Outsourcing A Survival Strategy or a Tool for Speed to Market A Case Study - The biotech contract-manufacturing market has more than doubled in the last three years...from $1 billion to $3 billion


Outsourcing A Survival Strategy or a Tool for Speed to Market A Case Study
The biotech contract-manufacturing market has more than doubled in the last three years...from $1 billion to $3 billion.

BioPharm International

The pros are driven by considerations of speed to market and efficient use of available resources. The cons of outsourcing all relate to the risks of losing control over several aspects of product development: project planning, budgeting, product quality, compliance, and later process expertise. The decision to outsource will always be a question of balance between pros and cons, risks and opportunities, although it should also be recognized that in many instances, e.g., for small biotechs or newcomers, outsourcing is the only option.

The answer to the question of "do in-house or outsource?" is mainly linked to two major factors: the strength of the company, and the urgency of the leading projects and priority setting.

Large and medium-sized biopharmaceutical companies may seek to develop and manufacture their biopharmaceuticals in-house, to maximize industrial know-how, to build quality into the manufacturing process, to control production, and to create intellectual property. Such companies will tend to minimize outsourcing to limited and specific development and manufacturing activities, and will tend mainly to use outsourcing as a tool to enhance speed to market. In comparison, smaller and start-up companies may do the opposite. Typically, start-up companies bring bright ideas for new, innovative lead products, but in most cases, they have nonexistent or limited internal expertise to confront highly challenging manufacturing and development issues. The solution for these companies is to outsource all development and manufacturing activities; thus, outsourcing clearly becomes a survival strategy for them. Frequently, those products that reach phase I and II clinical trials are offered for licensing to a larger biopharmaceutical company to carry on the development.

CASE STUDY: SERONO INTERNATIONAL Serono International is a relatively large biotech company and is considered to be the third-largest biotech company worldwide, after Amgen and Genentech. It has eight recombinant products on the global market in four therapeutic areas, and its revenues exceeded $2 billion in 2003.

As a large biotech company its strategy for manufacturing is as follows :

  • Build in-house large-scale manufacturing capacity.
  • Keep in-house biotech core process development and manufacturing activities.
  • Build wide expertise in a range of fields, from genetic engineering to industrial production.
  • Perform day-to-day process improvement in-house.
  • Maintain and expand co-development and partnership with biotech companies.
  • Outsource specific high-technology tasks to specialized research organizations.

Serono International is, thus, a company that exemplifies the following: "Think broad, with an open mind, go where the real leadership and expertise are mastered, but . . . master your own process."

There are two key drivers of outsourcing at Serono: high product quality ("platinum quality") and speed to market. These two drivers have led to the formulation of the following basic rules, which experience has shown to support the best outsourcing agreements:

  • Fair agreement on service and/or product supply
  • Clear milestone definition
  • Partnership attitude
  • Strong technology know-how
  • In-house transferability of the technology and the know-how
  • Premium price for platinum quality
  • Partner/third-party plans integrated into Serono master plan

Table 3. Serono Outsourcing Portfolio
Based on the above key points, Serono has a wide, yet very specific, outsourcing portfolio, as shown in Table 3.

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