More and more pharma companies are interested in shifting volumes to CMOs / CDMOs. The level of contract manufacturing in more conventional technologies like small molecules – solids have reached to 40+ percent of industry volume. The rest of small molecules technologies such as liquids, semi-solids, injectables have increased dramatically. CMOs/ CDMOs are becoming more and more sophisticated, and we see CMOs/CDMOs very active and successful in Oncology, Steroids, Highly-Actives and large molecules. Thanks to CMOs/CDMOs that we are able to get Covid-19 vaccines in large quantities. Some resources estimate that 70 percent of small molecules will be manufactured by CMOs/ CDMOs in next 10 years and the share for the more complex technologies are still in the early phase and will grow significantly.

The demand for Contract Development is also increasing significantly. To accelerate, increase and optimize their product development cost, many pharma companies use CDMOs at an accelerated rate. However, the scope of this article is CMO space which is closer to my area of expertise.

"Pharma companies want to see that Operational Excellence and Continuous Improvement organizations and plans are in place and efficient"

Another factor in CMO/CDO space is manufacturing site divestment by big pharma companies. Traditionally, big pharma companies had their own manufacturing sites and manufactured their own products. Big pharma companies have 10 to 80 manufacturing sites and employ up to a few ten thousands of highly qualified employees. As a part of product life-cycle, pharma companies divest their mature products and divest the relevant manufacturing site together with the product and or separately to a CMO/CDMO organization. More and more CMO/CDMO and investment institutions are interested in acquiring manufacturing sites from big pharma, optimizing them, piping in new volumes and turning into profitable businesses.

Let’s start with the question. What are the expectations of pharma companies from CMOs? Here are few main things to consider;

1. Quality and Safety: This are the foundations of the making business with pharma companies. In other words, these are the licenses to operate. Pharma companies do not take risk in these areas and CMOs/CDMOs should have solid Quality and Safety organizations and procedures in place. Quality departments should be independent from the site management and should make its decisions freely. Luckily, more and more pharma companies have sophisticated External Supply Organizations which support CMOs/CDMOs with their quality and even safety challenges.

2. Supply Reliability: It is only meaningful if a product is supplied at the right time and in the right quantity. Therefore, supply chain reliability and efficiency are very important foundations. A reliable supply chain system, advanced tools to communicate with customers ERP systems, Vendor Managed Inventory applications and implementation of MRP2 principles are very important. We recently see that External Supply organizations of big pharma companies support CMOs/ CDMOs with their Supply Chain Excellence programs and transfer them their know-how. I strongly recommend CMOs/ CDMOs to embrace such programs and make best out of them.

3. Responsible Procurement: This is a concept that came into our lives for more than 10 years ago. It is a very broad topic and deals with human rights, right to unionize, prevention of discrimination on the grounds of race, religion, disability, sex and sexual orientation, providing a safe working environment, environmental protection and sustainability and compliance to local and global laws. Pharma companies wants to see that CMOs have these processes and policies in place and strictly follow them.

4. Competitiveness: Both Generics and Innovative Medicines companies need competitiveness. Innovative medicines start with high margins and initial focus is on supply safety and quality. When competing molecules come to market and/or patent protections end, competitiveness becomes an urgent need for Innovative Medicines. For generics, this is a challenge from day-1. Generics pharma companies want to be “First In and Last Out”. “First In” is related to a company’s ability to develop a product fast and bring to the market. “Last Out” is keeping the product in the market as long as possible with viable margins and so, it is vital for Generics companies.

Competitiveness has many elements and generally CMOs/CDMOs are expected to be the experts in cost optimization. When I assess a CMO, I always ask them about their product lifecycle management and optimization organizations and plans. A well-utilized site, with the right level of automation, with right equipment size and terrain and a lean organization are best set-up for competitiveness. Pharma companies want to see that Operational Excellence and Continuous Improvement organizations and plans are in place and efficient.

5. Creating Value for the Customer: Pharma companies try their best to reduce supply prices while CMOs/ CDMOs want to increase their supply prices and profitability every year. Sometimes it gets so serious that it becomes a threat to the viability of a product in the market. What we generally oversee is creating value for both parties. It is low effort trying to negotiate down the supply prices and similarly trying to increase supply prices based on some industry indexes. It is more effort to create value and it requires some investment but, it generates great value for both parties. I expect a good CMO to come to me with projects such as a cheaper API source, increased batch size, a cheaper manufacturing technology, shorter lead time, a cheaper packaging configuration, Vendor Managed Inventory, Consignment Stock Set-Up, special prices for tenders. Good part of these examples, they also create positive environmental impact. And the benefit should be shared between the customer and CMOs/CDMO so that it is a win-win.

6. Security of intellectual Property: Pharma companies transfer their technology, know how, patented products to CMOs/CDMOs. CMOs/CDMOs serve to many customers and they even develop and manufacture competing products in parallel. Once I had this challenge for a new product development. Pharma companies want to see how their know-how and technology are protected and not used for other customer’s products. This is a very difficult area, and it requires special expertise to create such firewalls and prevent any mishandling and conflicts. In my case, I heard a lot of verbal assurances but, not many procedures and practices. I recommend all CMOs/CDMOs to think about these areas and develop procedures.

There is a lot to be said and a lot to be discussed. I have limited space and wanted to use this space to cover the most important topics. I hope it is useful for the readers and give some ideas and inspirations.