By William Downey, President, HighTech Business Decisions.
Dated: 1/1/2008
The demand for biopharmaceutical contract manufacturing outsourcing (CMO) services continues to expand as pharmaceutical and biotechnology companies increasingly rely on biopharmaceutical contractors to provide more production capacity and a wider range of services. Many companies’ manufacturing strategies now incorporate outsourcing manufacturing of some or all of their production to contract manufacturers.
Over the coming years, there will be significant changes in the worldwide biopharmaceutical contract manufacturing industry as contract manufacturers add new capacity and expand their service offerings. As the industry matures, however, pricing pressures, primarily for large-scale production of biologics, are compelling some to consider outsourcing to contractors in lower-cost Asian regions. In addition, having closer access to the Asian market for biopharmaceuticals will be, in itself, a compelling reason for manufacturing biologics there.
In the latest report by HighTech Business Decisions, Biopharmaceutical Contract Manufacturing: Quality, Capacities and Emerging Technologies, 41 directors of biomanufacturing at pharmaceutical and biotechnology companies worldwide were surveyed on outsourcing strategies, criteria for choosing a biopharmaceutical contract manufacturer and attitudes towards outsourcing production to Asian contract manufacturers.
Outsourcing is part of the production strategy for most of the respondents in the study. In addition, contract manufacturing services are expanding globally. Furthermore new facilities for contract manufacturing of biologics are either in the planning or production stage in Singapore, South Korea, China, India and Malaysia. With the addition of biopharmaceutical contract manufacturer in Asia, biopharmaceutical manufacturing directors’ attitudes about using an Asian CMO are also changing.
Contract manufacturer selection
In the recent study, manufacturing directors surveyed said criteria expectations include experience and reputation, price, customer service and quality. A summary of those responses is shown in Figure 1. In analyzing the responses further, the highest ranked criteria in choosing a biopharmaceutical contract manufacturer are experience, quality, and capability. It should be noted that while price is important in choosing a contract manufacturer, none of the manufacturing directors lists it as a top criterion.
None surveyed listed geographic proximity as a top criterion for the selection of the contract manufacturer. Many said finding a contract manufacturer that meets their top criteria is inherently a difficult process; therefore they do not want to limit their choice of a manufacturer by geographic proximity. Even though geographic location is not a top criterion for choosing a manufacturer, the vast majority directors surveyed said there is a definite advantage to working with a manufacturer who is in close proximity to them.
The advantages typically mentioned are time savings, ease of interaction and communication, and the ease of site visits. While the relative ease of using a manufacturer that is in close proximity is seen as an advantage by most directors, proximity did not weigh heavily as a criterion when choosing a manufacturer.
Industry views on using an Asian contractor
While the vast majority of the biopharmaceutical manufacturing directors recognize the advantage of being close to their contract manufacturers, it is generally not an area of great concern. In our current and past studies, the directors discuss the possibility of outsourcing their biologic production to Asia.
The attitudes toward outsourcing to Asia have changed: a large majority of the directors surveyed were willing to consider an Asian contract manufacturer for their projects. In our latest study, 80% of the directors stated that they would consider using a contract manufacturer located in Asia, compared to prior studies done of 60% (see Figure 2).
The directors see four major benefits of using a biopharmaceutical contract manufacturer in Asia:
• Cost savings,
• Shorter project timelines,
• Availability of capacity, and
• Distribution or access to the Asian market (see Figure 3).
The biggest benefit seen by the directors to using an Asian contract manufacturer is the cost savings derived from using one located in a low cost geographic region. Almost 75% of the directors state obtaining significant cost savings for their production project as the reason for considering a contract manufacturer in Asia.
Conclusion
Offsetting some of the potential benefits derived from using an Asian contract manufacturer are the concerns over intellectual property protection, capability and communication. An overview of the various concerns mentioned by the biopharmaceutical manufacturing directors is shown in Figure 4.
The manufacturing director who chooses to work with an Asian contract manufacturer must balance the benefits of lower costs versus perceived additional risks associated with using an Asian contract manufacturer. While there are always project risks with outsourcing, most directors see an additional risk in using an Asian contract manufacturer.
Asian biopharmaceutical contract manufacturers located in low cost geographic regions are poised to take advantage of the need for price-competitive biologics. The majority of the manufacturing directors surveyed are willing to consider an Asian contract manufacturer for their projects as a result of the pressure to reduce costs. While project costs are an important criterion for choosing a contract manufacturer, it is not one of the major criteria used by the biotechnology companies when choosing an outsourcing partner.
Asian biopharmaceutical contract manufacturers must also be able to demonstrate to their client that they have the capabilities, quality and experience in meeting the requirements of the project along with offering lower costs. They must also address the specific concerns that that biopharmaceutical manufacturing directors have with outsourcing biologic production to Asia.
Industry Views on Proximity to Manufacturer
Below are the industry responses from the surveyed biopharmaceutical manufacturing directors about the advantages of proximity from the report.
“If CMO was outstanding in process development, price and availability then I would consider going to Europe or Asia. The other thing is the company would have to have a validation program within the facility.”
“Certainly proximity is a nice to have but not a major part of our decision. We consider regulatory track-record, pricing, compliance history and capacity. We tend to go where the best deals are.”
“If two CMO have similar capabilities, we would always choose the CMO that is closer. In reality this is rarely true. Most of our decisions are based on the CMO's capability.”
“There are some advantages: you can visit easily. But it isn’t critical. I think a CMO with an excellent track record would attract me regardless of location. For large scale requirements, the process is usually pretty well worked out so we would look at cost rather than geography, all else being equal.”
“There are advantages of working with a CMO that is local; ease of tech transfer, communication, and the use of the same language. We would be motivated to use a CMO in a different geographic region as a secondary supplier for commercial production. In order for us to go to the Far East there would have to be significant cost benefits. Once we launch our commercial product, there may be an advantage to seek capacity in the Far East.”
“For early phase production, we prefer to have a CMO as close as possible. For commercial production, we don’t have an issue about going overseas. When we are scouting for a CMO, we don’t eliminate a CMO based on its location.”
Benefits of Working With an Asian Partner
The report provides views by the surveyed biopharmaceutical manufacturing directors on the advantages of working with a contract manufacturer in Asia.
“We would consider working with an Asian CMO. The circumstances would be that there is a significant cost savings of 50% or greater with regulatory and execution risks of less than 10-20%. An Asian CMO with a proven track record and regulatory experience would be highly attractive.”
“During the development phase of the projects we prefer to work with a US or European company and have close interaction with them. For routine manufacturing, we would consider a CMO in Asia. When pricing is most important, we would consider going to an Asian CMO.”
“The main reason we would consider working with a CMO in Asia is if it could do something faster or cheaper. It would need to demonstrate the ability to meet the EU and FDA regulations.”
“ We have not established a relationship with any CMO in China or India. There would need to be something that attracts us to work in Asia, such as lower cost. We would, of course, need to check the quality of their work, which would have to meet GMP standards.”
“We would like to work with Asian CMOs. Contract manufacturing is booming in Korea, China, and Taiwan. Using Asian contractors provides a big opportunity for price reduction.”
“In order for us to go to an Asia CMO there would have to be a big cost incentive. For large volume production, we may consider partnering with a CMO in Asia.”
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Figure 2
Figure 3
Figure 4
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