that it’s very important for clients to be able to have capacity
enough to meet their sales demand. Last year, only one-third
of respondents shared that sentiment. This may be an indication that CMO ability to provide adequate scheduling of projects and campaigns may be getting squeezed.
Indeed, many of the attributes we identified saw an increase
this year in the share of respondents deeming them to be
critical. Since there wasn’t a concurrent increase in the share
of respondents finding these all to be at least “important,” the
results suggest that while these attributes aren’t being considered by a greater portion of the industry, those who are looking at them are attaching more importance to them.
IMPACT OF COST FACTORS
While many selection criteria this year increased in degree of importance, there was a notable exception: CMOs
demonstrating the cost effectiveness of their services, which
only 22% this year regarded as “very important,” close to
half of last year’s figure (42.1%). That may simply point to
respondents this year being more convinced of outsourcing’s
inherent value and not needing CMOs’ assertions of their
cost-effectiveness. It may also point to the greater overall
recognition of the value CMOs can provide.
In fact, separate results from our study indicate that a growing
trend for outsourcing to be used as a cost-cutting mechanism has
subsided. Over the past couple of years of surveys, we observed
an increase in the proportion of study participants who had outsourced a variety of areas in order to reduce overall costs at their
organizations. But this year, that tide seems to have stemmed.
We evaluated five cost-cutting areas specific to outsourcing.
The most commonly-performed, we found, was outsourcing
of jobs in manufacturing, which roughly 1 in 6 respondents
( 16.6%) claimed to have done during the prior 12 months
to cut costs. That was virtually equal to last year’s results
( 16.8%), which had climbed from 11.8% two years earlier.
The next area was outsourcing manufacturing to non-domes-tic service providers (off-shoring), used as a cost-cutting mechanism by 13.1% of respondents, again mostly flat from last year
( 12.6%), after having increased from 5.7% two years prior.
The rest of the outsourcing actions we measured for
cost-cutting each saw a slight pullback:
- Outsourced jobs in process development ( 11.7% this year,
down from about 13.3% each of the prior 3 years);
- Outsourced jobs in R&D ( 9.7%, down from 11.2% last year);
- Outsourced manufacturing to domestic service providers
(9%, down from 14% last year).
Our survey data shows that among the many attributes that
are important to clients when choosing CMOs, some are con-
sistently at the top of the list. The range of attributes, from
development of working relationships, to effective project man-
agement, to compatibility of quality and information systems,
Clearly, this indicates that the relationship is a two-way street,
and when one side perceives an issue requires focus, it’s likely
that the other side is experiencing problems or stress as well.
Having appropriate customer relations management systems
in place to head off potential problems, and address those that
inevitably appear, differentiates the most effective service pro-
viders in this industry.
The data also show that while cost no doubt plays a part
in clients’ calculus when selecting CMOs, it takes a backseat
to other considerations. This suggests that clients are prepared to negotiate costs with partners whom they feel they
have the best relationships with – as the strength of those
relationships may end up preventing problems, mistakes, and
potential cost over-runs further down the line. ■
1. 11th Annual Report and Survey of Biopharmaceutical
Manufacturing Capacity and Production, April 2014,
Rockville, MD www.bioplanassociates.com/11th
2. 10th Annual Report and Survey of Biopharmaceutical
Manufacturing Capacity and Production, April 2013,
Rockville, MD www.bioplanassociates.com/10th
ABOUT THE AUTHOR:
Eric S. Langer is president and managing partner at BioPlan
Associates, Inc., a biotechnology and life sciences marketing research and publishing firm established in Rockville,
MD in 1989. He is editor of numerous studies, including
“Biopharmaceutical Technology in China,” “Advances in
Large-scale Biopharmaceutical Manufacturing”, and many
other industry reports. firstname.lastname@example.org 301-
Survey Methodology: The 2014 Eleventh
Annual Report and Survey of Biopharmaceutical
Manufacturing Capacity and Production yields a
composite view and trend analysis from 238 responsible individuals at biopharmaceutical manufacturers
and contract manufacturing organizations (CMOs)
in 31 countries. The methodology also included over
173 direct suppliers of materials, services and equipment to this industry. This year’s study covers such
issues as: new product needs, facility budget changes, current capacity, future capacity constraints,
expansions, use of disposables, trends and budgets
in disposables, trends in downstream purification,
quality management and control, hiring issues, and
employment. The quantitative trend analysis provides details and comparisons of production by bio-therapeutic developers and CMOs. It also evaluates
trends over time, and assesses differences in the
world’s major markets in the U.S. and Europe.