Related Expertise: 医薬品, ヘルスケア業界
By Gian-Carlo Walker, Eduard Viladesau, Hob Brooks, and Elliot Vaughn
As COVID-19 vaccines and therapeutics are rolled out worldwide, demand for the services of contract development and manufacturing organizations (CDMOs) is skyrocketing. CDMOs have gone to great lengths to meet the needs of their biopharmaceutical customers during the crisis. But a larger challenge remains unresolved: how to ensure that growth continues after the pandemic has ended.
CDMOs need to capitalize on their increased relevance to make their relationships with pharma companies more strategic. This requires gaining a deep understanding of the supply chain and manufacturing risks that pharma companies face, developing the differentiating capabilities that will fill these gaps, and changing the partnership model. Such an approach will allow CDMOs to capitalize on the current situation and unlock new opportunities for strategic collaboration, making themselves an even more integral part of pharmaceutical supply chains for the long run.
COVID-19’s Impact on the CDMO Industry
CDMOs provide a wide array of services to pharma companies: drug development and clinical supply, commercial active pharmaceutical ingredient (API) and drug manufacturing, and packaging. These services allow pharma companies to reduce their development and manufacturing costs, timelines, and capital investments while benefitting from the most-advanced technologies.
Pre-Pandemic Relationships
Before the pandemic, most pharma-CDMO relationships remained largely transactional. When pharma companies needed more capacity or access to a new technology they didn’t want to build in-house, they’d source manufacturing services from CDMOs on a project-by-project basis, most often using a fee-for-service or project-based contracting model. In the case of large pharma companies, the relationship was asymmetrical: pharma companies have more size and financial muscle and capture most of the value of the product, whereas CDMOs only earn a margin on cost of goods sold—typically a small fraction of the price of the product.
For years, CDMOs have tried to deepen those relationships by building more-robust development, manufacturing, and relationship or account management capabilities. But those efforts have historically had little success, with around 80% of declared strategic partnerships faltering after a few years. As a result, while true strategic partnerships are pervasive in industries like consumer electronics, they remain very rare in pharmaceutical development and manufacturing.
Reversal of Fortune
Overnight, the pandemic upended the balance of power. As the number of COVID-19 cases soared, so did the need for new COVID-19 vaccines and therapeutics, as illustrated by the efforts of governments and NGOs to fund development and production. Some governments even began considering localization regulations to ensure that sufficient quantities of vaccines and therapeutics would be produced domestically.
Pharmas suddenly were faced with the challenge of producing the many millions of doses that would likely be needed. To expand their manufacturing capacity, some pharmas formed collaborations with like companies and other institutions, as with the collaboration between Pfizer and BioNTech or between AstraZeneca and Oxford University. Others transferred non-COVID-19 biologics out of their proprietary manufacturing networks to make room for the new vaccines. A few companies began rethinking their manufacturing footprint to plan for the years ahead.
The largest source of additional capacity, though, was CDMOs. Pharma companies reserved—and sometimes even double-booked—significant amounts of factory space with contract manufacturers. Pfizer, Moderna, and AstraZeneca have publicly announced their large partnerships with a number of CDMOs, including Emergent Biosolutions, Catalent, and Lonza, among others. Making the most of the opportunity, Catalent, Samsung Biologics, Cambrex, and several developing-country CDMOs have announced significant expansions to their plants.
These moves made one thing very clear: the pandemic has enhanced the position of the CDMO. But there is no guarantee that the shift will last for long. Some CDMOs are wondering if their growth prospects will fade when COVID-19 is over. If demand for manufacturing services subsides after global immunizations are completed, there could be a glut of capacity, which would raise costs and erode margins for years to come.
Pivoting to More-Valuable Partnerships
Now is the time for CDMOs to lay the foundation for more-strategic partnerships. In the short term, companies should expand their customer targets to pharmas looking to bolster the resilience of their supply chains as governments worldwide enact localization requirements. Government incentives to go local could change the economics of building new sites in locations that were previously considered too expensive. National health bodies are another potential source of customers.
To fully leverage the opportunity and increase their competitiveness in the long term, CDMOs need to pivot to a more strategic role that will make them even more integral to the pharma supply chain. (See the exhibit.)
Four steps are critical:
Assess Potential Post-COVID-19 Risks to Pharma Supply Chains
To proactively engage pharmas with a unique value proposition, CDMOs need to acquire a deep understanding of both their own capabilities and their clients’ vulnerabilities. This means assessing pharma capacity and capability needs in light of unpredictable supply chain disruptions, geopolitical considerations, and the competitive landscape. CDMOs should:
Digitalize Supply Chain Capabilities
To play a more strategic role with pharma clients, CDMOs should also focus on strengthening digital capabilities across their operations by engaging in:
Build Out Capabilities to Complement Manufacturing
CDMOs should also expand production capabilities that complement those of their pharma clients through:
Change the Partnership Paradigm
CDMOs should work with their pharma customers to change the collaboration model. Pharma companies themselves have been reflecting deeply on how to create more-powerful partnerships, so the timing couldn’t be better. Together, CDMOs and pharmas should:
Getting Started
CDMOs need to begin by reassessing their network strategy in light of COVID-19 with the confidence that the right capacity and capabilities will unlock new opportunities for strategic collaboration with pharma customers.
That means first modeling demand and supply scenarios to understand how various events could impact the CDMO network. This assessment will help illuminate where and what kinds of manufacturing capacity pharma clients may require.
At the same time, CDMOs should review their portfolio of digital, supply chain, manufacturing, and relationship management or strategic partnership capabilities to see where there are opportunities for differentiation. They should then determine which capacities and capabilities should be built first and focus investments there.