Contract manufacturing organizations (CMOs) have undergone considerable development during the past decade and will continue their growth trajectory in the next five years. Outsourcing the manufacturing operational needs enables the biopharma companies to hit the market earlier than expected, save their resources and facilities, and focus more on the core business to reduce the drug’s costs.
The business model for CMOs has witnessed a significant paradigm shift. Now they are a manufacturing option and an integral part of the biopharma companies’ overall supply chain. According to an ISR report — Contract Development and Manufacturing Outsourcing (CDMO) Models — only one-third of a company’s manufacturing tasks are conducted in-house. This ratio directly points to increased adoption of outsourced manufacturing options in the biopharma sector.
Earlier, the CMO market constituted numerous contestants collectively contributing to the revenue of the industry. During that time, the CMOs relied on a single client for almost 50 percent of income. This increased number of options increases client companies’ bargaining power, leaving CMOs with little space to negotiate. However, now CMO experiences a wave of consolidation. This trend will not just result in minimized competition among CMOs but also increase their bargaining power to negotiate with the biopharma companies. Some of the significant consolidations are — the Cook Pharmica by Catalent, acquisition of Patheon by Thermo Fisher, Capsugel by Lonza, etc.
Contract manufacturing works in a stepwise manner. The different steps involved from the start to the end are:
1. Company starts by looking for a contractor. This searching is done by advertising the project and requesting bids.
2. After selecting the bids, an original equipment manufacturer (OEM) chooses a few manufacturers to discuss applications.
3. Based on the discussions, the OEM decides the manufacturing company to work with.
4. The OEM and CMO come into a contractual agreement. This agreement specifies the contract manufacturer’s particular job, along with the agreed timeframe and budget.
5. Once hired, the CMO starts to produce goods or performs services for the OEM regularly. CMOs use the logo of the OEM company to all the goods before shipping.
Benefits of Employing a CMO for Manufacturing Process
Both the parties involved in a contract manufacturing agreement experience specific benefits, like the contract manufacturer gets benefitted from continued work that helps to have financial stability. On the other side, the OEM seeks to avoid the hassle of performing manufacturing operations and staff facilities. They also cut down costs involved in this manner. The OEM also gains the contractor’s experience and expertise, who usually has their quality control process. Instead of using their skills, they lean on the contractor’s skill set and capabilities. In all, partnering with a contract manufacturer allows the company to focus more on its core business operations while the manufacturing contractor takes care of the entire manufacturing sector.
Choosing the Right CMO
Before getting into any contractual agreement with a CMO, you need to consider several things. These include the factors like whether a manufacturer has access to the best technologies or not, also if their capabilities can meet your expected standard. Other factors like the delivery options, the time required for final products to arrive, payment plans, and experience are essential while making decisions. If a manufacturer cannot meet the specified timeframe expectations, then the owner company may look for another contract manufacturer that can.
Another condition is that the manufacturer with whom the company makes a contract must be willing to work on a trial basis before signing the contract. If the CMO isn’t ready to work according to the payment plans, customizations are then decided to ensure quality assurance.
Most contract manufacturers try to convince the client that they are trustworthy and the perfect choice for a long-term partnership. Untrustworthy contract manufacturers may lead to big problems in the future. One, they could present their clients with goods or services of average quality. Second, if the owner company decided to share its technology and specifications for the desired product, then a dishonest CMO can participate in IP-related disputes.
Globally-interconnected communication makes it simpler for companies to advertise for bids on CMOs and even take orders to manage the production process. Still, finding a pool of contract manufacturers is a tiresome task. To make this a bit simpler for you, we are mentioning a few of those contract manufacturers known to be reliable producers of high-quality results. Look at them for the desired results, note their capabilities and offers, and narrow them down to three or four candidates according to your preferences.
Recognized CMOs in the Biopharma Sector
The leading CMOs dedicated to providing drug development and manufacturing assistance to diverse biotechnology and pharma companies are Patheon, Catalent, Lonza, Boehringer Ingelheim, PCI, Vetter, Almac, Dr. Reddy’s Laboratories, Famar, and Recipharm.
Among all others, Lonza (Basel, Switzerland)is among the world’s most renowned companies in the contract development and manufacturing domain. It is an industry-leading service provider and delivers small molecule drug substances and their respective intermediate materials. It is a popular name because of its reliability, high-quality, global capacity, innovative technological platforms, and impressive experience.
Another global leader, Catalent (Somerset, New Jersey), provides several integrated services, including superior drug delivery technologies and manufacturing assistance to aid life science innovator companies in developing and effectively launch pharmaceuticals, biologics, and consumer health products. The company employs a broad range of technologies and capabilities and dedicatedly enables a better customer experience.
Biopharma companies often choose to outsource manufacturing to cut down production costs and focus more on core business operations. On the other hand, most newly-emerged biotechnology and pharmaceutical companies are not financially sufficient to establish their independent GMP-grade facilities. Hence, they choose to partner with the CMOs. Considering the ongoing trade war between the giants like the U.S. and China and the rising demand for lowered labor wages, India is regarded as the most preferred partnering option for pharma companies seeking to outsource their manufacturing processes. Additionally, there is an increased focus on biologics and biosimilars’ development, which makes outsourcing to CMOs the most feasible option.