Villax (Hovione): Intense global competition and excess capacity is eroding prices in early-phase materials. Profound restructuring at Big Pharma is making outsourcing a genuine strategic option for a large portion of development and manufacturing activities. These companies have high standards, and this demand will create a shortage of quality CMO capacity. Also, expect regulatory agencies' enforcement attitude to swing to the other extreme—not so long ago they ignored the risks of globalization and hid their head in the sand; now they are "furious" and the pendulum has swung. Expect strong enforcement action in all three major regions; expect a flight to quality suppliers.

Hamby (Ash Stevens): Big Pharma is outsourcing more development work to contract manufacturers to cut costs and increase efficiencies. Early-stage start-ups typically out of universities or started by ex-pharmaceutical professionals are struggling to raise funding for R&D, preclinical, and early-phase drug development. Early-stage biotech companies are having to rely more on government and nonprofit organizations (e.g., Leukemia and Lymphoma Society) sources of funding. Consequently, it is taking longer for compounds developed by these groups to reach the clinic, and limited funding is contributing to a decline in the number of early-stage start-ups.

The real concern is where drug R&D is going to come from in the future. Big Pharma is cutting R&D. Venture capitalists and private investors are looking for shorter-term and later-stage investments. Initial public offerings are only for companies close to market or with marketed drugs. Academic institutions are not designed to develop drugs. The question is where the long-term drug research and discovery is going to come from in the future. China is investing heavily in biotech R&D and will likely be one of the key innovator countries for future pharmaceutical breakthroughs.

PharmTech: Many companies have had to adjust their manufacturing networks because of mergers/acquisitions or shifting product mix and demand. What are the critical success factors and metrics in configuring a manufacturing network?

Maddaluna (Pfizer): Quality and compliance are always going to be the overarching criteria for success and that will never change. That said, the challenge is to create an optimally lean, optimally efficient, optimally cost-effective network while building capabilities for the future and ensuring quality and compliance. We do this by managing capacity and utilization of capital investments, reducing complexity across the network, optimizing the network to allow for effective implementation of operational excellence, and managing cost while at the same time adding value to the network. Pfizer's evaluation process examines multiple factors and is designed to ensure a thorough and informed evaluation of the plant value to the network and to Pfizer's strategic business goals. In other words, does the plant optimize the efficiency and effectiveness of the internal/external global network?

Bailey (PwC: ) First, create clearly articulated and broadly agreed goals for what you want to accomplish. What's the relative priority across potentially competing goals (i.e., lowest cost, lowest risk, highest reliability)?

Second, make sure to work from a good fact set. In our experience, companies typically have a poor understanding of true product cost. This happens for at least two reasons: costs often are allocated according to what's easy to measure (e.g., square footage) as opposed to true drivers, and some costs are never allocated at all (e.g., idle equipment). As a result, there are often significant hidden cross-subsidies (e.g., high-volume products subsidize low-volume products) that result in a distorted picture.

Third, make decisions that optimize overall network performance rather than individual site performance. This sounds obvious, but we see all the time that plants operate as mini-businesses and do things to optimize the performance of their business (e.g., pricing contract-manufacturing deals to cover marginal cost only) that detract from the overall performance of the network. Getting at this is as much a culture/incentives issue as it is a data issue.