Outsourcing Outlook

As major pharmaceutical companies take initial steps to prune their supplier base and negotiate better pricing, nonpharmaceutical companies that took those measures 10 years ago are moving to next-generation sourcing strategies. In designing those plans, these front-runners are applying two key lessons learned in recent years: supplier consolidation often doesn't go far enough, whereas price cutting can go too far.

Growth is critical to a strong company, and not only because it generates economies of scale.

A summertime burst of acquisition activity in CMC development services prompts the question: a coincidence of timing or the start of a trend?

Contract manufacturers serving the biopharmaceutical market add capacity in a bet on renewed growth for biomanufacturing.

The pharmaceutical outsourcing industry is well into its second year of very strong growth, and indications appear that it will enjoy a healthy third year as well.

2005 has been a good year for the contract services industry, and 2006 promises to be nearly as successful, according to the 2005 PharmSource–Pharmaceutical Technology outsourcing survey. But as pharmaceutical outsourcing activity grows, companies are looking for more sophisticated ways to manage and control their contract services expenditures.

Singapore is competing aggressively with India and China for a piece of the Asian sourcing business.

The Chapter 11 bankruptcy filing of aaiPharma (Wilmington, NC, www.aaipharma.com), parent of AAI Development Services, was the culmination of an agonizing year-long odyssey. It also was a first step in restoring one of the best-known brands in the CRO industry.

Major pharmaceutical companies are focusing more than ever on the prices CROs are charging for their services.

Achieving the promised benefits of offshore sourcing to India and China is more complicated than it seems.

After a five-year downturn, cautious optimism is taking hold among API manufacturers.

Too many players and threats to the main customer base challenge European dose manufacturers.

Patheon is betting the whole is worth more than the sum of the parts in its acquisition of Puerto Rico contract manufacturer Mova.

The blockage in the new product pipeline may be breaking. CROs report increased demand for late-stage development services in their latest round of earnings reports.

What should pharmaceutical companies make of recent corporate developments at several high-profile service providers?

Big Pharma is ramping up capital spending in parenteral manufacturing at the same time that contract manufacturers are completing their own major investment programs.

Early development services continue to be a sweet spot for contract R&D services. The big question is how soon the impact of early-development candidates will be felt in late development and commercialization.

The contract services industry is fertile ground for the investment banking community this summer.

Data from the 2004 Outsourcing Survey indicate that pharmaceutical companies are spending more on outsourced drug development, but with fewer suppliers.

Despite investors' strong interest in the chemical industry overall, pharmaceutical chemical businesses have not experienced much attention from investors thus far.

It's not clear whether contract service providers can deliver the performance improvements and costs savings that drug companies expect from large, long-term, semi-exclusive contracts.

Sponsors who have been lax in performing financial due diligence on their contractors have been given a wake-up call by the recent developments at aaiPharma.

Recent events in the pharmaceutical outsourcing industry highlight the importance of ongoing attention to contractors' financial situations and their strategic intent.

As outsourcing services become a more integral part of pharmaceutical processes, drug companies are taking a harder line on consequential.

The changing fundamentals of the industry are causing Big Pharma to focus more on operating efficiency instead of just product performance.

As manufacturers move to manufacture to demand rather than to forecast, the traditional wholesaling business model is being transformed.

Exhibitors at October's AAPS meeting confirmed that the demand for services is robust and believe that the industry's pipeline appears stronger than it has been in the past few years.

As FDA tries to bring pharmaceutical manufacturing into the 21st century, competitive dynamics in contract manufacturing are likely to change in favor of companies that have greater manufacturing expertise and the means to invest in new technologies.

Outsourcing is part of the public debate as politicians seek to explain the lag in job growth despite a recovering economy, and as the Bush administration presses its initiative to "competitively source" more agency activities.

CROs and contract manufacturers had a decent second quarter, but they are hoping that Big Pharma comes through with a burst of trial start-ups in the second half of 2003.