To be one of the chosen, a contract development and manufacturing organization (CDMO) must have the expertise to support fully integrated capabilities, be able to form truly collaborative relationships and provide highly customized solutions to meet aggressive development and commercialization timelines and project budgets. Flexibility, responsiveness and innovation are therefore crucial to success.

In the face of ever growing cost pressures, both pharmaceutical and biopharmaceutical companies are implementing strategies to increase efficiencies across all activities. Many pharmaceutical manufacturers are also looking for ways to get candidates into clinical trials and make decisions on their potential more rapidly, and more frequently are turning to external service providers that support not only commercial manufacturing, but early-phase analytical, formulation and drug development work and/or have specialized capabilities. Consequently, the global pharmaceutical contract manufacturing market is expanding at a healthy compound annual growth rate of 6.6%, according to Frost & Sullivan.

Challenging times
Despite this positive outlook, providers of services to the pharmaceutical industry are navigating an increasingly competitive landscape. Consolidation within the pharma industry has been on the rise and is reducing the customer base for contract manufacturers. In order to simplify supplier management activities, many pharma and biopharma firms are also consolidating the number of suppliers with which they partner. Given these conditions, various market analysts have predicted that as many as 30% of exiting custom manufacturing organizations will be forced to exit the market in the coming years.

To survive, service providers must be able to provide real value and continually anticipate the changing needs of their pharmaceutical customers. Contract development and manufacturing organizations that have expertise in pre-formulation/formulation development and are also able to provide clinical trial supplies and achieve seamless scale-up and technology transfer for commercial manufacturing will have a distinct advantage. Those CDMOs with specialized capabilities, such as the production of innovative dosage forms technology, potent compounds and controlled substances, will be further differentiated.

Acquisition evidence
The recent spate of acquisitions in the CMO/CDMO space underscores the recognition by many firms that having a comprehensive offering across all drug development phases from discovery to commercialization will be crucial for continued success. The IPOs of Patheon and Catalent, designed to raise capital for further expansions, followed significant acquisition activity by both companies. For instance, Patheon acquired DSM’s pharmaceutical products business and Gallus Biopharmaceuticals, while Catalent purchased Pharmapak Technologies, Redwood Bioscience and Micron Technologies and invested in several facilities around the world. The merger of Cambridge Major Laboratories with AAIPharma is another important example. Other acquisitions have included Hameln Pharma by Siegfried Group, Aesica Pharmaceuticals Limited by Consort Medical, and very recently Coldstream Laboratories by Piramal Enterprises.

Many CMOs/CDMOs have also invested in their equipment and facilities. This list includes Dr. Reddy’s Custom Pharmaceutical Services (CPS), Pharmaceutics International, Inc. (Pii), Xcelience, Cirrus Pharmaceuticals, Metrics Contract Services, Bend Research and Almac, among others. UPM itself has made $12 million in capital expenditures over the past 24 months.

More than technical support
However, advanced technical capabilities will be insufficient to ensure ongoing success in the turbulent pharmaceutical market of the future. Differentiation through the offering of advanced, specialized technologies combined with adaptable, tailored support and a willingness to work in close cooperation with customers throughout the lifecycle of a given product/project will be imperative. An awareness of emerging industry trends—automation, cloud-based data management, biosimilars, unit-dose packaging, etc.—is also essential in order to be able to anticipate future customer needs and make the investments necessary to maintain a leadership position as an industry innovator.

Importance of risk mitigation
Only those CDMOs that can mitigate the risks associated with the outsourcing of formulation development and manufacturing activities will attract the interest of pharma and biopharma companies. Obvious requirements include financial stability, an excellent audit history and an established track record for on-time delivery of high-quality products. Having the ability to meet the different needs of customers at the pre- and post-proof of concept (POC) phases can play a role in mitigating the risk associated with customer development projects. A demonstrated ability to smoothly execute technology transfer and scale-up activities in a compliant manner is also crucial.

Equally important are effective project management and communication systems that facilitate collaboration and allow the CDMO to function not just as a supplier, but as an integrated partner that is more an extension of the customer than an external provider. In such relationships, expectations are clearly established and protocols/procedures are well definite and understood. Seamless technology transfer can also be achieved. As a result, a CDMO that has both the capability to participate in and the willingness to make the commitment required for such strategic relationships can help its customers work more efficiently and cost-effectively and get products to the market and in the hands of patients more rapidly.

Be a worthy steward
In essence, to succeed in the current competitive environment, CDMOs must be able to convince potential pharmaceutical and biopharmaceutical clients that they are worthy stewards of their development projects. In addition to having expertise and industry knowledge of early stage formulation development, analytical services, cGMP scale up and commercial manufacturing, a fundamental commitment to meet client objectives with the highest quality while maintaining the most efficient use of time and controlling costs is also a necessity.

Project teams must not only operate as extensions of their customers’ organizations, but also take ownership of their clients’ work and develop continuing relationships that often go beyond the scope of a single project. In addition, a customer service culture based on interactive, face-to-face relationships allows for anticipation of and rapid response to changing customer needs, with the goal of identifying the optimal, customized solution.

Conclusion
The most effective strategic partnerships involve transparent communications and are built on a foundation of trust engendered and demonstrated over time. Reliability, quality and comprehensive value-added technical expertise are key structural components. Successful CDMOs also appreciate the cost and time pressures faced by pharmaceutical companies and offers flexible, affordable, and rapid outsourcing services designed to meet our clients’ specific development and manufacturing needs. In addition, because the drug development process is often challenged with unexpected clinical and marketing changes, CDMOs have the operational capability to quickly respond to such project variations. We are fast, flexible and agile because we bring together advanced scientific and technical capabilities and experience with responsiveness and innovation in order to accommodate the unique needs of each of our strategic pharmaceutical partners as they navigate the dynamic drug development process. 

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James E. Gregory, chief executive officer of UPM Pharmaceuticals since 2004, previously worked for King Pharmaceuticals as executive vice president and general manager of King’s Bristol, Tennessee manufacturing facility. He served on the King board of directors in 2002 and 2003. Mr. Gregory has a B. A. from the University of Maryland and MPA from American University.