Biopharmaceutical Contractor Selection

A new report details client criteria

By William Downey

Biopharmaceutical product revenues continue to grow and become an important part of the pharmaceutical market, with biologics expected to provide much of the future growth for the large drug companies.  In 2007, it is estimated that worldwide product revenues for biopharmaceutical products will reach $65 billion. In the past five years, supply and demand for outsourced biopharmaceutical contract manufacturing capacity has fluctuated from short supply to oversupply. Both the CMOs and the pharmaceutical companies have made major investments in biopharmaceutical production capacity over the past years. In the coming years, new biopharmaceutical contact manufacturing capacity is expected to come online from both new entrants, such Alpha Biologics, Cook Pharmica, LG Life Science, as well as from established biopharmaceutical CMOs. With new capacity and new choices for contract manufacturing services being offered to biopharmaceutical customers, it is critical to understand the attributes and criteria used by the biotechnology companies when selecting a contractor for production of biologics.

Photo courtesy of Sandoz GmbH

Key Selection Criteria

In the latest report by HighTech Business Decisions, Biopharmaceutical Contract Manufacturing 2007: Quality, Capacities and Emerging Technologies, 41 directors of biomanufacturing at pharmaceutical and biotechnology companies worldwide were surveyed regarding contractor selection. Outsourcing is part of the production strategy for all respondents in the study. The directors were all willing to discuss their top criteria with us. We asked the directors to rate the four most important criteria in selecting a contractor. Their responses are summarized in Figure 1. As noted, the most important criteria are a) Experience and Reputation of the Contractor, b) Price, c) Customer Service and d) Quality.

The single most important criterion for a biopharmaceutical company in choosing a contractor is the contractor’s experience and reputation. Not only is this mentioned most often by the directors, it is the top criteria for most of them. For the directors, experience includes both technical and process experience as well as experience with the appropriate regulatory agencies. Experience and reputation carries a great deal of weight because it proves to the directors that the contractor has the quality, technical and production capabilities in place to execute on a project. Having a contractor with the requisite experience is especially important for new product production.

With so many unknowns at the beginning of a project, from process development, scale-up through regulatory requirements, it is important to have a contractor who has been through this before. Similarly, a few of the manufacturing directors mentioned that they have encountered contractors who have claimed to have certain capabilities, only to discover later that the contractor either lacked the capabilities or misunderstood the complete requirements needed for the project.

Included in the areas of experience and reputation is the experience of the employees who will work on the project. Many of the directors mentioned that it is critical that the contractor’s staff have the experience to be able to provide the assistance and depth of knowledge needed to keep the project running smoothly. Some of the manufacturing directors pointed out the importance of experienced staffs in dealing with the regulatory paperwork. One director noted a project delay caused by inexperienced staffs dealing with regulatory paperwork issues.

The reputation of the contractor goes hand-in-hand with its level of experience; here the manufacturing directors look to the reputation of the contractor for producing a quality product, and the reputation of the contractor to solve unforeseen problems as they arise. Having experienced staff who can provide the requisite technological knowledge to solve a problem is key. Reputation also includes the past experiences that other biotechnology companies have had in dealing with the contractor, both on a quality level and commercial level.

Over 90% of the biotechnology manufacturing directors told us that they rely on networking and input from colleagues or their personal experiences with a contractor when they begin their search for a contractor. While reputation includes quality, it also includes “softer” topics such as how a contractor handles commercial issues. Overall, with the high risk associated with the development and commercialization of a biologic, using a contractor who has the experience and reputation is a way to mitigate some of the risks.

Below are a few comments from the surveyed biopharmaceutical manufacturing directors about the desire to use experienced contractors for their project:


The second most important criterion is price. As we mentioned from our earlier report HighTech Business Decisions, Biopharmaceutical Contract Manufacturing: Best Practices Pricing Study 2006, we observed that pricing pressures are part of the most important industry trends noted by pharmaceutical and biotechnology company respondents. Competitive pricing pressure is increasing as more contractors enter the market and established contractors build up their capacity.

While price is mentioned by all biopharmaceutical manufacturing directors, only one director ranked price as his number one criteria when selecting a contractor, and that criteria is limited to only commercial production. Our current study shows price pressures continue to have an impact on the contractors as capacity utilization rates have declined. Most of the biopharmaceutical contract manufacturers have remarked that capacity utilization rates are lower than in the past. The lower utilization rates are also confirmed by the majority of the biopharmaceutical manufacturing directors who state that capacity for their projects is readily available — unlike the situation a few years ago. The lower prices and lower capacity utilization rates correspond to the lower overall margins reported by many of the biopharmaceutical contract manufacturers in our study. We expect price pressures to ease somewhat in the next two to three years as utilization rates increase from their current levels.

Further analysis of price criteria shows that price is a higher priority in contractor selection for those biopharmaceutical companies with multiple biomanufacturing sites. These companies have more in-house skills available to them; therefore placing a lower value on the capabilities offered by the contractor. These companies also have more commercial products in which the production processes are already defined and understood. Finally, as a matter of simple economics, pharmaceutical and biotechnology companies with multiple sites have greater bargaining power against the contractors, with the option to keep the production in-house.

Customer service is the third most mentioned criteria. While none of the directors ranked it as the top criteria, it is highly valued on a weighted basis. The directors who mentioned customer service include replying to requests on a timely basis, meeting timelines, having a good attitude, and showing good teamwork. Directors also mentioned showing enthusiasm and showing a personal commitment to their project as a part of customer service.

Finally the fourth most mentioned criterion given by the directors was quality and quality systems. We believe this criterion is rated lower than others mostly because it is a given. Without quality, there is no reason to even continue discussions with the contractor. Furthermore, many of the respondents who mentioned reputation and experience as their number one criterion almost always mentioned experience with quality systems, regulatory systems or licensure. Additionally, the contractor’s reputation included reputation with regulators. It can be interpreted that experience and reputation is the result of having excellent quality and quality systems. As mentioned by one director about quality and reputation:


Finally we asked the directors how a biopharmaceutical company would choose between two contractors who ranked equally in their criteria. Given that all other top criteria were equal, most directors stated they prefer a contractor who is located close to them. After proximity, the most mentioned attribute for deciding between two equally qualified contractors is their personal interaction and rapport with the contractor’s employees. In our study, most directors saw some advantage to working with a contractor in the same geographic region, most often citing the ease in communication and travel. Below are a few of the comments provided by the biopharmaceutical directors.


To fully understand contractor selection, the biopharmaceutical directors were asked to list contactor behaviors or attributes that would result in their companies not using a contractor. Poor quality is mentioned most often by respondents, followed by the failure to meet timelines, lack of transparency and failure to protect intellectual property. The results are shown in Figure 2. While most directors did not rank quality as the top criteria in selecting a contractor, poor quality is ranked as the top attribute for disqualifying a contractor. This is just an absolute. Included in poor quality are inferior quality systems, lack of adherence to GMP, unexplained production problems, and inspection history with the regulatory bodies.

After poor quality, the failure to meet deadlines and timeline commitments, lack of transparency and failure to protect the client’s intellectual property are all top reasons for disqualifying a contractor. One final point: we have all heard about the need for open communications between the client and contractor; however, the biopharmaceutical directors continue to cite examples of this as a weakness with the contractors that they deal with.

Following are a few comments made by the biopharmaceutical directors about the attributes that would cause them not to use a contractor:


As more choices for contract manufacturing services avail themselves to the biopharmaceutical industry, just having available capacity is not enough to gain a customer. The biopharmaceutical industry is becoming more sophisticated in the processes that they use to select an outsourcing partner. Critical to a contractor winning business is its experience, reputation, price, and customer service in support of its client’s project. Poor quality and quality systems are the major attributes that disqualify a contractor from consideration.

William Downey, MBA, is president at HighTech Business Decisions (San Jose, CA). The company recently produced the report, Biopharmaceutical Contract Manufacturing 2007: Quality, Capacities and Emerging Technologies, which is based on surveys and interviews with biomanufacturing directors at 41 pharmaceutical and biotechnology companies and 27 biopharmaceutical contract manufacturers worldwide. He can be reached at [email protected] or 408-978-1035.