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6 BioPharm International eBook March 2018 www.biopharminternational.com Outsourcing Resources Drug Development between the present values of cash inflows and outflows. Researchers analyzed data from five drug devel- opment projects, three involving monoclonal antibodies (mAbs) and two for small molecules, to get an idea of how single-source contract- ing made a difference. Results showed an average sav- ings of 14 weeks using the single- vendor approach and total gains from reduced development costs and higher net revenues of $44 million. The greatest reduction in chemistry manufacturing and con- trols (CMC) time was found with small molecules in Phase I, where 19.1 week s were saved, a nd in mAbs in Phase III, in which devel- opment times were shaved by 19.8 weeks. Shorter time frames resulted in $20.6 million savings in after- tax development costs. Reductions in after-tax preap- prova l development t ime costs reached $49.3 million for mAbs in Phase III and $18.9 million for small molecules in Phase II. The increase in the present discounted value of after-tax net returns was $32.6 million for small molecules in Phase I and $30.7 million for mAbs in Phase III, with total net ga ins of $80 million for m Abs in Phase III and $44.5 million for small molec ules in Phase I. Tufts will continue this research, expanding its scope to include more therapeutic categories and maybe even drug delivery forms in the f ut ure, according to Joe D i M a si, d i r e c tor of e c onom ic analysis and research associate professor with the Tufts Center for the Study of Drug Development. REFERENCES 1. J. DiMasi, et al., J. Health Economics, (5) 47:20-33 (2016), www.ncbi.nlm.nih.gov/ pubmed/26928437 2. J. DiMasi, "Outsourcing Drug Manufacturing: A Study of the Economic Impacts of Single vs. Multi-Vendor Sourcing," a presentation by the Tufts Center for the Study of Drug Development, October 2017. 3. J. DiMasi, Z. Smith, and K. Getz, "Assessing the Economics of Single- Source vs. Multi-Vendor Manufacturing," The Tufts Center for the Study of Drug Development White Paper, Tufts University School of Medicine, October 2017. BP Results showed an average savings of 14 weeks and revenue gains of $44 million. Joe DiMasi, director of economic analysis and research associate professor, Tufts Center for the Study of Drug Development (CSDD), discussed research into the impacts of working with single source pharmaceutical contractors with BioPharm International. BioPharm: When will the full results of the study be published? DiMasi: We expect the full study to be published shortly. Currently, we are making minor changes to the paper in response to peer reviewer comments. BioPharm: Did the analysis also take into account the costs due to potential risks that might result from relying on a single vendor (e.g., when special products are involved and an outage or compliance problem develops at a contract manufacturing organization? [CMO] facility)? If not, are there plans to address this issue in subsequent work on this topic? DiMasi: We acknowledge that there are potential risks, but we had no way of quantifying them for the study. BioPharm: Did you see differences for small versus large molecules? DiMasi: With the caveat that the sample size is small, there actually was, on average, no appreciable difference in time reduction between small and large molecules. The mean time reduction for the monoclonal antibodies (mAbs) is 14.3 weeks, while the mean time reduction for small molecules is 14.1 weeks. BioPharm: Why was the time reduction so notable in Phase III compounds? DiMasi: It was somewhat above average, but it was mostly a structural aspect of the model with regard to R&D costs. The model assumes that clinical testing for a phase for which manufacturing is contracted with a single vendor can begin sooner than otherwise. That brings ultimate approval closer on the timeline to testing of the earlier phases. So, the model yields lower opportunity costs for all earlier phases. The later you are in the process, the more that earlier phases are affected. BioPharm: What are your plans for continuing this research? What additional factors and economic issues will be examined? DiMasi: We hope to expand the analysis to obtain data on more projects, which will serve to validate our initial analysis and allow for a comprehensive analysis of key variables of interest, such as molecule type, route of administration, and therapeutic class. BioPharm: Why didn't the concept of single-source manufacturing take off in the 1990s when the programs were first introduced? DiMasi: This came up in interviews [with subject matter experts]. Early efforts may have been more ad hoc, and outsourcing companies may have lacked the comprehensive capabilities needed to carry through effectively. BioPharm: Small-to-mid-sized pharma companies are using single vendors, but large companies might also benefit from leveraging them to achieve improvements. Why haven't more large pharma companies embraced the concept, and what would be needed to change their established point of view? DiMasi: Large companies have the resources to keep this entirely in-house. On the other hand, they also have the resources to better manage and leverage their outsourcing activities, and thus to optimize the advantages of single- source manufacturing if they do outsource. Reducing development timelines and costs

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