This post marks the commencement of a series delving into the landscape of the U.S. Advanced Therapies (AT) Contract Development Manufacturing Organizations (CDMOs) sector. Before delving into the report's core content, which includes an exploration of the country's prominent biomanufacturing hubs, it's imperative to first address the recent prevailing trend in the sector – namely, workforce reductions and facility closures. This introductory step serves to stimulate dialogues about the sector's current state, the journey that brought it here, and the potential ahead. My intention is to use this series as a means of fostering curiosity, engaging a broader audience, and igniting discussions about this captivating sector, encompassing its trends, prospects, and challenges.
Over the past few years, the AT CDMO realm witnessed a rapid surge in investment, resulting in the substantial expansion of capacity, capabilities, and skilled personnel. However, this vigorous growth trajectory has recently shown signs of a slowdown, marking a pivotal juncture as the sector undergoes significant restructuring. A telling illustration of this deceleration can be gleaned from recent instances of plant closures and workforce reductions.
This deceleration within the sector has spurred numerous conversations, prompting a contemplation of its causative factors and implications. Here, I offer several insights into the process of "right-sizing" the sector:
The COVID Impact: The peak of the COVID pandemic witnessed an influx of substantial financial support from various quarters, including the government's Project Warp Speed, as well as private and public markets. This substantial infusion of funds reverberated across the entire supply chain, from raw material sourcing to the establishment of commercial capacities. With vaccination rates now notably lower, the aftermath manifests as an overabundance of personnel and capacity.
Financial Realities of Downturn: The market's downturn has further compounded the situation, leading to workforce reductions and facility closures in the biotech sector. Consequently, this has impacted services, particularly evident within the CDMO arena. Surviving biotech companies are adopting stringent fiscal approaches, making strategic adjustments to pipelines, and seeking partnerships. Adding to the strain, funding for biotechs has dwindled, with private markets remaining cool and public markets exhibiting limited activity.
Burgeoning Capacity Build-Up: A brief span witnessed significant investments pouring into this specialized sector, often driven by major players such as Private Equity firms and industry giants like Thermo, Catalent, Resilience, and Charles River. The outcome is a fragmented market landscape characterized by considerable noise. Conversations with emerging CDMOs reveal a scarcity of clients and a plethora of options for them.
Niche Populations and Approval Challenges: Particularly evident in the Cell and Gene Therapy realm, many approved products cater to small patient populations, extending to late-stage trials as well. Despite substantial strides in developing life-saving treatments, the industry grapples with the inherent challenges of small patient groups and slow adoption rates. While approved therapies hold the potential to save lives, their niche focus often hampers widespread acceptance and garners limited payer interest. Notably, decisions like bluebird bio's withdrawal from the EU underscore the sector's imperative to address larger patient populations for sustainable financial success.
As we embark on this series, I invite your thoughts on the factors shaping this sector's trajectory – the 'how,' 'why,' and 'what next.' The unfolding narrative seeks to spark a comprehensive dialogue on the dynamic shifts within the AT CDMO sector and encourages a collective exploration of the trends, opportunities, and threats that lie on the horizon.