Does Your CDMO Take a Holistic Approach to Raw Material Sourcing? The Success of Your Program may Depend on it.

By Shannon Ennis, Manager, Strategic Sourcing, South Haven Plant of Grace FCMS; and Jay Kisslak, Manager, Strategic Sourcing, Tyrone Plant of Grace FCMS

Procurement of chemicals and CDMO services may seem simple and straightforward; however, that is not always the case. Even when the world is not facing a global pandemic, sourcing complicated, chemical compounds, pharmaceutical intermediates, or pharmaceutical APIs in a global marketplace – and the process and decisions required to secure effective and reliable supply – can be very complicated. Identifying which compounds to outsource, the level of supply chain security required to assure adequate and timely supply, as well as who and where to source from all become variables that can ultimately determine the success or failure of a program.

Companies seeking the services of a CDMO to support and commercialize their projects should factor the capabilities of the CDMO’s procurement resources and strategies into their decision-making process. Effective and transparent procurement processes are one of the cornerstones for successful projects. It is vital that companies select a CDMO that outlines the supply chain options available for their programs and works with them to implement the sourcing strategy that best meets their needs.

Advanced Molecules, Accelerated Timelines, and Supply Chain Struggles

Early in an API development program, the client and their CDMO must agree on the desired long-term route of synthesis for the API under development. If the decision is made to utilize advanced intermediates in the development program, what compounds are sourced as well as who, where, and how they are sourced become key choices that will influence the entire program. Successful CDMOs have the procurement experience required to navigate that minefield, help their clients identify the options available, and ultimately settle on the path suitable for their project needs. Companies need to work with CDMOs whose procurement teams know the chemical industry and have long-term strategic partnerships in place with flexible, high-quality chemical intermediate suppliers – skills and relationships that newer or smaller CDMOs generally lack.

Your CDMO’s Procurement Experience Matters

Companies should know what to look for and the questions to ask of a procurement organization when seeking out a CDMO because not all have the same procurement capabilities and experience. Companies should not assume a prospective CDMO partner has a procurement organization equipped to handle raw material security of supply, quality, program timing, regulatory support, and commercialization requirements. In worst-case scenarios, a company may have their trust broken by learning too late that their CDMO ordered raw materials from a plant that cannot supply them when initially promised, was shut down for an Environmental, Health and Safety (EHS) violation, or cannot deliver the quality specified and agreed to. Therefore, it is important to know if a CDMO’s procurement team can carry out in-depth audits of potential suppliers, understand and evaluate the need for primary, secondary – and sometimes tertiary – suppliers, implement the necessary supply agreements as well as evaluate and implement self-production of key intermediates when appropriate.

During the CDMO selection process, companies should investigate the capabilities of the CDMO’s procurement organization. How do they identify and assess the available suppliers for needed chemical compounds? How do they determine the level of risk associated with sourcing the compounds and arrive at the appropriate level of supply chain security to implement? Procurement due diligence will determine how many suppliers exist for the specific compounds needed to produce the client’s molecule and helps determine the next level of scrutiny. Are the required chemicals commodities or complex chemical compounds? This will identify potential risks to the project and help determine the level of redundancy desired. Highly specialized items may be produced by only one or two manufacturers, and a single source increases the level of risk; general commodity items can be obtained more easily and allow companies to easily obtain security of supply through multiple, qualified suppliers. It also is critical to supply chain security to understand lead times and know where the raw material suppliers are located. In either case, it is important your chosen CDMO has robust agreements in place with the chosen suppliers. A responsible CDMO will work with their client in a transparent manner, discussing the procurement challenges associated with their project, reach consensus on the appropriate path forward, and implement the client’s desired level of supply chain security.

Another important challenge for today’s CDMO procurement organization is handling accelerating project timelines. The compounds that CDMOs are being asked to produce are growing in complexity, in many cases requiring streamlined procurement of complex intermediates. The increasing demand for complex intermediates requiring highly specialized synthesis and manufacturing resources are creating supply chain challenges. Complex molecules are becoming harder to source and taking longer to produce and procure.

Due to the recent COVID-19 pandemic, we have seen countries limit export of chemical intermediates and APIs with little or no warning, forcing procurement organizations to consider their suppliers’ supply chains for raw materials when evaluating supply chain security. Looking one or two steps back into the supply chain of a target raw material is essential to understanding potential impacts to the supply chain that may evolve over the life of a project. Companies and/or their CDMOs have to know where the raw materials are, how that market is segmented, if there may be production or shipping issues (due to COVID-19, for example), if other suppliers can provide the remaining materials required, and if possible, produce those needed intermediates internally.

Fine Chemistry can Produce Innovative Sourcing Solutions

Companies in the early stages of product development typically assign raw material sourcing to a trader or other external agents because they do not have the internal resources or skills for the job. When they establish a partnership with a CDMO, they expect that partner will assume the procurement role. The procurement organizations of effective CDMOs utilize the trade tools and research databases available for identifying the most promising sources for target molecules. If the desired compound is not available, working with a CDMO that has a strong research and development team capable of identifying a viable route of synthesis for the needed molecule, and a manufacturing organization able to produce the vital intermediate can be essential for the program’s success. In addition, when custom manufacturing of a compound requiring multiple production steps is necessary, a CDMO procurement team with access to a capable R&D staff is beneficial. They would be able to identify alternative routes of synthesis, which might be less hazardous, eliminate EHS issues or simply shorten the process. In many cases, they not only simplify the procurement process, but also reduce the cost of securing the required compound for their client, all while improving the program’s security of supply.

Grace Fine Chemical Manufacturing Services (FCMS) manufactures custom pharmaceuticals and APIs at our South Haven, Michigan site. Our procurement team is an integral participant in the evaluation and quoting of every project. During our evaluation process, our experts are identifying the target compounds required for synthesis of the final product. Our procurement team is then given the task of identifying the options available for sourcing those target compounds. If in the evaluation of a program, we identify an intermediate which could be more economically and effectively manufactured at our Tyrone, Pennsylvania site, we will leverage that capability to save clients time, money, or other important factors. We work with and advise each client to tailor the procurement of raw materials for their program’s desired mix of cost, speed-to-commercialization, and supply chain security. Material sourcing and supply chain security are complicated and are becoming more so in the current landscape. Grace FCMS has the experienced procurement resources necessary to meet and exceed our clients’ needs.