CPhI report highlights unpredictability in CDMO growth

AMSTERDAM—CPhI Worldwide, held in Frankfurt in October and organized by UBM, has announced the findings of part one of the 5^th edition of the CPhI Annual Report, which focuses on immediate and long-term trends in pharmaceutical outsourcing. The unstable U.S. government administration, the longer-term implications of drug pricing and Big Pharma income repartitions are highlighted as key unknowns and risks for the contract development and manufacturing organization (CDMO) sector.

The trend toward integration of pharmaceutical outsourcing continues, with single-source providers increasingly sought. Acquisitions in the future may not be dominated by big deals and large mergers, but by smaller commentary services and niche technologies to fill specific technology asset gaps. The pharma industry is anticipating a large increase in the use of flow chemistry and fermentation technologies, but resistance to change may slow adoption significantly.

Vivek Sharma, CEO at Piramal Pharma Solutions, says that the one-stop-shop CDMO is now coming to fruition in the industry, with biotechs a clear beneficiary of this trend. He argues that over the next few years we will see “CDMOs in niche areas forward and back integrate,” offering more integrated value chains to customers.

“From pharma’s perspective, this enables them to concentrate on broadening the number of drug discovery programs they work on simultaneously and should expedite new drugs to market,” said Sharma. “In fact, over the next two to five years we will increasingly see more symbiotic relationships between pharma and CDMOs—with even capital and risk-sharing deals.”

Sharma noted that in terms of specific products classes, oncology continues to grow quickly as pharma and biotech see medium-term potential success. It’s likely that CDMOs will invest in parallel areas such as high potency API manufacture, lyophilized/injectable products and Antibody Drug Conjugation.

Gil Roth, president of the Pharma and Biopharma Outsourcing Association, suggests that the consolidation expected of the CDMO sector to improve the efficiency of outsourcing has not yet panned out in 2017 (prior to Catalent’s purchase of Cook Pharmica). The only large merger with the intention of creating a more integrated outsourcing model was the Lonza acquisition of Capsugel. Roth predicts smaller-scale buys to expand their current capabilities from CDMOs, while “ex-U.S. CDMOs” may try to boost their U.S. presence by acquiring an existing provider or an available facility.

Roth noted the relative unpredictability of the current pharmaceutical climate, considering the unclear plans of the current U.S. administration. There has been a keen political desire in the Unites States to reduce drug prices, but there is little indication of any Trump administration policy, leaving pharma companies and “CDMOs in the dark as to decisions that may very well disrupt their entire business model.”

STA Pharmaceutical CEO Dr. Minzhang Chen says flow chemistry has the potential to revolutionize and modernize pharmaceutical processes, but points out that the industry is still a full 50 years behind the bulk chemicals industry on the implementation of this technology.

“In the next five years, however, more advanced flow technologies will be developed and more companies will be developing continuous processes, while the existing scientists will build up more experience in this area. As a result, we should expect a wider range of reactions to be processed through flow and a lower bar to be established for selecting a process to be operated in flow. During this time, we expect to see more multistep flow processes performed,” Chen added.