Biotechs To The Fore
A second key trend is that biotechs are increasingly dominating pharmaceutical innovation. Their strategy is to get their compound through Phase II (generally speaking) and then sell either it or the whole company to a large pharma with the deep pockets needed to fund late-stage clinical trials.
These companies do not and will not have the infrastructure large pharma used to have. For Joachim Kaus, VP of small molecule development and managing director in Germany for Curia, this is “exactly the reason why we as a CDMO and the CDMO market are both growing”.
Perhaps a bigger question is how well the two parts of the CDMO can be made to work together.
“The first contract services organisation I joined 20 years ago did chemistry, manufacturing, and control (CMC) work. We were classified as a CRO, which wasn’t really the correct acronym for who we were,” said Russell Miller, vice president of sales & marketing, Enzene Biosciences. “As the model has changed, the D part has developed and it’s where the industry is going. It is not a myth.”
Perhaps a bigger question is how well the two parts of the CDMO can be made to work together. For Dr. Markus Blocher, CEO of Swiss CDMO Dottikon Exclusive Synthesis, there is limited synergy between CRO and CDMO activities. The required mindset at the different development stages is also different and there is no compelling reason why they should be carried out by the same provider.
Miller agreed, saying that developing a drug and assessing its efficacy are totally different. No company has yet “cracked that code” of combining the two and many attempts to do so have ended in them splitting apart again, starting as long ago as Cardinal Health in the 1980s. “One requires the other, but they don't need each other to operate both,” he said.
In addition, as noted by Dr. Satyanarayana Chava, executive director and CEO at India’s Laurus Labs, the decision-makers in large pharma companies are usually different at each stage. Any contract service organisation, be it the D, the R, or the M, must align with the way their clients are organised, Miller continued. Enzene has different groups to speak to the different decision makers.
“Small and emerging biotechs are very interested in that integrated offering,” he said. “Because they have a limited team, they need to come to an organisation and say, ‘Help me go from A to B’. The less they have to go to other providers, the more attractive it is for their management and the more attractive the package is when it comes to selling that asset off as that organisation grows.”
In addition, Blocher said, most CDMOs that have forward-integrated into the drug product (DP) space were financially driven. The margins in DP are higher “because you don't see the raw material costs going through the profit and loss. When you acquire a DP company, it improves your overall EBITDA margin and that's a good investor story case. They don't see the risk behind it.”
