Niche tech and biologics the new drivers for CMO consolidation, says PBOA

DPx CEO James Mullen told this publication in March​ the contract manufacturing industry continues to be ripe for consolidation, a trend demonstrated by a number of recent deals in the space.

But M&A strategy among contract manufacturing organisations (CMOs) is focusing more on niche technologies, according to Gil Roth, Founder and President of industry group the Pharma & Biopharma Outsourcing Association (PBOA), who we spoke to at last month’s CPhI show in Madrid.

“Consolidation is obviously a big trend within the industry, but it doesn’t seem to be about building scale anymore like it was 10-15 years ago, where companies would try to grow by buying up old pharma facilities, so they could add certain geographies and ranges.”​

Instead, he told Outsourcing-Pharma.com, “the industry seems to be driven more by the need to pick up particular niche technologies, as we have seen with some of Patheon’s and Catalent’s recent acquisitions.”​

Patheon acquired hard-to-manufacture API specialist Irix Pharmaceuticals in March​, and Catalent bought its antibody-drug conjugate technology partner Redwood Bioscience last year​.

“They weren’t about acquiring large scale, they were about making sure they could fill in some of the gaps and be more advanced in technologies and solutions than some of their peers.”​

Flexible tech to open bio-door for CMOs​

But it is the growth of demand for biologics commercial manufacturing which Roth said could be a major driver for CMO consolidation going forward.

“While we’re not seeing companies going out of their way to build or buy 25,000L gigantic stainless steel bio-sites, the flexibility of single-use systems and the new wave of bioprocessing has made commercial scale manufacturing a different economic proposition,”​ he said.

“That opens a door for contract manufacturers who may have been undecided in some respects in trying to move into that space.”​

If you’re not at the table, you’re probably on the menu​

The PBOA was founded in 2014 as a trade association for CMOs and CDMOs after Roth found the sector was under-represented during the US FDA’s GDUFA negotiations.

The group represents the industry before regulatory, governmental, and legislative bodies, keeping its members informed of relevant developments, and currently boasts 18 members - including Catalent, Patheon, Hospira One 2 One, and Jubilant HollisterStier – and, according to Roth, is set to grow further.

“There is an understanding that if you’re not at the table, you’re probably on the menu… a collective voice is going to be heard when an individual is going to be drowned out.”​