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The Outsized Impact of Smaller Pharma CDMOs

One portion of an article at PharmTech (Five Themes That Will Drive the CMO Industry) discussing opportunities for smaller CMOs recently caught my eye. It mentioned that those aforementioned opportunities for smaller service providers have been rapidly expanding, that they are a reflection of “the growing number of niche products that are getting commercial approval.”

This is certainly a very real trend in the niche spaces, and one which we are witnessing in the High Potency (HPAPI) and orphan drug spaces, to name a few.

The article (rightfully, I believe) points out the growing need for CDMO scalability – a contract provider’s ability to grow capacity in-line with client needs. But at the same time, smaller niche products are on the rise…both in terms of development as well as regulatory approvals.

scalableSmaller CDMOs, as the article points out, tend to be more agile and responsive to client needs – and have capabilities that tend to better align with products that – at their height – still only require small batch production. Much as smaller pharma and biotech firms tend to be innovation-centric, smaller CDMOs likewise have very concentrated – and often very advanced – knowledge of specific fields.

At Neuland, we tend to play on both sides of the proverbial river. We enjoy the challenges of working at smaller scales in our research and pilot lab facilities, with an emphasis on advanced chemistry process development & optimization. Those capabilities have served us well in the orphan drug API market, a topic I wrote about earlier this year.

But we also pride ourselves for having the capabilities and expertise needed to bring early-stage compounds through to eventual commercialization at the bulk scale – effectively & economically.

The challenge for mid-sized CDMOs who handle projects that start at the bench and eventually transition to commercial scale can be integrating the different approaches such circumstances call for. On the one hand, there’s innovation and agility, while on the other hand, commercialization-focused resources & robust infrastructure come to bear.

CDMOs: In Depth Knowledge
There’s no doubt your typical team at a CDMO will see far more diverse project types and process experiences than a drug manufacturer’s team would. A major strength of virtually all contract pharma partners, and (aside from cost) perhaps the biggest allure of contract research and manufacturing is the in-depth experience in one (or multiple) specific areas of scientific knowledge. In an interview on (CMOs, Pharma and Outsourcing: Perception vs. Reality) Stuart Needleman mentioned that “the high level of competence that CMO scientists bring to the table is often underrated.” He goes on:

“Many CMO scientists choose the pharmaceutical discovery and development industry because they appreciate the number and variety of active programs and proposals that will regularly come their way. In most cases, this is a far larger number than they would experience if they worked at a pharma company, where the focus on individual therapeutic specialty areas can limit a wider breadth of experience.”

fishSmall CDMOs: An Attractive Acquisition Target
As the article states, such innovative & agile small firms have become attractive fodder for the pharma acquisition machine. See a capability that clients want? Simple – acquire it. The unfortunate byproduct of this is that those capabilities can be diluted by the very act of acquisition. Agility tends to evaporate when new layers of decision-making are suddenly present. And the flame of innovation that made the small CDMO an attractive target in the first place can sputter in a strictly profit-driven and budget-centric environment.

Protecting Mindset During Company Expansion & Growth

It’s a wider, global business issue, beyond CDMOs. How does a firm stay responsive and engaged with the customer while growing to a mid-sized or larger company – either organically (as Neuland has) or through M&A?

Bottom line: it is fundamentally important to remember there are reasons small CDMOs are sought after, both as suppliers and as M&A targets. Those which grow successfully always remember that, and they embed it deep into the company mindset. Food for thought.


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