Emergence of Virtual Pharma and Need for CDMOs
Historically most innovative new drugs came from the labs of large pharmaceutical companies. The proverbial patent cliff has led to a decrease in revenue which in turn has led to increased pressure from investors and slashed R&D budgets. Rather than develop innovative compounds in house, large pharma has largely moved towards a licensing and acquisition strategy – choosing to acquire compounds or companies only after they have seen some clinical success and the probability of commercialization has drastically increased. This has led to the emergence or small and virtual pharmaceutical and biotechnology companies who rely on academic collaborations and entrepreneurship to develop new drugs and now hold the onus of innovation.
Small and virtual pharma companies are largely characterized by a lack of internal process development and manufacturing capabilities. Without internal capabilities, these companies rely on external contract development and manufacturing organizations (CDMOs) to manufacture their compounds in sufficient quantities to run early phase clinical trials. With their reliance on external resources to advance compounds, it is important for these companies to identify CDMOs whose business is aligned with their needs.
Identifying CDMOs whose business is aligned with the needs of small and virtual pharma companies can be a challenge. Peter Pollak and Andrew Bardot’s article Picking Tomorrow’s Winners, featured in the October 2013 issue of Contract Pharma featured outlines business development strategies utilized by large contract manufacturing organizations (CMOs) — those with multi-ton capacity and the luxury of picking and choosing their preferred projects. However it is quite evident that small and virtual pharma companies are underserved by large CMOs with the Pollak and Bardot article which goes so far as to say “this business is not attractive because of the small chance of success and small quantities of APIs being produced.”
Keys to a Partnership between CDMOs and Virtual Pharma
With small and virtual pharma companies relying on CDMOs to scale-up and manufacture their compounds, and large CMOs largely indifferent when it comes to these projects, a real opportunity is created for small and medium sized CDMOs who can align their business with the needs of these customers. The Pollak and Bardot article cites a number of 10,452 projects currently in R&D pipelines. With each of these projects representing an opportunity, it is apparent that there is sufficient demand to support business operations at both small and large CDMOs. Small and virtual companies are best served by CDMOs who:
- Focus on creating strong, customer-focused relationships
- Focus on serving customers with projects that fit core competencies
- Mitigate risk to ensure financial stability
The series of posts that follow will explore each of these in greater detail and demonstrate how small and virtual pharma companies can enter into mutually beneficial relationships with CDMOs.