A contract manufacturing organization, sometimes called a contract development and manufacturing organization, is a company that serves other companies in the pharmaceutical industry on a contract basis to provide comprehensive services from drug development through drug manufacturing. This allows major pharmaceutical companies to outsource those aspects of the business, which can help with scalability or can allow the major company to focus on drug discovery and drug marketing instead. Services offered by CMOs include, but are not limited to: pre-formulation, formulation development, stability studies, method development, pre-clinical and Phase I clinical trial materials, late-stage clinical trial materials, formal stability, scale-up, registration batches and commercial production. CMOs are contract manufacturers, but they can also be more than that because of the development aspect. Their customers are not only expecting competitive pricing but also regulatory compliance, flexibility on the production capability and on time delivery. Overall it is required that CMO complies with good manufacturing practice from their client and official organisation such as Food and Drug Administration.
Evolution
The pharmaceutical market uses outsourcing services from providers in the form of contract research organizations and contract manufacturing organizations. In recent years, the concept of a comprehensive single-source provider from drug development through commercial manufacture has emerged. This concept has been implemented by providers known today as contract development and manufacturing organizations. CMOs are a response to the competitive international nature of the pharmaceutical market as well as the increasing demand for outsourced services. The best-positioned service providers focus on a specific technology or dosage form and promote end-to-end continuity and efficiency for their outsourcing clients. With lower-cost international manufacturers capturing an increasing percentage of the contract manufacturing market, specialization may be an effective hedge against loss of market share. Before the financial crisis of 2007–2008, 75% of the candidate that outsourced services were small and mid-sized biotechnology and pharmaceutical companies. Following the financial crash in 2008 the CMO industry started to be funded by private equity as a result of a substantial growth and a more qualified management. The one-stop CDMO concept could be the direction the industry is heading by offering the whole spectrum of development services. The acquisitions that have been finalized in 2017 in CMO and CDMO industry brought some of these companies to a level that allows them to compete with global bio/pharma companies. The value of the mergers and acquisitions in 2017 was likely to exceed $20 billion, below are some examples of these M&A:
Lonza Group – Capsugel: their manufacturing scale combined together is equivalent to a $25 billion bio/pharma company
The Carlyle Group – AMRI Global: this acquisition will help AMRI to be more financial savvy and operational focus
Another aspect of these acquisition is coming from CMO that are acquiring manufacturing site from bio/pharma companies. Some example could be from some acquisition of Avara Pharmaceutical:
The industry is active at aiming to be a larger scale suppliers in the CMO environment but the number of attractive acquisition is limited
Advantages
The bio/pharma companies used to build and staff dedicated manufacturing capacities for drugs in development only to see them cancelled if the product failed in Phase III of clinical research; working with a CMO limits that financial risk.
Disadvantages
The pharmaceutical client using the services of a CMO does not have direct control of the project in regard to scheduling, cost, quality, or accountability. Data security is an issue to be considered when selecting a CMO, as intellectual property and other proprietary data are exchanged between client and service provider. One of the major risk remains in the lack of control over the CMO's compliance for the client, for example when an FDA warning letter is issued, a resulting interruption of production may result in major delay or interruption of shipping. The rise of the CMO industry led to an increase of inspectors from various divisions of the Food and Drug Administration.
