Grant Playter

In a competitive outsourcing market, contract development and manufacturing organizations (CDMOs) are always searching for the best ways to serve their clients. CDMOs and other contract organizations will look to industry to determine where they should invest in their services and facilities, and successful CDMOs will pivot to meet industry needs.

In this vein, successful CDMOs are perhaps one of the best sources for insight into trends not only into the outsourcing sphere, but the entire pharma industry. This article will explore the factors CDMOs view as important in landing pharmaceutical clients, and what one can infer regarding the state of the industry from them.

A stray observer attending just about any pharma conference would likely be struck by a phrase CDMO representatives seem to repeat again and again: end-to-end services. In 

®’s coverage of the 2023 DCAT conference alone, representatives from Thermo Fisher Scientific (1), CordenPharma (2), and Quotient Sciences (3) stressed that their company offered end-to-end services. Sarah Stevens, senior vice-president and head of Drug Product Development & Manufacturing at Quotient Sciences at the time of the interview, even made the case that we would see this marketing increase further over the course of the next few years.

“Thinking about it from the CDMO and pharmaceutical services perspective, I think we will see this continuing direction of travel towards offering a fully integrated end-to-end service,” said Stevens (3). “I think almost all CDMOs will be at least claiming to offer integrated, end-to-end services.”

In large part, end-to-end services are receiving abundant attention because they satisfy two interconnected core criteria: supply chain anxiety and flexibility. Existing issues of the just-in-time supply chain model were shattered by the COVID-19 pandemic, leaving manufacturers who were dependent on multiple companies in multiple countries for different steps of the drug development, manufacturing, and packaging process scrambling to maintain their manufacturing processes (4).

This situation presented CDMOs with a unique opportunity: companies offering both drug substance and drug product services could now pitch themselves on the virtue of supply chain redundancy, which was now in demand. While this hasn’t necessarily been entirely transformative—many CDMOs, in particular small-to-mid sized operations, will almost certainly continue to specialize in certain steps of the manufacturing process—it has become an increasingly viable way to get one’s foot in the door. And should the pitch land, it presents a stronger value proposition for the CDMO, as they have the added leverage because they are more deeply integrating themselves into their partner company’s operations.

However, as Stevens somewhat alluded to in her quote, an end-to-end service needs to satisfy the many complex needs of its partner company. While many companies advertise their end-to-end capabilities on paper, they often do not have the existing capabilities to serve all potential clients. In a DCAT roundtable on the topic, Enrico Polastro, vice-president and senior industry specialist, Global Pharmaceutical and Fine Chemicals Practice, Arthur D. Little, noted that end-to-end companies are “unlikely to be able to offer the full range of molecule building and formulation capabilities covering the entire spectrum of pharmaceutical products” (5).

This is where manufacturing flexibility comes into play. While it is difficult to cover the full spectrum of needs, the more one can offer, the more enticing that becomes to potential clients, as it allows the partner company to operate more broadly and trust that changes can be made on the backend to accommodate any necessary changes. Furthermore, establishing a relationship with an outsourcing company that can address various needs may be desirable for companies who anticipate expanding into various types of drug products, as it gives them the option to return to a familiar process that has previously addressed their needs.

“Outsourcing partnerships that prioritize flexibility enable companies to quickly adapt to market changes,” says Nandu Deorkar, senior vice-president, Research & Development, Avantor. “In a fast-paced industry like pharmaceuticals and biotech, market demands can change rapidly, and companies that can quickly adapt have a competitive advantage. By having a flexible outsourcing partner, companies can adjust their operations promptly to meet changing market demands and stay ahead of the competition.”

This flexibility can take many forms. For instance, according to Deorkar, manufacturing agility, scalability, and collaboration are all crucial factors, in addition to technical expertise and demonstrated capability. Ultimately, what is crucial is starting a dialogue that enables an outsourcing company to efficiently and capably respond to the needs of its partner; end-to-end capabilities are one such answer in the current broader pharmaceutical market.

Another corporate structure that has received increased attention among CDMOs is the push toward sustainability operations. On the surface, this move works well purely from a public relations perspective; a 2021 Pew Research study found that 80% of respondents in 17 advanced countries were willing to make “a lot” or “some” changes to how they lived or worked in order to fight climate change (6). Even as it pertains to the United States, which has historically fought over the issue, as of April 2023 69% of Americans believe the country should invest in renewable resources and strive toward carbon neutrality by 2050 (7), and the United States government has passed major legislation geared toward energy sustainability (8).

“Outsourcing companies are placing an emphasis on their sustainability practices to showcase their commitment to social responsibility, which can also improve their reputation and brand image,” says Deorkar. “Consumers are becoming more aware of environmental issues, and they prefer to purchase products and services from companies that prioritize sustainability.”

All that said, while the preferences of the general public should be noted—particularly as public opinion places a key role in shaping legislation—their direct impact on business-to-business interactions is difficult to directly
link. However, an understated impact of sustainability measures is in how they confer an economic benefit to businesses that use them.

, Pierre Luzeau, CEO of Seqens, an outsourcing company specializing in pharmaceutical synthesis and specialty, noted that customers were specifically looking for partners who could help them reach sustainability goals like carbon-zero (9). Luzeau argued that it was such a strong factor in business decisions that failing to hit that benchmark, or at least work toward it, could be a death sentence.

“We are convinced that the selection of suppliers will be based on the best supplier from that standpoint,” said Luzeau. “If you are not capable of proposing the best solution as far as [corporate social responsibility] is concerned, you will disappear in the 10 years’ timeframe—this is for sure.”

The economic reasons for this are multi-faceted. First, as public opinion continues to favor environmental sustainability measures, the likelihood of government-subsidized energy programs and fines for energy inefficient processes rises. Companies that cannot get ahead of anticipated regulations in a timely manner will be deemed more inflexible in that regard than their competitors.

From a strictly cost-savings perspective, energy initiatives reduce energy consumption and waste. Sustainability and efficiency are inextricably tied, and there are measurable savings that occur from energy and waste reduction.

For example, while the fixed costs on solar panels are significant at the beginning, with enough time one can recoup those costs and more. Furthermore, anticipated advances in energy-saving technology could pave the way for “alternative energy” to simply become “energy,” as Jason Lomberg, North American editor at Power System Designs, succinctly notes in “The Elusive ‘Break-Even’ Point for Alternative Energy.”

“In the very near future, solar—and other technologies with an unforeseen ‘break even’ point might shed the ‘alternative’ label and just be an extremely viable form of energy,” said Lomberg (10).

While this article has tackled what CDMOs are placing an emphasis on, one might notice one factor that is not being discussed: cost. In many private sector negotiations, regardless of other qualifications, the lowest bid often gets the job. However, pharma marketing tends to steer clear of this topic—no CDMO is publicly advertising themselves as a “budget” option.

There are multiple reasons for this. George Ntortas, partner at Fuliginous Management Consulting, a consulting firm that works with companies operating in the CDMO space, neatly summarized the inherent variability of the CDMO pricing structure in a feature he wrote on LinkedIn. In the feature, Ntortas explained that various factors, including the type of manufacturing being performed, the degree of difficulty of the task, whether competitor’s have similar capabilities, and dozens of others all impact price in some form or fashion. Production for a generic paracetamol tablet might only need to be
sold at a 60% mark-up, whereas lyophilized patented vial may be in more of a ballpark of 90% (11).

“Margin is not the only factor affecting what is the willingness of a pharma company to pay. Culture, location, quality, cooperation, responsiveness, and flexibility of the CDMO also affect customers’ willingness to pay,” said Ntortas. “If the pharmaceutical company is satisfied with the service level they get from a CDMO, if they feel that they are important and their supply is secured, they are probably ready to sacrifice part of their margin as opposed to choosing a CDMO with a lower price but also a lower service level and higher supply risk.”

It is because of the inherent variability of the types of projects, customers, and deadlines that CDMOs deal with that leads to cost differentials. If a CDMO were to advertise itself at one price, it would almost certainly be wildly overcharging or undercharging most of its clients; either way, it would soon be out of business. While cost might not be pushed to the forefront of marketing, it is still very much a consideration—but it is one that is dependent on variables that need to be ironed out in negotiations.

“While cost is undoubtedly an essential factor to consider in outsourcing partnerships, it should not be the sole focus,” says Deorkar. “Successfully bringing a drug to market or clinic requires more than just cost reduction. Technical expertise, scalability, and flexibility are also crucial capabilities that can significantly impact the success of an outsourcing partnership. Companies may sidestep cost discussions in public because it’s a sensitive topic, but it’s still an important consideration in the decision-making process.”

1. Playter, G. Discussing the Growing Role of CDMOs with Anil Kane. 

, March 29, 2023.
2. Playter, G. Illuminating the State of Outsourcing with Stephen Houldsworth. 

, March 27, 2023.
3. Playter, G. Exploring the Future of Outsourcing with Sarah Stevens.

, April 28, 2023.
4. Spivey, C. Drug Solutions Podcast: Securing Manufacturing Independence Through Re-shoring Facilities to USA. 

, March 1, 2022.
5. DCAT Value Chain Insights. Straight Talk: End-to-End CDMO/CMO Business Models. 

 July 24, 2019.
6. Bell, J.; Poushter, J.; and Kennedy, B. In Response to Climate Change, Citizens in Advanced Economies Are Willing To Alter How They Live and Work. 

, Sept. 14, 2021.
7. Tyson, A.; Funk, C.; Faigan, M.; and Huang, C. What the Data Says About Americans’ Views of Climate Change. 

, April 18, 2023.
8. H.R.5376, US House of Representatives, 117th Congress, 130th Session (Washington, DC), Sept. 27, 2021
9. Playter, G. Setting Sustainability Goals with Pierre Luzeau. 

, March 30, 2023.
10. Lomberg J. The Elusive “Break-Even” Point for Alternative Energy. 

, May 30, 2017.
11. George Ntortas. Pricing in the Pharmaceutical CDMO Environment. 

Pharmaceutical Technology
Vol. 47, No. 6
June 2023
Page: 16-18

When referring to this article, please cite it as Playter, G. Governance of Future Pandemics. 

Articles

What factors do CDMOs consider vital to their success?

The Outsourcing Success Story 

Aragen Life Sciences, an Indian contract research and development organization, and FAR Biotech, a US-based computational drug discovery company, announced on May 30, 2023 a collaboration to advance preclinical programs in neurodegeneration on May 30, 2023. Under the collaboration, Aragen will use its experimental discovery platform to advance FAR’s small-molecule program.

 molecules we've seen coming out of FAR Biotech over the past several months and look forward to helping them advance their neurodegeneration program,” said Simon Haydar, senior vice-president and head of Integrated Drug Discovery, Aragen, in a company press release. “We are confident that the outcome will be novel therapeutic candidates for a high-impact target that has proven hard to drug."

"A key therapeutic area for FAR Biotech is neurodegeneration, where we believe our computational approach can deliver structurally diverse, novel molecules that move us closer to overcoming Alzheimer's, Parkinson's and other related diseases that have thus far proven intractable,” said Martin Martinov, CEO, FAR Biotech, in the release. “We are very pleased to be collaborating with Aragen—who we regard as a highly complementary expert partner that can help to accelerate our neurodegeneration program."

Aragen and FAR Biotech will collaborate to advance a small-molecule neurodegeneration program.

Aragen Life Sciences and FAR Biotech Enter Neurodegeneration Collaboration

Novartis announced the purchase of an investigational hematopoietic stem cell gene therapy program from AVROBIO, a pharmaceutical company specializing in clinical-stage gene therapy treatments, on May 22, 2023. Novartis will pay $87.5 million for the asset, which is intended for treatment of cystinosis, a rare genetic disease. According to a company press release, the move is designed to “extend the company’s cash runway” into the fourth quarter of 2024.

“This transaction strengthens AVROBIO’s balance sheet, focuses our pipeline strategy, and is a strong endorsement of our HSC gene therapy approach and plato gene therapy platform,” said Erik Ostrowski, interim CEO and current chief finance officer, AVROBIO, in the release.

“Novartis acquiring the cystinosis program is a wonderful validation for the whole hematopoietic gene therapy field and great news for cystinosis patients,” said Geoff MacKay, former CEO of AVROBIO, in a statement on LinkedIn (1). MacKay stepped down from his long-time position as CEO earlier this month to join the leadership team at an early-stage company (2).

“Novartis is acquiring AVROBIO’s investigational hematopoietic stem cell gene therapy for the treatment of cystinosis, a rare, genetic, metabolic, lysosomal storage disease that causes cystine accumulation which can lead to widespread tissue and organ damage, including end stage renal disease,” said Novartis in a statement sent via email. “The acquisition of a potentially transformative and first-in-class therapy for a severe, rare condition with no disease-modifying options aligns with Novartis’ platform strategy in Gene & Cell Therapy. Ongoing development of the therapy, AVR-RD-04, will be supported by Novartis’ experience and capabilities in the development and delivery of gene and cell therapies for rare diseases.”

1. MacKay, G. Personal Statement. LinkedIn, May 23, 2023, https://www.linkedin.com/feed/update/urn:li:activity:7066371768185167872/ (accessed May 30, 2023)

2. AVROBIO. AVROBIO Announces Leadership Transition. Press Release, May 1, 2023.

The $87.5 million purchase grants Novartis rights to an investigational gene therapy program intended for treatment of cystinosis.

Novartis Purchases Cystinosis Gene Therapy from AVROBIO

FDA released its final guidance concerning covariate adjustments in randomized clinical trials on May 30, 2023. The guidance, which applies to randomized, parallel group clinical trials for both drugs and biological products, focuses on the use of prognostic baseline covariates “to improve statistical efficacy for estimating and testing treatment effects,” according to an agency press release.

The guidance does not address use of covariates to control for confounding variables in non-randomized trials, in models to account for missing outcome data, or for analyzing longitudinal repeated measures data. Additionally, the use of Bayesian methods or machine learning methods for covariate adjustment is not addressed.

The guidance describes FDA’s current recommendations regarding adjusting for covariates in statistical analysis of randomized clinical trials.

FDA Releases Final Guidance on Adjusting for Covariates in Randomized Clinical Trials 

, is organizing the next Cannabis Science Conference Fall meeting in Providence, RI, which will run on Sept. 20–22, 2023. The conference is looking for speakers to share their knowledge on a variety of topics including analytical science, medical cannabis, cultivation, and psychedelics.

The event is currently soliciting a call for abstracts. Please submit your talks for consideration to the 

2023 Cannabis Science Conference Fall Abstract Submission Portal

. The deadline to submit abstracts is June 2, 2023.

The next Cannabis Science Conference Fall meeting is soliciting a call for abstracts.

Cannabis Science Conference Fall Meeting Issues Call for Abstracts

Myrna Wilson, director, Global Marketing, Strategic Growth and Technical Sales, Pharmaceutical Ingredients, Univar Solutions, spoke with Grant Playter, associate editor, to discuss the state of the pharmaceutical ingredients industry shortly after this year's DCAT Week. Topics of discussion include the state of the biopharma supply chain, movements in the patent industry, and more.

Broadly speaking, can you give me your perspective on the state of the ingredients industry? Would you characterize it as in a state of flux? How can companies look to strategically maneuver in this space?

: As the world economy continues to recover and evolve post-pandemic and with geopolitical tensions, the ingredients industry is not immune from the impacts of those financial conditions.

As with most industries, the ingredients industry is constantly in a state of flux as it must continuously respond to global supply chain challenges, and – specifically as it pertains to pharmaceuticals – the need for drug manufacturers to continuously improve the medicinal efficacy of their offerings. Also, the increased focus on environmental, social, and governance factors means the ingredients industry will have to evolve to ensure it is either working on how to manufacture its product offerings with environmental footprint considerations or consider alternatives to its current lines that can address those requirements.

Strategic maneuvering all depends on the long-term strategy of each company. However, there are a few elements that should remain at the forefront of a strategy in this industry. For Univar Solutions’ pharmaceutical ingredients team, it means that as we position ourselves to respond to external dynamics, we always consider quality, security of supply, traceability, and documentation of adherence to quality and regulatory standards. If we keep those in the forefront of our planning, we are sticking to the core of what our customers need from us.

We recently passed the three-year mark of the COVID-19 emergency declaration (March 2020 in the U.S.) but many are still talking about its impact on the supply chain. What is your perspective on these alterations? Do you think the just-in-time model may return in full force at some point, or will efforts like onshoring stick around in the long-term?

: COVID-19 pushed the industry to respond faster and to become more efficient than ever before. It also highlighted supply chain pinch points and forced the entire pharmaceutical industry, and far beyond, to make swift moves to sustain the pressure. While I don’t think our industry has completely recovered from the many supply chain constraints we were presented with, businesses up and down the chain are making changes to their core infrastructure to better position themselves in the long-term.

Shortages that have gone unresolved over extended periods of time have caused the industry to either create or adapt to new supply sources or alter their existing supply chain paths. These sorts of adjustments are often both costly and time consuming, making it unlikely that entities would work to undo new paths created. Additionally, many may have found secondary benefits with these alternative paths, such as improved sustainability outcomes and supply chain optimization.

Also, there has been a push by government entities around the world to onshore their internal access to secure the health of their citizens, even offering incentives to build infrastructure within their borders. Again, the cost to make these moves is significant. Once those investments are made, it would be difficult and costly on a variety of fronts to undo them.

What are some recent technological innovations in your space? Can you illuminate them for our audience?

: Univar Solutions prides itself on the fact that we have a global network of pharmaceutical laboratories within our solution centers which serve as pharmaceutical application and formulation laboratories to help support the road to innovation and reformulation for our customers and suppliers. Because Univar Solutions sits at such a key intersection in the supply chain with science and technology, we strive to be a true solutions partner delivering benefits far beyond logistics for our customers and suppliers. Distributing the chemical or ingredient is only the bare minimum.

In terms of innovations based on trends in the pharmaceutical space, there has been a significant shift toward creating more palatable drugs and taste-making active pharmaceutical ingredients (APIs). Due to the influence of Generation Z on the drug market, today there is increased focus on not just the efficacy of a drug, but on its taste and ease of consumption.

As an example, drug manufacturers now can create products specifically engineered to deliver two APIs that are unstable when combined with one another. These duo-capsules are game-changers for drug manufacturers and consumers alike, while also delivering significant benefits in sustainability.

Patents are in a bit of an interesting space at the moment, particularly in the United States. The Inflation Reduction Act was signed into law last year, which introduced new price controls and changed how certain drug exclusivities work. Meanwhile, broad genus clauses recently faced challenges at the Supreme Court level in the Amgen vs. Sanofi case, which could have upended how patents are handled in the biopharma space. Can you talk a bit about how the patent industry is preparing for these significant changes?

: The pharmaceutical industry is facing a big patent cliff. It’s creating urgency among manufacturers in the generics space in the race to get their Abbreviated New Drug Applications (ANDAs) in place so that they can enter the market with their generic. Simultaneously, large pharmaceutical companies who may have held back research and development projects so as not to cannibalize their current product offering in the market may be releasing the follow-up much faster than planned.

Between patent battles, competing offerings, the likelihood of success through the trial process, and the massive cost to take a drug from clinical trials to commercialization, the pipeline of projects should be constantly refilled. It would also seem prudent for drug manufacturers to weigh the commercial viability of their projects by ensuring that their recipes consider cost and security of supply of any materials built into the formulation in earlier trial phases.

As a distributor, it’s a partnership that we aim to offer our customers. It is critical that sourcing and cost implications be part of the planning as production needs to scale up. If a manufacturer partners early with us, we can source, provide secondary sources, and design efficient supply chains that consider quality and security of supply from small quantities to commercial consumption.

Do you have any bold predictions for where the biopharma industry will be ten years from now?

: The rate that technological developments accelerate in any space is increasingly exponential, and the life sciences industry is changing and evolving at an amazing pace. A 10-year prediction would be truly hypothetical based on where research and development are currently focused. Personalized medicine developed based on each person’s body could be leaps and bounds from where it is now. The biopharma industry already has a promising pipeline of therapies being evaluated for cancer treatment and rare diseases. Hopefully, the brilliant minds working on the next wave of projects will work to eradicate some of these rare diseases and begin finding cures for even the deadliest of cancers.

Idealistically in 10 years, targeted gene therapy can be used for everything, not just limited to rare diseases or those that scientists know the molecular pathways for. This could result in sought-after cures, with little to no side effects. The intensity around curative therapies for chronic conditions along with advances in early detection technology could reduce the need for medications considered to be lifelong medications.

An increasingly aging population with a longer average lifespan could also provide a new source of challenges for the biopharma industry, as scientists look for a way for to keep the population living with relatively good health and mobility into their 90’s and 100’s. Finally, 10 years from now, with that aging population and the continued push to make health care more affordable for everyone, we could see big movements to somehow make these sizable developments more accessible.

For more of our coverage on DCAT in 2023, viewers can visit 

Myrna Wilson, director, Global Marketing, Strategic Growth and Technical Sales, Pharmaceutical Ingredients, Univar Solutions, discusses the state of the biopharma supply chain, movements in the patent industry, and more.