SVP at Lonza Group AG
- Salient developments in the C> (cell and gene therapy) manufacturing market, including outsourcing rate, manufacturing economics and supply chain pressures
- Latest M&A, corporate strategy and CAPEX trends among key tier 1 C> CDMO (contract development and manufacturing organisation) incumbents
- Lonza’s (VTX: LONN) competitive landscape, strengths and weaknesses
The C> [cell and gene therapy market] manufacturing market is constantly evolving, and given all the recent developments it would remiss of me to get too specific with my questions at this point. In your view, what are some of the salient developments or trends when it comes to C> manufacturing, CDMO [contract development and manufacturing organisation] outsourcing, process developments or anything else? Perhaps you could delineate between in-vivo gene therapy and ex-vivo cell therapies?
What are your thoughts on the decentralisation of ex-vivo manufacturing? You discussed how you see the autologous cell therapies moving towards in-vivo transfection, but on balance, we’re also hearing about the decentralised manufacturing, so the use of GMP [Good Manufacturing Practice]-in-a-box instruments, such as Lonza’s Cocoon or the Miltenyi Prodigy, in the hospital or point of care. This would theoretically allow for very fast vein-to-vein times for autologous cell therapies, something which has been a key logistical challenge historically. Do you subscribe to the opinion that decentralised manufacturing for cell therapies is going to be the future or not, and why?
Looking at the cell therapies, such as CAR Ts, coming down the pipeline over the coming years, what percentage of volumes do you expect to be manufactured in a decentralised setting using a Cocoon or Prodigy vs in a centralised setting at a CDMO or a captive manufacturer site?
What is the rate of outsourcing to a third-party CDMO vs in-house captive manufacturing for (a) viral vector-based gene therapies and (b) autologous or allogeneic ex vivo cell therapies?
At the market level, if we look at the clinical stage programmes and not just the commercially launched therapies, you mentioned 80% of all ex vivo allogeneic therapies are outsourced. What would that rate of outsourcing look like for the ex vivo autologous and in-vivo AAV [adeno-associated virus]- or LVV [lentiviral vector]-based gene therapies?
You mention 50% of the ex-vivo autologous pipeline candidates are outsourced given most biotech customers have small clean rooms. However, as these progress through the clinical trial stages, and these biotechs need to then scale up and out, they would go to a CDMO? So we will see a ramp in the level of outsourcing for ex-vivo autologous?
Reconciling the variables, what is your outlook for the 50% outsourcing rate for ex-vivo autologous over the medium-to-long term? On the one hand, smaller biotechs looking to scale their clinical programmes represent a positive driver given they don’t have the capacity and therefore need to outsource. On the other hand, we know big pharma are bringing manufacturing in-house and you mentioned that late market entrants are unlikely to capture significant patient volumes. Coupled with the fact big pharma tend to build their pipelines via the acquisition of biotechs, and have the financial resources to accelerate clinical development and get to market early, presumably the cell therapies that are arguably the most promising with the largest commercial opportunity would end up being manufactured in-house. Long term, how much of the autologous cell therapy market do you see realistically being accessible to CDMOs such as Lonza and Catalent vs being captured by the in-house big pharma manufacturing operations?
You mentioned a large amount of capacity recently built out that remains underutilised or empty for autologous cell therapies. Could you quantify that at the market level and which CDMO you think has the largest underutilised capacity for autologous cell therapies? Secondly, how should we be thinking about break-even utilisation rates here?
How significant is the supply-demand gap for viral vector CDMO capacity specifically?
You mentioned viral vector manufacturing for the CDMOs is a very high-margin business, above that of even biologics such as monoclonal antibodies. Is that sustainable in your view? Presumably, viral vector manufacturing is being industrialised, efficiencies and yields are being gained, supply chain bottlenecks are being addressed and everything is ramping up more broadly. How should we think about the evolution of COGS in addition to the price point a player such as Lonza can charge customers?
Who would you say Lonza’s key full value chain CDMO competitor is in C> and what have been their respective corporate strategies and approaches to CAPEX projects in this particular market? Are we seeing divergent approaches? Some of the key competing CDMOs include, but are certainly not limited to, players such as Thermo Fisher, WuXi, Catalent, Danaher with Aldevron, Fujifilm, etc.
You’ve mentioned Oxford Biomedica is the benchmark for LVV, but it has made a pretty concerted move into AAV manufacturing, partnering with AstraZeneca for its COVID-19 vaccine. The company, via its Oxbox facility, can manufacture AAV at the 1,000-litre. Do you see Oxford Biomedica expanding beyond LVV and competing head-to-head with Lonza in AAV?
Exactly, and there seem to be broader safety concerns associated with LVVs given they are integrating vectors. Does Lonza have competitive suspension technology for AAV manufacturing at the 1,000-litre scale, similar to what Oxford Biomedica has at Oxbox?
Catalent seems to be particularly aggressive in acquiring capacity, buying Paragon in 2019, Masthercell in 2020 and Promethera and Delphi in 2021. It’s also been investing in additional in-house capacity, and I think has already added three suites to the 10 existing suites in its gene therapy campus in Rockville. It has an additional five GMP suites expected by mid-2022. How are you thinking about the company’s approach to CAPEX here and the amount of capacity it’s building out relative to its peers?
Has Catalent acquired any particularly differentiating or unique C> technologies via Paragon, Masthercell, Promethera, Delphi or any other deals?
Is Catalent and Thermo Fisher’s competitive threat to Lonza purely due to the breadth of services they offer, or do they have additional depth in terms of C> expertise and competencies vs Lonza’s?
Perhaps an oversimplification, but we are talking about potentially curative C>s, so theoretically patients are removed from the TAM once treated, and therefore there is a greater impetus and importance placed on getting to market as fast as possible. How does that impact the desirability of a one-stop-shop CDMO? Do players prefer that, as having a one-stop shop and a single master service agreement allows biotechs and big pharma to get to market faster? Or given the importance of speed, will players actually prefer to find the most agile individual service provider for every component across the value chain? Indeed, how does Lonza compare to its competition in terms of speed to market?
Do you think a one-stop-shop CDMO is more valuable in C> vs biologics given everything we have discussed?
As a teaser for our part two [see Lonza – C> CDMO Deep Dive – Part 2 – 17 May 2022] can you run us through a high-level SWOT analysis of Lonza’s C> CDMO? What should we be paying attention to?
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