Inside OUTsourcing

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Guide to Strategic Outsourcing (with Trends, Surveys and Analysis)

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<p>A SUPPLEMENT TO:</p> <p>INSIDE OutsourcingStrategic OutsourcingTRENDS.SURVEYS.ANALYSIS.</p> <p>GUIDE TO</p> <p>December 2012</p> <p>Before you choose a CMO partner, we invite you to put us under the microscope.30+ years of mammalian cell culture experience. 25 years of ll/nish experience. 50+ unique recombinant proteins including IgGs, IgMs, fusion &amp; connective proteins, enzymes &amp; cytokines. Laureate will partner with you from discovery to reality and every step in between. To learn more, visit us online at www.LBioS.com or call 609.919.3300.</p> <p>www.LBioS.com</p> <p>609.919. 3300</p> <p>Best Contract Manufacturing OrganizationVaccine Industry Excellence Awards (2010-2012) Third Year in a Row</p> <p>For more information, visit baxterbiopharmasolutions.com Visit us at: email: biopharmasolutions@baxter.com ICSE at Booth #10E25</p> <p>Baxter and Galaxy are registered trademarks of Baxter International Inc.</p> <p>920810-00 6/12</p> <p>* 52 8 3Were more than just a magazine...</p> <p>INSIDE OutsourcingSALES Russ Pratt, VP of Sales &amp; Group Publisher, Pharma Science Group rpatt@advanstar.com Wayne Blow, Publisher, Applied Clinical Trials wblow@advanstar.com Michael Tracey, Publisher, Pharmaceutical Technology and BioPharm International mtracey@advanstar.com EDITORIAL Marylyn Donahue, Editor, Inside Outsourcing Special Projects Editor, Pharmaceutical Executive mdonahue@advanstar.com William Looney, Editorial Director, Pharmaceutical Executive wlooney@advanstar.com Lisa Henderson, Editor in Chief, Applied Clinical Trials lhenderson@advanstar.com Angie Drakulich, Editorial Director, BioPharm International, Pharmaceutical Technology adrakulich@advanstar.com Adeline Siew, Editor, Pharmaceutical Technology Europe Peter Houston, Content Director phouston@advanstar.com CIRCULATION</p> <p>#</p> <p>ePT</p> <p>The ePT weekly e-newsletter delivers critical information on recent contract awards, company mergers &amp; acquisitions, and fresh news of interest to a highly desired community of pharmaceutical manufacturing professionals.</p> <p>PT Sourcing and Management</p> <p>The PT Sourcing and Management monthly e-newsletter is the authoritative source on sourcing and management within the pharmaceuticals global supply chain.</p> <p>Equipment &amp; Processing Report</p> <p>Equipment &amp; Processing Report focuses on pharmaceutical manufacturing process and technology, providing manufacturing news, related regulatory issues, and current trends.</p> <p>Mark Rosen, Circulation Director mrosen@advanstar.com</p> <p>President, Chief Executive Ofcer Joseph Loggia Vice President, Finance &amp; Chief Financial Ofcer Ted Alpert Executive Vice President, Corporate Development Eric I. Lisman Vice President, Electronic Media Group Mike Alic Vice President, Market Development Georgiann DeCenzo Vice President, Media Operations Francis Heid Vice President, Human Resources Nancy Nugent Vice President, General Counsel Ward D. Hewins Executive Vice President, Healthcare &amp; Pharma/Science Ron Wall</p> <p>PTE e-Alert</p> <p>Pharmaceutical Technology Europes weekly electronic e-newsletter PTE e-Alert provides news, market developments, industry surveys and information on up and coming trade events.</p> <p>Digital Magazine</p> <p>PharmTech Digital provides readers around the world with authoritative peer-reviewed research and expert analyses in the areas of process development, manufacturing, formulation and drug delivery, API synthesis, analytical technology, packaging, IT, outsourcing, and regulatory compliance.</p> <p>+ access to</p> <p>web seminars</p> <p>podcasts surveys</p> <p>www.pharmtech.com</p> <p>Get all this and more. Subscribe now at</p> <p>Copyright 2012 Advanstar Communications Inc. All rights reserved. Return all undeliverable Canadian addresses to: Circulation Department or DPGM, 7496 Bath Road #2, Mississauga ON L4T 112. Printed in the USA. INSIDE OUTSOURCING does not verify any claims or other information appearing in any of the advertisements contained in the publication and cannot take responsibility for any losses or other damages incurred by readers relying on such content. Advanstar Communications Inc. provides certain customer data to third parties who wish to promote relevant products, services, and other opportunities that may be of interest to our readers. If you do not want Advanstar Communications Inc. to make your contact information available to third parties for marketing purposes, call toll-free (888) 527-7008 between the hours of 7:30 a.m. and 5:00 p.m., EST, and follow the instructions to remove your name from Advanstar Communications Inc. lists. Outside the United States, please phone (218) 723-9477.COVER IMAGE: GETTY IMAGES</p> <p>Parenteral Contract Manufacturing Service of Hospira</p> <p>Our comfort zone is global parenteral manufacturing Biologics Highly Potent Drugs Cytotoxics Betalactams Controlled Substances Sterile Compounding Single-Use Technology Lyophilization Global Regulatory Services QP Release</p> <p>Zagreb, Croatia</p> <p>Chennai, India</p> <p>Discover your comfort zone at one2onecmo.comGet your custom report online or contact One 2 One. Call +1-224-212-2267 or +44 (0) 1926 835 554 or e-mail one2one@hospira.com</p> <p>Your Parenteral Comfort ZoneParenteral Contract Manufacturing Service of HospiraP11-3517A-Jan., 12</p> <p>6</p> <p>TABLE OF CONTENTS</p> <p>Contents8 10 18 20 27IntroductionLetter from the Publisher</p> <p>28 32 32 40</p> <p>ROU NDTA BLE</p> <p>5 Key Leaders on The New InnovationThought leaders weigh on whats new</p> <p>L E A D S T O RY</p> <p>Risk: The Peril and PromiseOperating risk and resource risk from sponsors to CROs being facilitated By Kenneth GetzM A N UFA CT UR IN G</p> <p>INSOU RCING</p> <p>Lillys New HybridA look at a very different insourcing relationship between Eli Lilly and its partner, AMRI By Patricia Van Arnum</p> <p>Taking MeasureInside Outsourcings annual report on the state of the biopharmaceutical industry By Eric LangerC L I NI CA L T R IA LS</p> <p>SU RVE Y</p> <p>Does the Size of Your Outsourcing Organization Really Matter?It may not be rational but when picking an outsourcing partner tends to go with sIze By Janice Hutt</p> <p>Making it Succeed: OptimizationSolving the common hurdles and challenges for conducting Phase II and Phase III studies. By Lisa HendersonO U TL O O K COMMENTA RY</p> <p>Strategic Partnership: The Emperors New ClothesWith all the talk, are strategic partnerships really partnerships, and are they strategic? By Andrew Parrett</p> <p>Boom TimeBetter-than-expected business performance for contract services industry into 2013 By Jim Miller</p> <p>Full Service Contract Manufacturing Clinical to Commercial Multiple Dosage Forms Regulatory Excellence</p> <p>Ask us about our</p> <p>LAB SERVICES:Interphex, NYC Bio, Chicago</p> <p>I almost lost herFifty years of marriage, three children, six grandchildren, and two great-grandchildren. We were nally getting to sit back and enjoy our golden years. It all ashed before me with a single, chilling image on a screen my wife had a brain tumor. Thanks to her strong will and quality medical treatments, Mieko and I are back to doing what we love best enjoying our family. We didnt think about how the quality of Miekos medications helped speed her recovery, but Jubilant HollisterStier does.Mieko is the mother of a JHS employee</p> <p>Scan the barcode or visit jublHS.com to review a video about our organization</p> <p>Now offering Laboratory Services as part of our extended outsourcing capabilities.jublHS.com info@jublHS.com 800.655.5329 locations in U.S.A., Canada and India</p> <p>Solid Dosage Non-Sterile Topicals &amp; Liquids Sterile Ophthalmics &amp; Otics Sterile Injectable Fill/Finish</p> <p>8</p> <p>INTRODUCTION</p> <p>FROM THE PUBLISHERNew Models for a New Worldn the six years since Advanstars Pharma Science Group began publishing Inside Outsourcing, weve witness a meteoric rise in outsourcing and a dramatic evolution in the dierent forms it takes from tactical to strategic relationships between sponsors and their service providers CROs and CMOs. Today, nearly all of the large sponsor companies (e.g., major and some mid-sized pharmaceutical and biotechnology companies) have adopted and are actively using single- and multi-functional partnerships under long-term alliance arrangements. Sponsors are seeking not only more ecient access to dedicated global capacity and talent, but also cost savings through partnerships with a select and reduced number of contract service providers. Tis has been a boom to the outsourcing industry. As Ken Getz points out in his fascinating story Te Peril and Promise of Risk Imbalance on page 10, the total global market for all contract services supporting prescription drug R&amp;D is $90 billon to $105 billon, nearly ve times larger than commonly cited. Te pressure for the pharmaceutical industry to achieve higher levels of clinical development has never been greater and more intense. Problem is with this shift towards strategic integrated alliances and the transfer of operating and resource risk, CROs are in new territory. Tey are being asked to</p> <p>An Introduction</p> <p>I</p> <p>take on more responsibility to create and implement solutions far more innovative than have been traditionally generated and to weigh aggressive growth strategies that may redene the scope of contract services traditionally oered. Whether or not outsourcers are ready to assume this responsibility and whether the sponsors will let them remains to be seen. One thing is for surewhen it comes to pharmaceutical and biopharmaceutical outsourcing were not in Kansas anymore. Inside Outsourcing, an annual publication, is delivered digitally in a Nextbook edition to be found on all of Advanstars Pharma Science websites. Id like to thank the combined marketing, sales, and productions stas for their eorts. In addition, my appreciation goes to the Editor of Inside OutsourcingMarylyn Donahue, Special Projects Editor, Pharmaceutical Executive. I would also like to thank Angie Drakulich, Editorial Director BioPharm International and Pharmaceutical Technology; Adeline Siew, Editor Pharmaceutical Technology Europe; Lisa Henderson, Editor In Chief, Applied Clinical Trials; and William Looney, Editorial Director, Pharmaceutical Executive. Enjoy the read. Russ PrattVice President Sales &amp; Group Publisher, Pharma Science Group</p> <p>Choose Choice.Sustained-Release Immediate-Release Taste Masking Lyophilization Aseptic Filling</p> <p>Multi-Therapy</p> <p>Solubilization</p> <p>No other partner gives you more formulation options royalty free.Get access to the industrys widest range of complex formulation technologies for small molecules and biologics, and benefit from expertise forged over thousands of projects. At Patheon, were not tied to any technology. That means science alone drives the development of an optimal formulation, and youll never pay us a royalty. Our commitment is to your success.</p> <p>Choose choice choose Patheon.Visit www.patheon.com Call +1 866-PATHEON Email doingbusiness@patheon.comPatheon Inc. All rights reserved. Published 11/12 PATH0214R2</p> <p>10</p> <p>LEAD STORY</p> <p>Peril and PromiseOF RISK IMBALANCERisk mitigation strategies executed by CROs, combined with more favorable capital market conditions, promise to drive substantial structural change throughout the outsourcing marketplaceBY KENNETH GETZ</p> <p>INSIDEOutsourcing</p> <p>11</p> <p>the transfer of operating risk and resource risk from pharmaceutical companies to contract service providers. In response, CROs most notably the market leaders have taken on substantially more xed costs and assumed more autonomy and accountability in servicing large and highly valued integrated and strategic partnerships. Te transfer of higher levels of risk is pushing CROs to experiment with, and implement, novel and innovative approaches to improve the speed, eciency and eectiveness of a variety of functions. Te jury is still out on whether sponsors can be patient enough to allow these novel approaches to pan out.</p> <p>The Run-Up of Unbalanced RiskNearly all of the large sponsor companies (e.g., major and some mid-sized pharmaceutical and biotechnology companies) have adopted and are actively using single- and multi-functional partnerships under long-term alliance arrangements. Trough these integrated relationships, sponsors are seeking not only more ecient access to dedicated global capacity and talent, but also cost savings through partnerships with a reduced, select number of contract service providers. Integrated relationships transfer much higher levels of operating risk by holding CROs accountable for functional performance and cost and by reducing the amount of oversight through shared governance, coordinated communication and issue resolution, operating processes and systems. Sponsors who have entered into integrated partnerships also look to benet from strategic insight into and engagement in future portfolio needs. Te largest CROs those uniquely positioned to provide the breadth and depth of capacity that sponsor portfolios require have been the primary recipients of integrated relationships. As such, the run up of operating and resource risk is imbalanced. A 2011 study conducted by CenterWatch found that for leading CRO companies, the majority of their revenue comes from strategic, integrated</p> <p>I</p> <p>t is a common criticism of contract research organizations (CROs) that they are incapable of providing new and innovative ideas and practices having evolved under the tutelage and shadow of their pharmaceutical and biotechnology company clients. After all, critics reason, CROs have a long history of hiring personnel trained by sponsor companies and of having to follow and use sponsors standard operating procedures, internal processes, practices and systems. Tese same critics may soon come to see CROs in a dierent light. Te growing sophistication of clinical development outsourcing has facilitated</p> <p>relationships. Among the top 10 largest CROs, 71% of their reported revenue comes from functional service and integrated alliances, and 29% from transactional relationships. In contrast, the majority (60%) of revenue for niche and mid-size CROs comes from transactional service relationships. Smaller pharmaceutical and biotechnology companies continue to primarily use transactional relationship outsourcing often under preferred arrangements to augment capacity for a specic project-related task. Greater autonomy in managing large and highly valued integrated partnerships is but one aspect of operating and resource risk assumed by leading CROs. Customization is driving up additional risk as no two integrated relationships are identical. One sponsors multi-functional relationship structure is not the same as another. Every sponsor wants to establish relationships that uniquely suit their culture, their operating style, their systems, practices and management models. Each and every sponsor wants to match their internal teams with the best team that the contract service partner can oer. CROs that have entered into integrated relationships have had to increase their own operating capacity, infrastructure, and capabilities in order to service the unique demands o...</p>