In 1983 I found myself buying leather jackets in bulk in what was then a much smaller Seoul. I shipped the jackets to my home in Osaka, where I took to the streets to sell them one at a time. An American start-up (sort of!), utilizing low-cost production in South Korea, selling in what was becoming a hyper-affluent consumer market in Japan. The jackets went at a nice profit, and I’ve never looked back: Going global rocks.
Some 32 years later I’m in San Diego at an Outsourced Pharma West session where biotechs are grappling with the question of whether they should search globally for a CMO. Of course hawking leather jackets and striving to develop the next medicines for patients are very different lines of work. Yet I’m amazed that in 2015 just the proposition of searching globally for opportunities is still a difficult decision for many biotechs and other drug-developers.
But because it is, I’ve captured (and edited) some comments from the industry experts at that OPW discussion that I think can help. The panel was moderated by Jeff Barker, Principal Consultant & Sr. Advisor, Rondaxe. Panelists were: David Enloe, President/CEO, Althea; John Gregg, President/CEO, BalinBac Therapeutics; Brian Mendelsohn, Leader of ADC Chemistry Group, Agensys; Nils Olsson, VP Chemistry, Manufacturing and Controls, Retrophin; and Nicholas Virca, President/CEO, HedgePath Pharmaceuticals, Inc.
First, approach outsourcing from the realization you cannot know everything. But what you can do is find some experts in the areas most vital to your project or business model. That was especially important when I joined my company, because we are not married to any specific technology or disease, but more driven by business development opportunities in general.
It was clear to me from the beginning I couldn’t handle our CMO search or management of outsourcing alone. Therefore, my initial objective – over the first year or so – was to bring in a small group of experts who I could fully rely on, and who did not require any handholding. I was fortunate to be able to bring good people on board. Experts like this are out there for you, too.
And it’s no coincidence that the individuals I selected for our internal group come from the four corners of the world. They know all the key service providers in their fields. So we feel no limitations in where we go in our search for CMOs. We now work with CMOs here in the US, in Europe and Asia. In my opinion, looking globally for the best fit seems inevitable nowadays, and there are strategies to do so.
I think the answer to every question regarding global outsourcing is, “It depends.” There’s so much risk that a company takes on with the “four corner’s of the world” approach, particularly depending on what your specific product is and what it requires.
For example, with a biologic where the process might not be fully tried and true yet, there’s a lot of expertise and knowledge that resides at the sponsor. It will require a ton of interaction and knowledge transfer to a CMO, and you’ll be trying to have that across multiple time differences – and perhaps at times some language differences – if your provider is in a far off location. Small inaccuracies – a subtle miss – can lead to a failed batch in an early-stage process. It can bring a project to its knees.
I think sponsors need to be balanced regarding risk-reward when considering more local vs. global outsourcing. Frankly, I’m always astonished at how many people say how far and wide they looked, and then how glad they are not to have gone so far and wide.
Maybe our company takes a slightly different view of this. We don’t really ever start looking for CRO or CMO partners for different projects: We’re basically always searching globally. Perhaps that’s a luxury we have because of a constant need to find partners, and because we have the headcount to do this kind of networking. But we’re always talking to people, we’re always looking, and we do it in Asia, North America, and Europe.
We find that the global search really increases our ability to find the best and most appropriate partners for the kind of work we need done. We look at every aspect at the CRO and CMO we think is important to accomplish our due diligence. For example, our quality team attends technical audits with us to review quality systems. All of this has become just the normal way we go about outsourcing … and doing business.
You’ll learn that in this industry there’s not one partner who can magically do everything you need. You’ll most likely have to mix and match, and you’ll have to learn to balance time to manage these CRO and CMO relationships. In the beginning, this really was a struggle for me.
However, I’m convinced the extra up-front work to find the right partner, and do that extra management, has paid off. We feel we got the CRO that could do our formulation best, and the CMO that could manufacture most reliably for us.
To be clear, though, even going to India or China for starting materials can be a big adventure. But it’s a big adventure for potentially big cost savings. You simply have to do your due diligence. At times we hire reputable brokers for some locations. That’s one way to get started and bring international service provides on board. Brokers or agents, though, can’t replace your own due diligence. You have to visit the CMOs and kick the tires, particularly in China and India.
So it is a healthy exercise to first think through whether you even want to pursue global opportunities. In the end, I agree a lot depends on your development plan for your product and overall goals for your company.
We try to be as interactive as humanly possible from the investigative stage through any relationship we establish with CMOs. So generally speaking, you can say it is a benefit to have a CMO close to your geographic location. You can easily meet people face-to-face, and go out and look at samples and processes when you like.
Nonetheless, in these times of various global and instant modes of communication, you can also interact quite easily with people anywhere in the world. If you take advantage of this, and make the extra efforts to stay connected, you can make it work.
Particularly, if you are going to search globally, the key is to establish more than communication, but a good working relationship with CMOs from the initial selection process. A fundamental question – no matter where in the world they are located – is do they have a group of individuals at the service provider that your internal resources can easily communicate and get along with? Frankly, you should consider whether they are fun to work with. If it is going to be a struggle, why bother?
Two final scenarios that you may want to consider. First, a company recently completed a license for some very important IP from a U.S. university. Part of the development was funded by the NIH, and it turns out it is mandated they have to do the manufacturing in the U.S. On the other hand, I find myself in a position where I can’t get a certain compound manufactured in the U.S., because of a very tight EPA regulation. However, I know I can get it produced safely and reliably abroad. That’s an example where you might want to have contacts both here and abroad, or select CMOs with international locations, even if your inclination is to stay closer to home.