Today, however, the CMO landscape for biologics is relatively undeveloped. We believe that the biotech industry is well positioned to benefit from companies pursuing a strategy to build a sizable biologics CMO and that there is significant opportunity for such companies to generate substantial returns if they have the necessary capital, a long-term view, and a tolerance for risk.
To support this hypothesis, we will address these key questions:
In those early years, the philosophy that "process defines product" governed regulatory actions.1 Because biologics manufacturing is so complex, the US Food and Drug Administration (FDA) believed it was insufficient to define the product by just its molecular composition. Instead, a product was also defined by the process with which it was made.
As a result, early manufacturers were required to perform pivotal Phase 3 trials in the same facility used for final commercial production. This required companies to invest in full-scale plants before entering Phase 3. Further, companies were required to file two license applications for a biologics product, a Product License Application (PLA) and an Establishment License Application (ELA). The PLA and the ELA had to be held by the same company. The company also had to perform a significant portion of the manufacturing itself to hold the ELA. This regulatory environment made it impossible for contract manufacturers to exist.
The high risk to which biotech companies were subjected as a result of these regulations led to several high-profile failures. One was Synergen. The company was unable to demonstrate the efficacy of Antril in its Phase 3 trials conducted in 1994. Unfortunately, this occurred after the company had already invested in a costly manufacturing facility. The wasted expense of the plant significantly contributed to Synergen's financial distress. Synergen was eventually acquired by Amgen.
Evidently, experiences such as Synergen's forced the FDA to rethink its policies. The FDA Modernization Act (FDAMA) of 1997 changed manufacturing regulations and significantly bolstered the growth of CMOs.