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Contract packaging has been a part of the pharma services spectrum long before “outsourcing” became a buzzword in the industry. There has been movement both in packagers being acquired by larger entities to fill out their service offerings to manufacturers; but also a countertrend of such companies shedding packaging assets as their strategic goals change. Bill Mitchell, CEO of Packaging Coordinators, has seen this from both sides, affiliated with companies that were acquired (such as when Cardinal Health bought his company in the 1990s) and with companies newly spun out, such as the AndersonBrecon business of AmerisourceBergen.
Pharmaceutical Commerce sat down with Bill to talk about these and other trends in outsourcing for today’s biopharma manufacturers. Here’s what he had to say.
1. Let’s talk about your background in pharma contract packaging. Can you take us through the steps by which you eventually became CEO of PCI?
I have spent my entire career in packaging, with the majority of my career specifically in pharmaceutical packaging, beginning in sales. Some people may not know that this is the second iteration of PCI. From its founding in 1971 and for several decades PCI was the leader in the pharmaceutical contract packaging market. In 1996 what was PCI was acquired by the healthcare distributer Cardinal Health. In 1997, I joined PCI as president of the printed components group and after a few years in that role I became president of the Cardinal/PCI contract services division.
I left the organization in 2006 just prior to Cardinal Health selling the pharma services business to The Blackstone Group. This business then became Catalent Pharma Services. Shortly after I joined printed components leader Clondalkin Group as the CEO of their North American pharmaceutical packaging group. We were building a great business at the time, but I was lured away by the opportunity with Frazier Healthcare. Alan Frazier, managing partner of Frazier Healthcare, called me and told me the investment group was interested in acquiring the Catalent Pharma Solutions North American commercial pharma contract packaging business and asked if I would like to return to lead this initiative. I was thrilled to have the opportunity to return the business to its former position in the industry. On June 20th, 2012, we closed the sale and rebranded the business again as PCI.
2. After Frazier Healthcare acquired those Catalent packaging assets, it doubled down on its investment in contract packaging by picking up the contract-packaging division of AmerisourceBergen, AndersonBrecon. Walk us through the resources and capabilities of today’s PCI.
We had only owned PCI for a few months and we were approached with the opportunity to acquire the AndersonBrecon business from AmerisourceBergen. PCI management and investors felt strongly that the outsourcing trend would continue and that this was a transformational deal for our business. It is striking how complementary the businesses were, both in capabilities as well as customer base. It was a great match.
The combination of PCI and AB created what we believe to be the world’s largest pharma and biotech contract packager. The size and scale of the new organization gives us really exceptional opportunities to provide solutions for our customers and support their needs, namely truly strategic partnership and delivering value for their therapies at each phase of their product lifecycle.
3. Frazier Healthcare has an extensive number of healthcare-related assets, including early-stage pharma companies. How does PCI benefit from this affiliation? And, how does a contract packaging company co-exist with high-risk/high reward early-stage pharma companies?
Frazier Healthcare over the years has expanded the scope of their investment portfolio beyond early-stage pharma companies to include growth equity investment in healthcare services companies, of which PCI is a great example. One area where we have found significant benefit and synergy is with our clinical packaging, storage and distribution business. Some of the Frazier Healthcare portfolio companies have been able to utilize our services for their clinical packaging needs as they progress through investigational studies.
Packaging and global distribution for investigational products is an area of focus for the PCI business as we look to provide a true clinical-to-commercial continuum for our customers, from very early Phase I through the commercial launch and then ongoing packaging support. Our pharmaceutical and biotech customers have been very receptive to this model and we have been fortunate to bring several products to commercialization in the short time since integrating the businesses.
4. PCI is making a substantial investment in clinical trial packaging. How does that differ from commercial-product packaging, and how does it fit with PCI’s existing businesses and services?
The legacy PCI business recognized in the late 90s the growth opportunity that clinical packaging presented and built out a significant global footprint. That strategy still holds true today. One of the key features of the acquisition of the AndersonBrecon business was the success of the clinical services portion of the business and its ability to foster growth for the new PCI organization. We closed that deal less than a year ago in May 2013 and in a matter of months we have committed substantial capital and resources to further accelerate our clinical capacities and capacity.
These investments include a new, standalone North American distribution facility due to open in August of this year. The combination of clinical and commercial services is a natural one for a number of reasons. Customers are looking for strategic partners. We often perform the clinical packaging and services for a drug and as they look for regulatory approval we are the logical choice to do the commercial launch of the product. The assets and expertise we have allow us to leverage these resources for both clinical and commercial businesses, including packaging lines, cold chain facilities, warehousing, and the expert staff.
This provides a scalable solution for navigating the varying requirements as products progress through clinical phases and then the ultimate commercialization. With complementary sites in both North America and Europe, this model supports the trend for global investigational studies as well as growth in emerging markets for commercial medicines.
5. Contract packaging in the US is a more-than $40-billion business; estimated at over $70 billion worldwide. Growth is projected at just over the overall growth of the worldwide pharma industry. How would you characterize the overall market for contract packaging, and how is PCI differentiating itself?
We view the growth of the pharma contract market as having two components: 1) the growth of existing outsourced products, which parallel the overall market grow rate of mid-single digits and 2) the additional use of our services by pharmaceutical and biotech manufacturers as a strategic outsourcing partner. This is where the opportunity for double-digit growth lies. This opportunity is born out as pharma companies large and small continue to recognize that outsourcing is not simply a tool to reduce cost but a method for providing competitive advantage for their supply chain to achieve their business goals. It is PCI’s commitment to our customers “to provide the industry’s leading customer experience.” If we are fulfilling our role as a strategic partner, we are delivering ongoing value and making our customers more competitive in the markets in which they compete.
6. Do these trends carry over into the international market for contract packaging?
Essentially yes. Volumes and growth rates tend to be different depending on what regions we are talking about. North America and Europe are traditionally the largest consumers of medicine, but with the rise in disposable income and increases in the standard of living in developing countries, we are experiencing growth in international markets for the products we support. The BRIC countries (Brazil, Russia, India, and China) as well as other emerging markets such as Turkey, South Korea and the Southeast Asian region are areas that are rapidly developing and are growing substantially in their need for pharmaceutical products. Today PCI is packaging products destined for over 100 countries around the world.
7. When you sit down with pharma companies to discuss their needs, what do you hear? Will even more packaging be outsourced to companies like yours? What are the pain points for pharma today regarding packaging?
We see the outsourcing of packaging accelerating. Customers are looking for strategic partnerships, with key suppliers expected to deliver real value and innovation. We are always looking at how we can provide a better solution for our customers. I believe that customers are truly entering an era of using outsourcing as a strategic tool rather than simply a way to reduce cost or increase capacity on a short-term basis.
Serialization is an excellent example of how a contract packager can deliver a better solution to the marketplace. Our customers are looking to us for our expertise and best practices, which is part of the services value we look to provide. We’ve had serialization lines in place for several years, mostly handling limited production runs for products being shipped to countries with a serialized-code requirement in place. Now we’re investing in enterprise-level serialization that will cascade out to other sites.
8. You’ve had a long career in life sciences packaging. Looking back, what do you see as the more rewarding aspects of this work? What are you looking ahead to?
There have been many positive and rewarding aspects to my career in this industry, but the one that stands out above all others is when we experience examples of how our participation in the life sciences supply chain has helped to save lives and improve the quality of life for patients. We recently had the opportunity to help commercialize an oncology product that is a first-to-market for the indication and truly revolutionizing life expectancy for this patient population. It is lifesaving. That is the real rewarding part of this business we are in.