Should You Bring Spray Drying In House or Outsource It?

TL;DR

According to Hendrik Grobler of Advanced Powder Dynamics, bringing spray drying in house makes sense only for a single, predictable commodity product whose short to medium term requirements will not change. New delivery systems, product variations, GMP and testing demands, and added CapEx point toward a contract spray drying partner. CEO Will West adds that the financial make-vs-buy analysis, which takes up 80 to 90% of most conversations, is only the first step. He recommends a spider graph that also weighs innovation, scaling, customers and channels.

• In-house spray drying fits a single product with predictable volumes and schedules, a basic commodity profile, and existing facilities and evaluation capabilities.
• One long-time APD toll customer brought production in house and then came back. New gummy and higher-solubility requirements changed flowability, density and other powder properties, and the customer could not be sure of repeatability or yield.
• Before moving in house, companies should check for an in-house quality team, GMP cleaning and sanitation compliance, and in-process testing. They also need CapEx for warehousing and for extra equipment such as mixers, homogenizers, or cooling and heating.
• Without engineering support to keep updating nozzle configurations and processing parameters, an in-house dryer will no longer be the best technology five or ten years out.
• Will West estimates that 80 to 90% of make-vs-buy conversations focus on finances. He calls that the first step and recommends a spider graph with axes for licensing, innovation, scaling, customers and channels.
• A cyclodextrin cannot be effectively dried on the inside with spray drying. According to West, only APD’s dynamic atomization technology can do it effectively.

When does it make sense to bring spray drying in house?

Hendrik Grobler: We have many customers that consider bringing production in house, but they do not consider all the requirements. This specific customer was a toll customer of ours for many years until they eventually decided that they want to bring it in house. The reasons for that were they had a single product. They had predictable volumes. They had predictable schedules, and it was a basic commodity product that they wanted to dry. The economics made sense. They had the basic facilities. They had basic in-house evaluation capabilities. So to them, it was, yes, let’s bring this in house, let’s run this product, and it’s going to be easy.

But then the customers had additional product requirements. There were new delivery system requirements. It was not only for a beverage product. Now they wanted to produce gummies. They wanted to improve the product, and they wanted to make a more soluble product. If you change the dry powder equipment for that specific delivery system that you want to apply, the properties change. It may not be flowable enough. The densities may be off. The whole product characteristic requirements change now because you have a new application.

This customer was lost, and they did not know if they could even run these different variations, not even a new product, just different variations of this product. Can they run this on their dryer, and would they be able to provide these characteristics? Would they be able to repeat these characteristics? And would they also maintain the high yield requirements that the customer had? So they came back to us.

The simple answer is it makes sense if you have one product and you know the short to medium term requirements for this product. It’s not going to change. It’s not a highly specialized product that requires experience in product innovation and formulation adjustment, and you have the basic facilities. Easy decision for you to make. It’s maybe a commodity product. But if you are looking for product differentiation, you’re looking at new product lines, and you have customers with new expectations and new product properties and the requirements for different applications, then you have to think, would you be able to do that for the customer?

What should you check before building in-house spray drying?

Hendrik Grobler: There are additional requirements that you have to consider. Do you have the in-house quality team? Can you comply with the basic GMP standards for cleaning and for sanitation? In-house and in-process testing is critically important if you want to produce the same product every single time. Do you have that? And if the testing requirements change and you have additional testing requirements, can you comply with that? Do you have the CapEx to provide for additional warehousing capability? Do you have the CapEx to provide for additional equipment requirements? A different formulation or formulation adjustment may require other equipment or other mixers or maybe a homogenizer or cooling and heating, and your packaging capabilities may not comply.

That’s why you need an experienced CDMO like APD who can develop a long term relationship with a customer, and we can, with the support of the customer, build a long term capability requirement. How’s the product going to grow? How will it change? And how would we provide that?

The last thing that I do want to mention is also critically important. You can buy the latest technologically advanced spray dryer out there, which, by the way, is the dynamic atomization technology that we have. But you won’t have the engineering background or the engineering support to maintain that technology and to keep expanding the technology and to grow the technology. We continuously improve the technology. We add different nozzle configurations, different processing parameters. If you don’t have that, then five years out or ten years out, you will not have the best technology anymore.

Why is the financial make-vs-buy analysis only the first step?

Will West: If the only thing our audience learns about spray drying and investing in technology in the sector this year is what I’m about to say, they need to remember this. Historically, people have looked at this as a make versus buy decision, and that’s where Hendrik started off. They look at it financially. Should I bring this in house? Should I partner? And 80 to 90% of the conversation is focused on that. That is the financial way of looking at things. That’s a management team analysis, particularly finance departments and accountants. Many executives start there because that’s what we’re taught. And that’s not wrong, but that’s how you exclude a purchase. That’s not the full decision. That’s the first step in a decision.

How do you use a spider graph for the make-vs-buy decision?

Will West: The way you make this decision is with the spider graph. You draw out all these axes, and Hendrik touched on some of the better ones. If a large business has a lot of scale, they generally say, okay, let’s analyze this, and we could justify bringing it in house. If you pass that test, make a spider graph.

One potential axis, which may or may not be there, is: am I licensing this technology in addition to producing this product? And, therefore, I have a vested interest in extending the lifespan of this technology by innovating it. Second, along those lines, maybe I’m not licensing it, but innovation of this technology is critical. I need to advance this technology over time. It’s not static. That absolutely should be there. Am I scaling this technology in the future? That axis should be there. One axis should be customers. One should be channels. Do I have multiple channels?

If you’re going further out on that axis, so you have a lot of channels, and you’re going out on the customer axis, so you have a lot of customers, that’s important to know. That’s going to influence you. The further away you get from that center point and the more expansive this web looks on your spider graph, the more likely it is you’re going to consider bringing something in house, but the more important it is to also be able to do the innovation. So it’s actually a double edged sword.

You need to be able to support the innovation and grow this technology, which means you have twin challenges. You’re going to continue to invest very heavily both at the large scale, because it’s in your best interest, and at the small scale, because you have to get from bench top to pilot scale to ramping up to that large scale through all these innovation cycles. They should really be looking at all of these axes and determining the influence of all of these things on their product or product lines in making that decision.

Can in-house spray drying handle cyclodextrins and delivery systems?

Will West: What we run into quite a bit are the delivery systems, the contributing factors of the things that run through these platforms, particularly things like the liposomals, the phytosomes, the other excipients, the things that get paired with an ingredient during drying. We are the masters in cyclodextrin technology. If you are using these things, the technologies that you are using to dry these ingredients are critically important, and they are constantly being revised, tested and advanced. Cyclodextrin is chief among them.

You cannot effectively dry a cyclodextrin on the inside with spray drying. You can only effectively do that with our dynamic atomization technology, which means you can bring spray drying in house, but you will have a problem with cyclodextrins. If you bring our technology in house, you will want to have a long term partnership with us to continue to take advantage, as Hendrik said, of our innovation, and we will gladly support and advance the technology.

But you have to think about how you do those two things: scale for economics, and innovate to advance the technology and build your franchise as a business. That applies whether you, as the customer and the owner of that technology or that product line, are the primary consumer of that product, or you are passing it on to an entire marketplace with many channels and many products within it. Thinking about all of those different dimensions of the technology, the innovation, the customer groups, and how to advance the permutations of that technology and the opportunities to build your business over time is critically important.

Edited for length and clarity from a recorded conversation with Hendrik Grobler and Will West.