Strategic considerations for partnering with CDMOs for cell and gene therapies

This article is part of our Biotech Review of the Year - Issue 11 publication

The biopharmaceutical landscape is undergoing a steady but seismic shift with the arrival of cell and gene therapies (CGTs) in the clinic and on the market.

Offering revolutionary treatment modalities, CGTs hold the promise of transformative advancements in healthcare. However, this burgeoning field comes with a set of unique challenges, particularly when it comes to manufacturing. 

Contract Development and Manufacturing Organisations (CDMOs) are key players in this area, providing expertise and infrastructure to navigate the complexities of CGT production. A modern CDMO often provides a full-service offering, with the biopharma client able to outsource some or all of its therapeutic development and manufacturing requirements to the CDMO.

Manufacturing challenges for CGTs

CGT manufacturing employs intricate processes with a multitude of components, resulting in a complex and often extensive supply chain. Unlike traditional small molecules, CGT manufacturing processes rely heavily on biological products such as cells and viruses as inputs which themselves involve complicated production and purification processes and consequently come with a high price tag.

The manufacturing costs of CGTs are further amplified by the complexity of the processes themselves which involve the generation of synthetic genetic materials and modifying a patient’s cells. Replicating, transferring, and scaling up these processes to GMP standards can prove to be a costly endeavour with significant risks e.g. if the process cannot operate reliably at a sufficiently large scale. 

Success in the CGT landscape often hinges on securing a first-mover advantage and in the race between companies developing competing products, the earliest entrant onto the market may be the one that has locked in its manufacturing process the quickest. 

Manufacturing capacity as a bottleneck

As a result of the growing demand for CGTs and the increasing reliance on CDMOs, a critical bottleneck has emerged in the form of manufacturing capacity. The shortage of specialist CDMOs with enough highly skilled staff, coupled with an infrastructure still in its developmental stages, has led to a widely recognised capacity crunch for advanced therapeutics such as CGTs. This has significant implications for both R&D batches and future commercial production. Companies find themselves navigating a complex terrain where contract negotiations with CDMOs must be initiated well in advance of actual manufacture to secure manufacturing slots, as lead times may stretch to 18 months or longer even to start work on a client’s project. 

The strategic role of CDMOs in CGT manufacturing

The surge in demand for CGTs has propelled the growth of CDMOs which play a crucial role in mitigating the challenges of manufacturing. Companies increasingly turn to CDMOs for their expertise and specialised infrastructure. Choosing the right CDMO becomes a strategic decision, evolving beyond a conventional vendor-purchaser relationship into a long-term partnership with shared goals.

Key considerations in contracting with CDMOs:

1. Flexibility: The ability of a CDMO to adapt its processes to align with a client’s needs is paramount. Companies often seek flexibility to incorporate their processes into the manufacturing strategy, minimising dependencies on the CDMO’s methods.
2. Confidentiality: Given the proprietary nature of CGT manufacturing processes and the particular reliance on trade secrets as opposed to patents in this area, preventing any leakage of the client’s IP will be a critical consideration. Robust confidentiality provisions are a must, as is considering the CDMO’s track record on keeping its customers’ information confidential. However, even with sufficient protections in place, many developers will refrain from disclosing their most valuable manufacturing techniques to CDMOs in the fear of losing the advantage of secrecy. 
3. Ownership of IP: CGT manufacturing contracts raise complex IP issues, with both parties typically contributing existing proprietary techniques to the partnership, against a backdrop of a crowded manufacturing patent landscape. Contracts with CDMOs need to be clear on the ownership position of all possible categories of arising IP to avoid any potential confusion or disputes as to who owns and has the right to use a particular process development. It is not unusual for companies to have an ongoing dependency on the IP of their CDMO partners.
4. Capacity planning: The current scarcity of specialist CDMOs creates challenges in securing manufacturing slots. Contracts should address capacity planning, ensuring companies can book slots well in advance and navigate potential issues arising from CDMO capacity constraints.
5. Financial terms and incentives: Companies are increasingly exploring financial incentives in addition to penalties to encourage quicker scale-up and reduced lead times.

Regulatory considerations

The ability to stand up to regulatory scrutiny is a key requirement for the development of any therapeutic and CGTs are no exception. However, the focus of the regulators’ interest when it comes to CGTs is firmly placed on the manufacturing processes, including elements such as analytical development, quality assurance and release. By some anecdotal estimates, as much as 80% of the FDA’s enquiries in respect of cell therapies can be directed towards manufacturing aspects, highlighting the critical role of robust processes in regulatory success. Transparency and cooperation with CDMOs become essential in navigating regulatory challenges and ensuring a smoother path to approval.

Addressing regulatory challenges in contracts:

1. Enhanced support and cooperation: Contracts with CDMOs should provide for enhanced support and cooperation in regulatory matters. This includes assistance with regulatory documentation, answering inquiries from regulators, and facilitating regular inspections and audits.
2. Regular communication: Regular communication between companies and CDMOs is crucial for staying abreast of regulatory changes and ensuring that manufacturing processes align with evolving standards.
3. Adaptability to regulatory requirements: The contract should outline the CDMO’s commitment to adapting processes to meet changing regulatory requirements, ensuring a proactive approach to compliance.

In-house manufacturing vs outsourcing

Ongoing capacity issues at CDMOs have prompted major pharmaceutical companies to reconsider the balance between in-house manufacturing and outsourcing, with more of them (as well as some mid-sized biopharma companies) increasingly investing in their own CGT manufacturing capabilities. While in-house manufacturing offers greater control, particularly for large companies, it comes with significant financial investments. Smaller biotechs typically lack the financial resources required to build their own manufacturing capabilities, making outsourcing to CDMOs the only viable option.

The decision to outsource or manufacture in-house is multifaceted and influenced by factors such as financial resources, access to specialised teams with adequate expertise, business strategy, particular treatment modality, concerns about valuable IP leakage and the manufacturing capacity that is currently available in the marketplace. Any company weighing up its options will also need to consider whether it is able to support the capital and operating expense of the in-house manufacturing capacity it has built up for the purpose of one or more products if those products fail to reach the market or are not commercial successes.

As the industry continues to evolve, companies are not necessarily tied to an all-or-nothing approach and many are opting to outsource some elements of production, whilst keeping any manufacturing processes which are tied to its “crown jewel” IP strictly in-house.

The investor and acquirer perspective

Investors and acquirers in the CGT space place significant value on manufacturing capability. Early development of a chemistry, manufacturing and controls (CMC) strategy becomes imperative, focusing on de-risking manufacturing processes, demonstrating scalability, and outlining plans for commercial production.

Particularly in the current investment climate, investors and acquirers seek evidence that manufacturing capability has been considered in detail even before series A funding, emphasising the need for a robust manufacturing plan and proof of concept for scalability. A thoroughly considered manufacturing plan reduces the chances of having to go back to the drawing board when setbacks occur during later phases of development.

Single source dependency 

Many CGT developers currently rely on a single manufacturing source, introducing potential vulnerabilities when problems arise. Even if the CDMO contract includes a robust set of termination rights for the client, these would be of limited benefit if the manufacturing ended up being delayed by a year or longer as the developer searches for a CDMO with equivalent capabilities and sufficient capacity before carrying out a potentially lengthy and tricky tech transfer process.

In light of this, companies are increasingly exploring self-help remedies and practical measures to address potential challenges. Downstream issues may be avoided if the client has sufficient rights to monitor the CDMO site to detect and flag any problems early on, in addition to a contractual right to require the CDMO to put in place remedial plans e.g. if the client identifies that the commissioned scale up process is not heading in the right direction.

Addressing the threat of the client’s trade secrets leaking through preventative and practical means is clearly preferable to exercising legal rights to deal with the aftermath. Being selective as to what information to disclose to the CDMO is key, but a CGT developer may also wish to prescribe that details of the manufacturing process are only available to a limited team within the CDMO. 

Taking a step further to prevent unintended disclosures, the contract may include a restriction on the CDMO from carrying out any work for the client’s competitors within a defined field for a number of years. However, insisting on these additional protections may prove challenging in a marketplace marked by a shortage of specialised CDMOs and a manufacturing capacity crunch where CDMOs are well placed to push back on any provisions which would increase their operating costs or restrict their freedom to operate. 

Shaping the future of CGTs

As the pharmaceutical industry propels into the era of CGTs, navigating possibilities offered by CDMOs becomes paramount for success, although the challenges presented by manufacturing capacity, regulatory scrutiny, and IP considerations require a strategic and proactive approach. For many, if not most, CGTs reaching the market in the coming years, one or more CDMOs will have played a key role in the therapy’s launch.