How Do We Categorize CDMOs?
By Louis Garguilo, Chief Editor, Outsourced Pharma
Are we on the same page? Do we need to be?
That is, how do we differ on what might seem like the mundane defining of CDMOs as small, medium, or large? Some readers have been asking lately.
There are obvious characteristics we’ll enunciate momentarily. First, how might this determination on CDMOs be relative to the individual sponsor itself? Why is that important?
One answer comes from OutsourcedPharma.com Editorial Board member Vadim Klyushnichenko, VP Pharmaceutical Development & Quality, The Calibr-Skaggs Institute for Innovative Medicines, a division of Scripps Research.
“I have placed projects at all types of companies,” he says. “In general, the size of the CDMO does not matter until we feel our projects get lost among the others at the CDMO.”
“Judging by the number of employees or the size of facilities, some ‘big’ CDMOs will not even reply to my RFPs. Others just as big – and I will point out WuXi as a prime example – always treat my projects like I am the most important client they have.
“All sizes of CDMOs in the US, EU, China, and India can behave differently.”
Latte Grande?
“On the question of CDMO size, I suspect this is changing given the smaller volumes of cell and gene therapies and other modalities,” says another Board member, Darren Dasburg, CEO, Clarus Biologics Inc.
“But if I come across a small provider, it often means it has a single facility and 5+/- current customers; midsize might have multiple modalities, capabilities and presentations, and 30 +/- clients).
“The large players are represented by the monoliths, those with multiple facilities in different countries (and billions in investment), offering multiple modalities and all presentations, and easily working with 50+ clients and even holding capacity for insurance situations for its larger customers.
“I do agree we could us a forum to frame this more concisely. For now, though, we all have adapted to this Starbucks model of offerings: five sizes from 8-30 ounces, all with clever names.”
Four To Explore
Despite the nuanced attempts by CDMOs to differentiate themselves, let’s zoom in on a core four to help us narrow our definition, or conversely, expand how we think about categorization.
1. Number of Employees
This is an obvious factor for determining the girth of an external partner, but it pays dividends for sponsors to dig deeply into exactly who and where those employees are, and how many are assigned to the various functions and capabilities you need.
Even a large CDMO may in fact have a relatively sparse group of professionals to address the specific (or specialized) service you need. (see: analytical departments)
A narrower categorization of a CDMO for your specific needs might be questions such as, “How many FTEs do you have available to work on XX for XX months?”
In other words, employee counts provide a wide-angle perspective, but you should focus on allocation and location.
2. Capabilities and Services Offered
The range of capabilities/services is an important determination in the CDMOs horizontal expanse along the development, clinical-trial, and commercial-scale manufacturing life cycle.
Naturally, also included here is a direct measurement of size – number of facilities, production scales (batch sizes and volumes; maximum outputs), and geographical reach.
“Large” CDMOs obviously add multiple facilities accessible across various geographies, and offerings such as packaging and logistics.
As to the question of serviceable modalities and platforms, today’s biopharma innovates extensively, and require specialization at times that may favor smaller CDMOs, or a variety of instrumentation and equipment, favoring bigger CDMOs.
Therefore, as with other categories of characterization, sheer size is not a full-proof indicator of a CDMOs suitability for your outsourcing needs.
3. Financial Stability
A primary (business) metric to categorize CDMOs is annual revenues. Obviously, with perhaps rare exceptions, the larger a CDMO, the more revenues.
That does not necessarily mean higher profitability.
And somewhat aligned with our focus here, revenue streams and profitability certainly impact the prices CDMOs charge you; you can’t say uniformly that big, midsized, or smaller CDMOs offer the best pricing options.
However, it can be difficult to gain information on profitability of your CDMO, or at times even on precise revenues (particularly if they are privately owned).
But it’s worth the attempt to gather such information. It can serve as a measurement if not of size precisely, of stability and longevity (and perhaps flexibility and again, pricing).
Of course a profitable CDMO can continue to invest in the skilled workers (and pay them competitively), and the new equipment and upgrades needed to stay competitive.
4. Client Base
If you can learn who a CDMO has worked with in the past (and is working with now), the size and diversity (or lack of diversity) of the client base can impact your categorization of the CDMO.
Large CDMOs will invariably assert they work with customers of all sizes. Small and midsized CDMOs are naturally limited by the circumstances of their footprint.
However, is this a satisfying measurement on a qualitative basis?
Have those smaller clients had a good experience at large CDMOs? Were they at a larger CDMO because of a lack of other options?
Conversely, Big Pharma can have their favorite (preferred), small-in-comparison external partners for specific needs.
Which again leads us to understand that while we are measuring size here, overall “fit” can be the most important measurement of all ….
Basic Definitions
After all that, perhaps we can revert to these simple categoricals.
Small CDMOs
Limited and often specialized capabilities and services focused on specific stages of development and manufacturing. They operate in a single or few locations, and have lower annual revenues and employee counts.
Medium CDMOs
Organizations typically offering a broader range of services than small CDMOs with an increase in optionality of operations. They may have multiple facilities and a more substantial client base.
Large CDMO
“Big CDMO” can serve “Big Pharma” but also serve a diverse client base with comprehensive services and extensive capabilities across all stages of development and manufacturing. They have multiple, global locations, significant annual revenues, a large workforce, and a diverse client base.
Did we end up close to where we were before we started this exercise? Even if we have, perhaps we’ve imbued a bit more thought and understanding into how we use these “definitions.”