What are the key factors for survival as a CMO today? Nordic Life Science has spoken to some Nordic CMOs to get an insight into the current possibilities and challenges.
Guest post by Anneli Hidalgo, Nordic Life Science
The pharmaceutical sector is undergoing some dramatic changes, with pipeline challenges, pricing pressures and emerging global markets reshaping the way that companies operate. The CMO marketplace has not been spared and has become a brutally competitive one. For smaller US and European CMOs competing with Indian and Chinese CMOs the solution may ultimately be to merge with each other or abandon particular specialties within pharmaceutical manufacturing. Another alternative is to quit the business completely in order to survive, according to the article The Future of Pharmaceutical Contract Manufacturing by Robin Elizabeth Margolis.
But there are less drastic approaches that are well worth considering. Clarkston Consulting has highlighted some key trends that are shaping the contract manufacturing industry. The report 2014 Contract Manufacturing Trends concludes that contract manufacturers that differentiate their offerings and capabilities will be able to both retain customers and grow their business. The crucial strategy to become a market leader is to adapt quickly by taking advantage of the transformative nature of the industry.
Andrea Celia Porchia, Senior Director Business Development responsible for the Scandinavia region at CMC Biologics, is in line with the conclusion that adapting is crucial for survival in the highly competitive CMO market.
“Nordic CMOs are not immune to the challenge of competing in the global contract manufacturing market. Contract manufacturers that differentiate their offerings and capabilities will be able to retain customers and grow their business within this highly competitive marketplace. Those that are flexible to adapt quickly by taking advantage of the transformative nature of the industry will emerge as the market leaders,” she says.
As a CMO that has been active for 15 years, the company has seen the changes in the market. Porchia notes for example that the European biotech contract development and manufacturing market continues to grow year-over-year as a result of greater demand and interest in outsourced services.
“Pharmaceutical and biotech companies are allocating a greater percentage of their budgets for contract services that were previously considered core business. Analysts suggest that this demand for services will continue over the next few years and, as such, capacity expansions through either internal capital programs or acquisitions are being planned by numerous CMOs. To meet the demands of an industry with various sizes and geographies, CMOs are securing investments and breaking ground on new facility expansions globally,” she says.
Offering a variety of services
Based in Malmö in southern Sweden, the contract developer and manufacturer of pharmaceuticals QPharma has been running its manufacturing plant and development labs for more than 40 years. During the late 1990s the company became a contract manufacturer. Kenneth Stokholm, Managing Director at QPharma, has observed the changes in the CMO sector for some time and he agrees that the market is quite competitive.
“Throughout the global pharmaceutical industry the main driver for the majority of the companies is cost, especially when it comes to generic products where the prices are even more under pressure. As for novel types of medicines the focus is more on delivery on time and line extension on next generation products. Overall, the key factor to being a successful CMO today is identifying products that withstand competition, such as products that are more niched, for example restricted products, polymeric products like implants or tablets that have complex, functional coatings.”
At the same time, offering a broader variety of services has become a more important factor for many customers.
”A number of companies have realized that transfer programs need to be done in a seamless way throughout the whole chain to commercialization. We have seen that the ability to offer development services as well as commercialization provides a big benefit,” says Stokholm. Porchia reports that according to CMC Biologic’s experiences, customers tend to be driven by similar demands.
“Our customers are driven primarily by our wide range of services, cost efficiency, quality and timelines. Furthermore, since many pharma companies are small, or even virtual, they are in great need of partnering with a CMO that functions as an external consultant for our expertise as well as our services,” she says.
QPharma is a relatively small organization, something that has also allowed the company to be a flexible partner, according to Stokholm.
“The agility of a smaller company is something that customers appreciate. Compared to large scale CMOs it is easier for us to adapt to shorter lead times and late stage changes, as well as product presentations.”
Read the full report from Nordic Life Science at www.nordiclifescience.org