2 Outsourcing Market Reports: It's A 50-50 Split With Internal Capabilities
By Louis Garguilo, Chief Editor, Outsourced Pharma
I’d been wanting to get back to two excellent market-outlook reports from a few months ago. In the meantime, although they cover separate segments of our outsourcing industry, they began to coalesce in my mind.
That ends up a positive for readers.
Both are products of ISR Reports, and based on surveys of the exact folks in the biopharma industry you’d want to hear from – professionals like you at emerging, mid-sized, and big biopharma organizations, actively involved in the drug development and manufacturing outsourcing continuum.
We’ll begin with the Sterile Injectable Drug Product Manufacturing Market Outlook (3rd Edition; October 2021), and get right to a simple, and most revealing question for Outsourced Pharma readers:
How much of your SIDP manufacturing is outsourced vs. kept in-house?
As this chart – specific to small-molecule products – demonstrates, it’s an even-steven affair. The same chart for large-molecule products differs only slightly.
We appear to have achieved a certain parity. And while this particular service has its unique challenges, specialized skill sets and equipment, reports for other services point to similar ratios. If anything, the balance now tilts to the outsourcing scale.
Of course for many readers, even a near 100% outsourcing strategy can be commonplace at young biopharma organizations, and has been for a while. We’ll get round to this particular point again in a moment.
First, here’s what we find in that second ISR survey report I mentioned above, and why the two reports melded over time.
This is taken from the Commercial Bioprocessing Market Outlook (November 2021):
“Two-thirds of respondents who have commercialized biologics use CMOs to augment existing manufacturing capacity, with no significant difference in rates between large and non-large companies (68% vs 65%).”
Certainly not a one-to-one representation between reports, but close enough to further indicate – as we make our way through this decade of the 2020s – when it comes to specific outsourced services (e.g., SIDP manufacturing or commercial bioprocessing), we are an assiduously mix-and-match industry – as hybrid as a strain of Mendel’s peas.
Hybrid Hijinx?
We plied and prodded analysis of the hybrid model throughout last year, for example in editorials such as,
“In And Out Sourcing” At An Advanced Therapy Biopharma. Last summer, we devoted on Outsourced Pharma Live event to the topic: Is It Difficult To Manage A Hybrid Outsourcing Model? (Please do check out the video recording if you haven’t had a chance.)
Our focus has been predominantly on emerging biopharma organizations driving hard from discovery to development phases, or those starting out by in-licensing assets in immediate need of development, and often quick-following clinical-material supply.
For the most part, these are organizations which gather funding from investors predicated on an outsourced model – the money gets collected to pay for materials and services as needed at CDMOs, and not for the build out of internal capabilities (beyond some modest development, analytical or testing labs).
The overall hybrid directionality, however, has been from outsource everything possible, to a subsequent consideration of building one’s own capacity.
“Outsource everything possible” is not a loosely derived construct: It must indicate that emerging biopharma can in fact secure all the specific services needed to progress development programs.
However, COVID-19 and also pre-COVID supply-chain disruptions; novel platforms; the need for elevated speed and flexibility; precision manufacturing; and other factors have in degrees limited those all-in possibilities.
“I’d say the paradigm has heavily shifted. We can control more ourselves [when we grow capabilities internally],” is how it was put recently by a former Big Pharma executive newly hired by an emerging genetic-medicine company. His role is to drive outsourcing and figure out how to acquire or build in-house processing capacity.
And like this professional, start-ups of all kinds – while it sounds somewhat incongruous – when wrangling with decisions regarding in-house vs. CDMOs, and hybrid configurations for development and manufacturing, can look for guidance to bigger pharma or bio companies that have in fact been hybrids of a kind for many years now.
Obviously, funding, timing, existing resources, experience, characteristics of drug or therapy programs, and current operational models all play a role in differentiating each organization.
So while a start-up looking to Pfizer for hybrid modeling may sound farfetched, the ultimate rationale in all cases should be to eliminate overly asymmetric risks when planning and implementing your supply chain. How other companies have looked to achieve this may be instructive no matter the size of their operations.
And again returning specifically to the former Big Pharma executive quoted above, this is in fact a contributing factor to why we hear so many of these professionals are being hired away to start-up biopharma organizations: They possess that hybrid knowledge and sense of risk symmetry (or at least optimal mitigation and planning) perhaps reflected in our two example reports.
We have come full circle:
The decades-ago emergence of biotech taught Big Pharma a lesson on just how much and how well drug developers can succeed based on an outsourcing model. But Big Pharma caught on.
And now? Perhaps biopharma can learn from these established companies a bit about how to meld that outsourcing with an adequate internal development and supply capability strategy for optimal success.
And as the ISR surveys demonstrate, we might all get to about a 50-50 proposition.