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Unlocking better growth for CDMOs

| 3 min read
cdmos

The contract development and manufacturing organization (CDMO) industry is rapidly evolving, with the emergence of new modalities, breakthrough innovations in existing therapeutic areas, regulatory changes, and increasing demand for personalized medicine. These changes offer CDMOs ample opportunities to drive growth – but a one-size-fits-all approach to offering, pricing, and quoting will fail. To capitalize on these opportunities, CDMOs must adopt differentiated commercial strategies to unlock better growth.

With a CAGR of seven percent, the CDMO segment is expected to grow to a 160-billion-dollar market by 2025. Not surprising, as the market is primed for growth.

Key drivers of this growth are manifold and include emerging modalities such as cell and gene therapy and ADCs, disruptive innovations for conditions like Alzheimer’s, indication expansions, and significant R&D activity within precision medicine targeting disease prevention.

With the CDMO market continuing to expand, many leading CDMOs have set ambitious double-digit growth targets and are aggressively expanding their global capacity.

Historically, CDMOs have been able to grow despite poorly defined commercial processes and concepts by maintaining a clear focus on regulatory and scientific excellence or by simply adding capacity. However, we expect that to partake in the growth journey in an increasingly complex and competitive environment, CDMOs will need to overcome several commercial challenges, including:

  1. Poorly structured service offerings resulting in ambiguity regarding scope and value-add as well as ineffective communication with client (procurement) teams
  2. Non-transparent costing and a lack of forward-looking cost elements resulting in inaccurate profit projections and risk of margin erosion during project delivery
  3. Cost-plus pricing that doesn’t systematically consider client willingness to pay resulting in money being left on the table
  4. Slow time to quote with ineffective quotation templates resulting in disadvantages in client experience during the quotation process and negatively impacted win rates
  5. Lack of systems and tool support resulting in resource-intense processes, redundancies, and missed data capture along the quotation process

Therefore, to efficiently and effectively scale up their business for growth without sacrificing margins, CDMOs need to improve several fundamental commercial components. What does that involve? CDMOs need to focus on providing a clear service offering with cost transparency, value-based pricing, and streamlined quotation processes.

By improving key components of their commercial processes and elevating their focus from a transactional mindset, CDMOs can unlock the full value potential of their services and create long-term, profitable, and better growth.

The CDMO growth trajectory will continue.

The size and dynamics of the pharma industry mean that outsourcing efforts will only intensify. Increasing investments will also mean increasing competition. Are CDMOs ready to benefit from this growth and stay ahead of competition?

We believe CDMOs need to differentiate fundamental components of their commercial strategy to benefit from the value they generate. By persisting with outdated, unsystematic practices, they risk being unable to scale their offering, pricing, and quoting-related processes in line with their planned growth and capacity expansion. Therefore, a solid end-to-end process is necessary in terms of:

Our series explores each of these topics, supported by best practices and extensive experience in helping CDMOs achieve better growth.

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