Managing Growing Complexity
As CDMOs have grown, they have become complex multi-site networks with their own management challenges, similar in some ways to the large pharma companies they serve. Curia is a prime example, with both development and manufacturing sites across the U.S., Europe, and Asia. It has structured itself, said Kaus, into different business units and works to ensure that R&D and API manufacturing sites work together.While proximity between R&D and manufacturing sites can help, the company’s profit and loss (P&L) structure may matter more. The early stages are usually less profitable and can be regarded as a loss leader for later stage work, but if they are treated as a separate P&L, that is bound to affect how managers act. All too often, Chava said, CMOs have been put together by investment drivers rather than science, with the result that the company eventually gets broken up again.“Another factor is the different modalities,” said Stapleton. “Every couple of years there's a new fashionable modality and a large CDMO at that point wants to get into that space before it grows. Eventually, all these different modalities get put under one umbrella and don't necessarily help each other out. If one plus one isn’t more than two, it doesn't really make sense to put them together.”There is a clear difference between the chemical and biological CDMO markets in terms of market share. The former is much more fragmented, with the top ten probably not having more than 15-20% of the market. This, Blocher said, is largely because the plants are multi-purpose and expertise in a particular field takes many years to develop. Biologics plants, meanwhile, are essentially monoplants. Following massive build-outs in the past five years, there is no longer a drug substance (DS) shortage and the largest CDMOs, like Samsung Biologics and Lonza, have bigger capacities than the pharma companies. Lonza, indeed, acquired a large facility from Roche at Vacaville, California, just before CPHI.
As CDMOs have grown, they have become complex multi-site networks with their own management challenges, similar in some ways to the large pharma companies they serve.
The big supply issue right now, all agreed, is in sterile fill-finish DP. This factor essentially explains Novo Nordisk’s acquisition of Catalent and taking the three main sites for its own use. A large pharma company buying a CDMO was unprecedented, but the speakers were clear that this was a symptom of the capacity shortage in a particular field, not a cause.
“Their stepping into the CDMO space to add capacity is not a trend or a wave of the future. It's a one-off thing to manage a blockbuster supply that they need to fulfil demand for,” said Miller. Nor is it in any way likely to presage further such moves. The trend is still clearly in the direction of CDMOs growing by acquiring former Big Pharma sites.
A number of large pharma companies have third-party manufacturing arms. However, Miller continued, they do this essentially not to lose money on capital investments. “It's not a part of their intrinsic strategy and never will we. We all operate at a wholly different margin level to pharma companies,” he said.
“I strongly believe that the most successful CDMOs are pure-play CDMOs,” Stapleton said. “If you mix internal products with CDMO capacity, you're always going to end up in a discussion with your client about what gets priority. If you run into a blockbuster, how safe is the manufacturing capacity of any client? Are they going to be pushed out in favour of their own drug? Mixing those two models within one company never really works long-term.”
This has all happened before, Blocher agreed. The problem is that large pharma plants are rarely multi-purpose and have very limited capabilities. Securing high utilisation in plants is capital-intensive. “All of us have looked at plants that were sold by pharma. They are mono plants. You have to do a lot of adoption and investment to have multi-purpose plants.”
Precisely because the requests chemical CDMOs get are so varied, it can be hard to generalise about trends in this field. Andrea Confetti, leader of the Exclusive Synthesis business unit at Dipharma, has seen growing demand for continuous manufacturing. There is both push and pull here; at times, Dipharma takes the initiative and proposes it proactively.
“There is a lot of peer pressure in the chemistry discovery space as large pharma companies move towards green chemistry and sustainability,” Chava said. This is bringing in many different and complex chemistries and manufacturing techniques. “Small molecules are not small molecules anymore. They're ‘large small molecules’ and they are complex.”
Curia, said Kaus, is “discussing flow chemistry every week”, though in most projects batch is still preferred. Green chemistry and sustainability are top priorities for its customers, with artificial intelligence (AI) coming up fast. “The pharma companies are going into AI and in one or two years they will push AI into CDMOs because they don’t want to invest in it too much themselves.”
