In 2024 the world of Contract Development & Manufacturing has been going through a period of upheaval.
Since the start of the year, every day have been significant acquisitions or investments in the CDMO space. In the United States there are highly significant legislative changes working their way through Congress which will re-define the industry.
Ahead of his talk at CDMO Live, we spoke Gil Roth, President and founder of the PBOA (Pharma & Biopharma Outsourcing Association) to give us his take on all the challenges and opportunities faced by this dynamic sector.
- For more insights into the changing contract manufacturing landscape in the United States, don’t miss Gil’s expert talk at CDMO Live in June, where he will be sharing his insights on How the upcoming US Election and Legislative Changes could Impact CDMOs. Register here for your free ticket
A period of change
Activity in the CDMO space has “accelerated in a big hurry” says Gil. “Catalent / Novo was a significant jump start to the year.”
The deal “speaks to the commercial prospects of that class of (GLP-1) drugs. The money that could be coming in, first to Novo and to Eli Lilly, is just so massive that it really changes the calculus of the make versus buy decision. “
However, the deal is “historically exceptional or an outlier.” says Gil. “We haven’t really seen a deal of this magnitude in this direction. We’ve seen large scale CDMO acquisitions such as Thermo Fisher Scientific acquiring Patheon, but we haven’t seen a pharma company acquire a CDMO to make some of its capacity captive. That’s a very different proposition. ”
Why is it happening now?
CDMO capacity takes a long time to come online, explains Gil. “We’re seeing some of the fruits of investments that were made during the pandemic era when there were questions about how much capacity is needed to be prepared for another Operation Warp Speed.“
Operation Warp Speed was the public–private partnership initiated by the United States government to facilitate the development, manufacturing, and distribution of COVID-19 vaccines, therapeutics, and diagnostics.
Investment in R&D is the lifeblood for the CDMO sector. “The jury’s still out as to whether that money is starting to come back in yet. ” says Gil.
“The change of inflation and interest rates really altered the calculus for a lot of venture capital investment in start ups and early-stage biopharma. The lack of money going into that space has caused some hiccups, or at least slowdowns for some CDMOs that are reliant on early-stage work progressing through their pipelines.”
Impact of the BIOSECURE Act
The BIOSECURE Act “is a whole complicated thing” says Gil. “Things got real weird, real fast. Honestly, when I saw it come up in January, I did not think it was going to happen.”
“We’ve seen that companies like WuXu AppTec and a few other China based companies explicitly named in this legislation as companies not to do business with.“
“It’s a very fast moving and fluid situation. Any company could end up on this list, if there were IP-related concerns and some of the issues that bio secure raises. It creates uncertainty, for sure.”
As a result many pharma companies are having to look for alternatives, which is creating opportunities for alternative suppliers.
“One of the effects of this seems to be a potential for Indian market to grow up around some of the areas that WuXi currently operates in. Indian companies are trying to build up their API business, and are getting into the higher-value biologic space.” says Gil.
Could this uncertainty result in less outsourcing?
“I don’t think that’s a significant concern. The investment required for start ups to put together the bricks and mortar to actually do this stuff would still be orders of magnitude greater than the issues related to a CDMO being acquired,” he says.
“Acquisitions tend not to mean the product goes away. For most of these situations, it’s just merging into a larger organisation that your CMO now belongs to, rather than losing capacity.”
Inflation Reduction Act impacting development pipelines
President Biden recently announced he “Beat Big Pharma” with the Inflation Reduction Act, which applies aggressive price caps to different types of drugs.
One of the unintended consequences of IRA are that it “could impact certain R&D decisions.” says Gil.
“It will only become apparent in 5-10 years that the pause in R&D ends up becoming evident.. when your Phase two pipeline doesn’t exist.”
“The ‘we beat big pharma’ rhetoric is something that just kills me. ” Gil adds.
“While ‘beating’ may be a good populist statement to make, it’s not a great way to frame things. To me, the combination of Big Pharma and the CDMO sector helped save the world during the pandemic.”
New requirements for supply chain transparency
A current issue for the contract manufacturing industry is that the US Congress and the FDA want a “clearer idea of where drugs actually come from and what supply chain really looks like at every stage, and including sourcing information on the drug labels.”
“They are asking for data that CDMOs aren’t necessarily allowed to disclose, and for the individual facilities to do the disclosure, not the owners of the drugs, which is creating some tension.”
“Despite years of regulating authorities on the roles CDMOs play, there are still ‘blind spots’ where they just use the term manufacturer interchangeably between the licence holder and the actual manufacturing facility.”
“One of the things that I was gratified by with the new Congress was they were much more cognizant that making everything domestically it was not feasible when it comes to building a reliable and robust supply chain.”
“Trying to put everything into the US is not a recipe for success, and potentially could actually create more fragility in supply.” says Gil.
The upcoming election will be important
“The huge uncertainty is what happens in November. There are questions around how either party would approach pharma, how they would look at the area of onshoring and securing supply chains.”
“I expect to see a lot of changes take place in the next few months. I’m sure there’ll be plenty to talk about at CDMO Live!”
Don’t miss Gil’s expert talk at CDMO Live in June, where he will be sharing his insights on How the upcoming US Election and Legislative Changes could Impact CDMOs. See the full agenda and register for your free ticket
