Consolidate by (a) providing trusted partners more opportunity, and (b) initiating fewer new relationships except where technology-critical. Also: look for innovation at experienced providers, while the less inured work to gain your trust.
Sounds straightforward. Yet there’s much that goes into this supply-chain philosophy, practiced at banner biotech Biogen.
We learn of the underlining tenets from Biogen’s own: Clive Patience, VP Asset Development & Program Management; Thomas Holmes, Senior Director, Global External Manufacturing; and Patrick Soares, Senior Director, External Manufacturing.
The Core And More
From the outset, Holmes says it’s important to make two points vis-à-vis supply-chain (and business) strategy. First, Biogen – a 1978 two-man startup now with 7,000 combined employees – began with (we know now a prescient) model of relying on outsourcing. And it’s still “a pillar of our supply chain strategy.”
Second, it’s important to note that what has come to distinguish Biogen in the biologics industry is its drug-substance manufacturing scale-up and manufacturing execution. “We have almost 200,000 liters of drug substance capacity throughout the world, and we’re building a state-of-the-art facility in Switzerland to help us potentially launch a product for Alzheimer’s disease,” says Holmes.
Combined, these two points add up to a salient message to other Bio/Pharma companies and service providers: You outsource strategically around your core capabilities. You need to clarify for yourself, and for current and potential partners, what those capabilities are. “This is a foundational element of our entire network,” says Holmes.
However, even a Biogen can find itself overextended in regards to the number and variations of CDMOs and CMOs it employs around the world, both for clinical and commercial supply. Its external network had grown to around 45 service providers, from development organizations to product distribution hubs. Much of that expansion is directly attributed to partnering and acquisition activities.
“So we ended up deciding to spend more time thinking about what our network is and what it should be,” explains Holmes, “and taking a fundamental look at the entire structure to determine our overall strategy, and if we have the right suppliers.”
What, Where And How?
Biogen took up three basic questions regarding its supply-chain strategy:
The “What activities?” question is broken into strategic and operational imperatives. Strategic imperatives include: emerging technologies; modalities; IP; competition: core competencies; risks related to product, process and market. Operational imperatives deal with: capacity, assets; cost; quality; agility, and cycle time.
The “Where to locate” focuses on: IP in the sense of ownership considerations; vertical integration; supply-chain simplicity; regulatory; transportation vertical integration; late-stage customization; local requirements; serialization; MOQs; and other cost-related items.
Finally, the “How to allocate?” question focuses the company on: launch strategy; therapeutic asset strategy; life-cycle management; regulatory constraints; capacity, tech transfer, redundancy, and of course performance.
Holmes says it might all boil down to this: “Is there a competitive advantage to doing certain activities in-house? For example, with an emerging manufacturing technology that has less than ideal capacity. However, if internally a drug owner can’t differentiate value across cost, quality and service, why do it yourself?”
Biogen’s network today is global, and according to Clive Patience, VP Asset Development & Program Management, “a lot of times what drives our sourcing decisions, and our supply-network decisions, is customer centricity. A part of that is ensuring you have secured redundant capability geographically, for us that means mostly Western Europe and North America.”
Of course different geographies also aid as “secondary risk redundancy.” “If there were a geopolitical event or something related to weather or those types of things, it helps us to have redundancy that’s not in the same geography, potentially,” explains Patience.
“So the one thing I would like to say to partnering companies,” adds Holmes, “when trying to understand how companies like Biogen make outsourcing decisions, it’s best to understand overall strategy, and not specifically about their most immediate needs. It’s something to keep in mind.”
Subtracting By Addition
With the above as a foundation, let’s now tackle how Biogen can increase outsourcing without growing the supplier base.
Patience says, “From an asset strategy perspective, we’ve moved away from a CMC-based model to an end-to-end, asset-based approach at the corporate level.” This includes aligning responsibility for the P&L on specific products to gain direct accountability within the organization for the cost of specific activities on those individual products.
“This ‘portfolio strategy’ has been a big mindset change within Biogen,” says Patience. “Ultimately, people in the line functions become more accountable to answer questions such as: ‘Have costs increased because you added a second or third supplier? Does it make sense?’ It’s fine if it does in fact make sense, but there’s now a clearer window to the decisions that are made – or suggested be made.”
Patrick Soares, Senior Director, External Manufacturing, emphasis “we’re always looking internally first, and then trying to understand what our current supplier base can do: Is there anything they’re developing that offers us an opportunity to work further with them? When we do select new suppliers, sometimes we are driven by the particular product. For example, as we get more involved in small molecules, there will be technologies that only certain suppliers will have.”
But even when led to new suppliers by technology-specific needs, Soares says keeping the network from growing remains a goal.
“We choose the suppliers that are strong technically, but also those that present the opportunity for further growth with us. If we are going to add an API supplier, while it’s not guaranteed, instead of cost as the main focus, we’re going to pick the partner with the best future opportunity for our network.”
Holmes adds: “And there’s that background concern of working with somebody new on something that you haven’t done before. So there’s a real velocity inherent in building a strong performing network. We’ve done clinical tech transfers for drug product in weeks instead of months, because our team knows the suppliers’ team and expectations are understood. It’s a really good mesh of two competencies. We want to reward that behavior.”