Drug Sponsors Are Reshaping Today's CDMOs

By Louis Garguilo, Chief Editor, Outsourced Pharma

CDMO mergers and acquisitions and the appending of services have been the wave; comprehensive offerings and elevating scales proclaimed indispensable to customers.

Sufficient time has now elapsed so we can evaluate this “era of more,” and those claims.

• Has sponsor experience and customer service improved?
• Does operational growth tend to dilute specialized/technical excellence?
• Do emerging modalities fit the bigger CDMO cultures?

Some of these questions are being answered in the marketplace, as we start to see some reversal of the bigger-is-better trend.

Take Charles River Laboratories, for extreme example. It has withdrawn entirely from CDMO operations to focus on core research services.

The company had constructed a “continuum” strategy stretching discovery services through manufacturing capabilities. However, after a recent strategic review, it divested its CDMO and Cell Solutions businesses (along with some European discovery assets).

Charles River evaluated “core capabilities” and opted to retain businesses that offered the most “synergistic growth.” Frankly, that sounds like strategic retreat from its (acquisitive) blueprint of not too long ago.

Other mid-sized CDMOs (e.g., Recipharm) re-emphase modality and a narrowed service focus, including those who have decided to specialize in sterile injectables, radiopharma, cell & gene therapy, oligonucleotides, biologics, fill-finish, or region-specific manufacturing, respectively.

Some big fish are also swimming in different directions.

A meaty display of new thinking (and directionally opposite from Charles River) emanates from Lonza, which a few months ago declared it is now a “pure-play CDMO.”

Lonza had considered itself a broad (and always getting broader, it seemed) “life sciences solutions” company.

It operated businesses in its pharmaceutical development and manufacturing services, and consumer-health and nutrition-oriented operations, notably its Capsules & Health Ingredients (CHI) division.

Lonza also owned adjacent businesses such as the Cocoon personalized medicines platform, MODA manufacturing software, and operations related to pharma manufacturing but not directly part of a traditional outsourced drug-development-and-manufacturing model.

Apparently spurred by investors, changing markets the bottom line, Lonza concluded its non-CDMO businesses diluted the company’s strategic identity and financial profile.

Today Lonza is a CDMO directly focused on core development and manufacturing services, operating through “three complementary and integrated CDMO Business Platforms” centered on serving drug sponsors developing complex and emerging therapeutic modalities.

But because no trend runs complete, counter examples exist. Thermo Fisher Scientific, for one, still bets on breadth and even more scale.

It continues expanding through acquisitions and service additions, including to its CDMO operations, clinical trial support services (e.g., recent acquisition of Clario, a provider of endpoint data solutions), and logistics network.

Yet even executives at Thermo are speaking less about the glories of broader offerings, and more about “sustainable capacity” and the targeting of growth segments.

Overall, current discussions in our broad business media repeatedly mention challenges with organizational silos and integration difficulties at larger organizations, and so we ask:

Are our external providers fit-for-purpose for today’s innovator class – big and small?

Historic Perspective On Growth

As far back as the early 2,000s, CDMOs around the world began thinking in scale and adjacent services.

The prevailing logic was that sponsors will wander the four corners of the earth for the best CDMO “deal,” which included pricing of course, but also the growing desire to manage fewer supply-chain partners.

The emerging biotech class discovered that while challenging at times, geography can be effectively dealt with if you can reduce the number of outsourcing  relationships (and save money as well).

And while multinational and other large CDMOs were more than happy to accommodate, nothing lasts forever.

Fast forwarding to the mid-2020s, and sponsors are more focused on assembling “best-of-breed” external partners in an intelligently networked supply chain. CDMO strategies are adjusting to match this new thinking.

Today, with our rabid pursuits of new drug sciences and technologies, more sponsors search for relationships based on specific contracted activities – unfettered from organizational complexity.

So is focused hands-down better than bigger?

Not exactly.

Large CDMOs continue to succeed today … if they are efficient at managing the focus within each of their individual services, and then effectively integrating them within a tightly knit organization.

Big Pharma, of course, often needs Big CDMOs. Multi-locational CDMOs with the most capacity are often the best bet for large-scale productivity.   

Still, there's a solid contention here that we are indeed shifting from maximum breadth and scale in order to catch any and all customers, to a more lucid specialization serving an exacting customer.

Why Change Models

When sponsors at least partially select CDMOs with a bias against "big" and unencumbered organizations, it directs the future of outsourcing.

Sponsor experiences over the years suggests cultures at CDMOs that dwarf yours in size can be intimidating, offer less flexibility or leverage.

That's not to say bigger never implies better; integrated CDMOs still offer more options, less external "handoffs," fewer relationships to manage, long-term planning from development through commercial.

CDMOs of all sizes must work continuously to improve customer experiences and outcomes so as to stay relative and competitive in changing markets.

Even a Lonza, Charles River, or Thermo Fisher, seemingly taking on different strategies, essentially agree: “We are taking steps to  better serve today's focused and discerning customers.”