1. What roles do contract research organizations (CROs) and contract manufacturing organizations (CMOs) play in the drug discovery/development value chain today, and how will their role change in the future?

CROs and CMOs deliver services in the area of $9 billion per year to the pharmaceutical industry. With more than 5,000 products still in clinical (CT1-CT3) phases in the hands of small or mid-size pharma companies, the role of CROs and CMOs has increased as there is a need for specialized service units to successfully deliver new APIs. This need includes API synthesis, stability tests, final dosage development and clinical trial production.

For launched products, CMOs' work in API or intermediates production and drug product production has increased as well. In addition, manufacturing services in generics are an important part of CMO work today, again in both areas of API/intermediates and drug products.

2. How have the requirements by pharma companies changed over the years, and how can suppliers manage to live up to them?

Heightened focus on quality and regulatory track record has definitely increased over the last few years. We've also seen increased FDA - Food and Drug Administration - and/or EMEA  - European Medicines Agency - audits at CMOs in Asia, Europe and North America. In parallel, margin pressure is still ongoing, specifically in the API and intermediates area, since overcapacity still exists.

3. Which new business models, like project-based or value-based outsourcing, could turn out to be the most promising guarantors for a successful cooperation with the pharmaceutical industry?

The pharma-CMO business model since the late 1980s is the same, mostly opportunistic outsourcing in case in-house capacity does not manage the production load. A slow shift to fully outsourced manufacturing is visible (e.g., Shire), mainly driven by mid-sized pharma houses. This trend may lead to a shift of the business model, where a CMO or DMO will take over the full supply chain (starting material to pharmaceutical product packaging). Such models are already used in electronics or nutrition industries. There is no reason the pharma industry could not move to such a model and keep the focus on its core activities, like research, sales and marketing, drug products, etc. Several industry leaders have already realized the capabilities to offer such an integrated offering, including DPx Holdings - the parent company of Patheon, DSM Fine Chemicals and Banner Life Sciences. It will be up to the industry leaders to catalyze the change. Besides simplified processes during the development timelines, such an integrated model will reduce drug cost due to lean management of the supply chain and fully optimized net working capital along the supply chain.

4. The establishment of shared risk/shared reward partnerships has increased significantly. Can these partnerships accelerate drug discovery and fill up the innovation pipelines?

In my view, there is no correlation between shared risk and reward and the success of pipelines. The question should maybe be positioned differently. What is the most efficient and leanest way to get in clinical trials or progress in clinical trials? How should services be bundled (e.g., co-development of actives and fill/finish) and expensive corrections like reformulations of products prevented? Here, the CDMO players can help with their specialized know-how and deep experience, specifically if they can combine API synthesis and drug-product formulation.

How such developments are paid for is a different question. Some CDMO companies may be willing to bet on the success of an early-phase development by taking a share of future profits, while others may see their role as pure service provider and would like to get paid for services rendered. If the risk-sharing approach is used in the majority of early-phase collaborations, it will increase the risk profile of the CDMO companies substantially and may lead to a lot of failures in the industry, since the capital structure of a common CDMO company cannot deal with such clinical risks.