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Diversified Sourcing And Sustainability Are Key For Centrient

CEO Rex Clements Also Highlights Importance Of Non-Price Procurement Criteria

Executive Summary

After almost a year as CEO of Centrient, Rex Clements reflects on the company’s experiences operating amid a pandemic that has underlined the importance of a diversified supply chain, while also highlighting the firm’s sustainable manufacturing initiatives and calling for non-price criteria to be taken into account by procurement processes, in an exclusive interview with Generics Bulletin.

Diversified sourcing throughout the pharmaceutical supply chain is key for the industry to emerge stronger from the coronavirus pandemic, Centrient CEO Rex Clements has set out to Generics Bulletin in an exclusive interview. Meanwhile, sustainable, efficient manufacturing and green procurement criteria, as well as a robust response to the risks of antimicrobial resistance, are also key priorities for the antibiotics, statins and anti-fungals producer.

Speaking almost a year after taking over leadership of Netherlands-based Centrient – following the departure of Karl Rotthier last March  (Also see "Who’s Hired? Teligent And Centrient Get New CEOs" - Generics Bulletin, 6 Feb, 2020.) – former Sandoz executive Clements highlighted that his stewardship of the company had started just as the first wave of the COVID-19 pandemic began to hit Europe.

“I came into the role in mid-March in Rotterdam right as the shutdown started, as I got off the train the Starbucks was closing behind me, so it was an unusual start,” he recalled.

Rex Clements, Centrient CEO Rex Clements

“Centrient is really positioned at the cornerstone of healthcare,” Clements said, “so especially with the betalactam antibiotics we make – we produce the most merchant ingredients for betalactam antibiotics in the world, more than anyone else in the merchant market – it brings a huge responsibility for us on supply.”

This, he emphasized, was especially true during a pandemic where, initially, elements of the disease were unclear – “was it a respiratory infection, what kind of infection was it?” – and the unfolding situation quickly underlined the importance of a diversified and sustainable supply chain.

An immediate priority for Clements as CEO was to “think about the impact on our employees,” given that the firm had “six manufacturing sites across the world, [in] vastly different countries with vastly different profiles [in terms of] the pandemic.” And “then the second part was how do we secure supply.”

“I think on the first we did very, very well: we had a very clearly focused team in place; daily monitoring of the situation; clear on-the-ground relevant guidance and information for the manufacturing sites and for the offices for how to protect our employees; because for me at the end of the day that was the most important thing.”

“Then secondly,” he said, “we started looking at how we secure our supply chain.” And “from a supply point of view,” Clements outlined, “other than a three-day interruption at one of our Punjab facilities, we had no interruptions to supply. So I’m very proud of the way the team handled those two aspects.”

“We are seeing, as do other antibiotic manufacturers, a significant downward pressure on demand.”

Despite the impact of the pandemic, Clements acknowledged, it had also been important for Centrient in 2020 “to keep growing and sustaining our business, and I think we were able to continue our investments in local production of antibiotics, our investments in local production of statins, which are key in cardiovascular drugs, and also be able to drive strongly our finished-dose business on the antibiotics side.”

Asked whether Centrient’s business was currently stable despite the backdrop of the ongoing coronavirus pandemic, Clements replied: “Yes, I believe we are in a period of stability and I think we have been there for a while now.” But the pandemic was having a direct effect on demand for certain products, he acknowledged.

“The key disruption for us, of course, is that as social distancing and control mechanisms are being implemented for COVID, and of course there are also ancilliary effects on communicable diseases that most of our portfolio treats. So we are seeing, as do other antibiotic manufacturers, a significant downward pressure on demand.”

“Now, I guess that’s good because at the end of the day it means that people are healthier,” Clements reflected, “but clearly we have to navigate around that to ensure we remain sustainable in the way we align our business going forward, and how we adjust to the reduced demand that we expect to come through this winter, with delayed and weakened flu seasons, with less spread in kindergartens and schools of bacterial strep throat, and things like that.”

“While it is good for the population as a whole, for us we have to think about how we manage that going forward.”

But outside of the immediate impact of the pandemic, other ongoing priorities for Centrient remained “very similar” to before, Clements outlined. “We focus on preserving the effectiveness of our antibiotics. We do this through sustainable manufacturing processes using enzymatic processes that we are the patent holder for globally. And [we drive] clean ways of producing that avoid any discharge of microbial active water into the systems.”

“In addition, we look at how we can improve our processes in this new world of reduced antibiotic consumption to be more efficient, to be more lean in production and to be more real-time in the supply overall.”

Diversified Sourcing Is Key To Strengthen Supply Chain

Asked about moves towards supply-chain localization and domestic production seen around the globe in the wake of the pandemic, including in Europe, Clements observed that “there’s clearly an interest in having local manufacturing.”

“We are in dialog with the European Commission on how local European-based manufacturers can remain sustainable,” he said, pointing out that “in the generics world, in Europe, often the pricing systems don’t support local manufacturers, especially intermediates and finished dosage forms.”

But “at the same time we don’t believe in being fully Europe-sourced,” Clements said, “because I believe there is an importance in diversified sources. So we do have emerging markets sites, we have global sites with diversified sourcing so that if we have an interruption in one location we have alternatives by which we can supply.”

Ultimately, Clements summarized, the important aspects of supplying a medicine were that “the drug needs to be accessible, it needs to be reliable and it needs to be efficacious. And then on top of [that] it’s got to be affordable to the healthcare system. Where and which country it comes from is not as important.”

“What we believe is that yes, there is a role for European sourcing. And we do believe that in Europe especially – and in the US as well – more attention needs to be paid” to this area. “But the more important point is the diversified nature of the sourcing.”

“That is where the focus needs to come: how robust is our supply chain?”

Taking an illustrative example of cephalosporins – “first-generation cephalosporin drugs, oral cephalosporin tablets” – Clements noted that in Centrient’s Delft location near Rotterdam “we have an intermediates manufacturing facility which makes the intermediate product for all the first-generation cephalosporin APIs.”

If a government body were to examine the European market to determine whether first-generation cephalosporins were competitive, he suggested, they might see for example 14 manufacturing authorizations for cephalosporin drugs, implying a competitive market.

“But those 14 manufacturing authorizations are made in only 10 different finished dose plants in Europe. And behind those finished dose plants, there are only two European-based active pharmaceutical ingredient plants. And behind those two European-based API plants, there is only one [intermediates] plant in Delft.”

“Now there are two more which are in China, but that just shows the fragility of the supply chain.”

“So what may look – to a government entity or tender entity – like a healthy, competitive, vibrant marketplace because of 14 manufacturing authorizations, all funnels down to one facility in Delft, Rotterdam from a European sourcing point of view.”

“And I think that is where the focus needs to come: how robust is our supply chain?”

Europe Lacks A Joined-Up Approach

Explaining that “we at Centrient have not gone the route that many of the large generics [firms] have gone which is to consolidate down to one mega-site,” Clements noted that “if we look at some of our competitors like Sandoz it all comes down to one manufacturing site.” Whereas with Centrient “we have three betalactam manufacturing sites, we have two cephalosporin sites.”

“And I think what’s important is that the European Commission starts paying attention not only to local manufacturing, which is important, but also robustness. And begins to look, in tenders, at the robustness of the supply chain and the companies that have tended to encourage that. Because if you only encourage the diversity of marketing authorizations, at the end of the day you might all be sourcing from one manufacturing site and still have that weakness in the chain.”

While certain individual EU member states offered incentives such grants or tax breaks, Clements observed that “what is lacking is a co-ordinated effort across the member states.”

“I think there needs to be a higher level of co-ordination in Europe between member states, whether that’s through the European Commission or other ways, around how these grants are given and also how they engage with smaller companies like ourselves versus the big behemoths,” he said. “I think there probably needs to be a little bit more of a co-ordinated approach. But I think that message is well-received in Europe and I certainly see a lot of interest to move very quickly in that direction.”

Ultimately, Clements said, the pandemic “has sensitized the industry to the security of supply chains, definitely in generics manufacturing and API manufacturing, and also on the policy side: policy makers at all levels are under pressure to really take the issue seriously. And with the EU Pharmaceutical Strategy, we really see that coming to fruition.”

“There are definitely clear steps around both environmental and pandemic preparedness that have been taken by both industry as well as member states. So I believe we will be stronger [and better] prepared,” he said, and on the current pandemic “I do think that the generics industry responded very quickly across the board.”

Positive On EU Pharma Strategy Proposals

Commenting on the recent EU Pharmaceutical Strategy and its indication that non-price factors should be included as part of procurement criteria – including “green production” and security and continuity of supply (Also see "EU Pharma Strategy Will Remove Barriers And Bolster Competition" - Generics Bulletin, 25 Nov, 2020.) – Clements was positive on the proposals.

“I think the building blocks are right, because it does break a little bit with the view that cost is the only driver,” he said. “I think things that I would still like to see more of are green procurement criteria, that is linked to supply security, and especially the impact around antimicrobial resistance, how well is that understood and researched in the criteria. I know some countries ask for a lot of information about that and I would like to see that across Europe.”

“When it comes to things like quality, you don’t get to play if you don’t cross the quality bar,” he insisted. “A lot of firms talk about quality as a competitive advantage – well, maybe so, but my view is that there is a bar and you are either above or below the quality bar.” And “so why should it be any different for the way the product is manufactured? If a company is releasing intermediates and they are discharging microbially active waste water, they shouldn’t get to play, to be blunt, because they are contributing to antimicrobial resistance.”

“These are cornerstone drugs in healthcare, so we need to combat AMR because that is a massive threat that could be looming on the horizon.”

Asked whether these changes in procurement practices could take a long time, Clements suggested that “I think it could happen pretty quickly.” Pointing to the example of places like Sweden and Germany where purchasing criteria had already been updated, he said “we do see some countries in Europe providing leadership on this.”

“Again, what we have done is we have reached out very strongly to the European Commission and others about this, because we believe that often what you find is that it’s the large companies that have the strongest voice, but it’s important for smaller suppliers like us to also have a voice in the process.”

AMR And Sustainable Manufacturing

Asked whether there was sufficient engagement within the broader off-patent industry on AMR, Clements noted that Centrient had been “a driving force in setting up the AMR Industry Alliance and the implementation of the common antibiotic manufacturing framework,” which “lays out the steps that producers need to take to ensure that pharmaceutical active ingredients don’t end up in the environment.”

“And so I think we’ve done a really strong job at leading, and leading in a very quantitative and authentic way, to make sure that we and our suppliers are producing to the highest possible standards. Our largest portfolio, the semi-synthetic penicillins, is already well within these targets,” he noted.  (Also see "Centrient Hits Milestone On Antimicrobial Resistance" - Generics Bulletin, 9 Jul, 2020.)

“In terms of the industry I think there is probably a high level of awareness, many companies have signed up to the AMR Industry Alliance,” he observed. But he acknowledged that “I still think there is probably more to be done across the industry.”  (Also see "Industry Needs To Engage On Antimicrobials" - Generics Bulletin, 17 Jan, 2020.)

“While I don’t want to comment on competitors’ facilities, I think there is more to be done across the industry to ensure that players get up to this standard.”

And on sustainable manufacturing, Clements said Centrient was also leading the way, making use of enzymatic production technologies that produced “a much lower carbon and waste footprint.”

“This was introduced in the early 2000s and we were well ahead with this,” Clements pointed out, noting that the process “reduces our carbon footprint by up to 65% because it uses natural fermentation and enzymatic conversion rather than chemicals or solvents.”

Moreover, he said, “we’re pushing for similar green approaches across the EU to ensure that there is a level playing field with other countries.”

“At the same time,” Clements noted, “we have also continued research projects to improve our enzymatic technology to improve it in a sustainable way. We want to continue along this route because there are always opportunities to modify and improve the processes as new technology and data analysis tools become available, [so that] we can continue to develop the efficiency and cleanliness of our processes.”

Further Investment To Come In 2021

Looking ahead to Centrient’s priorities for the coming year, Clements said that “in 2021 we will continue to invest in our semi-synthetic penicillins and semi-synthetic cephalosporins to ensure that we have more headroom to respond to fluctuations in demand, especially if there is an increase in demand, so that is important to us that we have that capability.”

“I think it’s important for us that we become stronger based on what we have learned this year,” Clements summarized. “I believe stakeholders are seeing more and more the real value that antibiotics bring to society and health systems. So for us at Centrient, continuing to work with industry partners and the European Commission on this is super important.”

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