Tom Moody, Jonathan Loughrey, Martin McCabe, Scott Wharry and Stephen Hughes, Almac Group, explores vertical integration of supply chains and technology integration in Active Pharmaceutical Ingredient (API) manufacture.
Almac Group
The pharmaceutical outsourcing landscape for API manufacture is characterised by increasingly complex supply chains, heightened regulatory scrutiny, and relentless demand for quality and cost efficiency.
APIs are the chemical substances that provide therapeutic effects in drugs and are the foundational building blocks of all pharmaceutical products and often require very complex synthesis and manufacturing processes. Traditionally, many pharmaceutical manufacturers have relied on multiple external manufacturers, often located overseas and at multiple sites. While this approach offers certain cost advantages, it also exposes companies to risks related to communication, quality, supply and shipping disruptions. Geopolitical uncertainties can also lead to significant supply chain disruption.
Vertical integration is the consolidation of multiple stages of production, application of technology or supply chain functions within a single organisation and has gained traction as a means of addressing the aforementioned challenges.
When applied to API manufacture, vertical integration enables pharmaceutical companies to control upstream and downstream processes, from raw material sourcing to final drug formulation within one organisation and, in the case of Almac, within one country.
Defining vertical integration
In the context of API manufacture, vertical integration can be categorised as:
- Backward integration of n-1, n-1 RSM/BB manufacture. Establishment of process and production capabilities for raw materials and intermediates required for subsequent API synthesis.
- API manufacture using controlled feedstocks of RSM/BBs and technology integration to develop and deliver a robust, safe and scalable manufacturing process which aligns with good CMC project management.
- Forward integration of physical control and particle size control. The API is manufactured to ensure that correct physical form and control at production is achieved.
Almac’s SMArT vertical integration is defined as the full integration of manufacture of building blocks and registered starting materials at its Arran Chemical Company site resulting in control of impurities defined at the development stage of API manufacture. Further integration includes the deployment of technology to streamline both BB, RSM and API manufacture including deployment of biocatalysis, flow chemistry and physical form control.
Drivers of vertical integration in API manufacture
There are several factors which are prompting pharmaceutical & biotech companies to pursue outsourcing to companies who offer SMArT vertical integration for API manufacture, including:
- Supply chain security: Dependence on third-party raw and API manufacturers, particularly those in distant geographies, can lead to disruptions caused by geopolitical tensions, trade restrictions, or pandemics.
- Quality assurance: Ensuring compliance with stringent regulatory standards (e.g., FDA, EMA) for APIs is vital. In-house manufacturing allows for stricter quality control.
- Cost optimisation: Although outsourcing may initially offer cost benefits, hidden expenses related to logistics, tariffs, and quality failures can erode margins.
- Speed to market: Integrated operations can accelerate product development timelines, enabling rapid response to market opportunities and public health emergencies.
- Innovation and differentiation: Controlling the full value chain facilitates proprietary process development and unique product offerings.
- When API development and manufacture are conducted in-house, there is less risk of intellectual property (IP) leakage. This is especially important for new chemical entities (NCEs) or innovative formulations.
SMArT industry examples
Multiple companies have embraced vertical integration with notable results.
This case study involved the development, scale-up and delivery of a complex small molecule API. The manufacture of RSMs was key, using complex Grignard chemistry followed by chemical manipulation to an alkene RSM. The alkene saturation in batch mode resulted in low yield and purity. The solution was to deploy flow hydrogenation at ~120 kg scale. High pressure hydrogenation was a key step to increase yield and purity. The next step involved control of the cis/trans isomer and the replacement of RuCy technology by a biocatalysis option with excellent control and yield.
The initial development work for the flow step involved setting conditions for the alkene reduction and that the flow produced material would result in superior product quality (GC purity flow ≥95.5% vs batch at <90.0%). In addition, flow offered an easier work-up (no need for celite filtration) and significant cost savings due to lower Pd requirements (<1.5% catalyst loading vs batch 10%w/w wet loading). In flow, a robust and reproducible process was developed with a consistent purity profile reported upon upscaling (6 mL development column vs 78 mL pilot production column).
A second example involved the manufacture of an aldehyde which required low temperature lithiation chemistry and subsequent quenching with ethyl formate to afford the aldehyde product. Key to the success of this process was the ability to seamlessly reproduce results generated in small scale lab equipment in the production rig, utilising in-house engineering expertise to design and build the rig.
Future trends
The trajectory of vertical integration in API manufacture will be shaped by several emerging trends:
- Digitalisation and automation: “Smart” factories and real-time data analytics will enhance process control and supply chain visibility.
- Geopolitical realignment: Governments are promoting domestic API production to reduce dependency on foreign suppliers, driving investment in local infrastructure.
- Sustainability initiatives: Integrated manufacturers are adopting green chemistry and circular economy principles to reduce environmental impact.
- Personalised medicine: Vertical integration will support rapid scale-up of APIs for niche and personalised therapeutics.
Conclusion
There is no doubt that pharmaceutical supply chains will continue to develop as APIs become more sophisticated and the need for controlled manufacture is essential. There may be a cornucopia of manufacturers globally, however the selection criteria must be scrutinised to ensure the right partner is selected for security of supply.
Challenges and risks for delivery of supply chains have been amplified during the last 5 years due to myriad or reasons including COVID-19, environmental changes, war in Ukraine, US tariff uncertainty, etc.
SMArT Vertical integration in API manufacture is a lever for pharmaceutical companies seeking to differentiate themselves in an increasingly competitive and volatile landscape. By gaining control over critical supply chain stages, organisations can unlock efficiency, ensure quality, fortify regulatory compliance, and drive innovation. While the path to integration requires careful planning and investment, the long-term rewards— in resilience, agility, and strategic advantage— are substantial.