The sourcing of pharmaceutical drugs from biological production systems, known in the industry as Biopharm, is becoming increasingly popular in the field of modern pharmaceuticals. In Queensland, Biopharmaceutical Contract Manufacturing Organisation PharmaSynth is helping continue the trend of using bacteria, yeast or mammalian cell type culture modification to produce pharmaceutical products.

In a recent discussion with PharmaSynth CEO Les Tillack, The Australian Business Executive sought to discover more about the company’s position in this steadily growing industry.

Progen Pharmaceuticals

Mr. Tillack’s pharmaceutical background was developed through his study at the University of Queensland, from which he graduated as a chemical engineer, though a double degree in microbiology was originally intended to see him move into a more scientific field.

“What I was specifically aiming at when I went through university was to get into biotechnology and in particular fermentation technology,” Mr. Tillack explains, “and I guess I hung around for a few years after I graduated, looking for a job, because the industry is not a huge one in Australia.”

Having worked in clinical pathology for a number of years, both during and after university, Mr. Tillack eventually settled in Brisbane, working for a company called Progen Pharmaceuticals, one of the few establishments in Australia undertaking this type of work.

“We’ve just had 25 years last year as Progen,” Mr. Tillack says, “who are our parent company. Progen started 25 years ago as a life sciences and molecular biology reagents company. So they used to make a range of molecular biology kits and chemicals, for use by researchers in universities and research institutes.”

At some point within that time the decision was made for Progen to move into drug development. Since there had been a manufacturing group within the company from day one, the switch to pharmaceutical development for internal products was an easy one to make. This change in direction eventually led to the manufacturing of other company’s products.

Mr. Tillack had been at Progen for about twelve years when a move away from the life sciences and chemical business meant the requirement for internal manufacturing ended, presenting an opportunity to spin Progen’s manufacturing group out into a separate company called PharmaSynth. This process happened seven years ago, and Mr. Tillack has been running the company ever since.

Development Phases

“We’re a contract manufacturer,” Mr. Tillack tells us, when asked to expand on his company’s processes, “so we manufacture other people’s products. The vast majority of products we manufacture are for use in clinical trials. So the drugs that we manufacture are new drugs that are under development and going through the process of becoming a registered, approved drug.”

The first stage of a lengthy development process is usually performed by the company, institute or university which first developed the drug. This is followed by the establishment of some rudimentary procedures for making the drug, after which the developers will approach a company such as PharmaSynth to begin production, which it ensures is done under GMP (Good Manufacturing Practice) conditions.

“We tend to work for the smaller drug development companies,” Mr. Tillack says, “earlier on in a drug development phase. The types of companies we would normally work with are small to middle-sized biotechnology or drug development companies, or in fact research institutes and universities.”

Once the drug is deemed fit for use in humans, it will be used in the clinical trials process, passing through three phases of clinical development, before it finally becomes registered.

Most companies coming to PharmaSynth at Phase 1 will already have patents in place to protect the product. PharmaSynth tends not to be involved in developing intellectual property, but in the few cases it is involved on that level, the company it is working for retains the IP, not PharmaSynth directly.

“Mostly, by the time someone would come to us, they are ready to go into clinical trials. We may have to do further development work for a company before they can get to that point, but in general everything we manufacture will end up in a clinical trial. Whether that drug is eventually successful and becomes a registered drug on the market is an entirely different thing.”

“We will manufacture for a company for their Phase 1 trial, and assuming that’s successful, a couple of years later they will be back for Phase 2. Assuming that’s successful again, a couple of years later they will be back for Phase 3 manufacturing.”

In between these phases, a company will run its own testing to continue developing the drug, either using an internal team or another service provider to which it has outsourced the job.

“A lot of the business we do is word of mouth and ongoing manufacturing, so a lot of the projects we have we will have had for many years. It takes at least 10-15 years to develop a new drug from the start of development, where the drug might be first put into humans, to where it would ultimately be successful and registered.”

In fact, the entire process is so lengthy and costly that PharmaSynth has not actually been involved directly with any drugs that have become a commercial product since its breakaway from Progen in 2008.

“The only commercial product we manufacture is a veterinary product,” Mr. Tillack informs us, “which we were involved in the development of through to approval, and we’ve been manufacturing that product for about fifteen years.”

There are trials in progress, however, most notably for Chinese-American company Zensun USA. Zensun is developing a recombinant protein drug used in the treatment of late stage cardiac failure patients, essentially triggering the body to re-grow damaged heart muscle tissue and improve cardiac function.

Zensun is currently starting a Phase 3 clinical trial in the U.S., and Mr. Tillack tells us it will likely have another three years of trials ahead before the drug has a chance of getting to market. This highlights the length of time it can take for the development phases to be completed; PharmaSynth has been working with Zensun since 2008.

Another key product in development involves one of Progen’s original drugs, known as PI-88, now licensed to a Taiwanese company, which has since been given the name Muparfostat. The company is still running a Phase 3 clinical trial, but there is hope within PharmaSynth that Muparfostat will eventually become a licensed product.

In addition to these products coming towards the end of their testing cycles, there are several Phase 1 products in development, including drugs developed by UK-based Immunobiology Ltd, and Melbourne agricultural biotechnology company, Hexima.

“In terms of new clients, a lot of it does come from word of mouth. Particularly in Australia, the industry is not huge and the whole drug development industry is not huge, so word of mouth is very important. But we also market ourselves as well… our largest area of marketing is attendance to scientific and business conferences, in particular we attend one of the largest conferences in the U.S called BIO.”

Regulatory Environment

“In Australia the manufacture of human pharmaceutical products is regulated by the Therapeutic Goods Administration (TGA),” Mr. Tillack tells us, “we follow a code of GMP regulations, like everyone else does in the world. Over the last number of years the world has been becoming harmonised on those regulations, through a thing called ICH, the International Conference on Harmonisation.”

The ICH had prepared guidelines for Good Manufacturing Practice to be implemented globally, meaning most countries around the world now follow the same code. As a member state, Australia was instrumental in helping set up these rules.

“That means the products we manufacture can generally be used almost anywhere in the world,” Mr. Tillack adds, “certainly all through Europe and a lot of Asian countries that are ICH member states.”

PharmaSynth does a lot of business in the United States, where companies are regulated by the FDA (Food & Drug Administration), a body with similar practices to the TGA. The guidelines followed in the U.S. are very similar to those in Australia, though there are a few differences.

“We ensure that we perform our manufacturing practices to meet both the Australian and the U.S. guidelines,” Mr. Tillack says.

The status of the Australian dollar over the last few years has meant the cost of manufacturing has proved somewhat lower than in other countries. PharmaSynth in particular has benefited from low overheads, due in the most part to the way the business is structured and run compared to those larger Contract Manufacturing firms overseas.

“That results in us being able to offer a service at a lower cost than working with a U.S. or European manufacturer, even though we work to the same level of quality and regulatory framework as those areas do.”

But around the rest of the world, being fully GMP compliant is not an easy thing, especially for countries that don’t have the same quality of companies and regulatory framework. GMP can often represent an extremely high level of regulatory burden.

Despite this, Australian companies like PharmaSynth still face competition from other areas of the world, especially in places such as China and India and increasingly, South Korea. The advantage for Australia is that most of the nation’s clients are extremely risk adverse.

The cost of manufacturing pharmaceutical products is therefore very high, with the cost of running clinical trials and other development work even higher. The truth is, it is hugely expensive to develop new drugs. “The risk of using a country where the regulatory framework is not quite so certain is high,” Mr. Tillack tells us.

India in particular has a very large pharmaceutical manufacturing industry, and some companies have recently run into significant issues with products made in India and used in the U.S. “A lot of it is being able to trust the company that one of our clients has been working with, and having a western regulatory framework around that is a big plus.”

Mr. Tillack understands that the Australian drug development industry has not performed particularly well over the last decade and a half, and this has resulted in the investment market being wary of pharmaceutical developments, particularly in biotechnology, meaning the access to capital in Australia for drug development has not opened up after the GFC in the same way it has overseas.

“It is a very hard thing to do for smaller companies, and the model in Australia in drug development has always tended to be small companies doing it. Spin outs from universities and startup companies that will take one drug and then try and raise the money to do it. And generally it always has been difficult in Australia to raise enough money to do drug development properly.”

This results in most companies having just one product in development, with the reality being that only 1 in 10 of the drugs going into Phase 1 will actually be successful and make it to market. It is inevitable then that the failure rate is going to be very high.

Public Perception

Our interview concludes with a question regarding the image of the drug business, as seen from the outside, since the pharmaceutical industry seems to have garnered a reputation for putting financial gain before the health of the population.

“I think the biggest misconception people have outside of the industry,” Mr. Tillack says in response, “in general consumers, is that there is a lack of understanding of how much it costs to develop new pharmaceutical drugs. There’s a lot of perception that pharmaceutical companies are very rich and the money they charge is just to rip everybody off.”

The reality is that it may cost up to two billion USD to develop a single drug, taking into account research and trials in development. This often runs over a ten to twenty year period, and so by the time they are registered, drugs will have at the most another five years of patent life left.

“So that money, the two billion dollars that’s been invested by the industry, has got to be made back within a very short period of time, before generic drugs are allowed to come onto the market. That’s the reason why, particularly new drugs, are so expensive.”

Find out more about PharmaSynth Industries

This PharmaSynth business profile has been made possible by the generous support of:

Waters Corporation

To view this editorial as it appeared originally in The Australian Business Executive magazine, click on the cover image below

Written by Nicholas Paul Griffin
Research and interview by Jesse Landry