Specialist
Former VP at CMC Biologics AS
Agenda
- Recent trends and developments in biologic contract manufacturing and key players' competitive positioning across geographies
- M&A and organic growth strategies and outsourcing trends
- Growth expectations across microbial fermentation, mammalian cell cultures and CGT (cell and gene therapy)
- Q4 2021 industry outlook and growth dynamics for large and small players
Questions
1.
What dynamics have shifted in the biologic CDMO [contract development and manufacturing organisation] industry since our 2019 Interview [see Biologics Manufacturing Sector – Update & 2020 Outlook – 19 December 2019]?
2.
Can you expand on the challenges in delivering investments? What else do you think is making this so challenging, beyond supply-demand dynamics?
3.
How should we assess demand’s relation to capacity and greater costs with that dynamic currently?
4.
What’s the addressable market vs the last 2-5 years across microbial fermentation, mammalian cell cultures, CGT [cell and gene therapy] and plasma purification? To what extent does the suppling dynamic vary across each category?
5.
How are supplying dynamics developing by region?
6.
Is the prioritisation of COVID-19 vaccines and general supply chain tightness still resulting in material shortages for CDMOs? Would you say those material shortages are improving? How is that trending?
7.
Can you quantify the dramatic delays in materials? How has it trended? Has it become more acute as the pandemic has gone on? You mentioned it will be exacerbated given how much past-due demand there is and given new demand. How have you been expecting some of these delays to trend?
8.
What are your expectations for newer technologies in terms of CDMOs for cell design and processing? Has anything else shifted this broader dynamic since our previous Interview?
9.
You noted the dynamic of stainless steel and single-use has shifted. Could you discuss the costs or margin considerations due to these perhaps shorter-term changes to stabilise the current dynamics?
10.
How does cost break down by geography, particularly considering Asia? To what extent does this geography have an increasing role in the biologic manufacturing market, particularly in how it’s impacting capacity?
11.
In our previous Interview you noted that brand recognition will always come first above cost, particularly in the complex segments of biologic manufacturing. Do you expect that pendulum to swing back? You said you expect this to resemble small molecule manufacturing longer term, but when do you think it’ll happen? What key factors need to occur for that to materialise?
12.
You mentioned there’s a lot of building out capacity. Whose ability to add on capacity, organically or inorganically, have you been most impressed by? Are there any big brands you’d highlight as impressive, or do you think they’re all struggling across the board?
13.
You mentioned Lonza has a longer-term plan and hasn’t been able to keep up with the market pace. What have you been most impressed by about the company’s approach vs any limitations or qualms with this longer-term strategy?
14.
: Catalent has been moving significantly towards biologics manufacturing, in significant investments and divestments on the small molecule front. Can you expand on the company’s positioning and what it’s done that’s impressed you vs players such as Lonza, which you say is still under-investing even with all its focus here? How do you expect Catalent to fare?
15.
You grouped Thermo and Wuxi together as particularly focusing on M&A to grow in biologics. What are the potential limitations to this? You mentioned Lonza might need to rethink its geographic footprint when considering organic growth. Do you have any expectation for potential challenges around M&A as a way to expand?
16.
What outsourcing rate are you expecting for CDMOs from smaller biotech and pharma companies? To what extent might the potential for larger companies to acquire their own facilities inform those expectations?
17.
How do you think Thermo is playing in the biologics industry? The company has been quite acquisitive across the board, most recently with its PPD acquisition, which to some extent changes that dynamic.
18.
You mentioned Danaher intends to expand in biologics. What are you expecting here, particularly postacquisition of Aldevron in August 2021? What might its positioning be, particularly given how great the opportunity is?
19.
You said WuXi set a record pace in growing and adding capacity. Can you expand, particularly considering the company’s geographic positioning? Where is it winning out the most vs any potential challenges in specific geographies?
20.
You mentioned that geopolitical issues, particularly because of the pandemic, have led to a shorter-term push towards domestic manufacturing across the board. Beyond that, are there any potential longer-term implications of the pandemic, or anything additional that you think is important or overlooked?
21.
Could you expand on sterile fill-finish? We discussed some under-investment in this category in our previous Interview. Where does this stand since we last spoke?
22.
Can you expand on the cost profile and margin implication, particularly when assessing smaller CDMOs, larger CDMOs and informed by the factors you’ve spoken to today?
23.
Where are cost increases coming from? Labour dynamics are a continuing concern in the industry. Does anything else stand out as informing that cost profile disproportionately?
24.
What EBITDA margin would you expect after cost and price increases normalise?
25.
Given we discussed branded companies with brand recognition simply not being able to keep up with demand and having long lead times, how sustainable a strategy for players such as Lonza would cherry-picking their projects be? You mentioned this is backfiring for a lot of players and making space for smaller CDMOs. Can you expand and discuss how this is impacting Lonza or similar peers?
26.
Are you impressed with any smaller CDMOs’ ability to add scale or win over some of the share that Lonza couldn’t, given the missteps you mentioned?
27.
Do you have any commentary on Charles River’s entry into CGT manufacturing? What are you expecting from it as a manufacturing competitor?
28.
Has there been any recent shift towards increased efficiency and flexibility? Would you expect anything in this regard near term?
29.
Do you have any further commentary or anything else you’d like to touch on? What’s your 12-18-month outlook for the biologics manufacturing industry?
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