“Capacity” for outsourcing bio/pharma development and manufacturing has mostly been defined by a strict calculation of how much material a facility (or facilities) can output over a period of time.
If you can produce one million units of material a week on a reliable, qualified equipment train, then you have 52 million units of capacity a year. As an industry executive at Outsourced Pharma Boston noted: “It’s not a very mature or sophisticated way to look at it.”
And one that doesn’t work today.
The New Measurements
Simple definitions of capacity don’t work today because we are in – and have been for a while – an industry of broader competition, employing varying outsourcing models to meet changing drug profiles and markets. What’s changed, in a word, is dynamics.
It’s reached the status of cliché that forecasts are always wrong (it’s just by how much and in which direction that causes concern). Now that acquiescence to inaccuracy of a given product also severely impacts and impedes “drug dynamics” – varying quantity needs, production availability and delivery times – of other products looking for the same capacity.
As that industry expert said in Boston: “Drug owners have to constantly adjust your thoughts of capacity internally and externally. Capacity is now defined by a production line at your CMO, the number of customers on that line, and what people are willing to pay to be there. You need to be at that CMO to understand where you stand in that order. Buyers need to assess more clearly how much of that production capability can and absolutely needs to be theirs, and to what type of partnership they are willing to commit.”
Of course no one is suggesting throwing out forecasting or math altogether when considering capacity. Here’s how Steve Cook, Head, Global Biologic Supply Chain Operations, MedImmune, describes the thought process:
“One of the areas we focus a lot on is scale as it relates directly to any impact on capacity. We start by looking at it in ‘three buckets’: large scale, let’s say more than 8,000 liter bioreactors; somewhat mid-scale, say 2,500; and small scale at 500 liter capacity. It’s then a matter of looking at our pipeline, the amount of kilograms for each one of those products, and the total number of kilograms. We try to do this over a ten-year period, which is roughly our standard. There’s also a look at peak-year needs, and the upside and downside forecasts from base calculations. This all goes into the slotting of those products into that respective quantity scale.”
Cook concludes: “You can then get into thinking about if you get a mix of over or under base-forecasts, and varying scenarios of success in your pipeline through your clinical trials, what does it really do to the capacity availability in each one of those scales?”
And added to this type of advanced analysis … is an accelerated pace.
Franco Negron, President, Drug Product Services, Patheon, represented the service providers on that Outsourced Pharma Boston panel. He started with an increasingly common thought experiment: Comparing the bio/pharma supply chain with that of other industries.
“Our industry is probably twenty years behind many other industries, right?” asks Franco specifically in regards to our need for more products, shorter runs of those, and thus increased product turnover.
“When I think prior to joining the pharma sector, when I was with Procter & Gamble, lines had to change in thirty minutes. If you talk about anything like that in pharmaceuticals, the reaction is: ‘What?’ So it’s more about catching up for us now. It’s making the change in mindset and behaviors. The days of running a product for long periods of time are mostly gone. Going back to capacity, the model has to change. Now you need to talk about ‘instantaneous capacity.’ What is your responsiveness rate? It’s more complex, but its not new. Other industries have been there before us. We just have to replicate that in a highly-regulated environment, which is usually where the challenge is.”
Perhaps Bob Sheroff, SVP, Technical Operations, Agios Pharmaceuticals, and a long-term pharma industry veteran, then summed this all up in practice:
“A lot more changeover really means less capacity overall.”
Capacity To Capability
Anand Ekambaram, Executive Director, Global Technical Operations, Merck, says over the past decade he’s seen some of that mindset shift concerning external manufacturing. He says the former approach to the buyer-seller market for outsourcing services was based on two questions: Do you have the capacity for my product, and how cheaply can you do it?
“What I call ‘Outsourcing 101’ was really based on notions about bringing down cost,” says Ekambaram. ‘We want you to do the same thing we do [internally], but do it faster and cheaper. I think it was a flawed model, and I'm glad it’s receding as a way of doing business.”
Receding to give way to what?
“The discussion is very much shifting towards capability,” says Ekambaram. “The questions are more about capability than purely capacity and price. For a Big Pharma with both internal and looking for external assets, the question is capabilities and complimentary skill sets. Big Pharma performs searches very much based on identifying those complimentary skill sets which create real value … for both parties. Value creation is the emphasis even when focusing on capacity questions. Maybe this is really where the buyer-seller paradigm in pharmaceutical outsourcing has shifted.”