Outsourcing continues to be an integral part of biopharmaceutical manufacturing, and facilities are outsourcing activities today at heightened levels. As a result, the contract manufacturing organization (CMO) community has seen an expansion of opportunities, leading to increased competition.  In this science and technology-driven environment, how can CMOs separate themselves from the pack? In other words, given the increasing degree of technical complexity and competence, what attributes are most important to clients when selecting a CMO partner?

Results from our 11th Annual Report and Survey of Biopharmaceutical Manufacturing Capacity and Production [1] indicate that the one attribute rising above all others, as both most common and most critical is probably the most elusive: Establishing a good working relationship.  This soft-skill attribute, according to our study, is not always a strength, even among the most technically competent CMOs.

The 238 global biomanufacturers we surveyed almost unanimously reported that this was an important factor when considering outsourcing of manufacturing to a CMO – with 96.6% feeling that this was the case. That made it the most-commonly cited “important” factor of the 19 we measured. Additionally, it was the also the factor deemed “very important” by the largest share of respondents – slightly more than two-thirds (67.8%). Both figures were up from last year’s study – increasing from 89.5% and 49.1% of respondents, respectively. [2] This increase has continued over the past decade we have evaluated this industry.  It may be that even as the industry matures technically, clients and their CMOs continue to find the right balance in relationship-building elusive.

At the heart of the increased focus on relationships is the emphasis on the development of increasing numbers and types of new partnerships, including expanded technical outsourcing, and the globalizing of the outsourcing marketplace. The initial focus when selecting a CMO is whether the technical aspects of a project are viable. Once this ‘easy’ part is accomplished, the partnerships must continue to evolve and improve at the relationship level, as this underpins other dealings and the development of trust and experience can avoid potential problems.

There are, of course, many other considerations for clients when seeking out CMOs, and the attention given to some of them has changed from last year’s survey.
In terms of the most commonly cited “important” problems, this year’s study finds relatively more of the industry requiring CMO attributes such as:
- Having regulatory compliance expertise (86.4% this year citing as “important,” or “very important”, up from 80.7% last year);
- Having capacity enough to meet the client’s demand (87.3%, up from 82.4%); and
- Helping determine the value of capital avoidance (55.9%, up from 49.2%).

On the other side, fewer respondents seem to value attributes such as:
- Offering a secure supply (control of capacity), deemed “important” or “very important” this year by 86.4%, down from a leading 94.7% last year;
- Providing lead times sufficient to cover development processes (69.5% this year, down from 80.7% last); and
- Being local to the client (23.7%, down from 38.6%).

When it came to the really critical attributes, those considered “very important” by clients, there was a significant increase in the share of respondents this year citing the top 4 attributes:
- Establish a good working relationship (considered “very important” by 67.8% of respondents this year, up from 49.1% last year);
- Comply with my company’s quality standards (66.1% this year, up from 49.1% last year);
- Protect intellectual property (62.7% this year, up from 49.1% last year); and
- Effectively handle cross-contamination issues (61%, up from 47.4%).

Those are some large swings, approaching 20% points in a couple of cases. And they weren’t even the largest ones – other considerations have become more critical in the last year, too. For example, 54.2% of respondents this year said 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-domestic 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); and
- 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 consistently at the top of the list.  The range of attributes, from development of working relationships, to effective project management, to compatibility of quality and information systems, and compliance track records, points to the complexity of the decision process. Yet the results also indicate that, this year, as has been the case over the last 10 years, establishing a good working relationship is remains top-of-mind. These soft skills are difficult to define, when compared to more technical attributes. But there appears to be no substitute for a good “general fit” between prospective partners.  This is also recognized by CMOs themselves. Last year, for example, when we asked CMOs about the most common mistakes made by their clients, every single one said that “clients not communicating with them effectively” was a common problem. 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 providers 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.     n

1. 11th Annual Report and Survey of Biopharmaceutical Manufacturing Capacity and Production, April 2014, Rockville, MD
2. 10th Annual Report and Survey of Biopharmaceutical Manufacturing Capacity and Production, April 2013, Rockville, MD

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.  301-921-5979.

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 biotherapeutic developers and CMOs. It also evaluates trends over time, and assesses differences in the world’s major markets in the U.S. and Europe.