Can CDMOs Live up to the Hype?

On May 30, 2023

As more Life Sciences companies view CDMOs as strategic innovation partners, CDMOs must learn what it takes to fully capitalize on the opportunities.

Thanks to the burgeoning demand for Advanced Therapy Medicinal Products (ATMP) and the recent rapid delivery of mRNA vaccines, the global Contract Development and Manufacturing Organization (CDMO) market is growing at a record pace. Contract Pharma reports that it will likely reach $302 billion by 2026.

CDMOs are in a great position to deepen their relationships with Pharma companies, Biotech firms, and other Life Sciences organizations. According to Boston Consulting Group (BCG), this will require “gaining a deep understanding of the supply chain…, developing…differentiating capabilities…, and changing the partnership model.”

To become powerful strategic allies, BCG urges CDMOs to assess capacity needs, expand production capabilities, change the partnership paradigm with greater accountability and transparency, and digitalise supply chain capabilities. Strengthening digital operations can help CDMOs improve supply chain visibility, facilitate collaborative planning and dynamic pricing, and offer options for clients through dual sourcing.

Pharmaceutical Outsourcing has similar recommendations for CDMOs, most of which involve greater digitalization across operations. According to the publication, “advanced project and workflow management systems are enabling CDMOs to operate more efficiently with consistent processes and oversight. And data driven analytics is enabling CDMOs to anticipate and plan for future outcomes as well as make decisions faster. Analytics also will increasingly play a role in quality processes, helping CDMOs identify and reduce manufacturing deviations as well as inconsistencies in Standard Operating Procedures (SOPs).”

Enterprise Resource Planning — A Foundation for CDMO Digitalization

CDMOs can differentiate themselves and increase their relevance by modernizing their portfolios of supply chain, manufacturing, relationship management, and strategic partnership capabilities, with an eye toward improving collaboration, real-time data sharing, operational efficiency, and agility.

The first step for digitalizing a CDMO’s business is to implement a comprehensive Enterprise Resource Planning (ERP) solution that’s purpose-built for Life Sciences. With such a solution in place, CDMOs can accelerate growth and improve responsiveness to clients through advanced data integration and process automation.

One of our US-based customers, for example, found itself being held back by paper-based processes and siloed systems that led to duplicate data and redundant steps for ensuring regulatory compliance. Knowing that they needed to digitalize operations and integrate with finance to support company growth, executives at leading CDMO company turned to the experts at AX for Pharma.

“We selected AX for Pharma because of the company’s deep knowledge of Microsoft Dynamics 365 and the pharmaceutical industry, in addition to their expertise implementing and validating ERP systems with proven methodology based on industry best practices,” recalls their Chief Financial Officer. “From a technical standpoint, Microsoft Dynamics 365 was the right solution for our very dynamic industry…AX for Pharma 365 was the indispensable extension that addressed all our requirements, without costly and risky customizations.”

During the first phase of the project, we helped our client eliminate duplicate data and create a single source of truth. The CDMO now leverages modern tools—such as a mobile app and integration with barcode printers and scanners—to streamline warehouse operations and reduce paper.

The integrated ERP solution offers:

  • Inventory visibility
  • Traceability of lots and containers
  • Compliant management of controlled substances
  • Control of storage conditions for temperature-sensitive products
  • Easier validation using a risk-based computer software assurance approach

Future project phases will include a project management and accounting solution, a sophisticated costing model, and a weighing and dispensing system that integrates with electronic scales.

Generating Revenue through Digitalization

This operational modernization is becoming increasingly important for CDMOs as they expand their service offerings beyond manufacturing to include preclinical research, clinical trial services, and commercial launches.

Having an effective ERP solution in place makes a CDMO much more attractive to Life Sciences clients, because it shows their commitment to efficiency, innovation, and compliance risk mitigation. This is especially important for smaller biotech and virtual pharmaceutical companies, which rely heavily on CDMOs to bring their intellectual property to life as fast and effectively as possible.
According to Marwood Group, “relationships in the virtually outsourced model tend to be weighted toward the CDMO partner in cases where a small virtual manufacturer engages a contract manufacturer to manage the entire commercialization process. In some instances, the CDMO serves as a general consultant performing non-core functions, including preparation of documents for the client to submit to authorities, customs and brokerage services and third-party logistics solutions.”
As the CDMO market evolves through an expansion of services and widespread market consolidation, enterprise technologies like ERP systems will play an important role in separating market leaders from the rest of the pack.
To learn more about AX for Pharma’s leading ERP solution for the Life Sciences industry and how we can help digitalize your business, contact us today.