Parents pissed at poor production

Chinese parents are understandably angry after the emergence of a third vaccine safety scandal in about as many years. Regulators announced last Friday that Changsheng Bio-tech (which ironically means “long life” in Chinese) had sold over 250k low-quality DPT vaccines to a Chinese public health agency responsible for 100M citizens. Hey, at least that’s better than the over 400k subpar DPT vaccines produced by a different Chinese manufacturer which authorities uncovered last November. Or the spoiled vaccines illegally sold in 24 provinces in 2016. Authorities are also sick of the scandals, so on Wednesday they announced an audit of China’s entire vaccine production system. Until that’s done, you might not see consumers springing for vaccines Made in China for a bit.

Everyone’s getting the short stick

Drug shortages are nothing new, that’s why the FDA updates their list of shortages daily. But things seem a little worse than normal—9 in 10 physicians say their emergency departments lack critical medicines. That includes mainstays like diltiazem (a go-to treatment for hypertension) and morphine. You can blame market forces and manufacturing issues. Most of the drugs in shortage are sterile injectables, which can be difficult to both make and make a profit on. Those low margins can lead to less incentive to maintain the quality of sterile injectable manufacturing facilities as they age, which in turn leads to issues with the quality of the drug products. It’s things like that which can cause cardboard to contaminate batches of “sterile” injectables. If only they had contaminated them with cash instead…

A manufacturing first in China

We’re sure you all remember that in December of 2017 InsightCity reported that “if you wanted to hold a commercial drug license in China, you had to manufacture the product using only in-house facilities. Yep, no outsourcing of drug manufacturing.” Sounds like us. As an update, this week STA Pharmaceutical, a subsidiary of WuXi AppTec, reported they were the first CMO to get regulatory approval to manufacture a commercial drug in China. For a nice summary of China’s Marketing Authorisation Holder (MAH) program from the Economist, go here. What’s next? Well, if we look into our crystal ball, this has to fully open the doors to increased business for CDMOs, provide flexibility for innovator companies in China, and open the door to smaller innovator companies that couldn’t afford their own manufacturing facilities in China. In essence, we’re talking about a land grab.

CDMO industry sees mo’ mo’ expansion

It’s a decent time to be a Contract Development & Manufacturing Organization (CDMO). Google “CDMO expansion” and you’ll spend hours sifting through recent and relevant articles about how CDMOs are expanding, merging, and/or acquiring assets. Recently, one of the industry’s largest CDMOs (WuXi AppTec) raised more than $353m in its initial public offering on China’s Shanghai exchange. Here are two good sources for recent activity in the CDMO space: 2017 DCAT summary and one from 2018. For a more graphical summary of CDMO activities, see this infographic. And if that’s not enough, here’s one example of a recent 1,000-person expansion from Lonza at their New Hampshire site. Given all the activity in the industry, we don’t see a way around the fact that soon CDMOs will have Mo’ Money, Mo’ Money.

Sam sung blue, everybody knows one

Be honest, did anyone get the Neil Diamond reference? 2,000 InsightCity bonus points if you did. So, why is Samsung blue? A week ago, Samsung BioLogics (the world’s 3rd largest biotech contract manufacturer) lost $6B in market cap because South Korea’s financial regulator indicated there is a “suspicion it breached accounting rules to inflate its net profit before its 2016 listing.” In 2015 they posted a ₩1.9 trillion net profit, in 2014 they posted a ₩28 billion net loss. Too many zeros. This comes on the heels of Samsung’s heir apparent, Lee Jae-yong, being formally indicted a year ago on multiple charges including bribery and embezzlement. See Samsung BioLogics’ response here (spoiler, they say they didn’t do it). It’s going to take more lawyers than My Cousin Vinny to clear this one up.

Made in China, with a twist

At InsightCity, we consider ourselves fairly knowledgeable about the pharmaceutical market. That said, we were a bit taken aback to learn that until July 2016 if you wanted to hold a commercial drug license in China, you had to manufacture the product using only in-house facilities. Yep, no outsourcing of drug manufacturing. In case you didn’t know, using a Contract Manufacturing Organization (CMO) is big business in the US and Europe. China has started a 3-year pilot program called the Marketing Authorization Holder (MAH) System. There was a recent summit to discuss MAH progress and as one might expect, Chinese CMOs are considering themselves quite fortune-ate (too much?). Look for homegrown Chinese CMOs and established western CMOs to start down the joint venture path. Also, 2018 is the year of the Earth Dog in China. Now you know.

Tax haven troubles

Puerto Rico’s status of not really being a United State but still being part of the United States (explained here) has made it very attractive for medical manufacturing. For instance, companies there can create “US-made” products from factories incorporated as foreign subsidiaries, which means paying a 4 percent excise tax instead of US income tax. This has saved a lot of money for companies like Amgen, AZ and AbbVie, but the US tax overhaul may change that. The proposed bill would place a 20 percent excise tax on all offshore transactions. That may incentivize companies to change their offshore tax avoidance policies, perhaps choosing a different island to do business on. All of this while Puerto Ricans are facing $100 billion in storm damage. Click here to help with that.

I can’t find genes that fit

Good news, bad news. Companies that are developing cutting-edge gene therapy recently got some good news when the FDA approved the first gene therapy in the US and indicated they will expedite the approval of experimental gene therapies. Great. The bad news? Genes (specifically, modified genes) are in high demand. A recent NY Times article explains that “firms that can (manufacture the genes) are swamped with orders and requests.” Organizations are having to sign-up years in advance to secure manufacturing slots, often before proof-of-concept is complete. Risky. Expensive. Decisions have to be made and one company, Bluebird Bio, has taken the bull by the horns, securing their own manufacturing. We’ll keep you updated, and for an InsightCity approved view of men and skinny jeans go here.
[Editor’s note: two-thirds of InsightCity approved anyway.]