This past year has been economically challenging for all industry sectors and the life science industry, while full of promise, has not escaped unharmed. As James C. Greenwood, President and CEO of the Biotechnology Industry Organization (BIO), expressed in his annual address to association members, the biotech/life science industry is facing tremendous financial pressure. “A full forty percent of current publicly-traded biotech companies are down to their last 12 months of cash and about a third of those companies ended 2008 with less than six months of cash.”
It’s clear that to survive the changes in the current economic environment, including the globalization of products and services, life science companies must run lean and efficient organizations.
Outsourcing enables virtual companies and start-ups to have the flexibility and scalability needed to get off the ground, entrusting industry experts to perform streamlined processes, while avoiding the time and expense associated with infrastructure build out and hiring and training specialized personnel.
Emerging life science companies are now able to bring products to market without investing significant capital in manufacturing or distribution facilities. In addition, established companies are choosing to contract services to avoid costs and eliminate excess capacity by outsourcing distribution and related activities and either divesting warehouse facilities or repurposing the square footage for core initiatives. By outsourcing, companies are able to shift fixed costs to variable costs -- paying only for what they use. Additionally, companies can reduce the overall capital invested in their businesses, yielding higher returns on invested capital.
From Vertical to Virtual
In today’s reality, outsourcing has proven to be a strategic advantage across the life science spectrum. A Third Party Logistics (3PL) provider, Business Process Outsource (BPO) providers, Clinical Research Organization (CRO), Contract Manufacturing Organization (CMO), or Contract Sales Organization (CSO), all have the specialized knowledge and expertise needed to give manufacturers a competitive edge.
Even though the state of the economy poses an ongoing challenge for securing capital, today’s entrepreneurs require far less financial support to start a life science company -- thanks to the benefit of outsourced services -- than those who entered the market just a few years ago.
Despite the challenging economy, the U.S. market for outsourced pharmaceutical manufacturing continues to grow at a rate of 10 to 12% annually. According to a recently released Health and Life Sciences Market Monitor Report produced by the independent investment bank Harris Williams & Co., the $43.5 billion general outsourced pharmaceutical services industry is growing at an 8.9% compound annual growth rate (CAGR). Due to the advantages provided by outsourced services, such as minimizing capital investments and avoiding heavy on-going fixed costs, Biotechnology companies have nearly doubled in number over the past five years.
One of the many fiduciary responsibilities held by the C-suite -- increasing economic value – can be positively impacted by reducing costs, both operating and capital, through outsourcing. This white paper seeks to assist members of the life science C-suite by providing executives with three key areas of consideration when contemplating outsourcing – business considerations, financial considerations and partnership considerations.
Carole Pfeil is the vice president of Corporate Communications, Dohmen Company. As the VP of Corporate Communications Carole works to positively position Dohmen, DDN and RESTAT in the eyes of key audiences — employees, clients/prospects, shareholders and local communities --through proactive public relations and publicity efforts. She has worked in communications capacities specifically in the Pharmacy and PBM spaces for more than 15 years. Prior to Avicom she was the Director of Business Development and Marketing for IHS, a unit of IMS Health, whose 8000-employee workforce supplies consulting, PBM auditing and business process outsourced services to the life science industry. Earlier experience includes rising from Technical Writer to Communications Specialist and then Manager of Communications and Public Affairs for Honeywell-Bull (Bull-HN) a French-owned company with a worldwide presence in more than 100 countries, particularly active in the health care and telecommunications sectors. She also works with DDN and RESTAT’s leadership and marketing teams to ensure branding consistency while creating dynamic internal and external communications tools to help inspire our workforce and reach our client and prospect audiences with compelling messages that extend our corporate vision. Recently she has completed a high level white paper on Outsourcing in the Life Science Industry. For article feedback you can contact the author at