Customer Drivers Influencing Supplier Differentiation - Pharmaceutical Technology

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Customer Drivers Influencing Supplier Differentiation
The article examines the drivers of customer perception of contract service providers of pharmaceutical development and manufacturing.


Pharmaceutical Technology
Volume 35, pp. s40-s44

Levels of outsourcing

The survey examined the level of all pharmaceutical outsourcing in terms of the average number of services outsourced and the amount spent. Emerging biotechnology/biologics companies outsourced the most number of services, an average of 5.79 services, and emerging, niche or start-up companies the least, with an average of 3.27 services. Big Pharma companies were the second largest purchaser of outsourced services, outsourcing an average of 4.82 services, followed by biotechnology companies with an average of 4.35 services and specialty pharmaceutical companies with 4.04 services.

As would be expected, Big Pharma companies spend the most on outsourced services. Fifty-six percent of Big Pharma companies spend $50 million or more on outsourced services on an annual basis, 23% spend between $10 million and $50 million, and 10% spend less than $10 million. Biotechnology/biologics companies' spending levels were fairly evenly distributed. Twenty-one percent spend more than $50 million per year, 27% spend between $10 million and $50 million, and 22% spend less than $10 million.

Although emerging biotechnology companies on average outsourced more services than other bio/pharmaceutical company types, they spend less. Only 4% of emerging biotechnology companies spend $50 million or more on outsourcing services per year, 10% spend between $10 million and $50 million, and 7% spend less than $10 million. Emerging, niche or start-up companies tend to spend less as well, with 42% of these type of companies spending less than $10 million per year on outsourced services, 17% spending between $10 million and $50 million, and 7% spending more than $50 million. The spending patterns of specialty pharmaceutical companies fall in between those of Big Pharma companies and smaller players. Only 12% of specialty pharma companies spend more than $50 million per year on outsourced services, 23% spend between $10 million and $50 million, and 18% spend less than $10 million.

Outsourcing areas

Understanding the drivers of customer perception, the spending levels, and volume of outsourced services are crucial determinants for a contract service provider in developing and implementing a business strategy. These factors provide an overall framework for which specific areas of outsourcing activity can be further accessed. The survey analyzed the distribution of outsourcing activities by bio/pharmaceutical company type to examine which type of company outsourced in a particular area. For example, for those companies outsourcing custom manufacturing, 37% were Big Pharma companies, 26% were biotechnology/biologics companies, 16% were specialty pharmaceutical companies, 14% were emerging, niche or start-up companies, and 8% were emerging biotechnology companies. In examining the other areas previously examined in terms of customer perception (i.e., chemical synthesis, sterile manufacturing, lyophilization, and preformulation/formulation development), the survey results showed the following distribution among companies in outsourcing those functions:

  • Outsourcing chemical synthesis: Big Pharma (34%), biotechnology companies (28%), specialty pharmaceutical companies (14%), emerging biotechnology/biologics companies (10%), and emerging, niche or start-up companies (14%)
  • Outsourcing sterile compound research and development projects: Big Pharma (39%), biotechnology companies (27%), specialty pharmaceutical companies (11%), emerging biotechnology/biologics companies (11%), and emerging, niche or start-up companies (13%)
  • Outsourcing lyophilization: Big Pharma (34%), biotechnology companies (35%), specialty pharmaceutical companies (8%), emerging biotechnology/biologics companies (14%), and emerging, niche or start-up companies (10%)
  • Outsourcing preformulation/formulation development: Big Pharma (38%), biotechnology companies (24%), specialty pharmaceutical companies (19%), emerging biotechnology/biologics companies (11%), and emerging, niche or start-up companies (8%).


Figure 1: Percent of chemical synthesis projects outsourced by company type and anticipated spend. All figures are courtesy of Nice Insight.

Figure 2: Percent of custom manufacturing projects outsourced by company type and anticipated spend.

Figure 3: Percent of lyophilization projects outsourced by company type and anticipated spend.



Figure 4: Percent of formulation/preformulation projects outsourced by company type and anticipated spend.

Figure 5: Percent of sterile compound R&D projects outsourced by company type and anticipated spend.









Reference

1. "Nice Insight Pharmaceutical and Biotechnology Survey, Quarterly Report" (Nice Insight, New York, June 2011), http://www.niceinsight.com/.


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