Getting the Most from Your CMO Relationships: A Life Cycle Approach

Effectively managing multiple CMO relationships is critical to successful commerciali-zation, product launch, and profitability.
Jul 01, 2006
Volume 19, Issue 7

For biopharmaceutical manufacturers, the relationship with a contract manufacturing organization (CMO) is much more than a typical customer–vendor relationship. CMOs provide products or services that have a direct impact on product quality and integrity, supply continuity, and cost. CMOs also play important roles in ensuring Good Manufacturing Practice (GMP) and other compliance requirements, and are typically subject to supply and quality agreements. Relationships with these partners usually span many years, and have the potential either to constrain a company's growth or add significant value to their business.

Todd Applebaum
Because many biopharmaceutical companies outsource large portions, or even their entire supply chains, relationships with one or more manufacturers, fill-finish providers, and packagers, create a truly distributed supply network. For these "virtual" companies, effectively managing multiple CMO relationships is critical to successful product launch, commercialization, and profitability. Because they lose direct control, these organizations must build a core competency in managing these multiple strategic relationships. While important areas of expertise may be outsourced, managing the overall supply chain is still the critical responsibility of the drug license holder.


In far too many cases, CMO relationships are established and managed without considering the strategic nature of these partnerships. Long-term business requirements are often neglected in the rush to establish short-term capabilities. Day-to-day operating principles are assumed to be known and understood without setting expectations and establishing specific processes. Future demand and technical and business uncertainties are assumed, rather than explicitly addressed.

Figure 1. CMO Lifecycle Model
At one emerging biotechnology company, for example, an Active Pharmaceutical Ingredient (API) provider relationship was established early in the product's development phase by a team with no commercial experience, which had assumed that the supplier would be capable of commercial production of their product. It was not until the beginning of Phase 3 production that questions were raised about the CMO's ability to provide GMP product at commercial volumes, and the relationship had to be revisited to ensure a proper fit.

During the evaluation and selection process, much attention is paid to a contract manufacturer's technical capabilities, while establishing an effective working relationship and management structures are often overlooked or ignored. Common mistakes fall into several categories, including:

  • Lack of clear long-term partnering objectives. Sourcing and partnering efforts, particularly at emerging companies, overem-phasize tactical goals related to finding the required material or capabilities and negotiating a favorable price. Overall, longer-term objectives are rarely considered.
  • Incomplete or casual evaluation and selection process. The selection process typically focuses on finding a supplier that meets technical specifications at the lowest unit price. A rigorous selection process is seldom followed and the selection decision does not thoroughly consider all factors.
  • Poorly defined working relationship. There is often a lack of clarity about responsibilities, roles, processes, and metrics that will guide interaction between the two organizations on a daily basis. Additionally, there is usually not a plan for resolving issues.
  • Lack of business and partnership metrics. Usually, there are no defined service or performance expectations or specific remedies for non-performance.
  • Lack of future flexibility. Often, CMO relationships are defined too rigidly and can limit the ability of companies to adapt effectively as their business environment changes.

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