As the JPM meeting of 2023 closes, what can we learn from the last year and project into 2023 for biotech/pharma contract manufacturing? Responding to this question is critical. As CEO of Argonaut Manufacturing Services, a contract manufacturing firm for biotechnology and pharmaceutical companies, I have reflected on it and would like to share some thoughts.
The 2022 year began with a bang as Omicron ran rampant throughout the United States. At Argonaut, we flexed our production lines, surging capacity to meet the increased demand for our clients’ diagnostic products. We dealt with shortages from tubes to cardboard to reagents, but our supply chain adapted. We met new suppliers and qualified alternative suppliers while keeping it all together. The obstacles did not stop there, as snarls from carriers in the distribution network added frustration for everyone. We adjusted and saw clients increasingly tap into our 3PL services. These services provided clients with validated storage, warehousing (including cold chain), and a commercial portal to access their inventory stored at our site. This inventory was then shipped on demand to the client’s customers direct from Argonaut, thus reducing a step in the supply chain and eliminating more complexity. For products that were lyophilized and did not require dry ice, there were far fewer problems. This trend to lyophilize and “Go Ambient” gained significant traction in 2022. We also announced two exciting enabling technologies (LyoDots and BioFuse Sample Prep) at AACC2022, that folks are excited about, that take the “Go Ambient” ideas to new levels and deliver competitive advantages to our clients.
By August, however, COVID-19 testing had dropped precipitously worldwide, requiring us to flex back and reduce the production of COVID-19-related activities. We designed our production system to scale (up and down) quickly, and the supply chain began showing signs of returning to a more normal roar. We saw clients working in other exciting areas of molecular diagnostics start to brighten up by late 2022. These new growth areas were an opportunity to more than triple the size of our lyophilization capacity, and this new location is on target for move-in during Q1, 2023.
Essentially, 2022 demonstrated many positive virtues of outsourcing in our industries:
- Flexibility and variable cost- the ability to rapidly scale-up kept many products in stock. When demand dropped, we saw clients scale back, and we helped them leverage that variable cost advantage they gained by working with us. Allowing clients to throttle scale is something we coined as “Variabilized Cost” (it is a word now)
- Reliable ecosystem partners– by having deep relationships with key suppliers and partners in our ecosystem for items such as enzymes, oligos, components, and packaging solutions, we could quickly offer clients options to adjust to the supply constraints everyone was facing.
- Lyophilization– as mentioned previously, lyophilized products were not as susceptible to shipping stoppages. Since these shipments weigh only a fraction vs. boxes filled with heavy dry ice, they were also less expensive to ship.
My major conclusions from JP Morgan 2023 echo the lessons of last year: there remains considerable uncertainty, especially in the early months of 2023. In this environment, it makes a ton of sense for our clients to look hard at the leverage that working with a contract manufacturing organization like Argonaut can create. Capital is tight. We know this very well at Argonaut as we have just been through that effort ourselves to increase our drug product manufacturing capacity. For our collaborative ecosystem to see our markets thrive, we must find ways to fund innovation and technology development. Argonaut continues to help our clients succeed by providing them with an operational model that has the flexibility needed in both times of uncertainty and opportunity.
CEO, Argonaut Manufacturing Services