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?

A Need for Greater Variation of Manufacturing Assets

Chad Telgenhof: The current market growth for CDMOs is fueled by the continued focus of pharmaceutical companies on their core competencies of R&D and marketing, leading to the outsourcing of process development and manufacturing.
However, the role of ­CDMOs and the demands being put upon them are evolving. As pipelines and drugs in development change, with the rising demands for biologics and other new modalities — as well as niche and orphan drugs — customers are requiring specialized, diverse, flexible and scalable capabilities.
For small molecule APIs, lower volume demands are coming with increased molecular complexity, a greater number of processing steps and the likelihood of challenging, and often hazardous, chemical transformations. This means there is a need for greater variation of manufacturing assets to handle the necessary reagents and reaction conditions, as well as a broad range of vessel capacity to efficiently process potential swings in volumetric needs.

“Increasingly stringent regulatory requirements
are making it more challenging for innovators
to meet compliance standards on their own.”

Another key factor is the expansion of pharma companies into emerging markets, and the need for local manufacturing capabilities. CDMOs offer cost-effective solutions through their economy of scale and flexibility for these situations, and larger CDMOs with wider manufacturing networks can assist in the security of supply chains by providing secondary sources of materials under the same quality framework, as well as back filling synthetic steps in processes.

Increasingly stringent regulatory requirements are making it more challenging for innovators to meet compliance standards on their own. As global regulations around drug development, manufacturing, and quality control become more complex and rigorous, companies are turning to CDMOs for their expertise in navigating these regulations efficiently. CDMOs have access to advanced technologies, supported by robust quality systems, and a deep understanding of global regulatory requirements, enabling them to deliver compliant solutions that meet the highest standards.