The ongoing pandemic is putting pharmaceutical R&D strategies to the test and also challenging manufacturing planning and supply chain management. Particularly in this industry segment, the supply chain is global, complex and interconnected. Each link must be strong enough to ensure that the road from lab to final drug product is as smooth as possible, even under the most difficult circumstances.

In addition to the pandemic, the growing threat of a no-deal-Brexit amid old and new trade conflicts and increasing protectionism, is putting even more stress on companies operating in the pharma sector.

In cooperation with Wombat Capital, a cross-border investment bank, CHEManager asked executives and experts of CMOs, CDMOs and CROs operating in the pharmaceutical sector to share their opinion on current challenges for their industry and how these challenges may influence changes in their market.

What in your opinion and from your perspective are the main impacts of the coronavirus pandemic on the drug supply chains?

Andrew Henderson: For Sterling the impact of Covid-19 has been minimal, and we have experienced no interruption to our operations. We quickly implemented strict measure to deal with the situation and ensure as much as possible the safety of our employees, customers and suppliers. From a wider pharmaceutical industry perspective, the initial part of lockdown did impact global supply chains and logistics were significantly impacted. I think this will have a lasting impact as governments and industry will look to establish more diverse and robust supply chains in the future with at least part of the supply, particularly for critical medicines, coming through domestic channels.

Many Western CDMOs have already shifted operations back to the USA and Europe as intensive business activity in China has driven up labor costs. In addition, national policies, trade-related developments such as Brexit and the US-China dispute, and impacts of pandemics are likely to require repatriation of at least part of the supply chain in many countries. Could CMOs/CDMOs be beneficiaries of restructured supply chains?

A. Henderson: As highlighted above I think governments and industry globally will be looking at restructuring supply chains for at least their critical products to ensure they have some domestic based supply. This shift or redistribution of supply chains was to some degree already in motion pre-Covid but has now been accelerated. CDMOs will play a critical part in this evolution of pharmaceutical supply chains.

What do you think the impact of the repatriation of the drug supply chain will have on the M&A activity in the CMO/CDMO industry? Do you think that this would create an impact on valuations?

A. Henderson: The redistribution of global supply chains to ensure more domestic channels will drive all countries and regions to ensure the necessary manufacturing capacity and infrastructure is available. This will be achieved over time through M&A but will also need significant capital investment.

Has the inability to hold face-to-face meetings with prospective clients and conduct client visits to sites affected your new business development since the outbreak of the coronavirus pandemic?

A. Henderson: We have put in place the ability to host virtual tours and audits of our facilities. As a result, we have seen minimal impact to date.

EU regulatory authorities and the FDA have issued guidance on conducting clinical trials during the Covid-19 outbreak. Have you as a CMO/CDMO been affected by these changes?

A. Henderson: We have seen some delay to clinical trials which has impacted the timing of projects. The earlier phase projects have been impacted more however, in recent months we have seen things starting to pick up and customers looking to initiate more early phase projects.

The race is on to develop treatments and vaccines against Covid-19, and so is the need to assure supply of these potential drugs and vaccines. Pharma companies are leveraging their internal manufacturing networks but also partnering with CMOs/CDMOs. What supply and manufacturing strategies/alliances are in play?

A. Henderson: We have received a range of potential Covid product enquiries and are now involved in a number of Covid-related projects. These projects range from the development of novel products being investigated as treatment options through clinical trials to projects to reestablish local supply of existing products.

The CMO/CDMO industry has managed to support efforts to develop vaccines and therapeutics for Covid-19 despite already being at a high level of utilization. What made that possible?

A. Henderson: For any CDMO to be successful you need to have a flexible business model to adapt to and accommodate a wide range of projects. This clearly has benefits for the Covid situation as these companies can invest and create capacity very quickly.

“Emerging”, “virtual” and other small (bio)pharmaceutical companies are driving the discovery and development of new drugs but are mostly dependent on the availability of financing – which could become more restricted due to the economic downturn cause by the economic and epidemiologic disruptions to the global economy. As emerging biopharma companies are important customers of CMOs/CDMOs, how is this going to affect your business?

A. Henderson: At Sterling we have placed significant strategic focus on ensuring we have a diverse customer base and project portfolio. We work globally with big pharma customers through to small virtual companies and are working on projects from pre-clinical through all phases of clinical development in addition to supplying an extensive launched product portfolio. This diversity is important in providing a robust platform for any shift in future market dynamics and most importantly demonstrates to our existing and potential customers we have a stable and healthy business to ensure the long-term supply of their key products.

For the biopharma CMO/CDMO industry, the pandemic crisis has created great opportunities. What is your opinion on whether and to what degree the CDMO industry will enjoy long-term benefits from its role in tackling the current crisis?

A. Henderson: The flexibility of CDMOs and their ability to innovate and mobilize resource and capacity quickly has been critical in the response to the Covid crisis. These key attributes are not only important in the response to the Covid situation but also to support the growing complexity of pharmaceutical products and their associated development and supply chains. The CDMO’s that are able to demonstrate these key attributes and deliver exceptional service will be well placed to benefit from the current crisis and ongoing evolution of pharmaceutical product development, manufacture and supply.

In May of this year Sterling Pharma Solutions has commenced production of hydroxychloroquine (HCQ), a treatment currently under investigation for Covid-19. Sterling manufactures the API with the finished product being manufactured and supplied by Accord Healthcare. This new deal with Accord will establish a domestic supply of the product ensuring access for patients in the UK, should the drug prove successful. Is this collaboration a blueprint for future local/domestic supply chains?

A. Henderson: I think it is now becoming clear that individual countries need to establish a more diverse and domestically located supply chain for a range of key medicines. To do this in a cost and time efficient way industry and governments will need to be creative in developing the necessary collaborations to enable robust supply chains. The collaboration between Sterling and Accord is therefore one of many that will be required to ensure the future supply of key medicines.

www.sterlingpharmasolutions.com

This interview was conducted in cooperation with Wombat Capital, a cross-border investment bank providing mergers and acquisitions and strategic advisory services. With offices in New York and Paris, Wombat Capital focuses on the CDMO/CRO and pharma outsourcing sectors.