Life Science Leader Magazine Supplements

CMO 2017

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Page 69 of 81

LIFESCIENCELEADER.COM THE CMO LEADERSHIP AWARDS 2017 68 By L. Garguilo ARE CMOs SUFFICIENTLY SERVING BIOTECHS? BEST PRACTICES Outsourcing SIZE MIGHT BE DISPOSABLE Demers, too, has experienced "Big CMOs" focusing more on filling their large-scale production capac- ity with larger clients and big-volume material needs. "They're geared more toward a larger pharma, or maybe a smaller pharma or biotech if there is a highly predictable commercial operation upcoming." Yet Demers insists there are service providers out there that are flexible, can operate at different demand levels, and with smaller clients. "I wouldn't say it's necessarily size that's always the concern," he says. "If a CMO has the vision to meet the needs of the emerging biotech — and for example, in our case serving the orphan drug industry — then it is a viable option no matter the size." One specific attribute Demers looks for today in a service provider — big or small — is disposable technol- ogy. "We need flexibility for speed," explains Demers. "To that extent, we're fully committed to disposables versus stainless steel. We're elated this technology is now well-accepted across the industry, and we look for a CMO that's adopted this equipment platform." Disposal equipment is a key advancement. But it won't dispose of the increasing tensions between today's vir- tual and other biotech models, and the consolidation at CMOs. Even more, the natural evolution of pharmaceu- tical markets will continue to have an impact. Demers mentions the orphan drug industry above — a growing market target that revolves around smaller volumes, less capacity needs, and greater flexibility. For decades, the advancement of smaller-sized drug developers has been fueled by the growth of service- provider models. XOMA itself is a biotech with a living history of this parallel trajectory. In part two (found on of our discussion with Demers, we take a closer look at the course of those lines and whether they can form today's needed bio- tech-provider intersections. L He explains: "While I'll draw from our own internal technical expertise, for practical purposes, I'm the outsourcing department. I need to ensure our network stays streamlined and manageable. However, this has to be accomplished without compromising deliveries, timelines, or of course, quality. It can't lead to a lack of price leverage or to cost disadvantages. The goal is to keep the work complexity at that optimal minimum." "I'm trying to do this by setting up strategic rela- tionships that fit our operation and business philoso- phy," he adds. DO THEY ACTUALLY EXIST? But are the opportunities for these strategic relation- ships available to today's biotechs? "CMOs and we biotechs may operate in the same space, but we're not in the same business," Demers says. "I mean this in the sense that the service provider's first goal can be, for example, capacity utilization. Ours is more speed to the clinic. We are based on different business models. Somehow, we've got to diagram that right spot inter- secting mutual needs." That intersection may be hard to find. A recently pub- lished article on more mutuality in sponsor-provider relationships received this reader rebuke: "I have been reading your exuberant articles about partnering Pharma and Biotech sponsors with CMOs. … Our experience has been diametrically opposed to the picture you've painted. … As a small biotech with a viable biologic product, we signed a deal with a top-tier CMO to manufacture our bulk drug substance in the U.S. in 2011. … We gained approval of our BLA [biologic license application] in 2016 and then were informed by our CMO they were closing our manufacturing area, and we had up to five years to transfer our process to one of their international sites or somewhere else. ... That's a $30 million, three-year project we never expected to undertake. On top of this, larger sponsors with deep- er pockets appear to have locked up the capacity out to 2020, so we also face a manufacturing shortage." This is a critical report from the front lines. First, bigger ("deeper pocket") sponsors competing with biotechs for capacity have always presented a challenge, but a lack of capacity — or the right capacity — seems exacerbated today. Add that it appears biotechs are being squeezed by consolidation in the CMO industry, forming "Big CMOs" with operating models built less around the smaller cus- tomer. Big, it appears, is the enemy of biotech. I'd like to see CMOs that have created strategic partnerships between themselves. L O U I S D E M E R S Director of Development & Manufacturing Outsourcing, XOMA

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