Antibody Drug Conjugate CDMOs – Competitive Landscape & Demand Outlook

1.

My understanding is an ADC [antibody drug conjugate] is the main subset of what the industry likes to call a bioconjugate and, as the name suggests, is an antibody paired to a payload via a linker – this payload can take various shapes but the most common is a cytotoxic agent. Other payload examples would be a radioisotope, such as lutetium-177. Can you build upon that and outline the extent to which ADCs represent a promising therapeutic modality, the depth of the ADC pipeline and how you see the market growing relative to other advanced therapeutics, whether biospecifics, C> [cell and gene therapy] and so on?

2.

You noted that ADCs represent a natural extension for MABs [monoclonal antibodies]. Do you think the majority of the growth in the ADC market will stem from existing antibodies being used as a backbone for a new ADC, ie simply adding a payload to that existing antibody, or might growth come from entirely de novo antibody and payload constructs? I’m looking to understand whether there may be a different level of demand for antibody vs linker vs payload CDMO services.

3.

Looking at history, one can argue ADCs have underperformed expectations and have only met with somewhat limited success, especially looking at some earlier HER2 ADCs from Roche. By contrast, we’re seeing that the Daiichi-AstraZeneca ADC Enhertu [trastuzumab deruxtecan] is going from strength to strength, not only in HER-positive breast cancer but also HER2-low and potentially lung and gastric cancers. Do you think Enhertu is an exception here or a harbinger of what’s to come?

4.

Do you think efficacy, safety and overall risk-benefit profiles are improving for ADCs?

5.

I’d like to better understand the use case of an ADC vs a biospecific. Roche recently secured approval for its biospecific in non-Hodgkin lymphoma. Genmab has a few pipeline candidates demonstrating impressive efficacy in very advanced patients, similar to what we’ve seen for CAR-T [see Bispecific Antibodies in NHL – Roche’s Lunsumio & Glofitamab & Genmab’s Epcoritamab Deep Dive – 24 June 2022]. To what extent might biospecifics dent the growth of ADCs in oncology or other indications?

6.

You mentioned double-digit compound growth for ADCs and it seems expectations differ. Some analyst reports estimate as high as 20% CAGR, with the ADC market reaching in excess of USD 15bn by 2023. Millipore notes a USD 10bn market size by 2025, while Lonza expects the bioconjugates market to grow at a 7-9% CAGR up until 2025. There seems to be some variance here. Which of those do you subscribe to?

7.

We’ve heard similar commentary regarding Lonza in other end markets such as C>, in that the company focuses on mid-to-late-stage commercial partners and hasn’t been getting into bed with early-stage drug developers, which ultimately represent the mid-to-late-stage developers of tomorrow. Can you quantify the extent it has fallen behind and its ability to recapture share in that early-stage pipeline? Is it too late?

8.

My understanding is that CDMO [contract development and manufacturing organisation] customers are typically very sticky, as once you’ve captured a pre-clinical or clinical stage customer, if you have the capacity and capabilities to do so, you will keep those customers in-house and scale along with them. Does the same calculus apply to ADCs? My understanding is that the supply chain is very complex in ADC manufacturing and there are only a few integrated players. Is customer stickiness in ADCs of the same magnitude as other modalities?

9.

You noted that Wuxi has arguably built out the most robust one-stop shop offering across antibody, bioconjugation, payload and finished dosage form services. What do Lonza or other large tier 1 CDMOs lack? Does Lonza lack the centralised finished dosage form but otherwise has the antibody, conjugation and payload capabilities? What makes Wuxi particularly unique?

10.

You highlighted the manufacturing and supply chain complexity, especially in context of the number of vendors and how ultimately the supply chain needs simplification. How should we be thinking about the appetite to outsource ADC manufacturing vs doing this in-house? Indeed, what is typically outsourced? Is it all three components of an ADC – antibody, bioconjugation and payload – or is it usually one or two? Do those three different components go to the same CDMO? If possible, are they split across the respective specialists? Long question short, how does the decision-making process around outsourcing work?

11.

Previous specialists noted that AstraZeneca has been building out its own ADC infrastructure, and it’s clear that big pharma more broadly are building out their own manufacturing facilities. Is that mainly for the finished dosage forms or are they also building out in-house capacity for the bioconjugation, linkers, payloads and so on?

12.

Do you know who manufactures Enhertu?

13.

Merck Millipore has published a white paper where it believes the outsourcing race for ADC conjugates to be around 73%. Do you subscribe to that number?

14.

How does the 73% outsourcing rate compare to a standard MAB?

15.

You mentioned certain clients were waiting for almost two years to get a slot at Lonza. How significant is the supply-demand delta for ADC CDMO services at the market level, and how long are lead times for CDMO capacity today?

16.

Are the lead times for CDMO capacity as extended as in C>, where we’re hearing upwards of 12 months lead time, or does all the additional capacity coming online mean a client would only have to wait 3-4 months to get ADC CDMO capacity?

17.

Will the profitability of an ADC CDMO operation likely to be pressured as more incumbents come to market or undertake CAPEX projects, or do you not think this will happen, given the extent of the supplydemand gap?

18.

Do you see the 50-60% EBIT or 20% EBITDA margins being sustainable over the mid-to-long term? This may be a niche example, but we’re hearing that the number of payload molecules added to the ADC molecules could be decreasing over time as the potency of the cytotoxic molecules increases. For example, Daiichi and AstraZeneca’s second-generation ADC has half the number of cytotoxic molecules that Enhertu does. If the antibody-to-drug ratio decreases, could that start hitting CDMOs’ profitability? Are there any other pushes and pulls here?

19.

Which CDMOs would ADC biosimilar developers go to in the first instance? You said some India-based players were approaching ADC Bio.

20.

We previously discussed that the outsourcing rate for innovative ADCs will likely be around 70%. What do you expect the outsourcing rate for biosimilar ADCs to look like?

21.

Who would you classify as the tier 1 or 2 players in the ADC CDMO market, or who represents more of a one-stop shop vs a specialist outfit?

22.

Where would you put a player such as BSP Pharmaceuticals?

23.

A major theme we’ve been discussing is capacity, and you highlighted how Piramal has been rather aggressive in its approach to CAPEX projects. Lonza has also been investing in two manufacturing suites for ADCs at its Visp facility. Who else has been very aggressive in their capacity build-outs?

24.

BSP seems to have been investing in capacity. According to press releases, the company has allocated EUR 320m already, with a further EUR 220m earmarked for bringing some of its production sites, presently under construction, up to stream in H2 2023 as opposed to 2027, as originally planned. Do yousee BSP becoming a major force here, following these investments?

25.

Can you outline the key purchase criteria for a prospective biotech or pharma ADC CDMO customer? On what bases do they evaluate the different ADC CDMOs, and how do some of the names we’ve discussed benchmark against those criteria?

26.

It seems the linker is key here. Can you outline the different types of bioconjugation, and whether there’s one particular approach that will likely represent the workhorse of the industry going forward? Secondly, who is the best-positioned CDMO or has the greatest expertise with that particular bioconjugation technique?

27.

Does one CDMO – either a large integrated shop or a smaller boutique – stand out in terms of its expertise and know-how with linkers and bioconjugations?

28.

As we have discussed, there has been a changing of the guard at the C-suite level at Lonza, and the company is opening its doors to smaller biotechs and pre-clinical-type work. How successfully is it winning back market share there?

29.

Lonza is making significant effort, as demonstrated by the investments into its Visp site, but has that directly translated into market share gains already or will that come over the longer term?

30.

Is speed to market – going from the lab desk to the clinic to commercialisation, etc – any form of competitive advantage for the players we’ve discussed? In C>, Lonza offers an 11-month timeline between identification of gene of interest to first grams of protein, which previous specialists have noted as a significant differentiator. Does the company have a similar speed in ADCs, or does any other player stand out from a speed standpoint?

31.

Are any other CDMOs making comparable speed claims for ADCs?

32.

How far along is Sterling Pharma in building out CGMP [Current Good Manufacturing Practice] ADC manufacturing following its April 2021 acquisition of ADC Bio? There were plans to build this in Deeside in 2022. Has that been completed?

33.

How significant a step change would it be for Sterling to have GMP manufacturing in terms of ability to win customer contracts, economics and so on?

34.

Sterling has had quality issues, leading to the FDA issuing a complete response letter to its partner Verrica Pharmaceuticals in July 2022. This was for the molluscum contagiosum treatment, Verrica’s drug device combination containing cantharidin 0.7%, with Sterling serving as the CMO [contract manufacturing organisation]. Might this complete response letter have impacted the company’s reputation in ADCs? Could there be any bleed-over between the two operations at Sterling?