Mastering the Build vs. Buy Decision in Life Sciences Manufacturing

As the life sciences sector continues to expand, organizations advancing from research to development face a pivotal decision: Should they invest in internal manufacturing infrastructure or collaborate with a contract development and manufacturing organization (CDMO)? Some organizations may also explore a hybrid approach that incorporates elements of both strategies. 

Each option carries distinct advantages and challenges. Developing internal infrastructure requires significant financial investment, time, and resources but allows for greater control over processes, quality assurance, and intellectual property protection. Alternatively, partnering with a contract manufacturer enables organizations to scale production more quickly with less upfront investment, though it introduces considerations related to quality oversight, regulatory compliance, and operational transparency. 

Key Considerations in the Build vs. Buy Decision

When evaluating manufacturing strategies, organizations must consider several key factors, including cost, time to market, regulatory requirements, and intellectual property protection. 

• Cost and Capital Investment: Internal manufacturing demands substantial upfront costs for real estate, equipment, technology, and workforce training. By contrast, outsourcing leverages existing infrastructure, reducing initial capital expenditure. 
• Speed to Market: Contract manufacturers already have established processes, reducing ramp-up time and facilitating faster production cycles. An internal build-out may take years before reaching full operational capacity. 
• Regulatory Compliance: Organizations are responsible for adhering to Good Manufacturing Practices (GMP) and other regulatory standards, whether managing production internally or working with an external partner. 
• Intellectual Property Considerations: While internal manufacturing allows for direct control over proprietary processes, outsourcing may necessitate safeguards to mitigate risks related to technology transfer and data security.

Navigating the Pros and Cons of Each Approach

Building an Internal Manufacturing Facility

Pros:

• Greater oversight and control of the manufacturing process 
• Customizable production to meet specific quality and consistency standards 
• Direct protection of intellectual property and proprietary processes 
• Potential cost efficiencies for high-volume production over time 

Cons:

• High upfront capital expenditure 
• Extended time required to design, construct, and validate facilities 
• Need for in-house knowledge to manage operations effectively 
• Ongoing regulatory compliance requirements and audits

Outsourcing to a CDMO

Pros:

• Lower initial capital investment with access to existing production capabilities 
• Faster scale-up and production readiness 
• Experience in regulatory compliance and industry best practices 
• Flexibility to adjust production volumes as needed 

Cons:

• Less direct control over manufacturing processes and quality oversight 
• Potential intellectual property and technology transfer considerations 
• Contractual obligations that may impact long-term flexibility 
• Higher per-unit costs for low-volume production

Industry Trends Impacting the Decision

Increased investment in novel therapeutics, heightened mergers and acquisitions activity and growth in PE and Venture funding are driving heightened demand for manufacturing capacity both in-house and outsourced. 

As organizations choose whether to build vs. buy they must assess their ability to scale efficiently and dedicate the resources to maintaining compliance with evolving regulations, including policies related to international tariffs and the potential passage of the BIOSECURE Act. These factors may influence whether a company chooses to invest in internal capabilities or engage an external manufacturing partner. 

Hybrid Approaches: Balancing Flexibility and Control

Some life sciences organizations opt for a hybrid strategy, combining internal production with outsourced capabilities. For example, a company may invest in core manufacturing processes while partnering with a CDMO for specialized production. In another case, an organization may acquire an equity stake in an outsourcing organization to secure manufacturing capacity while maintaining strategic oversight. 

Leveraging Technology to Support Strategic Manufacturing Decisions

Technology plays a critical role in enhancing manufacturing strategies. Enterprise resource planning (ERP) solutions, such as BDO’s Life Sciences for NetSuite solution, support outsourced manufacturing models, in-house GMP compliant manufacturing and hybrid models.  BDO’s solution for NetSuite provides financial and supply chain visibility, as well as material control at the batch and lot level. A scalable, technology-driven approach helps organizations align their manufacturing strategy with business objectives, helping to ensure regulatory readiness and efficient use of valuable resources. 

Making an Informed Decision

The decision to build or buy manufacturing capabilities depends on factors such as financial resources, speed to market, therapy type, regulatory considerations, and long-term business goals. Organizations should assess the risks and benefits of each approach to determine the most effective strategy for their unique needs. 

BDO Digital provides guidance and technology solutions, including NetSuite ERP, tailored to life sciences companies at all stages of development. To explore how your organization can optimize its manufacturing strategy, connect with our team today.