Out-sourcing: how to benefit from experience and competence

Liselotte Larsson looks at the trend for the increased outsourcing of manufacturing biopharmaceuticals and outlines the reasons for this.

There are many new biotechnology derived products in the pipe-line, many have entered the clinical phases and more are expected as a result of the genomic and proteomic research.

Many of these new products are being developed by small biotechnology companies which are focused on a few products and very specialised. These companies do not have their own manufacturing capacity, in fact some of them might even be virtual companies with one of the main business ideas to out-source essentially everything.

There is also a structural change going on in the pharmaceutical industry in general. Large companies are merging, forming larger and larger entities. One of the main objectives are to cut down costs by utilising the resources more efficiently. By focusing on the core business of identifying new drug candidates, clinical development and marketing, resources can be used even more efficiently.

Most important for biopharmaceuticals is that the views of the regulatory authorities have changed. Biopharmaceuticals are often defined by their manufacturing process, and until a few years ago, a company wanting to register such a product also had to be the producer. Today, a CMO (Contract Manufacturing Organisation) can register its plant with the Medical Products Agency, getting it approved for production of active pharmaceutical ingredients.

How to benefit from out-sourcing

Several advantages can be identified when utilising a CMO. You will gain from your contractor all his previous experience from many different kinds of products and technologies. The contractor will have an adapted organisation for taking on assignments. He will also have qualified equipment and Quality Assurance systems in operation. All these things would require a lot of effort for you, both financially and time-wise, to put in place.

Before getting started with the selection process, (Fig. 1) it is most important to clearly define the objectives of out-sourcing. Will the contract involve production only, or is there need for development and up-scaling? Do you intend to market your own products or is your intention to sell the concept or license it to other companies? Do you need regulatory support or do you have that competence in-house? Are you prepared to enter into a long term collaboration or do you wish to maintain complete flexibility?

There are many different types of CMOs. For example, there are dedicated CMOs with the main business idea to provide manufacturing services opposed to excess capacity suppliers which strive to utilise their manufacturing capacity more efficiently by taking on assignments. There are small CMOs with very specialised services as well as large CMOs with a very broad spectrum of services. Some offer services like development and scale-up and it might be advantageous to use such contractors since the learning curve is then entered very early in the production phase or even before.

Payment terms may also vary. In the start-up of a new project it is common to either pay per batch or based on time consumption plus expenses. In order to avoid set-backs, choosing the right partner is crucial. The client must feel that he is being treated as a VIP by the contractor and the contractor must feel that his client find the efforts valuable.


Liselotte Larsson is with BioGaia Fermentation AB, Lund, Sweden.

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