CDMOs assist biopharmaceutical companies in creating the process development and the manufacturing cycle from start to finish – from the clinical to the commercial. But what are the obstacles that stand in the way of CDMOs from scaling-up? This article examines these challenges.
The biopharmaceutical market is one to watch in the coming years. Not only is it growing at an annual rate of 8.6%, but it is also expected to comprise more than 20% of the revenue produced in the pharmaceutical sector.
As more products are being clinically tested, approved, and scaled for commercialization, it becomes increasingly difficult for pharmaceutical companies to keep up. Their internal manufacturing capabilities are constrained by the capital costs in rolling out new equipment and expanding the labor force. This is especially problematic since expanded production capacities can exacerbate organizational issues and cause a cultural transition away from core competencies.
Difficulty meeting the demands of industry growth has created a market for specialty providers, who provide outsourced development and manufacturing services. These service providers are called "Contract Development and Manufacturing Organizations" (CDMO). Their aim is to assist biopharmaceuticals companies in taking their products through process development and the manufacturing cycle from start to finish – from the clinical to the commercial.
In this way, biopharma companies are able to shift the complications they encounter on the path from clinical to commercial production – onto the CDMO.
However, there are inherent difficulties for CDMOs as they vie to offer competitive pricing, maintain quality, provide production flexibility, and move products from clinical to commercial success. Even for specialized CDMOs, the journey from clinical operations to commercialization possesses its own slew of challenges such as capacity issues, general growth complications, internal culture, management maintenance, and standardizing a complicated operation for the mass market.
These difficulties create significant potential improvements from wasteful inefficiencies and burdensome expenses associated with contract manufacturing, making streamlined processes and cost cutting measures essential for a CDMO to remain profitable.
Avoiding these, in order to achieve CDMOs' efficiency, will require a CDMO to provide process subject matter expertise, a lean and continuous improvement mindset, and the ability to form strategic partnerships with their client.
This article will examine these challenges, and suggest ways in which CDMOs can cope with them.
CDMOs provide flexibility that is often critical in the process of scaling up – moving from small to large-scale operations – which naturally creates problems within organizations across industries. Growth can happen naturally and even unknowingly within a biopharma company, but development is key to ensuring that a company grows with direction.
Developmental growth implies directing a company’s growth toward efficient scaling-up. This notion must be understood when heading toward commercialization because, without direction, growth can easily become chaotic.
As the organization grows, the non-standardized processes will only become costlier and ineffective as roles and responsibilities are inadequately defined. The organizational structure creates gaps or redundancies, and best practices can be lost.
What are the complications which a CDMO faces? How can they be tackled?
i. Lack of nurturing during the scale-up phase
The lack of organizational nurturing during a scale-up initiative is a common pitfall for growing CDMOs. Commercializing as a CDMO means it may need to invest in more labor, equipment, and space to support the increase in demand.
This influx of labor, state-of-the-art equipment, and increase in space combined with rapid growth, can result in knowledge gaps, lack of experience among personnel, and inevitably a revamping of existing processes and flows.
These drastic changes can result in a reduction of product quality, increased process errors, and an overall reduction in labor expertise throughout the CDMO impacting the business significantly.
Market studies suggest 32% of clients took their products from one CDMO to another due to process errors, 34% due to lack of quality, and 34% due to competitors therapeutic/operational abilities respectively.
Understanding the dynamics of growth is critical to avoid inefficiencies, decreased throughput, and unnecessary costs that can gradually become bigger problems during a scale-up initiative.
ii. Internal communication difficulties
A particularly painful point for CDMOs and many other organizations is communication. Interdepartmental communication is critical, and inefficiencies in clinical production will inherently be exacerbated in commercial production.
An example of this poor communication is a manufacturing lab not having established sufficient communication with operations and QC department. The telephone in the clean rooms is used to alert QC of a sample ready for retrieval, but a history of calls made too early has created a delayed response, due to past experiences from waiting on the samples, resulting in lost time receiving and returning the results (often costing over an hour per process/day).
The time and money wasted in this example would only be amplified exponentially through a scale-up initiative leading to more expensive services, longer and less accurate timelines, and less reliable logistics. This problem would have been fixed if communication between the two departments was more accurate and even reliable.
In addition to directing internal growth of a CDMO’s scaling-up from clinical to commercial phases, there are external factors that can hinder growth as well.
i. Schedule changes
One general complication a lot of biopharmaceutical CDMOs encounter is balancing the client’s product development flexibility with the CDMO’s schedule, which may lead to financial difficulties within the CDMO. A common example of this is when a client may decide to postpone or completely cancel a scheduled process. Another example is when clients need to change the details or steps within certain processes, impacting the current operations and resulting in financial repercussions.
On the one hand, it is important for a CDMO to recognize this need for flexibility and adapt their finances and processes accordingly. On the other hand, these changes can have significant effects on CDMOs. In terms of cancellations, any materials prepared before the process are considered time wasted by the personnel who prepared them and money wasted for the materials used.
These changes may sometimes be essential specifically with CDMOs participating in human/health technology services, because clinical phases are always variable and exist to be flexible in order to work out the kinks of the product being studied.
For example, putting together the laboratory manual for a process may require printing documents, organizing them into a binder, and having an associate review the manual before the process begins. But when the process is canceled, both the materials put into creating the lab manual, as well as the time spent on putting it together and reviewing it, was wasted as a purely unnecessary sunk cost.
Postponing or changing schedules is less wasteful because prepared materials may still be used, but the time slot on a schedule for the process to occur may no longer be utilized, wasting the time of manufacturing technicians and other personnel scheduled to participate in the process.
These types of scheduling changes cause setbacks for CDMOs in many departments, by wasting materials and valuable time, which is magnified immensely when moving toward to commercialization.
ii. Change of processes
Similarly, process changes made by clients can complicate the work done by the CDMO. As mentioned above, within the industry of human/health technologies, clinical processes are expected to change frequently, so CDMOs should expect this type of volatility within their manufacturing processes, but that does not mean it is unmanageable.
Process changes that occur often can make it difficult for the CDMO's manufacturing team to fully grasp a manufacturing process. Also, any new technicians will not be properly trained, if the process is different every time and there are no set of structured guidelines. This is true for the manufacturing department as well as other departments throughout the organization.
With continuously changing processes, the quality of the product will be lower, the error rate will be higher, and the timeline will be longer and more expensive due to the fact that personnel never have the chance to master the process.
Commercializing in a state like this would be difficult as taking on more processes that are not standardized, can only result in more inefficiencies down the line, and more costs to the CDMO in total.
In order for a CDMO to overcome and thrive in challenges brought by scaling-up, the competitiveness of a CDMO lays on the ability to serve its clients’ needs while maintaining cost efficiency. Strong bonds with clients and highly functional teams can help to build up these core abilities.
1. Develop strategic alignments with clients
A reliable and timely communication channel with a protocol for facilitating alignments would allow a CDMO to stay flexible enough to meet clients’ requests, while easing the burden of dealing with constant process changes.
For CDMOs specializing in human health technology, the ability to balance flexibility with costs can be beneficial when facing its industry’s naturally volatile production needs and schedules. This can be done in two ways:
2. Build a highly functional and quickly adapting team
In order to stay profitable and competitive, a CDMO needs an efficient and adaptable client-focused team. The creation of a functional team relies on coordination among different disciplines and a continuous improvement culture. This can be done in the following ways:
It is expectable that challenges in external communication and internal coordination rise when a CDMO company is scaling-up. Standardizing communication protocol with clients and building a harmonic team with the ability to quickly respond to client requests, while maintaining facility efficiency, would ultimately allow a CDMO to survive and excel on the journey of scaling-up toward commercialization.
Written by Zachary Rosenbloom, Business Analyst, and Ilya Makovoz, Consultant
Monopoly Building, Operational Excellence, Change Management & Supply Chain Expert