Contract development and manufacturing organizations (CDMOs) have been on the rise in the last decade. Historically, CDMOs operated on a business model which predominantly focused on serving as external service providers for manufacturing pharmaceuticals. This model included the addition of capacity by the acquisition of manufacturing facilities from (bio)pharma companies or own capital investments. However, CDMOs have increasingly become innovation leaders and cover more areas of the pharma business, not just manufacturing, opening up additional revenue streams.

This change of focus has been accompanied by a change in the M&A landscape in the market. Some CDMOs are expanding their services and swapping their “contracts” for “partnerships”, evolving the term “CDMO” into “PDMO.” By getting closer to their partners, CDMOs can move past some of the pressure and offer consultative support or innovation to develop products in new ways.
The evolution of the CDMO sector is propelled by rising manufacturing standards, the advent of groundbreaking therapies, and a shift towards personalized medicine.

CHEManager asked executives and industry experts from a broad range of CDMOs to share their views on how their companies are dealing with this changing economic environment and the resulting opportunities and challenges. We proposed to discuss the following aspects:

• (How) have the rules of the CDMO market changed since the pandemic of 2020/21?
• What do you consider the most important growth drivers for CDMOs?
• What is your company’s strategy to grow the market share in the CDMO industry?

Speed Is Now a Crucial Factor in Judging CDMOs

Jordi Robinson: Since the accelerated development of vaccines in response to the Covid-19 pandemic, many pharma companies have been reviewing how development timelines for new drugs can be shortened. This has led to pressure being put on suppliers to provide extremely competitive lead times for projects, and especially for early-phase programs, where speed has always been critical. Speed is now a crucial factor in judging CDMOs, and has been used as a metric in customers’ rationales for reducing the number of suppliers they work with.

The reasons for this are twofold: firstly, if a company is selecting a supplier principally on the basis of the timeline they offer, this can only happen if the two other key factors of cost and provision of a technically-sound proposal are closely matched across all suppliers; and secondly, if the customer is only working with a smaller number of suppliers, it follows that they need to be able to offer a wider range of services and technologies to fulfil the wide range of customer’s needs.

“The reliance on a smaller supplier base leads
to a partnership relationship model,
rather than the more ‘trans­actional’ approaches of the past.”

Although this may appear that the customers are getting everything they want, there are also benefits for the CDMO in this scenario. The reliance on a smaller supplier base leads to a partnership relationship model, rather than the more ‘transactional’ approaches of the past. Despite the increased pressure for competitiveness, the likelihood of a long-term, and mutually beneficial relationship will result is increased, as each party is dependent on the continued performance and success of the other for the relationship to prosper. This leads to the potential of continued work for the CDMO, whether it be through access to new projects coming through the pipeline, or the continued supply as molecules progress through the development cycle. The result is that even if it appears that the supplier is working under ever-increasing pressure, those that are more agile and flexible can have longer-term benefits from this approach.