Small firms turning to US CMOs in downturn; SOCMA

24-Feb-2010 - Last updated on 24-Feb-2010 at 10:38 GMT

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In the economic downturn biotechs have cut back on outsourcing to Asia and opted to use the US instead because they lack the resources to manage overseas relationships, according to a SOCMA representative.

Kevin Duffield, regional director of business development at Regis Technologies, said that a “significant number” of biotechs and mid-sized pharmas that were outsourcing to Asia now use companies in the US. This is because of the resources needed to successfully outsource to Asia.

Speaking to Outsourcing-Pharma at Informex 2010, Duffield, a representative of the Society of Chemical Manufacturers and Affiliates (SOCMA), explained that the benefit of the lower initial costs of Asia-based companies is offset by the resources need to oversee the project.

Larger companies are able to commit the time and money needed to ensure a contract manufacturing organisation (CMO) delivers the project on time and to specification but this can be a significant drain on resources at smaller businesses.

Furthermore, prices in Asia have risen as quality and service improvements are made and Duffield believes this, coupled to management costs, has led many smaller companies to choose US-based companies.

Duffield is hopeful that this has prompted a long-term shift in attitudes, resulting in firms continuing to outsource to US-based companies when the economy improves.

Difficult year ahead

Despite gains made as business returned from Asia, 2009 was a difficult year for many CMOs serving biotechs and mid-sized pharmas, according to Duffield.

There are signs that the situation is improving, added Duffield, but it is too early to tell if 2010 will be significantly better. Duffield expects business to be stable in 2010, after declining in 2009.

Another year of significant decline would force companies to make cutbacks, added Duffield. He explained that 2008 was a record year and consequently companies could avoid serious cutbacks in 2009 but further declines would force them to act.

To avoid making cuts companies must learn to prosper in an increasingly competitive market. Duffield explained that before the downturn there were lots of business opportunities but there have been fewer over the past 18 months.