Cephalosporin CMOs discontinue or downsize business

CMOs that manufacture cephalosporin antibiotics in Korea are discontinuing or downsizing their businesses

3 companies discontinue or reduce manufacture in one year…Consignors competing to ‘hire new consignees’

“Is non-profitable due to rising labor costs and sharp rise in raw material prices in China and India”

CMO companies that have been manufacturing cephalosporin antibiotics upon consignment are either shutting down or reducing their business one after another.

 

Given the limited number of domestic manufacturers, existing consignors are in a rush to find new consignees.

 

Due to this, industry concerns are rising over how this breakaway among consignees may accelerate due to the increased production cost and lead to an antibiotic crisis in the second half of the year.

 

◆3 CMOs discontinue or reduce manufacture in 6 months According to industry sources on the 3rd, A mid-sized pharmaceutical company, Company A, recently delivered its plan to discontinue the manufacture of cephalosporin to its consignees.

 

The company had agreements to contract manufacture 4-5 cephalosporins.

 

By product, 4 to 10 pharmaceutical companies had entrusted the manufacture of their products to this company.

 

An official from Company A said, “We haven’t officially decided to withdraw the business, but are considering up to withdrawal in our final review.” Other companies are also discontinuing or reducing contract manufacture of cephalosporins one after another.

 

A large pharmaceutical company, Company B, had reduced its CMO business for cephalosporin last year.

 

Recently, another large pharmaceutical company, Company C, decided to discontinue its cephalosporin CMO business.

 

An official from Company C said, “We are not planning to completely close down the cephalosporin business.

 

We plan to continue selling our products but change our directly-manufactured products to contract manufacturing products.” In the case of the mid-sized pharmaceutical company, Company D, their contract manufacture of cephalosporins on consignment has been temporarily suspended due to its factory relocation process for the past 2 years.

 

Consequently, all the consignors that hired the CMOs above for their cephalosporin products now have to find new CMOs.

 

Among the 10 companies in Korea that manufacture cephalosporin antibiotics upon consignment, currently, the manufacture of cephalosporins in at least 4 companies is disrupted.

 

The industry estimates that there will be more companies planning to discontinue or reduce the manufacture of cephalosporins.

 

An official from a cephalosporin CMO said, “With many major CMOs leaving the field, not many CMOs that manufacture cephalosporin antibiotics are left in Korea now.

 

This is why there has been a significant increase in the number of inquiries about the consignment production of cephalosporins.

 

We are asking some pharmaceutical companies for their understanding as we cannot accept all the manufacturing requests.” he explained.

 

◆Triple distress due to ’surge in raw material prices+fixed supply price+reduced prescriptions' CMO companies that are considering market withdrawals say that ‘it is not profitable' to continue the business.

 

The increased price of raw materials and despite the fixed supply price maintained by national insurance have deteriorated profitability.

 

Most of the major raw materials used to manufacture cephalosporin antibiotics are imported from China and India.

 

The price of such raw materials has increased 10-20% going through the COVID-19 crisis.

 

And the recent rapid changes in the major exporter China’s internal situation have left companies with difficulty obtaining even these materials.

 

An official from a CMO said, "The Chinese government stopped the operation of raw material factories for 3-4 months earlier this year due to their hosting of the Winter Olympics.

 

Also, the lockdown of major cities in China has due to the resurge of COVID-19 cases, further decreasing the supply of raw materials.” He added, “Meanwhile the price of the products has not changed at all as they are listed for reimbursement in the National Health Insurance.

 

Labor costs have also increased significantly recently.

 

We cannot even attempt to maximize profit by increasing production due to the 52-hour workweek rule.” Another CMO official said, “The is almost no profit in manufacturing first or second-generation cephalosporins.

 

Their profitability has worsened with the significantly reduced use of such antibiotics.

 

Our company has discontinued contract manufacture the first and second-generation antibiotics, and will continue to manufacture the other third and fourth generation antibiotics.” The industry expressed rising concerns that if prolonged, the situation may worsen and result in a shortage of cephalosporin supply in Korea after this fall.

 

An official from the pharmaceutical industry said, “With the existing CMOs increasing manufacturing of cephalosporin antibiotics, I believe no issue will rise for now.

 

However, after the COVID-19 crisis subsides and the number of respiratory infections increases to the level recorded in the average year, there is a possibility that a supply shortage of cephalosporin antibiotics will arise.” Cephalosporins, or cepha-class antibiotics, are widely used to treat respiratory conditions including pneumonia, pharyngitis, tonsillitis, and bronchitis.

 

Since the Ministry of Health and Welfare has mandated the separation of its manufacturing facilities since 2012, it has been produced only in plants equipped with dedicated lines for the manufacture of cephalosporins.