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December 21, 2021updated 07 Jan 2022 6:14am

Small-cap pharma pipelines offer thousands of potential contracts to smaller CMOs

Small-cap pharma companies can be a significant contract source for smaller CMOs, with drug discoveries and early pipeline development.

By GlobalData Healthcare

Small-cap pharma clients can be a fruitful source of contracts for modestly sized contract manufacturing organisations (CMOs), despite the existence of contract manufacturing behemoths, said experts at the CPhI Worldwide conference in November. Small-cap (under $2bn) publicly traded pharma developers currently have more than 5,000 drugs in discovery and preclinical stages of development, according to the GlobalData Drugs database. These companies usually lack in-house production and require a contract manufacturer, but have small budgets so require the more economical contracts that smaller CMOs tend to provide.

In an online CPhI Worldwide session called “Challenges, Trends and Strategic Opportunities in the CDMO Landscape,” industry experts discussed the demand from early-stage drug developers for contract manufacturing.

Jim Miller, an independent consultant on bio/pharmaceutical manufacturing strategy, stated there are “ten or 15 times as many early development candidates as late development or commercial candidates. There’s an enormous demand for early development services, but it’s important to recognise what is needed at early development is very different to what is needed at late development. It’s often more about speed and you don’t have the GMP [Good Manufacturing Practice] complexities at early development. So there is a somewhat different skill set. There is a business opportunity for small CDMOs, which can offer value, speed and hand-holding for small clients.”

The CMO space is populated with small private companies that often struggle to compete in offering the same range and speciality of services as larger CMOs, but still have a place in the market and something to offer clients, panellists said.

Pratibhash Chattopadhyay, senior director of marketing at Catalent (Somerset, NJ, US), elaborated on the complexity of drug development for contractors, stating that “drug development is fraught with challenges and uncertainties, with the pipeline shifting towards smaller patient populations and fast track approvals, and also growing manufacturing complexities with advanced modalities.”

CDMO services are often used by small-cap sponsors as a necessity, as they often lack internal manufacturing facilities. The costs of contracts are of huge importance to this size of sponsor when selecting a partner. As the figure below shows, small-cap pharma sponsors account for a large number of pipeline drugs, with over 5,000 drugs in the discovery and preclinical stages. These require low volume but fast manufacturing. The number of small developers with an early-stage candidate owned by small developers is even greater when private companies are considered, but these are not included in the figure.

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