October 1, 2015 (Vol. 35, No. 17)
CMO Relationships Have Evolved Into Being More Strategic and Solutions-Oriented
The relationship between sponsors and contract manufacturing organizations (CMOs) is being transformed slowly but surely, with true value added for sponsors, says Franco Negron, senior vp for the North American CMO business at Patheon. “Years ago, the relationship was mostly transactional and based primarily on discovering ways for the industry to alleviate capacity constraints and to leverage a better cost structure.”
CMO relationships involved very limited discussion, but its transaction-based nature seems to have evolved into being more strategic and solutions-oriented, focused on the total value of the end-to-end services and supply chains.
For example, technology transfers are increasingly more collaborative. When considering speed, simplicity, and the success of a tech transfer, early engagement of both parties into the details of the transfer become more relevant. True collaboration, according to Negron, involves understanding the technical challenge and regulatory landscape.
“Executing a successful tech transfer is less about how one passes the baton to another, but how both organizations come together seamlessly to deliver the final outcome. Within the next ten years, our industry is likely to replicate the recent path of the electronics industry, in that sponsors will focus on the innovation of new products and increasingly rely on their CMO partners to bring them to market,” Negron adds.
For biopharm this will involve focusing on the innovation of new molecules and product life cycle management while CMOs will focus on the development, manufacturing, and delivery of products to customers.
A few years ago the term “partnership” with regard to CMO-sponsor relationships was overused, Negron notes. “A partnership was viewed as the basic level of service and delivery. Now when we discuss partnerships, we understand that both parties are involved in leveraging business relationships for mutual benefit from the agreed upon services and solutions.”
In effect partnerships have morphed from an association based mostly on procured business and even exchange to a collaborative relationship based on providing solutions to a mutually invested business.
“As we become the strategic partner to sponsors, CMOs must provide technical capabilities and expertise, which is key for a high level of collaboration and trust,” Negron tells GEN.
Strategy vs. Tactics
The shift from vertical integration to the more dynamic core competency business model has created numerous opportunities for pharmaceutical CMOs, as well as contractors specializing in research, development, and clinical trials.
When outsourcing began to take hold 20 years ago third-party service companies were employed tactically for straightforward production projects.
“But the past five years have shown a greater emphasis on engaging partners for their expertise, not just their capacity,” says Kate Hammeke, co-author of Contract Manufacturer Quality Benchmarking, a 2015 study from ISR Reports. “The direction is moving toward partnerships but a consensus does not exist on specifically what an ideal sponsor/CMO partnership might be.”
Positive experience with a CMO is a key selection factor. As sponsor/CMO relationships strengthen over time, and sponsors begin using CMOs for their expertise and scientific knowledge rather than just for capacity, the relationship strengthens, CMOs are entrusted with more complex projects, and partnerships become more long term. “But there will still be a need for CMOs to work on ‘simple’ projects through more one-off or tactical-type relationships,” Hammeke adds.
ISR measured approximately 30 attributes in its report but interestingly, no single standout factor emerged on how or why innovators select contractors, or even a consensus on the top five attributes that sponsors seek.
“Multiple attributes factor into CMO selection, and these vary by company size, geography, project requirements, etc.,” Hammeke says. “Truly understanding why a CMO is selected requires a thorough analysis of a CMO’s fit based on project specs.”
One of the report topics, technology transfer, has been cited as a potential stumbling block to CMO-sponsor cooperation.
“Tech transfer is an area where a CMO could effectively differentiate their offering from the competition and potentially win projects, as few CMOs exceed expectations in this area” Hammeke says. “Just two of the nineteen CMOs with in-depth profiles exceeded expectations in tech transfer and scaleup capabilities.”
BioPlan Associates has been following the CMO business for years. Its recent report, 12th Annual Report and Survey of Biopharmaceutical Manufacturing, covering the period 2006–2014, highlights changes in how sponsors view contractors. The most significant declines in attributes innovator companies deem critical when selecting a CMO are surprising.
Production platforms relevant to the sponsor’s product were cited by 50% of sponsors polled in 2006, but only 31% in 2014. Perhaps reflecting the significance of time-to-market, cost-effectiveness of services was mentioned by 38% of respondents in 2006 but just 22% in 2014. BioPlan attributes this partially to greater emphasis on quality and “sound relationships,” and to the observation that outsourced projects are shifting toward higher value.
Similarly, nearly half of those surveyed believed that “track record with products similar to mine” was critically important at the beginning of the study period, but just 34% believed so in the most recent survey.
According to BioPlan, biopharmaceutical customers assume that CMOs are versed in multiple production platforms, and where they aren’t they expect contractors to invest in production technology required for their job. This idea ties into the notion of higher-value project outsourcing.
CMOs moreover are interested in new technologies in their own right, to the point of staffing technology scouts to identify production and purification platforms that will differentiate them from other CMOs in their class.
The report covered 21 emerging technologies, of which disposable probes and sensors were identified as interesting by 67% of sponsors and 42% of contractors. For CMOs the leading emerging technologies of interest were single-use downstream process equipment (56%), cell culture media (44%), and chromatography products (44%).
Unsurprisingly, CMOs are much more likely to appreciate the value of more-efficient, single-use or ready-to-use downstream process equipment than are sponsors. Specifically mentioned were high capacity chromatography resins (82% of CMOs vs. 47% of developers), membranes (73% v. 45%), disposable ultrafiltration (73% vs. 42%), and prepacked columns (64% vs. 30%).