So, You Want to Become a CDMO…
Looking to pivot your business model to a CDMO service offering? Here’s what to keep in mind.
Sharon Johnson | | Longer Read
The CDMO industry is fragmented with a vast number of companies occupying broad positions. CDMOs offer an array of services to help innovators accelerate products to market and assist in drug development – whether in the manufacture of drug substances or the formulation of drug products. In between these broad lines of division, there are numerous other disciplines, such as analysis, and other specialized services. Some companies market themselves purely on their niche capabilities, offering discrete and transactional services; others look to provide integrated services and collaborative development partnerships, effectively acting as extensions to the innovator’s in-house team. No matter the nature of the company and the services it offers, the focus of a CDMO is to be customer-orientated and to deliver the best possible outcomes.
For an innovator company, the focus of R&D is science driven: discovering new chemical entities (NCEs) to target a disease and delivering treatment in the most efficacious way. Resources are centered on internal scientific excellence; business targets are set internally on project milestones and delivering the product portfolio.
The core competencies of a CDMO must be broader than that of an R&D company, whose value and unique selling points lie in invention and innovation. A CDMO must have the ability to take a molecule and, irrespective of disease target, develop and progress it towards becoming a treatment. The journey will be unique for each molecule, but the experience of other projects, and a wide range of cross-functional skills offered by a CDMO, are crucial for the successful development of a drug product.
Why become a CDMO?
The rewards and benefits of being a CDMO can be viewed in different ways. From a business point of view, the risk profile to the business is very different compared to an R&D company spending money on internal programs. For smaller companies, potentially with a limited number of promising candidates, the need for one of them to be successful determines the entire future of the company. And the number of successful projects in this industry, as we all know, is not as great as the number of projects that fail. By being a CDMO, the ability to work with a broad range of clients and having a diverse revenue stream reduces a company’s financial exposure.
Additionally, there are personal benefits and rewards. For example, scientists working in a CDMO environment have the opportunity to broaden their experiences by progressing a number of projects with various therapeutic indications. Science provides the opportunity to be creative, and working on diverse projects is a very different experience and role than working on a single project for a prolonged period of time. A CDMO’s strength is in the motivation and knowledge of its scientists; and the greater exposure they get in solving challenges and overcoming problems, the more experience they gain for future projects.
The satisfaction that can be achieved as a company that is part of a successful drug launch is also a factor that cannot be overlooked or overemphasized. As a CDMO, working on projects at various stages throughout their development, and to enable a molecule to become a treatment, is highly motivational for all staff. Success breeds success, and so, as the number of products launched increases that have been worked on by a CDMO, there is a sense of pride that comes with having a positive impact on a broader patient population. This not only enhances the reputation of a CDMO but increases its appeal to innovators.
But how do you, as an innovator company, change your business strategy to become a CDMO? And what are the differences that you must make during the transition? What should your main priorities be and how will you measure success?
The most important consideration is understanding what needs to stay the same. The same excellence in science and focus towards what is important does not change, and there will always be a patient at the end of every project. There will be a customer contract in place – but the final customer and ultimate goal will always be to meet patients’ needs.
It is vital that you keep scientific excellence at the core of your business: talent, expertise and experience is what attracts customers to working with partners. In my experience, this the most important selling point for any CDMO: mediocre services do not cut it.
From that core, the individual layers of service, procedures and values can be built up to create an offering. Some will be similar to undertaking internal R&D, but others are very different. You need to weave all of these layers together to create a positive “customer experience” that allows you to differentiate your company within the market.
Deciding on your structure
A good first step is to define the CDMO process and the company structure; roles and responsibilities should be well defined, so it is clear who is accountable for each step. The expectations of “what good looks like” need to be clarified, and a feedback mechanism should be established to assess progress in a transparent and honest way – in fact, this is crucial given the importance of customer service in a CDMO business model.
Put simply, the CDMO end-to-end process can be split into six distinct phases: i) customer engagement (pre-quote), ii) quoting, iii) ready to execute, iv) project execution, v) project close out, and vi) customer feedback. By going through this cycle multiple times with a continuous improvement mind-set – and based on a foundation of quality and regulatory compliance – you’ll soon have the foundations for your service provision. A CDMO also obviously needs a business development team to engage with potential customers, but operationally, the company needs to be in a position to be marketed effectively; you need the capability to handle multiple (and likely diverse) projects simultaneously – each to the highest standards. In other words, your internal processes need to be fit for purpose so that you can please your customers.
To ensure quality and delivery, you’ll need to establish a way of working that is standardized but agile enough to respond to challenges. In the CDMO world, no two projects are identical. The overall product development approach and processes are well-established in our industry, and governed by long-established regulatory requirements for quality, safety and efficacy of the product. And that does not change in the CDMO environment. What’s different? The nuances of interpretation of customer requirements. Each customer may also have their own best practices that can potentially increase complexity. As a CDMO develops and matures, you’ll need to have a continued focus on simplification, balancing standard ways of working with adapting to any bespoke needs of a project. You must be able to provide timely and transparent feedback to customers that can let them make the right go/no-go decisions.
Adapting to the customer
My experience in working within the CDMO space has taught me that it is important to act as an extension of your customers; that’s how customers should feel when working with a service company. And though it may sound obvious, for a company changing from a research-led ethos to an external service provider, it can be challenging to adjust to the customer service mindset! Communication – the basis of your relationship with customers – will be one of your most important skills. You must ensure there is unambiguous alignment about the scope of work being requested, you need to be proactive in providing solutions to development challenges (which there will be – I assure you of that!), and you’ll have to be responsive, flexible, and available – all while safeguarding the foundation of the company as a contract provider so that the business continues to be stable in the future.
Clear communication brings trust and openness. As a CDMO working on different projects – and in some cases on projects in closely-aligned areas – a clear policy on confidentiality will be paramount; it should be mandated in all employee training and education, and reinforced through everyday working practices.
There will be challenging situations. And, at times, there may be difficult conversations to be had with your customer about a project. Again, you must be clear and honest in these discussions. And then you need to mobilize resources rapidly to minimize any disruption to your customer’s project plan. You will probably need to think outside of the box and believe a solution is possible.
In a CDMO organization, everyone is a salesperson irrespective of their role; for every customer, every moment and every touch point matters – with whomever they interact. I’ve seen many occasions where a project’s success is defined by technical teams from both sides share insights and solutions that are credible and achievable, demonstrating the CDMO’s expertise.
For innovators transitioning into CDMOs, enabling regulatory success of projects may be one of the more familiar areas in which to provide assistance to customers. As an innovator, you’ll already have experience in developing products and navigating the regulatory landscape; as a CDMO, you’ll have the opportunity to anticipate, determine, and recommend strategies to customers less-versed in the journey, which is very rewarding. Every customer will have differing levels of need, but having the depth of expertise to challenge as appropriate and to suggest alternate paths is important.
When choosing CDMOs, companies often look for investment in terms of both innovative technologies and scientific talent. Innovators want to see CDMOs looking forward, anticipating the next trends in their area of specialism. Looking at new equipment and technologies is the easier of the two; you just buy what you need. Your in-house experts, however, will be absolutely core to your business. Indeed, knowledge and scientific talent is the true capital investment, so knowledge retention and creating an environment for career growth in a changing paradigm will be key to the success of your business.
The strength of scientific talent lies in the ability to extrapolate experience and expertise to something new – to harness scientific curiosity for creative problem solving. And it creates huge amounts of value for a CDMO. After all, CDMO scientists are exposed to a much more diverse range of molecules, indications, and technology, which feeds their imagination – but they are also driven by the need to find solutions within a target timeline to deliver the target product profile. Being on someone else’s clock creates a different perspective and urgency at times, and for some scientists this is a big step (and change!). Appropriate management and support is vital to ensure the transition can be made successfully – you don’t want to lose talent…
While making the transformation, continue to review your processes and practices, and evolve to the current market demands. (Sidenote: Changing your business model a few months before the start of a global pandemic is not ideal – try to avoid that if you can!). A CDMO always needs an answer to “What do we do about this – and how do we get to yes?” The importance of this cannot be understated. Today, the need to adapt and adjust has become both a necessity and a strength during these extraordinary times.
Leadership drives the company. And for success to lead to growth and longevity, you’ll need transparent, actionable key performance indicators to ensure accountability with a continuous improvement mindset.
In the highly competitive CDMO industry, I have long held the belief that only excellence is tolerated.