Page 37 - CW E-Magazine (Oct-Nov-2023)

Pharma Services

due function of artificially low interest Promise of new/growing modalities The industry saw a major and fas-
rates following the 2008 financial crash. That’s not to say that the CDMO cinating development when Thermo
There are a multitude of other factors/ sector is shrinking. There’s been plenty Fisher, which had acquired Patheon in
stories to tell, but I’m no economist so I of non-COVID growth in the sector, and 2017 to add CDMO offerings, bought
can’t gauge the validity of them beyond the various forms of -shoring have cre- PPD, a major Contract Research Or-
my own confirmation bias. The upshot ated opportunities for companies with ganisation. As someone who’s seen a
is that as funding becomes tighter, com- capacity in strategic geographies. In ad- variety of combinations over a near-
panies and investors have to make tough dition, there’s the promise of new/grow- quarter-century in this field, I’m quite
decisions about pipelines, and that trick- ing modalities: CGT, CAR-T, ADCs, interested to see how they integrate
les down (or floods) the CDMO sector, mRNA (duh) and more. Of course, these CRO offerings into their CDMO port-
which must make capital-allocation de- new areas are not without risk. FDA is folio and their larger healthcare servic-
cisions of its own. still racing to keep up with reviewing es and equipment arsenal.
these new modalities, hiring staff and
Rationalising of manufacturing developing guidance to better treat CGT Even in a challenging economic
capacity applications. Meanwhile, reimburse- environment, the CDMO sector will
Which brings us to another aspect of ment for some of these drugs has proven continue to play a vital role in supply-
the post-COVID environment for CD- difficult for insurers and national health ing their customers with new and long-
MOs: the rationalising of manufacturing systems. But CDMOs are positioning standing treatments for patients around
capacity. CDMOs did a phenomenal job themselves in these areas, with some the world. A supply chain reckoning
of keeping up with COVID vaccine and spending billions to build out capacity. may be coming, but there are limits to
therapeutic manufacturing demands, As the agency staffs up and fulfils some the changes that can be made and the
helping save the world in the process. As of the commitments it made to innova- very notion opens doors to CDMOs
a thank-you, once the demand shrank/ tor companies under the newest itera- who are in the right place with the right
fell off a cliff, some were left to their tion of the Prescription Drug User Fee capabilities. Governments will contin-
own devices to fill their expanded ca- Act, we could see significant growth in ue to explore ways to bolster manufac-
pacity. new areas of drug manufacturing for turing infrastructure, and at some point
CDMOs. But the lack of progress has that aforementioned political will may
In the early 2021 days of the vac- some companies to pare back expecta- come to bear in a way that makes manu-
cine rollout, I took part in a forum about tions in this space. facturing more sustainable and enables
vaccine production & future-pandemic this sector along with larger pharma to
preparedness where several participants All of that said, there are realities of be prepared for what comes next.
noted that, without significant govern- the CDMO sector that predate COVID
ment investment, long-term contracts, and remain in place. It’s still largely a Oh, you want my predictions on AI
and infrastructure/workforce commit- world governed by private equity in- and how it’ll affect manufacturing (as
ments, the manufacturing capacity that vestment, notwithstanding several no- opposed to R&D/discovery)? You’re on
was collectively marshalled to respond table publicly-held CDMOs. PE funds your own with that one. . .
to COVID was not sustainable going have limited lifespans and that results in
forward, neither for CDMOs nor in- sales of CDMOs to other funds or merg- About the author
house pharma. The non-pharma industry ers with other CDMOs or larger health- Gil Roth is the President of the
participants declared that we were in a care concerns. In the years leading up to Pharma & Biopharma Outsourcing As-
new world where many governments the pandemic, we saw large valuations sociation (PBOA), a trade association
now had political will to support and of CDMO assets, seemingly driven by advocating for the regulatory, legisla-
sustain such capacity through public- the notion that CDMOs would provide tive and general business interests of
private partnerships. I was sceptical at some of the steady revenue of pharma the CMO/CDMO sector.
the time, and my predictions were ac- with little of the R&D pipeline risk (a
curate: governments have gone back to Ph. II/III failure that leads to a startup [Source: CPHI Annual Report 2023]
bickering over healthcare spending and shutting down). Those acquisitions con-
pay lip service to “preparing for the next tinued into the COVID era, although GIL ROTH
pandemic”, while pharma manufactur- they’ve slowed in the last two years, Pharma & Biopharma Outsourc-
ing overall has been compelled to ration- again due to this new world of real in- ing Association
alise capacity. terest rates.

Chemical Weekly October / November 2023 33