Jim Grunwald, Emily Heffernan & Ryan McDonough , DPS Group02.06.23
Contract development and manufacturing organizations (CDMOs) continue to benefit from a global surge in the advanced therapy medicinal products (ATMP) market.
Consequently, however, CDMOs are also facing long lines of companies in need of their services—wait times for a pharmaceutical company’s place in line can be anywhere from 12 to 18 months or even longer.
To adequately address the demand for their services, CDMOs have begun to design and construct new facilities at unprecedented rates. For those still sitting on the fence as to how to undertake the investment, it’s important to remember that a successful strategy may need to thread the needle with flexible multimodal design rather than strictly dedicated specialization.
Here in the U.S., the Food and Drug Administration (FDA) anticipates receiving more than 200 investigational new drug (IND) applications for new gene therapy by 2025.
That influx of applications means the FDA may approve 10 to 20 new gene and cell therapies yearly.
Globally, the story is even more impressive. According to the latest research by InsightAce Analytic, the Global ATMP Service Providers Market was valued at $13.85 billion in 2021, and it is expected to reach $34.59 billion by 2030, with a CAGR of 10.9% during the forecast period of 2022-2030.1
Often-cited statistics from GlobalData indicate that approximately 1,300 trials were to be initiated in 2022, many with a decentralized or virtual component. This represents a 28 percent increase from 2021 and a 93 percent increase from 2020.
Small wonder, then, that the global CDMO market attained a value of about $177.1 billion in 2020. From 2022-2027, the market is anticipated to grow at a CAGR of 8.4% to reach nearly $302 billion by 2026.2
Until recently, pharmaceutical manufacturers have felt themselves on the horns of a dilemma: Should they build their facilities, at the expense of millions and a possible delay of many months awaiting regulatory approval—or should they join the growing list of companies waiting in line for their turn with CDMOs?
Increasingly, the answer for many has been to move to the CDMO market. The reason, as is often the case, comes down to money.
Additionally, building out a facility can be somewhat of a budgetary white elephant, particularly for smaller companies. In many cases, a company can’t scale quickly enough to fully use a dedicated facility unless it makes accommodations up front for expanding capacity as the company grows. We’ll discuss this notion of accommodation later in this article.
In general, however, rising consumer demand and the resource and budget limitations faced by ATMP developers are creating lucrative opportunities for contract services providers and increased market competition. CDMOs need to add capacity as start-ups, and small operations turn to them to keep their development going.
Key to a CDMO’s success will be threading the needle between specialization and multimodality.
CDMOs have become more sophisticated and specialized over the past five years and generally have become much better at following industry trends to identify where new therapies and modalities are coming from. For example, five years ago, there were virtually no CDMOs specializing in microbiome therapeutics or oncolytic viruses.
And yet now, there are a host of new builds specializing in many of these same modalities as well as others. So, startups and smaller companies have found space at CDMOs where they may previously have had to invest in their own facilities.
But that specialization can be a double-edged sword in novel therapies. By some estimates developing a gene therapy can run as high as $5 billion.3 This is more than five times the average cost of developing traditional drugs.4 Besides the expenses related to research, manufacturing, and distribution, such therapies and treatments must clear multiple stringent regulatory hurdles, which can extend the time to approve the drug.
CDMOs are playing the long game to see whether their specialization strategies will pay off. And given how new the entire cell and gene therapy market is, it may make the best financial sense for CDMOs to consider flexible multimodal design as they build out their facilities. This requires accommodating a single design for several different functions, including utilities, HVAC requirements, warehousing, and shared spaces.
It may seem daunting, but it’s a critical accommodation given how quickly the market is evolving. Because while some life sciences companies may feel that the choice between building their own facility versus outsourcing may be a dilemma, many are also considering the potential advantages of going their own way.
It may be disconcerting for an entrepreneurial company to sign on with a CDMO, understanding their turn in line might be 18 months from now. In our experience, some of these companies are considering the advantages of undertaking a small pilot plant for their research. They may be able to do some upgrades or retrofits to their existing infrastructure at an acceptable cost which would enable them to get through early-stage clinical trials out of their present facility. The moral of this story is that there is no “one-size-fits-all” solution to bringing these new products to market.
For both scenarios—the CDMO determining how or whether to expand with multimodal capability, or the pharma company trying to make the most effective use of existing facilities to avoid losing time to market—it’s essential to work with a team of designers and engineers that can streamline the process. These companies have considerable expertise in building facilities that can easily expand to accommodate future growth.
It's a booming market for CDMOs today, even while some manufacturers are clearly taking an incremental approach to building out their own facilities to undertake early-stage research. The CDMOs best positioned for success will be the ones that offer the broadest scope of possible services without sacrificing the specialized knowledge they have spent time, effort, and money to accumulate.
Jim Grunwald is Senior VP, US Business Development, Emily Heffernan is US Director, New Process Technologies, and Ryan McDonough is Senior VP, Project Operations at DPS Group Global. For more information, visit www.dpsgroupglobal.com.
Consequently, however, CDMOs are also facing long lines of companies in need of their services—wait times for a pharmaceutical company’s place in line can be anywhere from 12 to 18 months or even longer.
To adequately address the demand for their services, CDMOs have begun to design and construct new facilities at unprecedented rates. For those still sitting on the fence as to how to undertake the investment, it’s important to remember that a successful strategy may need to thread the needle with flexible multimodal design rather than strictly dedicated specialization.
Growth Statistics
A quick review of statistics—both in terms of demand for new products and the potential size of the CDMO market worldwide—offers an eye-opening reinforcement of the need for outsourcing services that can be applied to a wide range of potential products.Here in the U.S., the Food and Drug Administration (FDA) anticipates receiving more than 200 investigational new drug (IND) applications for new gene therapy by 2025.
That influx of applications means the FDA may approve 10 to 20 new gene and cell therapies yearly.
Globally, the story is even more impressive. According to the latest research by InsightAce Analytic, the Global ATMP Service Providers Market was valued at $13.85 billion in 2021, and it is expected to reach $34.59 billion by 2030, with a CAGR of 10.9% during the forecast period of 2022-2030.1
Often-cited statistics from GlobalData indicate that approximately 1,300 trials were to be initiated in 2022, many with a decentralized or virtual component. This represents a 28 percent increase from 2021 and a 93 percent increase from 2020.
Small wonder, then, that the global CDMO market attained a value of about $177.1 billion in 2020. From 2022-2027, the market is anticipated to grow at a CAGR of 8.4% to reach nearly $302 billion by 2026.2
Until recently, pharmaceutical manufacturers have felt themselves on the horns of a dilemma: Should they build their facilities, at the expense of millions and a possible delay of many months awaiting regulatory approval—or should they join the growing list of companies waiting in line for their turn with CDMOs?
Increasingly, the answer for many has been to move to the CDMO market. The reason, as is often the case, comes down to money.
The Slowdown in Capital Spending Creates CDMO Opportunities
Through our own experience, we’ve seen that smaller or start-up companies in the novel therapeutics and ATMP spaces have been slowing down on capital spending—specifically in areas such as expanding their manufacturing capabilities. Much of this is because FDA requirements for such novel therapeutic products are quite stringent and consequently have caused some companies to hesitate on their facility buildouts.Additionally, building out a facility can be somewhat of a budgetary white elephant, particularly for smaller companies. In many cases, a company can’t scale quickly enough to fully use a dedicated facility unless it makes accommodations up front for expanding capacity as the company grows. We’ll discuss this notion of accommodation later in this article.
In general, however, rising consumer demand and the resource and budget limitations faced by ATMP developers are creating lucrative opportunities for contract services providers and increased market competition. CDMOs need to add capacity as start-ups, and small operations turn to them to keep their development going.
Key to a CDMO’s success will be threading the needle between specialization and multimodality.
Specialization is a Double-Edged Sword
The CDMO sector has grown consistently because of its benefits to pharmaceutical companies in optimizing the supply chain when bringing products to market. This successful approach to development has consistently bolstered demand for CDMO services. The growth of gene therapy and other novel pharmaceutical products will only increase that demand.CDMOs have become more sophisticated and specialized over the past five years and generally have become much better at following industry trends to identify where new therapies and modalities are coming from. For example, five years ago, there were virtually no CDMOs specializing in microbiome therapeutics or oncolytic viruses.
And yet now, there are a host of new builds specializing in many of these same modalities as well as others. So, startups and smaller companies have found space at CDMOs where they may previously have had to invest in their own facilities.
But that specialization can be a double-edged sword in novel therapies. By some estimates developing a gene therapy can run as high as $5 billion.3 This is more than five times the average cost of developing traditional drugs.4 Besides the expenses related to research, manufacturing, and distribution, such therapies and treatments must clear multiple stringent regulatory hurdles, which can extend the time to approve the drug.
CDMOs are playing the long game to see whether their specialization strategies will pay off. And given how new the entire cell and gene therapy market is, it may make the best financial sense for CDMOs to consider flexible multimodal design as they build out their facilities. This requires accommodating a single design for several different functions, including utilities, HVAC requirements, warehousing, and shared spaces.
It may seem daunting, but it’s a critical accommodation given how quickly the market is evolving. Because while some life sciences companies may feel that the choice between building their own facility versus outsourcing may be a dilemma, many are also considering the potential advantages of going their own way.
It may be disconcerting for an entrepreneurial company to sign on with a CDMO, understanding their turn in line might be 18 months from now. In our experience, some of these companies are considering the advantages of undertaking a small pilot plant for their research. They may be able to do some upgrades or retrofits to their existing infrastructure at an acceptable cost which would enable them to get through early-stage clinical trials out of their present facility. The moral of this story is that there is no “one-size-fits-all” solution to bringing these new products to market.
For both scenarios—the CDMO determining how or whether to expand with multimodal capability, or the pharma company trying to make the most effective use of existing facilities to avoid losing time to market—it’s essential to work with a team of designers and engineers that can streamline the process. These companies have considerable expertise in building facilities that can easily expand to accommodate future growth.
It's a booming market for CDMOs today, even while some manufacturers are clearly taking an incremental approach to building out their own facilities to undertake early-stage research. The CDMOs best positioned for success will be the ones that offer the broadest scope of possible services without sacrificing the specialized knowledge they have spent time, effort, and money to accumulate.
References
1. https://www.prnewswire.com/news-releases/advanced-therapy-medicinal-products-atmp-service-providers-market-worth-34-59-billion-by-2030---exclusive-report-by-insightace-analytic-301557857.html
2. https://www.expertmarketresearch.com/reports/contract-development-and-manufacturing-organization-cdmo-market
3. https://gskkr.files.wordpress.com/2015/01/biotechnology.pdf
4. https://www.sciencedirect.com/science/article/pii/S2452302X1600036X
Jim Grunwald is Senior VP, US Business Development, Emily Heffernan is US Director, New Process Technologies, and Ryan McDonough is Senior VP, Project Operations at DPS Group Global. For more information, visit www.dpsgroupglobal.com.
