Technological Capabilities and Scientific Expertise Are Top Criteria in Pharmaceutical Outsourcing
Selection, Survey Shows By Lea Studer, Vice President of Marketing Communications, SCORR Marketing
Contract manufacturing is playing an increasingly important role in the strategic approach companies ranging from big pharma to specialized biotech take in producing products for sale. Among the factors influencing market growth in outsourcing manufacturing are a need to gain better control of costs; a shortage of capacity, expertise or technology in-house; or, as is often the case with startup, specialty and biotech firms, a complete lack of integrated manufacturing capabilities.
Because of a growing interest in this market area, SCORR Marketing developed a survey in partnership with Pharmaceutical Outsourcing to gather information from pharmaceutical, biotech, medical device, specialty and generic companies, as well as contract manufacturing organizations (CMOs), to determine trends in contract manufacturing outsourcing.
The survey indicated that demand for contract manufacturing services — and competition among CMOs for a share of the market — is increasing. Solid dosage drug manufacturing represented the most commonly outsourced activity, followed by manufacturing of parenterals, topicals, APIs, transdermals and intermediates. Counter to assumptions, we also learned that, although price is important, it is far from the most important issue driving outsourced manufacturing decisions.
More than two-thirds of companies outsource manufacturing at least once a year, and the rate is increasing. Last year, more than 75% of respondents outsourced the same or more than they had in previous years, and more than a quarter report growth in their outsourcing requirements.
Commenting on the survey results from the CMO perspective, Paul Josephs, senior vice president of sales, marketing and corporate development at DPT Laboratories, said, “We’ve seen solid growth of more than 10% across the board as well as substantial growth in the generic marketplace. We expect to see these trends continue.”
Rising Global Competition
Another growth area is the number of CMOs considered for each manufacturing contract. Although the average is just under four, 22% of companies look at five to six potential partners and 7% look at 10 or more, suggesting that competition for the contract manufacturing dollar is strong and rising.
Competition is also becoming increasingly global, with almost two-thirds of respondents reporting they outsource manufacturing outside the U.S. In recent years, companies have established facilities in India, China, Singapore, South Korea and other countries, and many western CMOs are expanding operations outside the U.S. The CMO survey found companies outsource to an average of 2.5 regions and that the leading regions outside the U.S. are Europe, China and India respectively.
On the CMO side, Josephs noted, “We find ourselves competing more often with large multinational companies that may be able to take advantage of regional differences in labor or other factors to make their bid more competitive. We are responding by looking carefully at all the aspects of a project and then choosing to participate in a bid on a case-by-case basis.”
How Intelligence Is Gathered
Companies seeking outsourcing partners use a variety of methods to gather intelligence. Although the vendor’s website was most commonly mentioned, industry events, word of mouth, consultants and industry associations were also important sources of information. Respondents also mentioned performing online searches and reviewing trade journals and their associated websites, LinkedIn and other social media as methods to learn more about CMOs.
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