From The Editor | March 12, 2024

What Investors Teach Us About CDMO Selection


By Louis Garguilo, Chief Editor, Outsourced Pharma


From a sagacious biotech and CDMO founder, CEO and board member, and long-time outsourcing ecosystem investor:

“My advice to a biotech when outsourcing to a CDMO is really understand what you want.

I don’t mean this as a criticism. Selecting a CDMO is most often not within the circle of competence of an academic, physician, scientist, entreprenuer, or other professionals starting a biotech – just like, frankly, it’s not a core competency of most venture capital companies.

If it isn't within your circle of competence, you're more likely to make a mistake. Therefore, biotechs have to be incredibly rigorous about what exactly you’re looking for in a partner.”

Thus begins our final editorial with Kineticos Ventures founder Shailesh Maingi on the role investors play in our global outsourcing ecosystem, concentrating on this critical activity of selecting your CDMO.

Systematize Selection

Maingi offers a comprehensive list of components to select from when discerning exactly what you’re looking for in a partner, including:

  • Price
  • Start time
  • Availability
  • Flexibility
  • Scale
  • Specific equipment
  • Menu of Services  
  • Human resources
  • Regionality
  • Quality systems
  • Scientific and Technical Specialization

Did some of you think, “I actually need all of these?”

Sorry. That would be an incorrect response. It’s an imperfect world out there.

Rather, Maingi wants you to become proficient at prioritizing. No one gets everything they want, so get what's most important to you and your project. 

“All those attributes matter, right?” Maingi says. “But the ability to say with confidence internally, ‘These are the top three things for us, and we’ll be successful if we get them,’ is step one."

And you have to fully rationalize your ranking and the ordering of needs. "Be systematic about this. You cannot wing it and succeed," Maingi adds. 

Cell Therapy Priority One

On the “highly innovative side” – for example, Maingi is currently focused on cell-therapy start-ups and their supporting CDMOs – he says one priority does jump to the top most always.

He suggests a CDMO should have “experienced professionals who have themselves been on the innovator side of the business, who understand you, and understand the need for flexibility with innovation.”

Still, you need to systematically order the top CDMO attributes for you specific company, project, current path and future plans.

Think it through. What internal resources do you have Currently? What staff, capabilities, capacity do you plan to build up yourself?

“Include this in your presentation deck to your board members. Have others review your choices measured against your criteria; do this as rigorously fact-based as you can,” Maingi emphasizes. 

Perhaps, he explains, three top preferences arise, yet because of the novelty and complexity of your cell therapy, “you may feel you can be happy with any one of those three” to get your program on a flight path.

That rationale is fine, says Maingi, as long as that stance is based on “discerning criteria.”

Unfortunately, over the years, he’s learned too many companies simply won’t go through a rigorous-enough process.

Some reasons:

  • The organization doesn't know how to effectively or efficiently proceed
  • Program leaders anticipate that level of due diligence isn't needed at an early stage
  • The C-Suite feels backed into a corner – they must prove to stakeholders investments are being put to use

“Even today,” Maingi says, “It still ends up, ‘Hey, I know somebody at a CDMO; let me just call them up.’”

Frankly, in all deference to Maingi, at times that might just work out.

As I have written often before, relationships make our outsourcing world go round. If I had a dime for every time a biotech executive has told me something similar, I’d be writing this on my own tropical island.

“Nonetheless,” Maingi avers, “You still need to really understand what you want.”

“Start by being in time to allow for a rigorous process to measure your potential partners,” he advises.

“Have board members, scientific-advisory resources, and others in the industry review your thinking on it,” and give them time to cogitate.

"If you make a mistake and select the wrong partner, you don't have a program," Maingi finishes up here. "Not in the cell or gene therapy business anyways.”

A Frank Agreement

Also joining our conversation is Frank Lis, Maingi’s long-time acquaintance and past collaborator, and newly appointed President & CEO of Kineticos.

Lis, an experienced investor who helped get the CDMO industry kickstarted in 2007 as a part of Cardinal Health’s carve out of Catalent, where he served as vice president and GM for the better part of a decade.

“I’d echo all the above,” he says. “It is about identifying what your requirements are of the particular CDMOs you are considering.”

He adds, “A number of CDMOs say they do a lot of things, whether it's analytical development or international regulatory affairs, but by understanding your requirements you can thoroughly confirm they can be addressed at the CDMO.”

Lis suggests due diligence is executed on “each of the separate services you require.”

“Take a hard look at the professionals, and not only the scientists. It's also their project management and top management who can be so important in bringing solutions to you at an early stage and as the science is evolving.”

Dare I ask the investors:

What about going so far as to assess the CDMOs investors – the sources from where they get their capital and guidance? 

Lis replies first:

“From a financial standpoint, you at least want to confirm the CDMO is stable, and they're going to be there for you down the road, because the drug development cycle is a long one.”

Then Maingi:

“Yes, it’s a good idea to understand the people involved in the aggregate – not only those directly involved with your project, but for example, who is on the CDMO’s board? The board is important. It basically represents the investors and shareholders. That'll tell you something.”

As for those investors specifically, says Maingi, the entire organization can make a difference – including their board.

Perhaps some readers will consider that a level too far – you’ve got a business to run and the clock is running.

But Maingi and Lis offer all the above as CDMO-selection food for thought. Go as far and wide as you can. And the search needs to be systematized, vetted and confirmed internally and externally.   

After all, they say, selecting a CDMO could be one of the best – or worst – investments you'll ever make.


Also see:
CDMO Carve Out Specialists
Why Are Cell-Therapy Outsourcers Unhappy? Investors Know