What are CMOs-Contract Manufacturing Organisations

What are CMOs?

CMOs are Contract Manufacturing Organizations that offer manufacturing services, with volume capabilities ranging from small amounts for preclinical studies to larger volumes for clinical trials and commercialization. Like Clinical Research Organizations (CROs), CMOs are focusing on re-alignment of their business models with prevailing industry trends. CMOs have traditionally dealt with primary development services and dosage form of manufacturing. But more recently, due to increasing demand for complex products such as cytotoxics, many CMOs have begun to look at high-end services including the manufacture of high potency APIs.

The global pharmaceutical contract manufacturing market primarily covers injectables, solid and liquid dosage forms. Solid dosage is the largest segment by revenue, but the injectable segment is expected to show the strongest growth. Moreover, the demand for specialized technologies and services such as biopharmaceuticals, sterile products, and lyophilization is likely to drive the market in coming years.

India, one of the most favored CMO destinations in Asia, is able to offer services across the contract manufacturing value chain – from custom chemical synthesis to APIs and finished dose forms with significant cost savings. In addition, large numbers of scientists and engineers with skills in the areas of process chemistry and biochemistry support India’s strength in contract manufacturing.

Structure of the CMO industry

With the exception of biopharmaceuticals, which are manufactured by only a few select companies such as Boehringer-Ingelheim, Lonza, Piramal, the technology toolboxes of all these companies are similar.

In terms of size, resources, and complexity of the chemical process technologies, CMOs can be broadly categorized into three types:

• Large – divisions of large publicly owned enterprises with huge in-house capabilities (R&D, manufacturing, marketing), and full service offering;
• Medium – publicly or privately owned 'pure-players' with adequate technology toolboxes, 1-2 sites in the home country, and limited global marketing organization.
• Small – these are typically privately owned, focused on niche technologies such as azide chemistry, halogenations, peptide synthesis, high-potency active ingredients).

Small and mid-sized biotech/biopharmaceutical companies, for whom it is uneconomical to maintain captive facilities, are a key source of business for outsourcing providers. Furthermore, Indian and Chinese CMOs are fast emerging as serious competitors on the global stage. For instance, Shasun, one of the leading Contract Research and Manufacturing Services (CRAMS) providers from India has a strong relationship with some of the top tier pharma companies of the world such as GSK and Eli Lilly. Shasun signed a technology licensing agreement with Merck & Co for the manufacture of APIs in 2008.

CMO expansion in Asia

As globalization of drug development gained pace in the early part of this decade, many pharmaceutical and biotech companies in Asia, Latin America, and Eastern Europe added contract manufacturing services as a new service line to their generic API and dosage form businesses. Indian and Chinese CMOs are well positioned to capture the majority of the Asian CMO market. Despite its detractors, the Indian biopharmaceutical industry has demonstrated its competence in several technical and manufacturing areas such as small-molecule generics, bioinformatics, clinical research, and drug discovery, many industry observers question India's position in the global CMO market. Indian CMOs offer high quality technical know-how, process development competence, and low cost manufacturing processes.

Concerns about the lack of proper intellectual property (IP) regime in India and China are discouraging many foreign players from outsourcing commercially promising drugs in these countries. This is mainly due to the risk of disclosure of sensitive information which is of necessity transferred to the service provider.

Asian CMOs started with large-scale manufacturing for generic and research driven companies but are now acquiring assets in the US and Europe to enter the discovery and development segment of the pharmaceutical value chain. Companies in Asia intend to tap this promising CMO market by taking advantage of low cost of labor and raw materials, which forced many plant closures and consolidations in the West.

India has an advantage of a large number of good manufacturing practices (GMP) compliant manufacturing sites. For instance, India has over 100 US FDA approved API manufacturing plants, the highest number outside the US, and over 150 cGMP compliant manufacturing facilities. In addition, a large number of research scientists and engineers with skills in the areas of biochemistry and analytical chemistry also support India's strength in contract manufacturing process.

Asian companies continue to attract foreign capital, with strong interest from private equity investors. For instance, In India, GVK Bio launched a five year agreement with Wyeth (now part of Pfizer in the US) to provide dedicated discovery services to Wyeth. According to the agreement, GVK received a $30m private equity investment from a US based private equity firm, Sequoia Capital.