With CDMOs Like This, Who Needs Biotechs?
By Louis Garguilo, Chief Editor, Outsourced Pharma
The question struck like a thunderbolt.
It shouldn’t have. In retrospect, it is a simple inquiry in search of a logical conclusion to what has been going on for years.
“Where are CDMOs going with all this?” asks Edward Ahn, CEO, Medipost, Inc., an organization whose business model raises its own set of intriguing questions (we’ll address subsequently).
Ahn is referring to the remarkable growth of some CDMOs. The indefatigable Thermo Fisher springs to my mind among others.
“When CDMOs aim to offer every service, capability, and the requisite capacities for an entire drug life cycle – from discovery to clinic to commercialization – what’s actually left for a biotech sponsor to do?” asks Ahn.
He tells me his thoughts regarding the future dispostion of CDMOs were elevated as he started to recognize, for example, their pronounced expansion of analytical and regulatory services.
“What I mean is I would like to understand from the perspective of a therapeutics developer, with these megalithic organizations for hire, what exactly do you need to accomplish?”
In fact, I add, some China-based drug makers might rather be described as CDMOs with their own discovery and development engines, and ample manufacturing capacities.
In a recent editorial, I mentioned the hundreds of compounds owned by parts of the WuXi organization, and the multiplex “pharma” organization Hengrui, with both able to fill the role of sponsor-service provider-manufacturer, so to speak, and also ready to license assets to third parties.
So, then, what is a biotech today? We’re moving from lean to virtual, to … what?
Concentric Commercialization
Ahn and I were speaking upon his return to Cambridge, Mass., from the JP Morgan Healthcare Conference in San Francisco. CDMOs nor outsourcing were front-seat objectives of his – it was predominantly investors.
Nonetheless, when I asked if he could comment on the atmospherics at the conference related to topics of external services and supply chains, he built further on his thoughts about the CDMO milieu.
Ahn is a perfect agent for this discussion. Let me explain.
MEDIPOST Co., Ltd., based in Gyeonggi-do, South Korea is a large biotech organization, most recognized for commercializing CARTISTEM, its stem-cell therapy for knee osteoarthritis.
First approved in 2012 in Korea, CARTISTEM is the world’s first allogeneic umbilical cord blood-derived stem cell therapy “proven for its long-term efficacy by reducing inflammation and regenerating damaged cartilage to its natural state.” The company has announced that the cumulative number of patients treated with CARTISTEM exceeds 30,000 patients.
Ahn was recently named CEO of Medipost, Inc., a newly established subsidiary in the U.S. to guide final clinical trials here, and work with the FDA for commercial approval.
In 2022, Medipost made a strategic investment in Canada-based CDMO OmniaBio Inc., and became its largest shareholder. Ahn was named to the OmniaBio board. An initial goal of this relationship is the preparation for manufacturing CARTISTEM for clinical trials, and then anticipated commercial supplies.
As mentioned above, we’ll visit this MEDIPOST business model subsequently. For now, it’ll suffice to understand Ahn’s vantage point for our current discussion, and from where his both practical and philosophic CDMO questioning originates.
All-In-One? How About All-In-And-Done?
Today we have megalithic organizations that provide the suite of “all these amazing services and SMEs you can hire at a variable rate, and at very high quality.”
“You tell them you want to develop this therapy. What else is it that you then need to do? What is the in-progress responsibility as it relates to these organizations?” wonders Ahn.
Biotechs can (I’ll still insist ‘theoretically’) contract out just about everything. Perhaps that leaves the sponsor as "a kind of a regulatory/quality contracts manager, with project management oversight, as even the basic research had been delegated to a CRO-slash-CDMO."
It’s no wonder we’ve arrived at this point of biotech reassessment. But God forbid this questioning starts to imply: Do we even need “biotechs” as we know them today?
More forbidden foretelling: Are CDMOs in fact becoming the new "biopharma?" Have we somehow come full circle, as torturous as that seems?
The drug industry started with organizations that, practically speaking, did it all -- building, procuring, hiring. They built moats around their IP, and held development and commercial plans close to the vest.
Biotechs came along and decided, ''We don’t need all that – actually, we need to do much less, and CROs/CDMOs are our get-out-of-jail ticket."
Now, some organizations are modeled as hybrid drug innovator/developer/CDMO, with commercial-scale facilities. Perhaps excepting the product marketing/distribution side (in some cases), all is set in place for a kind of industry revolution.
At the least, says Ahn, any virtual biotech working with a mega-CDMO becomes “operationally invisible.”
Okay. Let's pause here; many readers at biotechs are assuredly thinking: Not quite.
We are still ultimately responsible for our drugs, to the regulatory authorities, and to our patients. The above only adds another reason for us NOT to work with large CDMOs. We’d rather continue to seek strategic alignment – as in a relative pairing of size and leverage – when selecting an external partner.
That’s understandable; it is a well-developed practice and trend. Here’s hoping there are enough size-pairing CDMOs left to fit your strategy.
And that is a contention here, one that the same readers may often raise. Outsourcing optionality can be limited, and the concern grows as M&A combines the smaller service providers into much bigger organizations we are discussing here.
The Orchestal Drug Sponsor
Recently, we spoke of our penchant for metaphors applied to our outsourcing activities.
How about this one: Are we entering the halls of the orchestral biotechs? It’s a concept Ahn has been thinking about.
“The primary functions will be conducting asset direction, regulatory/quality ownership, and partner oversight,” he says.
“When your development, analytics, manufacturing, and even regulatory writing, sit with these large organizations, your role changes. Perhaps conducting vendor management alone remains existential.”
Ahn doesn’t present any of this discussion as some type of warning or cautionary tale. I asked him for thoughts upon his return from JP Morgan. We ended up probing the reality today, and providing a glimpse of the future.
CDMOs were once the “hired hands” of the biopharma industry. The mirror on the wall says someday they may become the industry itself.
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Part two with Edward Ahn, CEO, Medipost, Inc., is here.