Spotlight on the CDMO segment

The contract development and manufacturing (CDMO) sector is hot to say the least. COVID-19 and the sheer scale of manufacturing required to deliver vaccines to the entire global population is driving this trend. However, and perhaps more notably, sheer impatience is also contributing to this. This is impatience at a market that is currently relatively ill-equipped to serve the vast market demand in terms of capacity, technology and flexibility. This is particularly pressing at a time where drug manufacturing has become increasingly complex. 

A promising market 

This new stimulus in the market comes in the form of next-generation drugs. Examples include cell & gene therapies which have caused investment in the CDMO market to swell. This is an already buoyant sector, favoured for its ability to enable drug developers to flexibly scale up. One thing is clear; capacity is now at an inflection point. Manufacturers have developed and approved novel biologics products at an increased rate, putting great stress on current manufacturing capacities.  

But there’s no doubt these market bottlenecks are and will be addressed. At some stage, they will probably be democratised as well, as we see the likes of Lonza, FUJIFILM Diosynth, WuXi Biologics, and Catalent all reaching deep into their pockets to fund their next iteration of growth and market consolidation. One of the more eye catching marquee investments in this space manifests in the form of Nelsen Funds’ $800m investment into Resilience.

The New Kid on the Block

Resilence was born out of frustration at market deficiencies. The San Diego-based company must be discussed in the context of major shifts in the sector. Resilience focuses on innovation; it is creating a unique ecosystem for advanced biopharmaceutical manufacturing. They will continuously invest in R&D, constantly anticipating the needs of the market. Whilst not the standard template for one of the largest ever investments, it has proven itself as a great stimulus for a disruptive business model to emerge.  

“COVID-19 has exposed critical vulnerabilities in medical supply chains, and today’s manufacturing can’t keep up with scientific innovation, medical discovery, and the need to rapidly produce and distribute critically important drugs at scale. We are committed to tackling these huge problems with a whole new business model,” said Nelsen in a statement. 

So unlike more traditional drugs, the manufacturing process itself is in essence the product. Most advanced drugs are exceedingly complex and whilst initially led by science, they are characterized by their manufacturing processes. Thus, the significance of CDMO companies as a strategic partner, integral to the development path and commercial success of the drug, is acute, with an insatiable demand from drug developers. 

The fragility of CDMO 

With so many companies trying to capitalise by offering up their capabilities to supply demand on all fronts, one thing we mustn’t overlook is the expertise, leadership and track record of such organisations.  

Consequently, due diligence of the right strategic partners to serve a business will be essential. Reliability of supply from both internal and external sites is critical to the business’ performance. Lose one critical raw material supplier and the whole supply chain can find itself  in turmoil. In cases like this, those leaders who ask the right questions and understand the capabilities of their partners from the root of supply will prevail. 

We have seen great (infamous) examples of companies that had never before produced a vial inking massive contracts that ultimately failed to deliver. In the case of COVID-19 vaccine manufacturing you can argue that the speed and unprecedented human life at stake have had a major role to play in outsourcing decisions where there was frenzied buying of capacity. You could also argue many made some big errors in judgement.   

So one thing is clear: mistakes will continue to happen. Never before has the industry opened itself up to an extended supply chain and relied on partners to this extent. Shrewd leadership, innovation, vision and decision-making across the development and manufacturing eco system is a huge competitive advantage. In some instances, these skills are a business’s saving grace. In contrast, for many firms there is often a dark past related to the wrong investment. This could relate to acquiring a site, or indeed outsourcing to the wrong partner with far reaching consequences, not least for the patient.  

Talent Migration 

Where alliances form, so does the need for talented leaders. Such leaders must manage the harmony of intercompany development and manufacturing efforts in key technical and commercial functions. Such functions include Business Development, Alliance Management, Tech Transfer, Process & Analytical Development, PMO, Manufacturing, Quality and Regulatory Affairs.  

CDMOs are now at the forefront of the development and manufacturing ecosystem. Therefore, they need comparably astute and forward-thinking leadership talent in the driving seat for the next stage of development. Thus, CDMO companies are on the charm offensive. They aim to transplant in talent to exploit the opportunities in the market, with many coming from the developers themselves. 

The Fly in the Ointment

There is a pressing talent shortage. This is a clear void in the sheer number of people with expertise required to deal with these complex next-generation medicines to serve the growth of the sector. Previously, one could rely on home-grown talent. But now, the sheer speed and scale of the sector growth means that businesses must nurture new and increasingly skilled talent pools.

Talent attraction is a differentiator in this arena. Creating a stimulating scientifically and  technologically charged environment for the brightest minds to thrive is crucial. With new aspirational stories to tell, it is important that CDMOs promote the right narrative. They must appeal to leaders who perhaps once imagined innovation and impact was only reserved for careers in the developers.  

Ultimately, next generation companies will require next generation leaders. Like osmosis, we expect to see a continued migration of talents into this blossoming sector. 

We look forward to reviewing further developments in this dynamic industry.  

To discuss this topic further, get in touch with Peter Gay, Director of Life Sciences, hereFollow us on LinkedIn to stay up to date with all insights into the end-to-end supply chain, including more on life sciences and innovation. 

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