Our study shows that biopharmas see outsourcing as a useful cost-reduction tool that will have direct impact on their overall business strategy. We researched how companies are reducing costs and found that a significant percentage have been using outsourcing of operational areas during the past 12 months to cut costs (Figure 2).
The fact that 12% of the industry outsourced process-development activities in 2010 to cut costs is an indication that companies are willing to let go of some of their more critical tasks. Outsourcing of process development, typically an in-house core capability, can be a harbinger of increased integration of outsourced services. Careful selection of an effective CMO with the requisite know-how and observation of industry standards and process can increase the value of outsourcing, and potentially mitigate risks of outsourcing high-level activities.
Although only 6.5% of companies last year actually outsourced or off-shored manufacturing activities, the 24-month projection for increases in higher end manufacturing jobs indicates that the market for these contract activities is likely to expand in the near future.
Outsourcing of manufacturing jobs is a by-product of tightened budgets due to the global economic situation. However, as biomanufacturers use this approach as an economic tool, they also appear to be establishing deeper alliances with their outsourcing partners. The changes reported in this article and numerous other changes shown in our survey indicate not only a growing reliance on outsourcing but growing expectations for what these relationships yield.
“More companies are considering outsourcing increasingly more complex production operations, not only during the development phases but also after commercialization of their innovative pharmaceutical products,” Morten Munk, vp of business development at CMC Biologics, said. “This is a long-term trend that is creating opportunities, particularly for CMOs with experience in regulatory areas and those able to perform technical operation at a high-quality level.”
This is supported by our report, which shows that industry outsourcing for biopharmaceutical manufacture is a long-term trend, with increases expected to continue as the industry adopts project-management processes, and establishes the skills needed to manage external relationships. The industry, and particularly client-contractor relationships, will continue to mature and become more complex. With these changes will come a more cooperative management and maintenance of outsourcing relationships, which will increase the ability to partner on technically complex projects.
Increasingly, CMOs are attempting to position themselves with capabilities in upstream production, downstream purification improvements, and other changes. As a result, outsourcing itself is maturing and positioning itself to become an increasingly essential part of R&D and manufacturing strategies.
Additionally, biopharmaceutical manufacturers are looking to outsourcing to address chronic issues that have been growing in importance over nearly a decade, including the costs of downstream operations and the need for real-time process monitoring.