Key success factors for CMOs
The
following section provides the key factors for success in the contract
manufacturing business.
Value addition to end-users
Companies
in the contract manufacturing business need to continuously improve processes,
reduce cost, and enhance productivity. They are required to follow the
effective/rapid processes and innovative procedures to break away from
traditional approaches to production.
Scientific skill-set
CMOs
require strong scientific skill-sets to undertake new process initiations and
innovations. They should have the ability to perform complex chemical synthesis
activities thereby increasing production yield and reducing delivery time.
Respect for intellectual property rights
Gaining
trust and confidence of innovator companies is one of the key success factors
for both CMOs and CRAMS. In contract research and manufacturing business, the
innovator company has to share the under-development and in-patient product
details with CRAMS players. Thus, confidentiality of such intellectual
properties is essential to gain confidence and maintain long-term contracts with
the innovator players.
Cost-effectiveness
As
the primary driver of outsourcing, competitive cost structure is imperative for
CMOs to gain long-term manufacturing contracts mainly in the area of API and
intermediate production. Moreover, India and China are emerging as the most
preferred destinations for pharma outsourcing due to the cost-advantage of over
60% in comparison to Western countries.
Strong relationship with innovators
Establishing
a strong relation with the innovator company takes several years, which can
also act as entry barrier for other companies. Providing world-class service at
a reasonable price and timely delivery are the key ingredients of long-term
relationship between CMOs and innovator companies. In addition, regular
communication with innovator companies also makes the processes transparent and
more reliable.
The Indian CRAMS business
Increasing
R&D cost, impending patent expirations, and escalating pricing pressure
have made Contract Research and Manufacturing Services (CRAMS) business an
attractive option for pharmaceutical innovators across the world. The Indian
pharmaceutical industry has leveraged its intrinsic competitive advantage such
as low cost manufacturing and large pool of research talent to emerge as one of
the most preferred outsourcing destinations for global pharma and chemical
industry. Although global pharmaceutical outsourcing and Indian CRAMS are on a
steady growth path, the global recession in 2008/09 and a drop in global
R&D spending in 2009 impacted the growth momentum of the entire CRAMS
industry.
Factors impacting the growth momentum of CRAMS in India
Cancellations and contract delays by small-to-mid size biopharmaceutical players
The
small-to-mid size biopharmaceutical players, which are primarily funded by private
equity investors or pharmaceutical innovators, are largely dependent on CRAMS
providers for clinical data, process development, and dosage preparation.
However, liquidity concerns due to recent economic slowdown in 2008/09, made
many small-to-mid size biopharmaceutical manufacturers to either cancel or
delay their pharma outsourcing contracts, impacting the growth momentum of
CRAMS business across the world. In India, CRAMS players are largely dependent
on the discovery led/integrated pharmaceutical players as small-to-mid size
biopharmaceutical manufacturers account for only around 10-15% of total
outsourcing opportunity.
Slowing regulatory approvals and stagnating prescription sales
Slowing
regulatory approvals have delayed the potential outsourcing opportunity for
many companies while stagnating prescription sales in both the US and EU
regions have adversely impacted the demand prospect of many CRAMS players in
recent years.
Mega mergers between big pharmaceuticals also delayed the outsourcing decisions
In
spite of an economic slowdown, the global pharma industry witnessed some mega
deals in 2009. Some of the major ones include: Pfizer/Wyeth of $68bn,
Roche/Genentech of $46.8bn, Merck/Schering-Plough of $41.1bn, Abbott/Solvay of
$6.6bn, GSK/Stiefel Labs of $3.6bn, and Dainippon/Sepracor of $2.6bn. As the
companies were more focused towards their synergetic integration of various
operations, such deals have delayed decisions on outsourcing leading to delayed
procurement of inventory and new outsourcing contracts.
Reducing R&D expenditure
Declining
drug discovery productivity led by increasing scrutiny of new drug pipeline by
regulatory authorities, multiplying clinical data requirements are the greatest
concerns of global pharmaceutical innovators in recent years. The global
economic slowdown also led to a reduced R&D spending by many companies
resulting in delayed contract research opportunity for the CRAMS industry.
Large patient pool
India
provides a major advantage in outsourcing of clinical trials which is mainly
due to the availability of a large heterogeneous population mix with various
disease profiles. Such patients are available at low cost, thereby reducing
cost of conducting clinical trials.
