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Pharmasourcing with CMOs

By Mark L. Casey | November 14, 2007

In April 2007 I attended my first INTERPHEX trade show. The show was hosted at the Javitz Center in NYC. Coming from an electronics manufacturing background, I wanted to get a feel for the state of contract manufacturing in the pharmaceutical and nutraceutical domain (sometimes referred to as pharmasourcing).

There were over a hundred firms that were exhibiting as contract manufacturing organizations (CMOs). As you would imagine, there was quite a variety in terms of size, focus, capability, and target market. Among the services offered was the production of soft gels, liquids, semi-solids, tablets, caplets, packaging solutions, and everything else related to the manufacture, packaging, labeling, and distribution of a pharmaceutical or a nutritional supplement.

One of my interests was to understand how these firms sell their manufacturing services. What I found was a bit surprising. Most of the CMOs did not have a dedicated sales force tasked to sell their services. Many of these CMOs grew from a pharma company that found itself with extra capacity and decided to create a division to do contract work. As such, they typically maintain a sales force for selling their own products, but not a separate force to sell their contract services.

I asked several of the exhibitors how they sell their services. One lady said, “Well, we have a really good website, and customers find us on the web.” Another person said, “Our VP of Sales knows a lot of people, and he talks about our services with them.” I asked a few people if they ever considered the use of independent manufacturer’s reps such as are common in the electronics manufacturing services (EMS) domain. They looked at me like I had two heads.

The parallels between the EMS industry and pharmasourcing are interesting. Many EMS contract manufacturers began as OEMs of their own products. As capacity opened up in their factories (sometimes due to their own outsourcing to lower cost regions), many OEMs began offering contract services. As outsourced manufacturing has gained acceptance and grown, more than one former OEM has totally morphed into a dedicated CM through this process. It appears to me that the same thing is happening in the pharma CM industry. Many of the big pharma companies are offering contract services as their capacities open up through the expiration of blockbuster drug patents. Many smaller firms are taking advantage of this world-class capability and using CMOs to manufacture their drugs. As with the EMS industry, an increasing number of firms will have to decide if they want to become dedicated CMOs or maintain one foot in each world.

I anticipate that as more and more firms enter the contract manufacturing space, the pharma CMOs will have to become more aggressive in their sales efforts. They will either augment their current trade show and web offerings with a direct sales force focused on contract manufacturing or they will begin to employ independent manufacturer’s rep who work on commission.

In future articles we will continue to explore the pharmasourcing domain and track emerging trends that impact both CMOs and the firms that use their services.

By thw way, the 2008 INTERPHEX show will be held March 26-28 at the Pennsylvania Convention Center in Philadelphia.

Topics: Contract Manufacturing, Pharmaceutical Manufacturing, Services | No Comments »

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