The past 25 years have ushered in considerable change in the industry, once dominated by small molecules to the advanced biologics and cell and gene therapies of today. From blockbusters such as AstraZeneca’s heartburn drug Prilosec and Pfizer’s statin Lipitor, that in 1999 had sales of $4.2 billion and $3.7 billion, respectively, to Merck’s runaway immunotherapy drug Keytruda to treat 17 tumor types, that brought in $25 billion in 2023, and Kite’s Yescarta, a CAR T-cell therapy for advanced blood cancer, that had $1.5 billion in sales in 2023.  

Among the most notable changes in recent years is the prevalence of complex and expensive biologics such as advanced therapy medicinal products (ATMPs), compared to small molecule, chemical-based drugs, and the evolution of manufacturing processes, from large to smaller batches, along with greater supply chain complexity and need for advanced cold chain solutions. 

To highlight some of the more recent milestones, Pfizer and BioNTech’s COVID vaccine Commirnaty represented the first FDA-approval of an mRNA drug product, which occurred in August 2021. Additionally, in December 2023, Vertex Pharma’s Casgevy became the first FDA-approved therapy utilizing CRISPR/Cas9, a type of genome editing technology, along with Bluebird Bio’s Lyfgenia, representing the first cell-based gene therapies for the treatment of sickle cell disease.

Today there are upwards of 800 cell therapy prospects currently in development to treat hematological cancers¹ representing a 50% increase from 2019, when approximately 245 CAR-T therapies were in clinical development.² While predicted to grow 30% CAGR over the period 2021-2031, which would lead to a total CAR-T cell therapy market size of $23.2 billion in the next decade,² the autologous nature of cell therapies poses considerable challenges with respect to manufacturing, supply chain, and scaling. 

Looking Ahead

These past couple of years bore witness to some staggering headlines, including: Novo Holdings to Acquire Catalent for $16.5 Billion; Merck, Daiichi Enter Global ADC Alliance with Potential Value of $22 Billion; and U.S. Legislation Seeks Sanctions on BGI, WuXi Apptec, just to name a few.

Upending the traditional sponsor/CDMO outsourcing model, the Novo Holdings merger agreement to acquire global CDMO Catalent, intends to sell three Catalent fill-finish sites and related assets to Novo Nordisk. While Novo Nordisk and Catalent have a long-standing collaboration, the acquisition of the filling sites aims to support Novo Nordisk’s supply of semaglutide (Ozempic for type 2 diabetes and Wegovy for weight management). The acquisition is expected to gradually increase filling capacity beginning in 2026.

With the ever-expanding global weight loss market, according to Jefferies analysts, GLP-1 drugs are set to generate upwards of $120 billion in annual sales globally by 2031. The current GLP-1 frontrunners include Novo Nordisk’s Ozempic and Wegovy, and Lilly’s Mounjaro and Zepbound, have these pharma giants investing billions to expand manufacturing capacities to support their GLP-1 portfolios.

Novo Nordisk’s additional efforts to expand production capacity include a $6 billion investment in its Denmark operations and an additional $4.1 billion investment in its Clayton, NC site for the construction of a 1.4-million-sq.-ft. production facility. Novo Nordisk continues to explore semaglutide in new indications, potentially expanding to more patients and further adding to supply pressures. Wegovy, for instance, was approved by the FDA in March 2024 to lower the risk of cardiovascular events in overweight or obese patients with cardiovascular disease.

Meanwhile, Lilly recently raised its outlook thanks to Mounjaro and Zepbound and forecasts overall company revenue in 2024 will be between $42.4 billion and $43.6 billion for the year. Supply of its GLP-1 products continues to be tight and the company anticipates further sales growth will be limited by how quickly it can add production capacity.

Lilly is making historic investments in manufacturing and ambitious expansions to support its diabetes and obesity portfolio, adding capacity to manufacture API and bolstering its global parenteral product and device manufacturing network. Since 2020, Lilly has committed more than $18 billion to build, upgrade and acquire facilities in the U.S. and Europe to help meet ongoing demands.

Industry Challenges

The past several years alone have been turbulent, as evidenced by drug shortages, supply chain challenges, reshoring trends, geopolitical tensions, biopharma layoffs, and, going forward, the potential impact of the Biosecure Act and Inflation Reduction Act. Notably, the industry landscape continues to adjust following the impact of the COVID-19 pandemic on the supply chain, CDMO operations, and investments in R&D.

In January of this year, the U.S. House Select Committee introduced the Biosecure Act, which intends to prevent Chinese biotechnology companies from accessing U.S. funding and collaborating with pharma companies. The bill aims to safeguard personal health and genetic information of Americans from foreign adversaries. It also aims to have U.S. pharma and biopharma companies reduce their reliance on China for pharmaceutical ingredients and early research services.

Having passed the House of Representatives on September 9, the bill heads to the Senate. The Biosecure Act would prohibit contracting with certain companies deemed potential national security risks, including BGI, WuXi AppTec, WuXi Biologics, and others. These companies provide contract research and manufacturing services for global pharma and biopharma firms, meaning U.S. companies would need to find new service providers. 

WuXi AppTec generates upwards of 60% of its revenue from its U.S. operations and has facilities in Georgia, Pennsylvania and California, as well as a new campus in Delaware. BGI operates more than 100 genetic collection labs in over 20 countries. If passed, the bill would further strain the U.S. supply chain.

Meanwhile, in 2022 U.S. Congress passed the Inflation Reduction Act (IRA), charged with the tricky task of lowering prescription drug prices while promoting clean energy. IRA includes provisions allowing drug price negotiations by Medicare, some targeting high-cost biologics, which in turn could impact the dynamics of the biosimilars market, for better or worse.

The initial reaction assumes IRA will impact investments in R&D. In the meantime, a record year for biotech bankruptcy and lack of funding has resulted in a myriad of biopharma layoffs this past year. This in turn could impact CDMOs with potentially fewer drug development projects. To what extent IRA impacts R&D going forward remains to be seen.

Drug Shortages and Reshoring Trends

Ongoing and active shortages are the highest in a decade, according to ASHP.³ Drug shortages can occur for many reasons and can range from the unknown to supply and demand, manufacturing, regulatory issues and quality problems, delays, and business decisions, such as discontinuations. The top five active shortages by drug class, according to ASHP, are Antimicrobials, Chemo, CNS, Fluids/Elytes, and Hormones.

Following the COVID-19 pandemic, reshoring efforts aim to bring product supply security back to the U.S. Today companies are looking to diversify their API suppliers and manufacturers instead of relying on one manufacturer. This heightened awareness and restructuring of supply chains through onshoring will have a major impact on the CDMO sector in the years ahead.

CDMOs continue to shoulder these and other challenges by investing in new technologies and facilities to help streamline development and manufacturing processes and to mitigate against supply disruptions. With the changing tides of R&D, whether it’s for capacity or capabilities, pharma and biopharma companies continue to leverage the strengths of the CDMO sector to support their drug development and manufacturing needs.

The following retrospective includes commentary from contract service providers looking at major changes in the pharma/biopharma industry and outsourcing, global market changes, major regulatory changes, and the future of the industry and outsourcing.

Shawn Murtough, Director of Quality and Regulatory Services for PCI Pharma Services shares insight on major regulatory changes that have impacted the industry in recent years:

There have been multiple regulatory changes impacting EU GMP, including three chapter updates and six revised Annexes published in Eudralex, new GMP Guidance for ATMPs, implementation of 536/2014 (CTR), and one of the stars falling off the EU flag as the UK left the European Union.

Keeping up to date has been a challenge these past ten years, and within these updates some have proven more difficult for the industry to adopt and implement than others. For example, updates to the Premises and Production chapters brought the need for toxicological assessments based on health-based exposure levels, and corresponding implementation where high potent drugs were manufactured. In many cases, this necessitated manufacturing reconfigurations or even facility remodeling to support contained/closed systems.

Some of these updates were quite expansive. For one, the revision to Annex 1 for Sterile Products with granularity was nearly four times the length of its predecessor. There was strong resistance to call for Pre-Use Post Sterilization Integrity Testing (PUPSIT), with risk assessments often being deployed. Annex 1 defines stringent criteria concerning where risk assessments are possible, but in many cases, this is being flouted, leading to contentious debates regarding PUPSIT’s real-world benefits.

The UK’s departure from the EU also impacted the industry, requiring supply chains to adapt to the new geographical borders; consequently, the post-Brexit UK is free to make its own laws and guidances concerning drug product manufacturing and regulation.

Most recently we have seen the implementation of the Clinical Trial Regulation (536/2014), whereby all clinical trials within the EU must be registered with sponsors, per the transition from the soon-to-be defunct Clinical Trial Directive 2001/20/EC to the new Regulation.

Wendy Stewart, President of Clinical Operations, R&D Solutions, at IQVIA discusses the future of the industry based on pharma/biopharma industry trends and their impact on contract services and outsourcing:

With increasing digitalization, regulations, expanding sites in Asia-Pacific and more, the global R&D landscape is evolving rapidly. Yet, sponsors still have ambitious goals to meet. Proactively addressing the unique needs of developers across the spectrum, from small emerging biopharma companies (EBPs) to mid-size pharma to more established, global companies, is more important than ever.

Partnerships may evolve from full-service outsourcing to functional service providers, but primarily, we are seeing the increasing need to flex (or adapt) our solutions according to sponsors’ changing needs. An EBP with limited functional in-house expertise and operations may choose to partner with an experienced CRO for full-service outsourcing to successfully conduct a trial from end-to-end, including trial oversight. A mid- to large-size pharma sponsor may cherry pick specific services when turning to a CRO partner (e.g., data management or regulatory guidance) while maintaining trial management internally or may look for a flexible solution to meet their needs. As needs change, CROs will have to scale services and solutions accordingly.

Stacey Williams, Vice President of Marketing at Alcami notes biopharma industry changes that have greatly impacted contract services and outsourcing, namely, the rise of biologics and advanced cell and gene therapies and the shift towards precision medicine:

CDMOs with expertise are well-positioned to navigate the complex development and manufacturing processes but must invest in specialized facilities, technologies, and talent.
Rising costs and pressure on R&D budgets has prompted increased outsourcing and use of contract services to manage drug development, including clinical trials, manufacturing, and regulatory compliance. Additionally, global events such as COVID-19 highlighted supply chain vulnerabilities. Companies increasingly outsource to contract service providers that offer robust supply chain management and risk mitigation.

Other industry trends include embracing digital technologies and advanced analytics, including widespread implementation of cloud computing and SaaS platforms, AI, machine learning, and big data analytics.

Furthermore, the role of Managed Care in the U.S. is impacting treatments in pipelines and portfolios and volumes of approved drugs. For example, rare or orphan drugs get more attention on one side but generics and biosimilars get support on the other.

The following highlights global market changes impacting the industry and in turn CDMOs:

• Rise of cell and gene therapies and complex biologics along with the demand for cold supply chain and custom cold storage conditions versus ambient storage to safely manage biologics and cell and gene therapies.
• Onshoring in response to supply chain and geopolitical issues and Biosecure Act uncertainties.
• Exploding popularity of GLP-1s for diabetes and weight loss, paired with industry consolidation, continues to impact sterile fill-finish capacity.
• Striking a balance between leveraging AI for efficiency with human oversight to ensure product quality and safety to harness the benefits of AI while mitigating associated risks.
• Industry response to the IRA, incentivizing biologics, fueling demand for biosimilar and generics to lower drug prices and reduce margins; CDMOs and CROs must accommodate increased analytical work.

Although there are now signs of recovery, the recent downturn in pharma/biotech funding had downstream consequences for CDMOs and CROs as more clients pause programs.

Krishna Cheriath, Chief Data Analytics and Artificial Intelligence Officer at PPD Clinical Research Business of Thermo Fisher Scientific, addresses the impact of technology on the industry and in turn CROs:

With artificial intelligence (AI), we are in a unique disruptive moment that can reshape how we do things. We need to continue to think about AI in a responsible and ethical way. We have the opportunity to ensure that the clinical trial design is most effective and efficient. As soon as the clinical trial protocol is decided, we must utilize AI, along with other digital capabilities, to get the first patient into the first visit as fast as possible and then optimize clinical development. As soon as the last patient and last visit is done, we can use AI to ensure the regulatory filing is completed as fast as possible. Whether it is rare diseases or oncology, if AI can get it to patients one day sooner, that is a huge win. 

References:

1. https://www.globaldata.com/media/pharma/blood-cancer-market-will-not-able-sustain-oversaturated-cell-therapy-pipeline-receive-regulatory-approval-says-globaldata/
2. https://www.cellandgene.com/doc/car-t-beyond-cgts-in-development-in-0001#:~:text=At%20present%2C%20there%20are%20750,therapies%20were%20in%20clinical%20development
3. https://www.ashp.org/drug-shortages/shortage-resources/drug-shortages-statistics