Mixed models
The complex interplay of these variables probably means that it will never make sense for a major pharmaceutical company to
outsource 100% of its manufacturing requirements. There will always be an argument to keep strategic products in-house, whether
they be high volume blockbusters with substantial economies of scale or unique high-value technologies that shouldn't be shared.
What we will see, and are already seeing, is the emergence of sophisticated mixed sourcing models, which more effectively
integrate contract manufacturers and in-house operations. Some major companies are already using such models to their advantage
(e.g., Wyeth has long depended on contract manufacturing organizations[CMOs] for its API requirements, and Genentech has effectively
used a mix of in-house and contract manufacturing operations). Innovative business models such as the one pioneered by Genentech (SouthSan Francisco, CA) and Lonza (Lonza, headquartered in Basel, Switzerland, will build and operate a cell culture facility dedicated to Genentech in Singapore,
partially funded by local entities), will become more common.
Indeed, despite the backtracking in AstraZeneca's response to Smith's comments, the company is already well on its way to
establishing a sophisticated sourcing model for its manufacturing requirements. Earlier this year, it established a sourcing
center in Shanghai that will be the focus of its worldwide sourcing activities and by its own admission is actively establishing
supply relationships in Asia and elsewhere. It is also divesting redundant facilities in its manufacturing network, most recently
a parenteral manufacturing site in France that it sold to contract manufacturer Recipharm (Stockholm, Sweden).
Corporate politics and financial complexities notwithstanding, it's clear that some major pharmaceutical companies are committed
to radically changing their supply-chain models. Now it's up to the CMOs to retool their business models to respond to the
opportunity.
Jim Miller is president of PharmSource Information Services, Inc., and publisher of Bio/Pharmaceutical Outsourcing Report, tel. 703.383.4903, fax 703.383.4905, info@pharmsource.com
http://www.pharmsource.com/.
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