An article written by Steve Poile on biopharma manufacturing alliances.
Written by: Steve Poile for
Publication: IPI Magazine Spring 2011
"Outsourced manufacturing has long been a key component of the pharmaceutical industry, whether it is to overcome internal capacity issues or exploit external expertise and cost advantages. In recent years, the trend towards outsourcing manufacturing to India and China has increased, enabling significant cost savings. However, manufacturing is often just a component of a wider deal where the product or technology is being developed and future manufacture for clinical or commercial use is anticipated within the agreement.
Broadly speaking, from a deal-making perspective, there are two types of manufacturing deal; arms-length contract manufacturing, and partnering deals that include manufacturing as a component of the deal.
Attributes of Pure Manufacturing Deals:
- Pure manufacturing deals tend to occur when the product is already marketed or at registration phase.
- Manufacturing deals are agreed in order to enable a primary marketer to extend its capabilities in order to respond to a growing or uncertain market for a product. In effect, the manufacturer is acting as a flexible outsourced contract manufacturer, providing product on demand.
Some manufacturing agreements may be put in place between a marketer and manufacturer to provide a contingency cover in the event that demand outstrips capacity, or as cover for any failure in the primary manufacturing capacity. This may particularly be the case where a product has a short shelf life, and therefore the ability to warehouse stocks of finished product is limited."