Is An Outsourced BD Model Gaining Traction At CDMOs?

By Louis Garguilo, Chief Editor, Outsourced Pharma

Why did George Hlass found Pharma Expanse, which I’ll roughly describe as a “BD-for-hire organization?” (see part one)

He says it was born of experiences and much thought over a long career in the role of business development professionals (BD).

When he started up in 2023, Hlass didn’t imagine how strong the demand would be from CDMOs for his services. (He also offers BD services to innovator Pharma and Biotech companies.)

Learning About CDMOs

“In the late 90s, I started at the bench at the University of Florida’s Powell Gene Therapy Center as a scientist in viral vectors, well before this was a commercialized technology – before  anybody knew gene therapy would be successful.

“Right at the time I left MBA school for my first job in a hybrid CDMO/Drug Discovery company.

“Altogether, I spent 21 years in four CDMOs in different stages of development, and covering different technologies and modalities.”

Hlass started Pharma Expanse as a business development service and consulting organization, differentiated from others that call themselves procurement companies, or are considered agents or brokers.

He has exclusive partnerships with two CDMOs where he acts as their BD. For one CDMO he is  their sole representative in the U.S, and for the a larger CDMO, he serves as a part of the business development team covering multiple business units.

So why did these CDMOs hire him?

They want to expand in the U.S. market, and he can do it less costly because he’s not coming on as a full-time employee.

“I operate as a company’s internal BD, except I'm across multiple CDMOs and business units (BUs) and for different parts of the supply chain,” he explains.

“Importantly, my CDMOs don’t compete against each other. They either focus on different technologies or different phases of development. ”

What should the biotechs think of this arrangement?

“From their perspective,” Hlass replies, “I can over them BD coverage for a number of  technologies and phases of development across CDMOs.”

A Surprising Market For BD

Hlass was surprised so many CDMOs reached out to him when he launched Pharma Expanse. “I had between 15 and 20 CDMOs contact me within the first 48 hours of my initial post on LinkedIn!  Today he isn’t looking to add CDMOs. He's focused on executing for existing CDMOs, and from that standpoint, feels he's at capacity at the moment.

The business model for Pharma Expanse is “a full integration within his CDMO clients,” based  on a “basic fixed fee – and no commissions or finder’s fees.”

And there is a clear distinction to be made:

Traditional brokers/agents may offer value with additional services, such as quality, regulatory, warehousing, shipping and receiving; Pharma Expanse does not offer those services.

“I'm not a ‘middleman,’ I am simply a part of BD team for the CDMO I contract with,” he says.

Back to the sponsors, he says they receive the benefit of “time saving” – a consolidation of the potential meetings they might have had because he represents multiple CDMOs.

“And the sponsor actually gets an advocate if needed (see part one), helping resolve issues with the CDMOs – or helping to gain the attention of upper management if needed.”

Poor BD Or A Declining Economy?

I’ll hypothesize here that the CDMOs seem eager for an outsourced BD solution because, I hesitate to say, they feel their current BD is lacking.

Hlass replies, “I’d say that may be correct in some cases, that some organizations feel they are not seeing the results they expected. When I talk to sponsors, it’s also evident there is a wide range in business development effectiveness.”

“However, I don’t think that has fundamentally changed in the past 5 years.  The bigger factor has been the declining economy – I just happened to announce the launch of my company at a point where it has been an extremely down market, and the number of outsourced projects had declined significantly.

Back in 2022, it was a CDMO’s – i.e. a supplier’s  market. Sponsors would send out multiple RFPs, but many CDMOs wouldn't even reply because they were overwhelmed with opportunities, and many were operating at capacity.

When Hlass announced his new company, in the fourth quarter of 2023, the economy had changed. VC funding was down dramatically for early-stage programs. That has continued, and has meant fewer projects than pre-COVID. “You’re starting to see a change in behavior of the CDMOs,” he says.

“Some larger CDMOs who primarily focus on Big Pharma, suddenly became interested in all opportunities for work.

“It’s an economic shift, and less a true change in strategy driving this,” Hlass says.

“I've been in the biopharma industry for a long time. It has been this economic environment driving people to look for opportunities, including alternatives for effective BD.

Still, Sponsor Concerns

A question I save for last:

Will prospective biotech customers be concerned the BD for a CDMO they are interested in working with is a professional from outside that organization, and also represents a number of other CDMOs (if even in different segments of the supply chain)?

This doesn't worry Hlass to a large extent. “I clarify my role upfront. Once I have a discussion with a Pharma company, most people understand it immediately," he says.

It’ll be interesting to see how this model and Pharma Expanse, currently a two-person organization, progresses. We’ll continue to check back.

Just as intriguing is whether others will also open up BD-for-hire shops based on similar models?

I’ll end with this. There certainly has been a level of grousing by (mostly) smaller biotechs about the lack of professionalism, than interest and follow up from business development organizations at CDMOs.

Any models introduced by entrepreneurs with industry experience in our industry to help sponsors and CDMOs get closer together, is worth a try.