The Rise of the New CMO

Emerging CMOs that are smaller, nimbler & product-focused are providing value-added options to the biopharma industry

Contract manufacturing organizations (CMOs) of pharmaceutical products have been experiencing growth rates much higher than that of the overall pharmaceutical/biopharmaceutical market for several years now, and this trend seems to be accelerating. This is due in part to several factors, including increased consumption due to emerging markets and an aging population; the growing number of biologic drugs in development by traditional pharmaceutical companies; and the increasing complexity of both small- and large-molecule drugs. These factors necessitate the need for options to increase production as well as additional expertise in manufacturing compounds that require specialized skills and capabilities.

While there have been plenty of mergers and acquisitions in the pharmaceutical industry recently to support this growth, we have also seen the emergence of a smaller, more flexible and more focused brand of niche CMO. These new, smaller CMOs may not have the capital of their Goliath competitors, but they can offer some distinct advantages. In many cases, this new breed of CMO can offer access to new technologies that are necessary to develop complex drug products that the sponsor companies do not have in-house. As a result, CMOs that can offer the most advanced technologies have the greatest chance of attracting the attention of sponsor firms. And as sponsor firms continue to pare down their vendor numbers and establish strategic partnerships with fewer, integrated suppliers, technological capabilities can become great differentiators.

For those CMOs that can offer specialized production and unique technical capabilities, there are opportunities to form collaborative capacity management and long-term, multi-project relationships. Emerging CMOs are finding the niche opportunities that the larger, multi-nationals can’t or won’t effectively respond to. Keith Koehler President of Excite Pharma, a niche CMO in Lee’s Summit, Missouri explains why this segment of the market is expanding.

“At Excite, we realized that the small batch market was not serviced well. The larger profit margins with running large batches simply isn’t there. Larger CMOs just aren’t interested.” Koehler also stated that, “we are willing to work with our clients at a smaller margin to help them be successful.” In addition, many of these emerging CMOs can provide specialty services or equipment focused specifically on their niche clientele. “Our strength is we offer high quality full chemistry support services in house is addition to manufacturing … which most small manufacturers simply don’t do.”

In summary, the rise of new, niche CMO was born of a simple necessity – filling a void that was not being serviced. But how they are filling that void is something special – with customized services based on very specific customer needs. These new CMOs may not be for everyone, but they are definitely demonstrating their value to many industry partners.

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