What are the main drivers behind the predicted 8% annual growth of the CDMO industry until 2028?
The CDMO industry's growth is primarily driven by two factors. Firstly, the challenging funding environment compels companies to seek external expertise. CDMOs offer valuable support to life sciences businesses, enabling innovation even amidst financial constraints. This synergy has established a productive cycle, enhancing the industry's success.
Secondly, the shift from small molecules to large molecules and biologics marks a significant evolution in healthcare. This transition necessitates specialized expertise in areas like cell and gene therapy, where CDMOs excel. Their role is not just limited to traditional manufacturing but extends to comprehensive solutions, including testing and production, cold-chain storage, and logistics fitting various client needs.
So then, would a better funding environment affect the CDMO industry adversely?
Opinions are divided on this topic. While some predict a tougher funding climate, I believe that innovation will continue to attract investment. However, funding patterns are changing. Instead of large, lump-sum investments, funding is becoming more staggered, influencing the way CDMOs operate. Projects are now more milestone-based. This shift does not necessarily harm CDMOs but it does alter the dynamics of how they engage with clients. As funding evolves, so will the relationship between funding and project execution, CDMOs just need to adapt.
What does Alcami do?
Alcami is a CDMO, and our operations are organized into three pillars. First is drug product manufacturing, which includes sterile fill-finish for vials and syringes, as well as the production of oral solid dosages like capsules and tablets. These are drugs directly for patients since our packaging and labeling capabilities are integrated into this segment.
The second pillar is laboratory services, providing a range of analytical and microbiologic testing services, from method development and validation to release and stability testing for small and large molecules. We are expanding our biologics testing and characterization center of excellence in the RTP (Research Triangle Park, North Carolina), since we’ve seen a lot of growth in these markets.
The third pillar, pharma storage, and services, encompasses bio-storage (cryogenic to ambient storage), commissioning qualification and validation (CQV), SI traceable calibration, and environmental monitoring services. Companies need to store their products and validate their processes, and we can do it more efficiently.
What are Alcami's expansion plans under your leadership?
Since joining Alcami in June 2023, I have focused on building upon the legacy of my predecessor, Pat Walsh, and expanding each of our operational pillars. In Wilmington, we are enhancing lab operations and expanding our stability storage facilities. Across our five campuses, growth is a constant theme. We are expanding biologics lab services in Durham, and increasing pharma storage capacities in both New England and North Carolina.
Our expansion is not limited to physical facilities; we are also diversifying our service offerings. For example, in Garner, North Carolina, we are establishing a large storage facility to support the thriving life sciences sector. Additionally, we are introducing services like aliquoting and sampling, which allows us the ability to not only store materials but also test them for our customers within our lab services network. We consistently move towards more integrated solutions to aid our clients, to speed up their own supply chains.
The primary challenge in such expansion is integration. It is one thing to acquire or establish new operations; integrating them into the existing framework is another. For example, setting up new facilities from scratch, like sterile fill finish or lab operations, can take years.
Alternatively, acquisitions can accelerate this process but come with their own set of integration challenges, especially concerning alignment with our vision, mission, and operational systems. Our recent experience with integrating Masy BioServices business into Alcami in 2021 is a testament to our ability to handle such complex processes. But we are aware that each expansion step must be well-executed and thought out.
What are the current challenges in the pharmaceutical manufacturing supply chain?
The pharmaceutical supply chain remains complex and not fully optimized. There is significant room for improvement, particularly in reducing the number of steps involved in moving products and APIs (Active Pharmaceutical Ingredients). Streamlining these processes cannot only save time and money, but also significantly reduce the potential for quality issues.
Major pharmaceutical companies are actively seeking ways to make their supply chains more efficient and proximal. Additionally, the logistics of importing and exporting drugs, including the clearance times and storage at ports, needs to be more efficient. This is a global issue that has not been solved yet, and addressing these issues is crucial for improving the overall efficiency and reliability of the pharmaceutical manufacturing supply chain, which we believe should be protected.
How does the Inflation Reduction Act (IRA) impact the CDMO industry?
The IRA, initially focused on drug pricing, is evolving to address broader issues like volume and access to medications. This shift could influence CDMOs since it squeezes the margins of the final product, and might lead to a more discerning market where only the best CDMOs thrive. In other words, the risk of failure plays a greater role, since customers simply won’t be able to afford to fail. The IRA could, therefore, be a growth opportunity for the CDMOs who get it right.
We focus on trust and quality, we understand that every role we play is critical. Trust differentiates us and will likely become even more crucial as the legislation perpetuates, and if it evolves.
