I was recently involved in a discussion with the global outsourcing manager of one of the big pharma companies. The premise of the discussion was around the criteria that big pharma players follow for choosing a supplier for their products. One key question that came up in the discussion was whether one-stop-shops are really the go-to companies for outsourcing. And the answer, to a certain extent, validated some of the hypotheses that we had developed internally.
To give you a background, in one of our market research reports, we had looked at the biopharma contract manufacturing market and identified close to 250 companies that offer biopharmaceutical contract manufacturing services. A number of these companies claim to offer end-to-end services across the value chain of the biopharmaceutical product. The majority of these one-stop-shop companies are those CDMOs that have actively made acquisitions and altered business models to get into a particular space.
However, the one-stop-shop business model doesn’t seem to be that attractive anymore. Initially, we witnessed the issues of overcapacity at some of the one-stop CMOs that made the overall operations less profitable. However, now, the one-stop-shop pitch seems nothing more than a pure marketing strategy (not to say that there are no one-stop CMOs). Except for a few top-tier CMOs (that are generally on the preferred supplier list of the majority of big pharma players), it is very difficult to validate that other CMOs actually have the same level of expertise across all the steps in the manufacturing value chain.
Horses for Courses – A better strategy?
An interesting article that I had read on this subject was by Louis Garguilo, Chief Editor, Outsourced Pharma. In his article, he presented interesting examples of why the horses for courses strategy works better than a one-stop-shop business model. One interesting section from his article that supports the argument is – If your project suffers setbacks (with a one-stop-shop) on the drug product side, your relationship on the synthesis side will also suffer. In other words, a breakdown of the relationship, or unforeseen challenges, for anyone part of your project can result in a breakdown of the entire relationship. Given the years of effort and investment that goes into developing a product, it is never a good strategy to put all your eggs in the same basket, or in other words, rely on just one supplier to decide your returns from the innovative product.
To summarize my discussion, I would say that while the biopharma companies are still figuring out what is the best business model moving forward, it is high time that companies move away from I do everything pitch to focusing on their actual unique selling points/expertise. This will make the sourcing decision much easier and establish more clarity in the industry.