Inyx drama highlights crucial need for due diligence on contractors

Inyx Inc. was a public company, with its financial records available for all to see.

Despite predicting it would achieve profitability by the end of 2004, it continued to experience substantial recurring operating losses while, still borrowing heavily and accumulating a huge amount of debt.

With its knife-edge financial history, and the association of some of its management with past failed manufacturing ventures, Inyx' recent bankruptcy problems are hardly surprising.

Adequate due diligence by the pharma companies who got involved with the firm could have avoided a lot of pain and exposure to vulnerability.

When Inyx Inc. bought Aventis' manufacturing facility in Manati, Puerto Rico in 2005, which was subsequently named Inyx USA, it also took over some of Aventis' manufacturing contracts at the site, along with those of two of its existing customers, King Pharmaceuticals and Kos Pharmaceuticals (now owned by Abbott).

Fast forward two years and the site is in a state of disarray, having been put into Chapter 11 bankruptcy protection, and its fate now hangs in the balance.

It is the centre of a fierce ongoing court battle over its future, and there is much speculation over whether the business will be sold to a third party intact or placed under Chapter 7 and subsequently liquidated.

As reported in Outsourcing-Pharma.com yesterday, Aventis has had to take Inyx USA to court after it failed to deliver on a contract manufacturing and supply agreement, a situation that Aventis feared could "seriously harm its interests".

Placing all your inhalers in one basket...

A host of other pharma firms have also found themselves caught out by the site's demise, particularly King and Abbott who were relying heavily on Inyx for the highly specialised contract manufacturing of hydrofluoroalkane (HFA) metered-dose inhaler (MDI) products.

HFA-based MDIs are the accepted environmentally friendly, non-ozone-depleting, replacement for chlorofluorocarbon (CFC) inhalers, which are no longer permitted for use in Europe and have to be phased out in the US by 2010.

HFA inhalers are not filled the same way as HFC inhalers as the drug product needs to be filled under pressure through the valve into the can.

It has taken the few in the industry who have such manuacturing capabilities between 10 and 15 years to develop them.

In April 2005, Kos (Abbott's acquired business) entered into an exclusive 10 year, $10m (€7m) contract with Inyx for the production of its Azmacort (triamcinolone acetonide) inhalation aerosol product line.

Under this contract Inyx was to make Azmacort in its existing CFC propellant form, as well as conduct R&D related to the development of a new formulation of Azmacort using the propellant HFA.

It then would have also been responsible for manufacturing the new HFA version once it came to market - it is understood that Abbott was expecting to receive US Food and Drug Administration (FDA) marketing approval by next year.

Meanwhile, around the same time Inyx also signed several 10 year development, manufacturing and supply contracts with King Pharmaceuticals for two of its respiratory drugs, Intal (cromolyn sodium) and Tilade (nedocromil sodium).

Again, the contracts were for the continued production of the CFC version of its products, along with the development of new formulations to enable the transference over to HFA, and their subsequent manufacturing once they reached commercialisation.

"Inyx will have many of the manufacturing responsibilities related to the production of our Intal and Tilade product lines.

We believe that Inyx' manufacturing capabilities should provide a high quality continuous supply of these products," said King's president and CEO Brian Markison at the time.

This deal also went beyond a simple contract arrangement and extended into a strategic partnership - a first for both firms.

King and Inyx agreed to co-market Intal and Tilade and each have a share in net revenues.

Inyx was also to be responsible for the distribution of Intal HFA in Canada.

Inyx' marketing of the drugs was being conducted by its newly established subsidiary, Exaeris, which is also now in Chapter 11.

In August King announced its decision to scrap the HFA versions of the drugs - it is unclear as to whether the Inyx disappointment was a factor in this decision.

The exclusive nature of the deals that Kos and King established with Inyx was a mistake in hindsight, as now, only two years into the contracts, Inyx is teetering on bankruptcy, and it looks as though the two firms may be left facing potential supply issues.

It is unclear what backup plans they may have had in place, nor the extent to which they have been affected, or whether they have been able to make alternate manufacturing arrangements.

Azmacort is used in the maintenance treatment of asthma as a prophylactic therapy and according to the FDA website, there are no therapeutic equivalents.

The product generates around $100m in annual revenue.

Similarly, Intal and Tilade are asthma treatments and are the only mast-cell stabilisers (non-steroidal anti-inflammatory, non-beta-2 agonist agents) currently available.

Both King and Abbott were asked by Outsourcing-Pharma.com to comment, however, they failed to do so before the time of publishing.

There has been talk of Abbott being interested in buying the facility, although an Abbott spokesperson previously told Outsourcing-Pharma.com: "We do not comment on rumours".

Shortfall in HFA capacity?

With Inyx USA out of action, it is believed that only around four other contract manufacturers in the world have the capability to commercially make and fill HFA devices - US-based Xemplar Pharmaceuticals, 3M and Catalent, (formerly Cardinal Health), along with UK-based Pharmaserve North West (which incidentally just bought an insolvent Inyx UK site partly to gain this new capability).

Meanwhile, only GlaxoSmithKline (GSK), Schering-Plough, AstraZeneca and Boehringer Ingelheim, as well as a couple of smaller firms such as SkyePharma, have also developed this new cabability in-house for their own products.

Both Kos and King previously tried to develop the process in-house but were unsuccessful and discontinued these efforts long ago.

"Any company wanting to move into this area of manufacturing would need at least five years to develop the expertise required.

There are also not a lot of trained people in this field and most of those that are work for big pharma companies," Charles Eck, president of Xemplar told In-PharmaTechnologist.com in an earlier interview.

"Any other pharma firms wanting to develop such products need to find a contract manufacturer who can do it for them," said Eck.

Along with King and Abbott, small UK firm Plethora was also caught out by the collapse of Inyx' HFA manufacturing capabilities and ended up going to court over the matter earlier this month to recover important clinical supplies that were seized as part of the Inyx estate.

Court documents show that Plethora was seeking the return of the product components inventory that was given to Inyx USA, along with16,981 finished units of its MDI spray PSD502, an investigatory topical aerosol product for premature ejaculation.

The situation Plethora found itself in appeared critical: "The components inventory and the finished inventory have various testing, product development and regulatory deadlines and expiry dates, many of which occur immediately," the documents state.

Furthermore, PSD502 was due to start clinical trials imminently, and any delay due to lack of available product would have proved very costly for the drug's clinical development programme.

As it turns out, Plethora was successful in getting its property back in the nick of time, although had to pay Inyx' trustee $41,226 for the privilege plus shipping costs, even though it had previously already paid Inyx USA.

Dr Steven Powell, CEO of Plethora, told Outsourcing-Pharma.com that the Phase III trial of PSD502 has now started as planned.

The firm appears to have had a lucky escape indeed.

The deal with Inyx USA was signed by Plethora in November 2006 - at this point Inyx' financial precariousness was well and truly evident in the company's financial filings.

Alarm bells should have been ringing.

However, at the time Powell said: "We are very happy with our collaboration with Inyx, which allows us to progress PSD502 down the path towards Phase III clinical development."

Plethora has also since found an alternate manufacturing site in the US and also has a European site validated as a back-up.

The firm had been working with the European contract manufacturer for the production of the drug's Phase II supplies and had switched to using Inyx USA because the US is its target market and so it wanted a US base for its contract manufacturing, said Powell.

"It is prudent for any pharmaceutical company attempting to get a product through clinical trials to ensure there is no interruption to clinical supplies so as to move the development programme forward as quickly as possible.

Having a back-up manufacturer is essential," he said.

Meanwhile, another specialty firm that has been affected on the HFA front is NovaDel Pharma, who in November 2004 entered into an exclusive, five year manufacturing and supply agreement with Inyx USA for its nitroglycerine lingual spray for the treatment of acute angina.

Thereafter, Inyx was to have a non-exclusive right to manufacture the spray for an additional five years.

The current status of this product is unknown.

The lesson that can be learned from all this is that when entrusting manufacturing processes to third parties, ongoing due diligence is crucial - such arrangements should not be entered into lightly, nor should companies take their eye off the ball once contracts are in place, lest there be a repeat of the Inyx debacle.