with a growing representation of small and emerging companies. Additionally, we have entered into a record number of long-term commercial supply agreements across the portfolio providing a stable base for future revenues.
In 2021 and beyond, our top priorities include continued streamlining of our business processes to ensure that they are phase-appropriate to deliver an enhanced customer experience. We will also continue to focus on securing early phase clinical programs, leveraging our integrated SimpliFiH® Solutions service offering across drug substance and drug product. A further priority area is maintaining our strengths in particle engineering technology and continuing to invest in capabilities and capacity for highly potent API (HPAPI).
Comparison versus 2019 at a constant exchange rate (CER)
Based on volume; Source: Citeline overall SM pipeline growth 2019-2020
The Small Molecules business saw the continued advancement of our commercial pipeline with multiple products reaching commercial status in 2020, while our clinical pipeline also increased. The signing of major long-term contracts have provided strong mid-term security. Finally, we were pleased to bring our highly potent active pharmaceutical ingredient (HPAPI) capacity on-line at our site in Visp (CH).
As with the rest of the business, we were impacted by COVID-19. The travel restrictions imposed in many markets presented challenges: regulatory inspections and customer visits slowed down, and many core marketing shows were cancelled.
However, we found innovative ways to overcome the challenges, through accelerated use of digital tools including hosting virtual audits and investing in live video tours for new customers. There was a shift from live events to webinars and digital events, which gave opportunities to build awareness of our offer. We also worked to protect our supply chain by securing contracts and establishing multiple supply sources across different geographies to mitigate any potential risks.
Moving into 2021, we look forward to both bringing new capacity online, as well as investing in additional capacity expansion. Learning from many of the innovations and learnings arising from the pandemic, we will continue to use digital outreach to generate demand, while optimizing and improving our customer journey.
During 2020, we continued to invest in key enablers including manufacturing assets. Examples include:
Particle engineering is a key component of our integrated services across drug substance and drug product development and manufacturing. The trend towards more highly potent molecules, driven primarily by oncology applications, has resulted in the need for expanded contained particle engineering processing. To meet increased demand, we announced additional investments in our global particle engineering network for expanded capacity and specialized capabilities. Development capacity (non-current good manufacturing practices – non-cGMP – assets), has been doubled at the Monteggio (CH) micronization site with investments including a new glove-box for isolation, upgraded process controls and expanded operator teams. A new micronization development wing has also been brought online at the Quakertown (USA) site.
In addition, an investment in early phase spray drying and enhanced particle engineering based dosage forms has been also approved for the Bend (USA) site, including 11 new cGMP suites to increase available capacity for clinical-stage development and cGMP activities. This investment includes the segregation of early clinical-stage activities from commercial supply, given the growth of our commercial product portfolio. It also includes implementation of phase appropriate operational and quality systems to enhance agility and improve customer lead times. The first suite became operational in December 2020 with the majority of the project due to be complete by mid-2022.
New investments have been implemented in the Tampa (USA) site’s product development labs to enable drug product development activities for highly potent compounds and a high potent capable granulation system has been purchased for manufacturing. Investments include new labs for development, sample preparation and cGMP manufacturing, alongside new roller compaction equipment with containment capability.
Additionally, to leverage our core particle engineering expertise, utilizing both particle size reduction and spray drying technologies, we established a new Center of Excellence for dry powder inhaler (DPI) drug product development at our Bend (USA) site. New services are specifically designed for streamlining formulation development for feasibility and early-stage clinical studies. We also established an evaluation methodology to determine the best particle engineering technology and formulation approach to meet the target DPI product profile.