Location, location, location: How important is geography when selecting a CMO?

An increasing number of pharma companies are opting to outsource the development and manufacturing of small and large molecules, AGC Biologics’ senior VP of business development, Christoph Winterhalter, told delegates at BIO Europe in November.

This growing trend has created a contract manufacturing organisation (CMO) market of approximately $5bn (€4.3bn) over the last 15 years, he added.

The decision to either ‘make or buy’ – to manufacture in-house or to outsource responsibility to a contractor – is not an easy one, Winterhalter explained. Nor is the selection process, if the pharma company elects to outsource its manufacturing to a new partner.

According to Winterhalter, this begs the question: how should pharma companies select an outsourcing partner? Does geography, and the CMO’s proximity to its client, play a major role in this process?

At the conference, Lene Hylling Axelsson, VP for strategic sourcing at Novo Nordisk, told delegates she believed geography was “extremely important” ​early in her career, “and I think it is, especially when [a company is] young in outsourcing experience.”​

Today, however, geography is less significant in Novo Nordisk’s decision making, she explained: “When you get a little bit more experience, I believe that geography is not really one of the most important factors,”​ adding that its selection criteria are increasingly related to the CMO’s ability to optimise processes and its working culture.

IP protection​

To ensure intellectual property is protected when outsourcing development and manufacturing contracts, Hylling Axelsson said it is imperative that the outsourcing partner not be a pharma company itself, nor the contract manufacturer of a rival company: “That’s much more important than geography.”​

“Sometimes when I [consider] some parts of the world, we are a little bit worried about patents and intellectual property, in particular,” ​she explained. “So, that’s where elements of geography come into play, protecting our properties.”​

The ‘human factor’​

According to Johannes Roebers, CEO of Cilatus BioPharma Consulting, new tools and modern technologies allow pharma companies to source on a “world scale” ​nowadays – which can remove challenges associated with international communication.

However, “It is still nice to have [a CMO close by], because the human factor of visiting somebody and hanging out together, is also important,” ​he told delegates.

“I still recommend that if you work with someone in China, every couple of months you [should] go and meet, or perhaps the other way around – let the CMO come to you. [This] can work wonders for the relationship,” ​he added.