CPHI Experts Report that Small to Mid-sized US CDMOs Must Invest Now to Benefit from 2025 Contract Funding Surge

As CPHI North America, held at the Pennsylvania Convention Centre (May 7-9, 2024) approaches, experts predict that US-based contract development and manufacturing organizations (CDMOs), especially small to mid-sized, should invest throughout 2024 if they wish to maximize on the rise in contract services funding predicted for 2025. Other key trends for 2024 include exploring pilot-scale manufacturing of new technologies, improving supply chain resilience, and ‘friend shoring’.

CPHI expert, Brian Scanlan, operating partner–Life Science Edgewater Capital Partners, sees 2024 as a “holding pattern year”, where funding gradually returns to biotech, as reported in a CPHI press release. He stated that he is already seeing this begin to filter through toward the outsourcing community. But if US-based smaller and medium-sized contract research organizations (CROs) and CDMOs want to benefit from a likely 2025 resurgence, they cannot just wait for the market to return. “They need to be focusing now on operational efficiencies and commercial effectiveness,” Scanlan stated. “This means investing in manufacturing process improvements, like continuous and titer reductions, as well as other areas of the business that could bring overall efficiencies, from enhancing quality management to areas like AI [artificial intelligence] to enhance/accelerate process development and quality trend analysis” (1).

Scalan emphasized that these companies should take every opportunity to invest. “Any area that drives more efficiency in CDMO operations, even streamlining and enhancing effectiveness in new business development using AI enabled tools [is worth pursuing]. So, this will be a year of seeking productivity excellence and cost containment to prepare for a potentially bigger resurgence in outsourcing in 2025,” Scalan said. CPHI North America plans to cover at least one of these potential applications—making use of generative AI to analyze upcoming requirements for pharmaceutical drug manufacturers and distributors as the Drug Supply Chain Security Act comes into effect in November 2024.

“What you are seeing in the USA—and in some ways it’s not a new trend—is a much more considered approach to sourcing,” added Bikash Chatterjee, president and chief science officer at Pharmatech Associates, in the press release (1). “Companies are looking to ensure they have alternative supply and potentially also in different geographic locations from their primary options ... What’s driving this? Well, we have seen a whitepaper come out from HHS [Health and Human Services] earlier this month on preventing drug shortages, and in the next few years we could see companies even scored on their supply chain resilience. So, we might be entering a period when companies are willing to pay more for extra resilience in their networks.”

Chatterjee added that in the next six months many companies will be looking to prepare for 2025, focusing on highly detailed planning for supply chain resilience, as well as a greater short-term focus on ‘near’ or ‘friend shoring’ options (instead of domestic US sites). These countries are currently better prepared, he said, to pick up resources and build ingredients and starting materials networks. More and more North American manufacturers are diversifying their sourcing of ingredients, looking not just to India as an alternative to Chinese suppliers, but also exploring options worldwide, including within Europe and South America.

At CPHI North America, where an anticipated 4000 attendees and 300 companies are planning to attend, these shifting trends will be present. This year’s event is focused on “empowering the North American ecosystem with the new insight and next-generation manufacturing approaches” (1) that it will need to “retool” before the 2025 outsourcing surge. The event will see 58 sessions, with notable keynotes on “Sustainability: Accelerating the Path to Net Zero” and “the Importance of Excipient Grade in Pharmaceutical Drug Development.”

Sarah Griffin, event manager, Pharma Brand US at Informa Markets, emphasized that it is critical for companies to use this event to plan their activity in 2025. "CPHI North America is at the heart of pharma in the US,” she added (1). “It's not just about staying informed and connecting with existing contacts; it's about actively engaging in the collaborative ecosystem that sustains success in the pharmaceutical industry.Participating companies can access invaluable resources, forge vital strategic partnerships, and, most importantly, establish the networks and technologies needed to maximize revenue potential in 2025 and beyond.”

Reference

1. Informa Markets. CPHI North America Experts ‘Mid-Sized Domestic CDMOs Need to Invest in Operational Efficiencies to Drive “Real” Reshoring’. Press Release. informamarkets.com, Apr. 30, 2024.