What do you consider to be the biggest trends in custom manufacturing?

J. Decker-Conradi (Bayer Healthcare): We at Bayer HealthCare (BHC) look for suppliers which are reliable and meet the increased quality and regulatory requirements as well as provide the opportunity to develop into a strategic partner.
In our production, quality and safety standards are of utmost importance. Therefore, we regularly and stringently audit our CMOs to ensure our standards are rigorously met.

Looking into the CMO market, we are observing an increase in the number of CMOs due to more and more Asian companies entering the market. This provides us with a choice of best quality at attractive market conditions. Within the different CMO market segments we see a significant expansion of the bio-pharmaceutical CMO market.

Many pharma companies are looking to concentrate on their core competencies and are outsourcing manufacturing services. How has your company benefited from this trend? Do you see this trend shifting or changing in any way?

J. Decker-Conradi (Bayer Healthcare): We have a clear focus at BHC: Make what is strategic and value-adding; buy everything else.
Compared to other research-based pharmaceutical companies, we believe to have a balanced approach between in-house and external production with an outsourcing ratio of more than 30%.

The main reason for that is the structured make-or-buy process BHC has in place. Within this process, procurement checks with cross-functional teams any investment in own capacities against external opportunities. This results in more business opportunities with dedicated CMOs that offer a special or niche technology or particular expertise in certain well-established technologies. The benefits for BHC are: better control of expenses; freed funds for investments in other areas; professional supply for niche technologies; participation in volume benefits for small volume products; and reduction of complexity within our own sites.

There is a clear trend that more and more Asian CMOs, especially from India, participate in our bids. And these suppliers offer additional services beyond simple supply.

What role does location play when it comes to custom manufacturing. How do you see competition from eastern companies who may have a better cost position?

J. Decker-Conradi (Bayer Healthcare): Location of manufacturing is essential for the manufacturing cost structure. This is one reason why we established a strategy to increasingly source within the regions, where the markets are. Since growth is expected especially for the Emerging Markets, manufacturing/sourcing will in future play a more important role in these countries. Herewith we gain an increase of flexibility and responsiveness to markets needs.

While we presently see only limited opportunities for global drug supply coming from CMOs in Eastern European, we see an increased necessity to fulfill local demands from local manufacturing activities in these countries.