Beyond Manufacturing: Broadening Horizons of CDMOs
November 15, 2023
The increasing trend of outsourcing services in the pharma industry has given rise to significant growth opportunities for CROS and CDMOs. More pharma and biotech companies are relying on external service providers for their research, development, and manufacturing needs. The downsizing of major pharma companies and the emergence of smaller biotech firms are further fueling the trend towards increased outsourcing, creating opportunities for expansion in the CDMO sector.
As Ramesh Subramanian, Chief Commercial Officer, Aragen explains, “Over the last few years, outsourcing has evolved to play a pivotal role in the growth and development of the pharma and biopharma sectors. From ‘good to have’ outsourcing is now recognised as a ‘must have’ strategy. Outsourcing helps companies ‘variabilise’ their fixed cost by leveraging the cost-effective business models of the CDMOs. It also helps them scale up or down as needed depending on the progress of their programme.”
He adds, “Outsourcing is also increasingly seen as an effective risk mitigation strategy. It not only helps mitigate financial risks arising due to project failures at any stage but also helps mitigate operational risks such as supply chain disruptions by ensuring continued operations even during a crisis.”
The India Advantage
India has long been a preferred location for global pharma and biopharma companies to outsource their services. Indian contract development and manufacturing organisations (CDMOs), with their strong technical expertise and regulatory-compliant facilities, have been capable partners to the global pharma industry from clinical supplies to commercial production.
Indian contract development and manufacturing organisations (CDMOs), with their strong technical expertise and regulatory-compliant facilities, have been capable partners to the global pharma industry from clinical supplies to commercial production. Factors such as lower R&D and manufacturing costs, skilled workforce, proximity to specific markets, shared risks and operational experience have nurtured the relationship between pharma/biopharma companies and Indian CDMOs. Now, this relationship is set to deepen and become more pivotal as CDMOs evolve to keep pace with the shifts in the pharma ecosystem driven by pricing pressures, competition for advanced therapies, and stringent quality and regulatory requirements.
An article published earlier this year by P&S intelligence outlines, “India could be a key gainer of this CDMO transition to the Eastern hemisphere in the coming two decades. The biggest CDMO opportunity in India might be for generic producers, with India supplying almost 40 per cent of the generics to the US already. As per studies, generic manufacturers are witnessing rapid growth in the global CDMO industry, especially synthetic ones. An idea of the CDMO opportunity available in India can be had from the fact that as per research, 70 per cent of the drugs sold in the country are supplied by CDMOs partnering with major globally operating pharma companies.” As per a report from market intelligence firm BlueWeave Consulting, the Indian CDMO market will grow to $1,883 million by 2027 at a CAGR of 10.75 per cent. So, how are CDMOs leveraging the immense growth potential by broadening their capabilities and offerings across various treatment categories and stages of the value chain? Let’s examine some key aspects:
Expansion and capacity building: Many CDMOs are making strategic investments to bolster their capabilities through expansion of manufacturing and R&D facilities, state-of-the-art equipment and overall infrastructure upgrades to be better positioned to handle large-scale projects in both, domestic and international markets, emerge as attractive partners for global pharma companies and gain a foothold in key pharma markets, as well as align with international quality and regulatory standards.
Giving a detailed perspective on how these investments help the pharma sector, Subramanian states, “CDMOs invest extensively in cutting-edge technologies and facilities, staying at the forefront of innovation. Partnering with them can provide access to novel manufacturing processes, analytical techniques, and formulation approaches that can enhance product quality and competitiveness. CDMOs also employ a highly experienced talent pool from a diverse range of scientific domains that can help accelerate drug development and manufacturing processes while maintaining high-quality outcomes.”
To cite a few recent examples:
- Piramal Pharma Solutions invested $11 million to expand drug manufacturing capacity at its Pithampur facility in 2022. The expansion allowed them to boost their production of OSD drugs from three billion to 4.5 billion doses. Earlier, in the same year, the company announced plans to improve high-throughput screening capacity at its Ahmedabad facility to augment in-vitro biology capabilities.
- Laurus Labs invested Rs 16.5 billion during 2020–2021 and divulged plans to invest Rs 24 billion over 2023 and 2024 to expand its footprint across the country.
- Aurigene Pharmaceutical Services, Dr Reddy’s Laboratories’ CDMO unit, is setting up a production facility in Genome Valley, Hyderabad for therapeutic proteins, antibodies and viral vectors with an investment of $40 million. It’s expected to be operational by the first half of 2024. The company is also building an additional fill-finish line before the end of 2024.
Strategic M&As: An EY article titled, ‘How CDMOs are leading innovation for pharmaceutical partners’ outlines, “CDMOs have increasingly become leaders of innovation and are covering more areas of the pharmaceutical business, not only manufacturing; adding additional revenue streams. Through acquisitions, CDMOs can rapidly expand their capabilities and, thus, are able to deliver technically advanced services at scale.” While the article, published in 2022, describes the global scenario, it is being mirrored in India as well. CDMOs in India are also looking at mergers and acquisitions (M&As) and strategic alliances to boost their strengths and spur growth. Through these consolidations and collaborations, CDMOs are gaining access to new technologies, expanding their client base, augmenting their geographical presence and diversifying their portfolio of services. This, in turn, is creating a more competitive and dynamic landscape.
- Piramal Pharma Solutions (PPS) purchased a 100 per cent stake in Hemmo Pharmaceuticals for Rs 775 crores in 2021. In the same year, it also expanded its footprint in biologics by purchasing a 27.78 per cent equity in Hyderabad’s Yapan Bio with an investment of Rs 101.77 crores
- In Jan 2023, Gland Pharma, acquired French CDMO Cenexi Group, for an equity value of nearly Rs 1,000 crores to expand its CDMO business in Europe
- In April 2023, Biocon Biologics and Serum Institute of India restructured an agreement centering on vaccines and various biological products. Serum Institute increased its total investment in Biocon Biologics to $300 million. The revised pact will grant Serum approximately 4.9 per cent equity stake in Biocon Biologics.
Technology upgrades: Digital and automation technologies are driving a tech renaissance in the pharma industry. CDMOs in India are keeping pace with this requirement by investing in technology upgrades to automate their processes, gain realtime transparency or visibility across their operations, enable key collaboration models and become resilient to disruptions. While many are still in the early stages of this transformation, the CDMO sector is heading towards a more technologically advanced and data-driven future. Some recent cases in point:
- Sai Life Sciences announced that they are using Dassault Systèmes’ industry solution experience ‘ONE Lab’ to bolster security measures and facilitate effortless data access and analysis. The company is using ONE Lab to create an integrated digital platform for its R&D and chemistry, manufacturing and controls (CMC) laboratories.
- Zeon Lifesciences, a CDMO for nutraceuticals, upgraded its Paonta Sahib plant enabled with AI and automation technologies to focus on innovations and research advancements in India’s nutraceutical industry
Building niche capabilities/ specialisation: The rise of novel therapeutic areas like gene and cell therapies, and biologics has created further growth opportunities for the CRO/CDMO industry. Indian CDMOs are expanding their capabilities in these emerging fields to meet the growing demand from biopharma specialists. These capabilities includean eclectic range of services for R&D and manufacturing of complex compounds, biologics, cell therapies, and personalised medicines.
- Syngene International, a subsidiary of Biocon, is planning to invest over $100 million annually with a primary emphasis on research, biologics, and small molecules. Reportedly, over the last five years, the company has already invested around Rs 4,500 crores.
India’s pharma CRO/CDMO sector is arming itself with new-age facilities, cutting-edge solutions, a talented workforce and strategic investments to meet the increasing demand for contract services and emerge as partners of choice for pharma and biopharma companies. CDMOs in India are poised to play a pivotal role in driving innovation and supporting the development of new therapies and treatments
- Enzene Biosciences, a biopharma company offering integrated CDMO services for biologics, recently inaugurated an R&D facility in Pune. Spanning over 75,000 sq feet, the facility offers integrated services from cell line development to fill and finish across a wide range of modalities
- Aragen is constructing a biologics manufacturing plant in Bengaluru, involving an investment of $30 million. This is a forward integration strategy to position Aragen as a comprehensive “gene to clinic” solution provider for biologics. Aragen has also established a new vivarium in Bangalore, enhanced the reagent generation labs in Hyderabad, and introduced new capabilities such as oligonucleotides and photochemistry
- In September 2023, Strides recently announced the launch of ‘OneSource’, a speciality pharma CDMO covering biologics, complex injectables and oral technologies (soft-gelatin capsules).
Opportunities galore Thus, India’s pharma CRO/CDMO sector is arming itself with new-age facilities, cutting-edge solutions, a talented workforce and strategic investments to meet the increasing demand for contract services and emerge as partners of choice for pharma and biopharma companies. The country’s favourable regulatory environment and strategic geographical location also provide a competitive advantage to this sector. CDMOs in India are poised to play a pivotal role in driving innovation and supporting the development of new therapies and treatments.
We are also witnessing the expansion of this sector with newer players. The MSN Group’s launch of a new CRO/CDMO vertical called ‘CRAMSN’ to provide end-to-end chemistry solutions, from discovery to launch illustrates this point. Explaining the business rationale behind setting up this vertical, Dr Vijay Mathad, COO, CRAMSN, informed, “One of the key challenges for existing CDMOs is to transform from traditional chemistry approach to sustainable/cleaner chemistry approach to help the pharma sector to meet UN carbon footprint goals. We see this as a huge opportunity for CRAMSN as we have world-class R&D infrastructure with green chemistry technologies to accelerate drug discovery and development process by reducing CO2 emission levels.” CRAMSN supports solutions like flow chemistry, bio-catalysis, highly potent compound development and manufacturing etc.
The sector is also receiving a lot of investments. Advent International’s majority acquisition of Suven Pharma, a CDMO, is a case in point. Advent acquired a 50.1 per cent stake in Suven at an agreed price of Rs 495/share.
But, the sector has its share of challenges too such as traditional mindsets and internal resistance to change, infrastructural constraints, a disruptive environment etc. Opining that a proactive approach is needed to overcome these challenges, Yuvraj Dutta, Director of Manufacturing & Process Excellence at Zeon Lifesciences recommends a few measures that can set CDMOs on an accelerated growth path:
- Change management: Implement comprehensive change management strategies to address internal resistance. Engage employees, provide training, and communicate the benefits of the transition to gain buy-in.
- Strategic vision: Develop a clear strategic vision for the transition. Outline specific goals, milestones, and the desired outcome. This vision should be aligned with the organisation’s long-term strategic roadmap.
- Invest in infrastructure: Allocate resources to upgrade infrastructure and technology. This investment is essential for accommodating the evolving needs of clients and regulatory changes.
- Agility and flexibility: Develop agile processes and systems that enable quick responses to client expectations and adaptability to changing regulations
- Client-centric approach: Prioritise understanding and align with the ever-evolving needs of pharma clients. Tailor services to meet their specific requirements and expectations.
Thriving in times of disruption
As the pharma industry continues to evolve, the roles of CDMOs will also have to continuously transform. Their capacity to provide holistic support will ensure their relevance and reinforce their position as indispensable partners in the life sciences industry. Therefore, adaptability and commitment to innovation will be pivotal to driving the sector forward.
From ‘good to have’ outsourcing is now recognised as a ‘must have’ strategy. Outsourcing helps companies ‘variabilise’ their fixed cost by leveraging the cost-effective business models of the CDMOs
– Ramesh Subramanian, Chief Commercial Officer, Aragen
One of the key challenges for existing CDMOs is to transform from traditional chemistry approach to sustainable/cleaner chemistry approach to help the pharma sector to meet UN carbon footprint goals. We see this as a huge opportunity for CRAMSN
– Dr Vijay Mathad, Chief Operating Officer, CRAMSN
Considering the current state of the dynamic industry, to overcome challenges and seize the opportunities, CDMOs must take a proactive approach
– Yuvraj Dutta, Director – Manufacturing & Process Excellence Zeon Lifesciences