CDMO partnerships must share risk and balance power, say industry representatives

Agreements between contract manufacturing and development organisations (CDMOs) and pharma companies are often imbalanced, according to Johnson Matthey’s VP of innovator products and solutions, Nick Shackley.

At Pharma Integrates in London last week, Shackley told delegates that financial and process incentives, as well as risk responsibility, must be addressed early on in a service relationship to ensure that both parties benefit.

Process incentives could relate to ‘continuous improvement benefit sharing’, as well as boosted economics for both parties driven by increased volumes, he specified.

“[There] needs to be a strategic conversation – either everybody wins or everybody loses. If you’re not in that win-win or lose-lose situation, it will drive you to…make your own manufacturing [site].​

“When there is a dialogue up front that agrees how those possibilities can be structured, benefits can be defined and shared," ​he added, highlighting an 'earlier the better' arrangement.

“It creates a more virtuous circle of dialogue between the two parties. Both are interested in driving improvement, but both understand upfront what their respective inputs to that improvement would be.”​

Power play​

For Alcami’s David Molyneux, who heads up the CDMO’s global sales and business development, a win-win partnership is linked to the equilibrium of power.

“The balance of risk always comes down to power at some point,”​ he said, adding: “If the innovator is the bigger guy, I think that sometimes they can try to push that [risk imbalance], which can form an unhealthy relationship.”​

At the conference, Molyneux urged industry to consider which party stands to gain the most from a successful development and manufacturing programme.

“[If] you have a drug that is coming through that could potentially go big in the market, the CDMO isn’t going to see the big returns from that [drug]. So, is it really fair that the CDMO should bear the large portion of the risk during development?”​

“The large share of that margin isn’t going to those service providers. [It is] going to the client and to the innovator, and that is where the risk needs to be shifted,” ​he added.