What are CMOs and what are they good for (Part 1 – Lonza) [Kurt In Albon]

What is a Contract Manufacturing Organization or CMO?

A CMO manufactures for pharma companies on a contractual basis. It is not a pharmaceutical company that makes its own drugs but rather has the manufacturing ability and takes contracts from other pharma companies to manufacture their drugs for them on a certain scale.

The drug or medicine remains in the ownership of the company which offered the contract. It has its logo on the packs, while the CMO gets the money for the manufacturing process.

Types of Contract Manufacturing Organizations:

There can be a wide spectrum of contract organizations based on the type of services they can offer. But in a way, they are all the same. What you’re basically doing is outsourcing your development or manufacturing activities. What kind of work and how much of the processes you outsource is what makes the difference.

For example, some CMOs will give you the API in a drum or a bulk container after giving them the molecule. Others will also do the final fill for you. There are CDMOs, i.e., Contract Development and Manufacturing Organizations, which will also help you with the drug development process and manufacturing.

In the entire supply chain, there can be different CMOs or CDMOs for different processes. And as Kurt says, in the best case, there will be a single CDMO to whom you’ll give the molecule, and they will give you the pill, packaged. They’ll do all the tedious stuff so you can focus on R&D and the more creative work.

History of Contract Manufacturing: Who was the first CMO?

Though it is not documented who was the first CMO, we can think about it. When you look at the large pharmaceutical companies globally like Roche, Pfizer, or Novartis, see the huge number of products they have on the market. This massive quantity and diversity of products require a considerable manufacturing infrastructure.

If a company has to make such a large supply, it needs to consider its production capacities. Building a manufacturing plant costs a lot of money and can be a tremendous burden on the business. So a company will definitely think about whether it should invest in building a plant that already exists somewhere else?

That forms the basis of contracts and outsourcing. When there is a less costly, easier, and more convenient way, businesses shift towards it. The first CMO must have been that company that would have taken the risk of building that plant. They probably knew the business opportunity, or maybe they had some plans of their own. But as it shows, this must be the way contract manufacturing would have started. Now that a manufacturing plant exists, an outside company looking to make a drug but doesn’t have the production ability will seek help from the one that already exists.

How to Find the Right CMO?

Imagine some brilliant scientists working in a pharma company’s lab or a startup. They discover a molecule that has quite a good potential to become an approved drug for medicinal use. Now they have the plan but don’t have the manufacturing plant and facilities. Seeking a contract with a good CMO will certainly be a sane option.

Now, how do they find a good CMO? Kurt says that most of the time, the venture capital company selects the CMO for the startup because they are usually well informed about what CMO or CDMO has the best services and best people working in them.

But if that is not the case and you have to look for a CMO yourself, here’s what you should do:

Do Market Research: CMOs and CDMOs are behind the curtains, and not many people know about them. So, doing good market research is the first step. Gather information about different CMOs from credible sources.
Check the History: Once you select a CDMO or CMO, you can go to the FDA website and check them for warning letters. This will give you an idea regarding their quality and compliance.
Perform an Audit: Go carry out an audit and see things by yourself. Auditing will give you more insight, and you’ll get to interact with the people you will be working with.
See Quality Track Record: Ask for their quality track record. You will come to know about their reputation and their successes and failures from the past.
Ask these Questions: Time and speed, you have to ask about these things. If you want to have a product made, ask your CDMO how quickly they can develop it and how much time it will take to come to the market. Business Model of a CMO or CDMO: How Do They Earn?

Earning model is not uniform across all contract manufacturing organizations. It can depend upon many factors. A CMO can charge according to different criteria, for example, per batch of the product, per weight unit of the drug, or gram of a peptide. They can charge for dedicating a certain facility or a manufacturing plant for your company on the contract.

Or if you are working with a CDMO and they’re helping you out with the development process, too, then they’ll certainly charge for that also. Similarly, if a CDMO is doing all the regulatory and submission processes for your product, they will have their compensation for that.

So, it depends. A CMO or CDMO having expertise in a particular process will charge you accordingly. And it depends on how much of the supply chain they are covering.

Do CMOs and CDMOs take a percentage of the patent?

Kurt says it may be possible but would be very rare. Maybe in the case of CROs and CDROs, which are contract research organizations. As they are involved in research and development, it might happen.

But for CMOs and CDMOs, it is not the norm. The contract-offering pharma company has the patent protection and all the rights associated. If somehow the CMO or CDMO decides to take a percentage of the patent, it would be like diving into a shark tank because this is synonymous with crossing your boundaries of work and entering another niche that big sharks already dominate. In this case, those big boys are pharmaceutical companies like Pfizer, Roche, Novartis, etc. So what will most probably happen is that the newcomer will not find itself at ease in the new space and will be overshadowed and possibly swallowed by the big sharks.

So, for the CMOs, it is better to be great at what they do instead of trying to become something else. And that is actually what happens in business. CMOs don’t own the patent.

When Should a Company Not Go to a CMO?

Never, says Kurt in a light-hearted way. There is no direct answer to this question, to be honest. Nonetheless, it is almost always in the company’s favour if it goes to a CMO or a CDMO.

See if there is a small company, a startup, or a group of researchers elsewhere, and they work hard to come across a healthy chemical candidate for a market drug. Research and development is already a cost-intensive process they’ve gone through. Now, if they decide to proceed further with manufacturing on their own, it will be a financial overburden. Outsourcing is the best solution in this case. That allows you to focus on your task while leaving the headache of manufacturing to a CMO. And that too, at a far lower cost. Because if you had to do it yourself, you would have to build a manufacturing facility that would cost you loads of continuous financial influx.

The Future of CMO and CDMO: Trends in Contract Manufacturing

According to Kurt, outsourcing trends are not going to decline anytime soon. This trend is spreading across the globe in all kinds of small and big industries, not just in the pharma industry. Simply because it makes your life easier, more productive, and focused. A company whose sole target is to find new drugs will be saved from the unnecessary burden of manufacturing and other tedious stuff that has little to do with their actual expertise.

Kurt gives an example of the recent contract between Moderna and Lonza for the COVID-19 vaccine production, which is a 10 years long contract. Such long contracts will happen, and the graph is expected to heighten up soon.

New Trends for How Quickly a Drug Gains to the Market?

Time to the market is a significant factor for a pharma company and the end consumers; the patients. We saw in this COVID-19 situation that when the pandemic came over, there were emergency authorizations and rolling submissions. After this pandemic, we likely set new standards for how quickly a pharmaceutical product makes it to the market. Look at how COVID-19 vaccines were developed in such a short time. These fast-paced methods require, no doubt, twice the diligence, but the results are worth it. While rolling submissions is such a thing that hasn’t even got downsides. It is just a faster, better alternative to parallel submissions.

Conclusion:

Kurt gives his closing remarks by highlighting the importance of CMOs and how they play such a big role in nearly everybody’s life. Everybody takes medicines, right? There is a whole world behind each manufactured drug that works hard, utilizes science and labour to bring you the product you deserve. People should understand that although a CMO or a CDMO won’t have its logo on the packaging, they have to be acknowledged for the good work they are doing.

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