PCI Synthesis Announces 2013 Trends and Predictions

November 12, 2012 -- PCI Synthesis, Inc. (www.pcisynthesis.com), a 12-year-old pharmaceutical manufacturer of new chemical entities (NCEs), generic active pharmaceutical ingredients (APIs), and other specialty chemical products, today announced a list of trends it thinks will impact the emerging biotech and generic drug industries in both Massachusetts and the U.S.

• Producing generic drugs will become more expensive in 2013. The Generic Drug User Fee Amendments of 2012 (GDUFA), passed by Congress in July, has a worthwhile goal: “to ensure Americans have timely access to safe, high-quality, and effective generic drugs.” But the fees – estimated by the FDA “to cost the generic drug industry less than ten cents for the average generic prescription,” squeezes a lot of the smaller companies. Companies will now have to pay for applications and Drug Master Files (DMFs) -- as much as $20,000 to $30,000 per DMF, which could have an adverse effect on the generic drug industry. GDUFA changes the risk profile for small companies applying for DMFs; companies need to be sure they can generate a better return to compensate that risk. In the long run, generics will become more expensive. The increased fees equate more inspections of foreign manufacturing and it remains to be seen if these efforts will truly shorten the FDA approval process.

• Foreign drug companies need to be held to consistent, high standards of the FDA. As prices for U.S.-produced generics increase, we can expect to see an increase in sales of foreign-made generics. The FDA needs to step up inspections of foreign plants in countries such as India or China to ensure their quality control meets U.S. standards.

• More VC money will be available in 2013 to fund new companies and research. The level of VC funding rebounded in 2011 (up from 2009 and 2010), and held steady in 2012. We expect that to continue in 2013. The structure of the investments has changed but money is still available. We continue to expect long-term trends to continue, for example: more virtual pharma companies that will outsource most of their work. This is good news for the Massachusetts CRO/CMO community.

• Recruiting will be a big issue. One of the biggest risks that everyone has is the lack of qualified people. Unemployment is still an issue in general in Massachusetts and the U.S., but finding qualified people for the pharma industry is a challenge. Expect to see more remote hires as talented people use technology to telecommute rather than relocate. Some in the industry have seen the rise of “supertemps,” talented employees who move frequently from one company to the next, but this is a short-term solution that does not help companies or the industry.

• For its biotech hub to remain competitive, Massachusetts needs to do more to bring more pharmaceutical business to the state. Massachusetts has done a good job supporting its universities, and its R&D cluster is growing, but we’re seeing an increase of companies from outside the state trying to lure business away from here. The state should focus not only on research jobs, but also how to better promote manufacturing which could be an impetus for even more jobs for the state. Too often great research and development is done locally then moves elsewhere for manufacturing upon commercialization. From a historical perspective this is counter to the other leading industries that were previously developed in Massachusetts such as semi-conductors, computers, textiles, etc.

• Outsourcing research and development to other countries will make less sense in 2013. The cost differential between U.S. R&D and foreign R&D is narrowing all the time. Labor costs in India and China continue to grow. Pretty soon the salary of a chemist in India and the U.S. will be more in line. Increased regulation may make it harder to bring new drugs into the country.

“This is a dynamic time for the industry – an increase in VC funding over a couple of years ago, which may spur additional development; new regulations and fees that make business more expensive. Over the past 12 years, we’ve provided our clients with insights into new trends to help them prepare and manage for the future. The biggest issue for the industry is the direction the FDA is going to take, and the continuing wage inflation affecting the Indian and Chinese economies,” said Ed Price, President of PCI.

About PCI Synthesis

PCI Synthesis is a 12-year-old custom chemical manufacturer of new chemical entities (NCEs), generic active pharmaceutical ingredients (APIs), and other specialty chemical products. A contract manufacturing organization (CMO), PCI provides emerging and mid-sized pharmaceutical companies access to the expertise needed to develop and manufacture complex small molecules and APIs used in generic pharmaceuticals. To learn more about PCI Synthesis, its proprietary NCE development activities and process R&D capabilities please visit www.pcisynthesis.com.