May Supplement Introduction: The Evolving Outsourcing Culture

Gil Roth

May 17, 2016

4 Min Read

When I began recruiting contract manufacturing organizations (CMOs) and contract development and manufacturing organizations (CDMOs) to join the Pharma & Biopharma Outsourcing Association two years ago, some of the biologics-focused companies were concerned about being in a trade association alongside small-molecule–focused providers. It wasn’t quite “Upstairs, Downstairs,” much less a Sharks vs. Jets rivalry, but they weren’t sure whether my big-tent approach was viable. (For you millennials in the audience, please replace those references with “Downton Abbey” and “Batman v. Superman.”)

But the bio-CMOs learned quickly that there are more areas of overlap than there are differences between them and others, at least in some key business areas. After the first meeting of our board of trustees (during BIO 2014), we had a trustee dinner where our members could talk casually and learn what one another’s companies do and how they operate in the larger outsourcing sector. Both large- and small-molecule CMOs and CDMOs came away understanding that customer relationships and project management can be remarkably similar no matter what part of the pharmaceutical and biopharmaceutical landscape you’re in.

Of course, there are major differences between the sectors, and some of those create vast new market opportunities for biopharmaceutical CMOs and CDMOs. For example, providers in the industry have had decades to build business models that accommodate both branded and generic clients, but biosimilars present opportunities and challenges throughout the bio-CMO sector (provided the US FDA, Congress, and the courts can smooth out the process of getting them to the US market, of course.)

New therapeutic models with the potential to upend patient treatment protocols also have the potential to drive CMOs and CDMOs for years to come. These demand highly specialized technology and expertise that these companies are positioned to deliver. We see that in partnerships such as that between Cook Pharmica and Selexis (in which the latter’s cell line development expertise complements the former’s capabilities in process development, scale-up, and manufacture of drug substance and product) and between IDT Biologika and CMC Biologics (which have tied up to provide end-to-end antibody–drug conjugate (ADC) services) as well as in merger and acquisition actions such as that involving Brammer Bio (which combined to form a cell- and gene-therapy-focused CDMO). The largest companies in the overall CMO and CDMO sector, Patheon and Catalent, have both been able to straddle the divide between large- and small-molecule services through strategic acquisitions and partnerships. Innovative pipelines also drive innovation within the contract service sector.

Innovation also boosts a sizeable amount of the bio-CMO market. High Tech Business Decisions (HTBD) recently reported that 47% of biologic drug substance production in 2014 was for phase 1–3 materials, a slight drop from its 2011 survey. CMOs and CDMOs support that finding anecdotally, with some companies saying that even large biopharmaceutical manufacturers are outsourcing more phase 1–2 work than in past years. Meanwhile, outsourcing has become a more integrated business practice, and CMO and CDMO internal facilities have been rationalized. Overall, HTBD forecasts the biologic drug substance CMO and CDMO market will rise to US$4.1 billion in 2019, from $2.8 billion in 2014 (with a projected $3.1 billion this year).

Those cultural and business shifts have occurred alongside technological developments that have enabled the sector to flourish. The biologics space isn’t exactly fast-moving, but I’ve seen some disruptive trends during the 15+ years that I’ve been involved in the CMO and CDMO space. (Compared with oral solid-dosage manufacturing, biologics have been making lightning-fast progress; but compared with social networking or ride-sharing apps, not so much.)

The key trend has been the rise of single-use/disposable systems, which have provided opportunities both for smaller-scale manufacturers and for developers of smaller-volume biologics. (Regulators and legislatiions are incentivizing development of orphan drugs and other therapeutics with limited patient populations, but a discussion of that could fill up its own supplement.) In an interview with me more than a decade ago, a biopharmaceutical expert predicted “the death of stainless steel” following adoption of single-use systems. But industry has left plenty of room for coexistence since then.

Clearly, there’s still a big market for stainless systems for the high-volume production of commercial biologics. But CMOs and their clients have found immense benefits with disposable systems and are pushing for greater innovation and applications. Some outsourcing providers are building chains of 2,000-L disposable bioreactors with no thought of scaling up to large, stainless steel systems. They consider disposables systems a more rational, flexible system for bioproduction, offering the option to add small increments of capacity rather than requiring giant leaps into systems that may never be used. That change in the economics of biomanufacturing has benefited both sponsor companies and outsourcing providers.

Globalization also has had significant economic impact. Our members report increases both in manufacturing for global markets (as reflected in the regulatory inspections they receive from multiple health authorities) and in development work for clients from emerging regions. The growth of high-value biologics development in the Asia–Pacific region has led to changes across the sector.

Making predictions is always difficult, but it’s clear that the outsourcing model is here to stay, and the biopharmaceutical industry has become increasingly better at leveraging it.

Gil Roth ([email protected]) is the president of the Pharma & Biopharma Outsourcing Association (, a trade association that represents the regulatory, legislative and general business interests of CMO/CDMOs and other service providers to the industry.

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