CMO Management: Not All Contract Manufacturing Organizations Are Created Equal

Life Sciences companies can benefit from purposefully leveraging contract manufacturing organizations (CMOs) in a strategic or tactical approach to navigating through growth and disruption.

In a survey conducted in 2019¹, life sciences companies responded that approximately 44% of their annual production volume and 30% of their manufacturing activities were outsourced. According to Technavio², these figures are expected to grow dramatically — at a CAGR of 9% — in the near future as Life Sciences companies face various disruptions, such as unforeseen global pandemics, supply chain risks and material shortages, and the development of new and specialized treatments.

The quality of the relationships between CMOs and Life Sciences companies is a key factor in why more than half are not prepared to face unforeseen disruptions. Our Life Sciences Supply Chain Management team at FTI Consulting has observed that life sciences companies typically select and engage with CMOs to merely achieve operational goals — thus only forming a tactical relationship.

Leveraging tactical CMOs can help companies achieve shorter-term business objectives such as cost reduction and capacity and geographic expansions. For life sciences companies to realize longer-term benefits, strategically engaging with CMOs is much more important. Strategic partnerships with CMOs allow life sciences companies to drive strategic goals and growth, operate cooperatively leveraging common resources, and receive niche expertise and support.

Footnotes:

1: Rigert, M. Disruptive Outsourcing Means Life Sciences Are Relying on CMOs More Than Ever. MasterControl (January 28, 2020). https://www.mastercontrol.com/gxp-lifeline/disruptive-outsourcing-means-life-sciences-are-relying-on-cmos-more-than-ever/.

2: Contract Development and Manufacturing Organization Outsourcing Market by Product and Geography - Forecast and Analysis 2021-2025. Technavio (May 2021). https://www.technavio.com/report/contract-development-and-manufacturing-organization-outsourcing-market-industry-analysis.