Capacity forecast misses driving outsourcing, says Patheon

Sitting down with Michael Lehmann, EVP Global Sales & Marketing, Patheon, at DCAT Week 16’*, Lehmann explained that the concept of forecasting years in advance, capacity volumes for launches, and sometimes clinical trials, has been a topic the company has been hearing about for some time.

However, even with increased focus on forecasting accuracy, it’s not easy to achieve – and without it, companies can misappropriate capital or have it left on the table. Either way, “missing forecasts can be an incredibly expensive thing to do​,” added Lehmann.

To combat these issues, Patheon has steadily been adding capabilities and increasing network size, which, according to Lehmann, has positioned the company to be able to offer flexibility, “not instead of forecasting accuracy, but in addition to our client’s focus on forecasting​.”

The survey​

To get a better sense of the industry’s challenges with forecasting, the company recently commissioned the business intelligence firm ORC International to survey 50 pharmaceutical companies across the US and Europe.

According to the report, the majority of companies either overestimated or underestimated their forecasts by up to 25% - with cases of more than a 50% over/under estimation reported.

This is problematic as a launch delay costs an average of $15m per drug per day, according to the repot. Additionally, research shows that a blockbuster drug loses $1bn in revenue annually until capacity is developed to meet demand.

For Lehmann, these numbers show that missing forecasts and uncertainty “is not a one off situation, it’s common in the industry​.” And this uncertainty is motivating companies to outsource.

“More than three-quarters of respondents noted that the less certainty they have about demand, the more likely they are to outsource​,” the report explained. “The decision to outsource is made at a high level to mitigate risk form incorrect demand forecasts​.”

The ‘condo’ model​

Patheon’s approach to mitigating the challenge in forecasting is de-risking the misses in estimating.

It’s “condo” approach is one method, in which a specific arrangement is made with a client. The company’s recent agreement with Grünenthal is one example this approach.

The strategic agreement, announced February 22, 2016, established Patheon as Grünenthal’s preferred development partner for its products made using Grünenthal’s technology, INTAC.

The arrangement allows Grünenthal to make use of Patheon’s process and infrastructure to simplify manufacturing.

Lehmann stressed, “The right approach is focusing on forecasting, but also on mitigating risks with regards to manufacturing and development going forward​.”

*DCAT Week 16’ is an industry event held by the Drug, Chemical & Associated Technologies Association (DCAT), a not-for-profit, member-supported, global business development association whose unique membership model integrates both innovator and generic drug manufacturers and suppliers of ingredients, development and manufacturing services, and related technologies.