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?

Prioritizing Strategic Partnerships

Kenneth N. Drew: The pressing question for many in the pharmaceutical industry is how to manage supply chain dependence on China. The global nature of the pharma marketplace makes this a complex issue. While finding a new supplier might seem straightforward, the reality is challenging.
Selecting a CDMO that has facilities in Europe as well as China can be challenging but can provide a stable supply chain. Having facilities in Europe provides an internal backup to China thus giving the innovator company the peace of mind they desire.

“The pressing question for many in the pharmaceutical industry is
how to manage supply chain dependence on China.”

Most, if not all, innovator companies are scrambling today to find alternative sources for their small molecules. Due to various issues in our world (war, inflation, sluggish biotech stock markets, high interest rates, political uncertainty in the USA), many companies were in a holding pattern until recently. Now the race is on to locate a CDMO that can provide manufacturing services. This is causing CDMOs to make difficult decisions as to whom to service creating a highly competitive environment where locating a reliable CDMO partner has become critical.
Core customers deserve priority, but CDMOs also aim to expand their customer base. Many CMC leaders had previously warned their executives to address these issues yet they delayed decisions and have now placed CMC and procurement teams in a difficult position. High-quality CDMOs are now overwhelmed with CDAs, RFIs, and RFPs from innovators who have waited to act and the competition for capacity is fierce.

Innovators should build relationships with CDMOs that have diverse geographic footprints. This approach mitigates risks with supply chain disruptions in China but also ensures a more resilient and flexible production network. The companies that wait for China to have even more issues than the BioSecure Act, will be on the outside looking in. Prioritizing strategic partnerships can help secure stable supply.