CDMOs still riding the wave
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NOV / DEC 2024
Getting into CPHI Milan on 8-10 October involved navigating unpredictable trains , torrential rain and a straightline layout that is very hard on my ageing feet . And there will be more to come , since the show has grown back beyond pre-COVID levels and only Frankfurt and Milan can now host it . But it is still essential to be there to take the temperature of the pharma industry .
It has been a decade or so since the CDMO emerged as a concept in the industry . Now , according to the organisers , there were about 600 on the show floor at CPHI , covering drug substance and drug product , chemistry and biology , and more . That number is really a matter of definition since the term has now become a cliché .
To differentiate themselves , some have added R ( for research ) or T ( for testing ) into the name . Meanwhile , Sterling Pharma Solutions unveiled itself as a ‘ PDMO ’, with the P standing for ‘ partnership ’ to stress that its approach is not transactional as potentially implied in the C , and it has trademarked the term for good measure .
Every year , the CDMO sector seems to grow further , outpacing the market as a whole . This year saw an unprecedented move when a large pharma company , Novo Nordisk , acquired a CDMO , Catalent . Industry insiders were unanimous , however , that this was a one-off event driven by particular circumstances , not a harbinger of things to come .
The overall trend is set to continue , according to the CPHI Annual Report that was launched in Milan . This found that biotech venture funding recovered in 1H 2024 , with significant improvements in ‘ follow-on ’ funding compared to the low reached in 2022 . European biotechs are seeing particularly strong growth in funding .
The result of this , said Brian Scanlan of Edgewater Capital and former senior executive at what is now Alcami , is that biotechs should “ return to more traditional spending patterns , with CRO / CDMOs benefiting from increased confidence in the financial outlook over the next 12 months ”.
In addition , large pharma companies are continuing to outsource and cut R & D , letting biotechs do most of the latter . This plays to the strengths of CDMOs . Those focused on later-stage and commercial projects are expected to do notably better than early-stage players , because this is where funding is headed .
With the exponential growth in demand for GLP-1 agonists , the CDMOs focused on fillfinish , peptides and radiopharmaceuticals should do best of all over the next 18 months , but ADCs , biologics and , yes , small molecules are also good places to be .
A survey of 300 companies identified biologics ( 53 %) and ‘ tides ’ ( 43 %) as offering the best opportunities for CDMO investment over the next five years . Small molecules still secured a steady 35 %, while ADCs fell to 15 %. The big exception appears to be cell and gene therapies , which have not lived up to the hype generated during the COVID pandemic .
A more immediate issue is the US Biosecure Bill . While not yet law , this is already impelling pharmaceutical companies to diversify away from China as a supplier . The WuXi group of companies is specifically named in the Bill and have been hit badly .
However , the annual report suggests that the industry is not that supportive : only 19 % said they regarded Chinese CDMOs as “ a threat ” who “ should be removed from Western supply chains ”, whereas 38 % saw the Bill as a “ politically motivated issue that sets a concerning precedent for the industry .” The remaining 43 % had a more balanced view .
Moreover , Indian firms , often seen as the likely beneficiaries , are sanguine , agreeing that they cannot simply replicate the Chinese model overnight , while others stressed that diversification of the supply chain was already happening and will continue . It will be an interesting year ahead . But isn ’ t it always ?
Dr Andrew Warmington
EDITOR – SPECIALITY CHEMICALS MAGAZINE
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