Victor Coker, Director of Business Intelligence
Mark Allen, Strategy Director
Nice Insights quarterly Pharmaceutical and Biotechnology Outsourcing Survey is sent to 40,000+ pharmaceutical and biotechnology executives, and with results now published for the first three quarters in 2011, interesting trends begin to emerge.
In the Q3 survey report, the largest segment of respondents (29%) represented Big Pharma companies for the third consecutive quarter. This was followed closely by biotechnology / biologics (28%), emerging, niche or start-ups (22%), specialty pharmaceuticals (15%) and emerging biotech companies (6%). The highest proportion of representation worked in R&D departments (35%), followed by operations (24%), manufacturing (16%), quality assessment / control (11%), purchasing / procurement (7%) and regulatory compliance (7%).
Survey respondents indicated that their company is planning on outsourcing an average of 4.38 different services in the coming year. Those from emerging biotech / biologics demonstrated the strongest numbers, indicating that they would outsource an average of 5.52 services – making them strong candidates for CROs and CMOs with appropriate capabilities to target. Not surprisingly, companies with budgets of $10 million or less were the most likely to reduce the number of services they planned to outsource over the course of the year.
It’s no secret that Big Pharma has been trying to rein in transactional spending on outsourcing in an effort to cut costs and sustain profitability. Results from the Q3 survey indicate that Big Pharma’s anticipated spend on outsourcing dropped 3% from previous quarterly statements. Conversely, biotech companies demonstrate an increase in anticipated outsourcing expenditure across 75% of the service areas covered in Nice Insight’s survey, and a 33% overall increase in anticipated overall outsourcing spend.
Looking at results across the year so far, the Q3 indications are supported as longer-term trends. Although outsourcing budgets have remained consistent as reported in surveys during the first three quarters of 2011, there were differences reported in terms of where these resources would be allocated – particularly between traditional, small molecule pharmaceutical companies and biopharmaceutical organizations. For example, Nice Insight found thatthe average number of different services outsourced increased by 7% for biotech companies and 11% for emerging biotech companies, but decreased by 12% for specialty pharmaceutical companies.
For CROs and CMOs, one of the ways to offset the financial impact of Big Pharma’s consolidation in outsourcing expenditure is to explore partnership opportunities among a more diverse range of customers. Outsourcing from biotechnology is demonstrating growth and Nice Insight’s Q3 survey found that custom manufacturing and process optimization were the two leading services that biotech companies are looking to outsource. When it comes to overall trends by service sector, 33% of survey respondents indicated that in the coming year their company would be outsourcing pharma analytical testing, followed by clinical research (29%), bio analytical testing (27%), chemical synthesis (18%), blending (13%) and drug delivery (16%).
Contract manufacturers can also position themselves to win business beyond their pure scientific capabilities. With regard to methods employed to select outsourcing partners, Q3 respondents used an average of 2-3 different techniques. For a second consecutive quarter, the use of consultants was number one, and at 73% this reflected an increase of 7% from Q2. So the use of consultants is clearly very strong – among referrals (55%) and attendance at industry events (44%) as the other members of the top three methods. CROs and CMOs should absorb knowledge of these trends into their strategy. When considering potential outsourcing partners, Q3 respondents ranked quality as their number one priority, followed by reliability, affordability, productivity, regulatory compliance and accessibility. This ranking has been fairly consistent across the year.
In a positive trend regarding customer awareness (CA), none of the CROs or CMOs in Nice Insight’s Q3 survey were completely unknown to respondents, unlike earlier results. In fact, responses indicated that the outsourcing companies represented had previously partnered with 323 of the 406 contract manufacturers included in the study. However, 42% of the CROs / CMOs still earned customer awareness scores lower than 40%, which means that the pharmaceutical and biotechnology company representatives knew little about the company beyond recognizing their name or logo. CA shortcomings underscore the importance of CROs and CMOs using integrated strategic marketing to build awareness and differentiate themselves, enabling more effective connection with potential outsourcing partners.
Nice Insight was established to provide primary research directly from outsourcing executives and benchmarks that give CROs and CMOs unprecedented intelligence that they can use to make more informed strategic decisions, position their business and tailor their marketing efforts.
Nice Insight Survey Methodology: The Nice Insight Pharmaceutical and Biotechnology Survey is deployed to 40,000 outsourcing-facing pharmaceutical and biotechnology executives on a quarterly basis / four times per year [Q3 2011 sample size 3021]. The survey comprises 1200+ questions and randomly presents ~30 questions to each respondent in order to collect baseline information with respect to customer awareness and customer perceptions on 400 companies that service the drug development cycle. Five levels of awareness from “I’ve never heard of them” to “I’ve worked with them” factor into the overall customer awareness score. The customer perception score is based on six drivers in outsourcing: Quality, Accessibility, Regulatory Compliance, Pricing, Productivity and Reliability; which are ranked by respondents to determine the weighting applied to the overall score.