In recent years, the pharmaceutical industry has undergone rapid changes, leading to significant restructuring. As the pace of development has increased, alongside rising costs and new entrants, Contract Development and Manufacturing Organization (CDMO) and Contract Research Organization (CRO) companies have increasingly become a vital component of the industry at large. These companies’ flexibility and efficiency present new opportunities in the space, but they’ve also led to new challenges.
As we’ve seen CDMO and CRO companies take a larger role in the pharmaceutical supply process, additional burdens are placed on these smaller businesses to upgrade their operations. Remaining relevant, efficient, and successful in the industry requires these companies to have a sophisticated approach to their operations. Companies that can’t compete on speed, scale, or cost are going to find themselves with fewer and fewer opportunities as their competitors outperform them.
The Rise of CDMOs and CROs
COVID-19 has obviously led to a huge uptick in Life Sciences investment and funding. The rapid pace as companies and countries raced for a vaccine meant that new, rapid ways of trialing and testing for pharmaceutical development became the standard. The ability of multiple companies to develop novel and effective vaccines in a minute time frame was the direct result of CDMO and CRO companies coming to prominence.
Investment and spending flooded into the marketplace. The CDMO market ballooned to $160 billion USD in 2020 alone, and CROs were close behind at $50 billion USD. There is more interest than ever in this sector and will only accelerate as spending continues to rise. While this presents a massive opportunity for companies in the space, it also means that competition will accelerate alongside increased focus.
The New Global Supply Chain
Though in some countries it feels like the pandemic has “passed” or at least diminished in its effect on daily life, the fallout for global supply chains is massive and ongoing. Sourcing raw materials internationally has become increasingly expensive and time-consuming, with prices and timelines not even approaching near pre-pandemic levels.
Particularly in the Pharma industry, the supply chain is global, linked, and particularly susceptible to market disruption. Even massive companies have found it difficult to source chemicals as global demand has increased with limited availability. Some smaller companies have folded as a result of being unable to source the needed materials. Companies that failed to develop stable connections lost out on business as a result.
Every element in the pharmaceutical and chemical supply chain needs to operate effectively, or the pieces above them can tumble. CDMOS and CROs need to have stable supply chains underneath them in or to take advantage of the new opportunities this growing market offers.
Increasing Competition: Opportunities and Challenges
Previously, sourcing managers were able to focus exclusively on finding cheap, fast, and high-quality materials. However, that’s not enough anymore. Increasingly, the focus on what makes a good supply chain has shifted for CDMO and CRO companies. Failing to have a system of redundancies built into the supply chain can cut the legs out from under these companies before they have the opportunity to take advantage of increased industry exposure.
Shifts in Focus
It’s not enough to find high-quality materials at a good price anymore. In the past, stable supply chains meant that companies could focus on cost reductions. However, the focus now needs to be on stability and recoverability. It doesn’t matter how good of a deal you got on your last shipment if you can’t source your next one.
Speed of Development
CDMOs and CROs are able to operate and shift more quickly than major pharmaceuticals. This made them perfect to produce responses to the COVID pandemic, rapidly supplying treatment options to counteract shifting landscapes. The speed at which the industry operates is significantly faster than pre-pandemic and is unlikely to return to its slower standards.
This has put an additional strain on sourcing. Having a supplier that can match the necessary pace is difficult. Supply constraints across the industry have made sourcing tougher, and finding a single supplier for all your needs is almost impossible.
As in-person events, conferences, trade shows, and the like have disappeared, business is being conducted increasingly online. While a necessary and powerful tool for finding new opportunities, it’s not without its challenges. Developing stable relationships can be difficult without a face-face connection. Due diligence takes longer, and with some global movement still restricted, it necessitates using trusted intermediaries.
Stable International Supply: China
While the shift to online, and closed borders, may have provided some new difficulties for engaging with China for CDMO and CRO supplies, it still presents massive prospects. The scope and breadth of the Chinese Chemical market presents opportunities to build a stable and efficient supply chain.
By accessing the Chinese market, CDMOs and CROs can build the redundancies they need to counteract raw material shortages and operate effectively against their competition. China is the largest player in the global chemical supply industry, and there exist multiple suppliers for every chemical need you might have. Companies that are able to engage with the market can build a fast and flexible network of suppliers. Accessing multiple smaller sources efficiently can protect companies from the potential fallout of a single large supplier’s challenges.
While more traditional approaches to due diligence may be closed, Chinese chemical manufacturers have recognized the need to evolve for the online world as well. After years of relying on the same in-person activities as the West to develop connections, they are rapidly improving their business capabilities to match their manufacturing prowess.
The market still presents some difficulties in finding, communicating, and developing trust with a network of suppliers. However, the benefits of having a far-reaching network make it necessary for CDMO and CRO companies to engage with this market. Fortunately, solutions exist to counteract some of the challenges that still exist.
How Chemlyte Can Help
Chemlyte is a chemical sourcing provider, offering first-class tailored services for companies seeking to source and manufacture chemicals in China. Built on decades of industry experience sourcing chemicals in China, we are now focused on overcoming the difficulties facing international companies entering the Chinese market.
Serving as the link between sourcing departments and chemical manufacturers, we serve as a trusted partner familiar with the challenges facing both sides to access the benefits of the Chinese market while avoiding its difficulties.
Using Chemlyte Solutions as your trusted partner in sourcing chemicals from China can present a whole new world of opportunity for your chemical needs. Contact one of our consultants to discuss how we can work to grow your business.