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Strategic rather than tactical considerations are driving biopharmaceutical outsourcing.
Companies providing outsourced services to the biopharmaceutical industry seem to be weathering the impact of the global financial crisis as many biomanufacturers seek to develop strategic partnerships and increase their outsourcing despite increased internal cost-cutting.
Outsourcing and budget projections are an early indicator of industry performance. BioPlan Associates conducted its 2010 biopharmaceutical manufacturing survey to quantify how these factors may translate to capacity problems. The results provide a global view from executives at more then 400 biopharmaceutical manufacturers and contract manufacturing organizations.
Drug innovators outsource operations for a variety of reasons, including competitive pressures, lack of access to capital and funding, lack of internal expertise (i.e., available staff), accelerating time-to-market (particularly important for smaller companies), lack of available capacity, and a need for enabling technology (e.g.,expression systems and downstream processing). In making the decision to outsource, the preliminary survey results (see Figure 1) indicate that the critical factors companies use to evaluate outsourced manufacturing are not cost-driven, but rather are focused on quality (67% of respondents said so), effectively handing product contamination (65%), and establishing a good working relationship (60%). These results show that drug manufacturers are increasingly considering contract manufacturing and outsourced services more as an asset to drive strategic manufacturing decisions than as a simple way to save money. We are likely to see this trend continue as the biopharmaceutical services industry matures, and risk-sharing and partnering agreements between service suppliers and drug innovators grow.
Figure 1: Critical factors when outsourcing biopharmaceutical manufacturing. (FIGURE 1 COURTESY OF AUTHOR)
A shift in focus
Since 1999, the biotechnology and pharmaceutical industries have backed away from the concept of fully vertically integrated business models. Then, virtual companies were getting funding, and investors were recognizing the value that contract manufacturers and other outsourcing firms added. The biotechnology industry has since matured, and companies have gained experience managing their contract suppliers. For example, the industry is now at an equilibrium with about 48% of biomanufacturers outsourcing at least some of their production during the last three years, according to BioPlan's 2009 biopharmaceutical manufacturing analysis.
Tactical to strategic outsourcing
Today, the industry has dramatically shifted from traditional tactical outsourcing of testing, clinical supplies manufacturing, and finishing/packaging, and has extended outsourcing to other functions based on long-term company requirements rather than just cost savings. In BioPlan's 2010 survey, we asked respondents where significant increases in outsourcing activities will take place over the next two years. We found that nearly one-quarter plan to outsource their fill–finish operations, where they had not in the past, and 21% will seek validation services (see Figure 2).
Figure 2: Projected levels of increased outsourcing by 2012. (FIGURE 2 COURTESY OF AUTHOR)
This emphasis on strategic biopharmaceutical outsourcing recently was expressed by Wolfgang Noe, vice-president of process development at the biotechnology company Biogen Idec (Cambridge, MA) in an interview with BioPlan Associates in late 2009. "Quite a number of CMOs with a considerable track record are on the market, and companies with idle capacity even offer a 'consortium approach' to cover costs." Noe, who is also responsible for the company's outsourcing strategy, notes, "Processes are sufficiently documented now that we can consider outsourcing and expect reliable, long-term relationships from our manufacturing partners."
Eric Langer is president of BioPlan Associates, tel. 301.921.5979, firstname.lastname@example.org, and a periodic contributor to Outsourcing Outlook.