CDMO selection and capacity top concerns among biopharma CFOs, report

Life sciences companies are struggling to find qualified CDMOs with sufficient manufacturing capacity, according to a survey of CFOs undertaken by consultancy firm BDO.

BDO’s 2023 Life Sciences CFO Outlook Survey polled 100 life sciences chief financial officers (CFOs) in October 2022 in efforts to explore the industry’s challenges and opportunities with development and manufacturing. The respondents comprised of biopharmaceuticals/biotech, traditional pharma, medtech/medical device, and contract manufacturers/suppliers from firms with revenues ranging from $100 million to over $3 billion, in equal parts.

Among the findings, every executive said they are trying to preserve cash as they work to generate more investment. Nearly half (46%) said they are looking to do this through an increased outsourcing strategy, using third parties for both scientific and technical functions including manufacturing.

Image: DepositPhotos/
garagestock

However, when asked about concerns on the manufacturing front over a quarter (28%) named selecting the right, qualified contract development and manufacturing organization (CDMO) partner. This was the joint top concern among CFOs, tying with the lack of availability of adequate manufacturing capacity, though the result excluded CDMO respondents.

“CDMOs have an opportunity to expand production capacity to meet demand,” the report confirms. “However, given the sizeable proportion of life sciences companies that say they struggle to find a qualified CDMO, these organizations should be sure that facility expansion can meet their clients’ needs, from early-stage clinical trials through to commercialization.”

As such, BioProcess Insider spoke with Lance Minor, Life Sciences National Co-Leader at BDO, to find out why biopharma is struggling to secure space at qualified CDMOs, despite a buoyant market and a slew of capacity expansions.

BPI: With so many CDMOs on the market – estimates range from 300 to more than 500 globally – why are biopharma companies struggling to select a qualified partner?

Lance Minor (LM): The more mature, highly skilled suppliers are in high demand. Selecting a newer CDMO carries risks in performance. Delivery and quality are more valuable than the cost to manufacturing, especially for development. It’s been said that a one-day delay to launching a billion-dollar blockbuster costs $1 million per day. More critically, a delay to clinical data for a startup can put their business at risk.

In addition, new modalities, such as cell therapy manufacturing, are still in the early years of process improvement. Finding an experienced vendor with available capacity is even harder since the past few years have seen a surge of new startups. With the cost of capital jumping in 2022, we may see excess capacity begin to free up later this year.

BPI: How has consolidation and investment leading to the arrival of a number of mega-CDMOs (Samsung Biologics, Fujifilm Diosynth Biotechnologies, Wuxi Biologics, Thermo Fisher etc) helped or hindered biopharma firms in looking where to spend their outsourcing budgets?

LM: The consolidation of the CDMO space has also come with expansion of capacity at these major CDMOs. Competition has arrived with newer, smaller CDMOs as well as innovator companies expanding their internal capacity. Development slots have increased in cost, but timelines appear to be unchanged, suggesting consolidation has hurt the industry overall.

BPI: With so many CDMOs and so many hundreds-of-millions-of-dollars CAPEX projects underway, why is there still the concept of inadequate manufacturing capacity in the industry?

LM: I think that perception is driven by the constraints in experienced staff to operate this new capacity. Larger, more mature CDMOs have expanded capacity, but they still have limited capability as shown by the timing, quality and costs of a first batch, especially for new modalities.

BPI: With COVID-related projects rapidly declining and a general decrease in biotech bucks, are we not on course to having too much capacity on our hands?

LM: Any industry with high capital costs projects that take years to license experience periods of boom and bust – too much or too little capacity. In the early aughts, for example, biotech saw an embarrassing amount of excess capacity that was gone 10 years later. Even though many new drugs are targeted to smaller patient populations with higher potency drugs, we still see many drugs under development with vast capacity requirements.