A Strategic Lever: The New Role for CDMOs in the Innovative Age

Bio/pharma companies are adjusting their strategies to cope with a variety of industry trends and are seeking out partners that can not only provide them with capacity but also support them through their innovation journey.

An increasingly complex therapeutic development pipeline, global market shifts, a drive for greater cost efficiency, and a need to employ more advanced technologies are some of the key factors leading bio/pharma companies of all sizes to adjust their operational strategies. Reflecting this strategy adjustment, market analysis has signaled that bio/pharma companies will increase their reliance on service providers by outsourcing at least 50% of their activities to partner companies over the course of the next five years (1,2).

“Outsourcing biopharmaceutical drug development and manufacturing is very much the norm for smaller and mid-size biopharma companies,” notes J.D. Mowery, President, Bora CDMO Business. “However, in the past few years, [there have been] more and more top 100 pharma companies partnering with CDMOs, often across many product lines and divisions.”

Impactful Overarching Trends

The bio/pharma outsourcing market is impacted both by general industry trends as well as by outsourcing-specific ones, explains Eduard Viladesau, Managing Director, HIPRA Biotech Services. General market trends are driving bio/pharma companies to have greater flexibility with regards to their capacity, facilities, and controls in the supply chain, he continues; this required agility translates across to CDMOs, who have “a critical role in supporting the global ecosystem and economics of bringing drugs successfully to the market,” Viladesau states.

For Elliott Berger, Board Director, Orientation Marketing and former Chief Marketing Officer at Catalent, the geopolitical tensions are a key trend shaping the outsourcing market at the moment as they are pushing bio/pharma companies to consider regional supply strategies for manufacturing. “This [trend] is driving U.S. investment and partnership discussions with CDMOs that can accommodate such an approach to avoid potential tariffs and assure affordable supply close to patients,” he says.

“Political dynamics are reshaping pharma’s global footprint, with governments pushing for onshoring to secure supply chains. Yet for many companies, the promise of domestic production is more mirage than boon — limited by cost, labor, and infrastructure realities,” agrees Owen Murray, Chief Executive Officer, Bend Bioscience. “At the same time, cost pressures are driving pharma to downsize internal capabilities. What remains in-house is strategic: portfolio management, regulatory oversight, and program direction. What gets outsourced are the specialized, capital-intensive technologies that demand deep expertise and flexible scale.” 

“One the most impactful trends in the industry right now is the significant pressure on CDMO commercial teams to achieve their sales targets,” emphasizes Will Downie, former two-time CEO and current Senior Advisor in the CDMO industry. “This [trend] is being driven by several factors: including the current biopharma funding downturn, ongoing geopolitical pressures, and continuing supply chain issues.”

Given this pressure on CDMO commercial teams, many service providers are experiencing profitability difficulties and weakened cash flow, while private equity backers are struggling with market valuation challenges and resultant difficulties in achieving a successful business exit, Downie confirms. “Customers have become more selective, decision-making has slowed, and procurement departments are exerting increased pricing pressure throughout the industry,” he says. “Biopharma clients seem comfortable extending current successful projects, but for new ventures, they’re opting for smaller starter projects and driving hard bargains on new molecules.”

The Drive for Affordability

“The industry’s drive for cost efficiency and affordability is forcing a shift in how pharma approaches outsourcing. Instead of spreading resources thin across multiple avenues, companies are moving toward risk-based, science-driven decision making,” remarks Murray. “The goal is to define what meets the ‘requisite standard’ from a risk perspective, then double down on informed options most likely to succeed, rather than testing every possible option.”

As innovators seek to make high-conviction bets on fewer drug candidates, outsourcing partners are being required to deliver rapid data, specialized expertise, and flexible models, Murray adds. “The result is a more disciplined, partnership-oriented outsourcing landscape, where efficiency and innovation go hand-in-hand,” he says.

Lauren Collison, Senior Vice President, Head of Innovation, FUJIFILM Biotechnologies, points out that greater demand for affordability from innovators leads to a more competitive landscape for service providers, who can differentiate themselves from their peers through improved efficiency, digitalization, and modularity. “Continuous biomanufacturing, as opposed to traditional fed-batch manufacturing, is one answer,” she says. “By intensifying processes and automating operations, it reduces energy consumption, cleanroom footprint, and labor requirements, while improving yields.”

Digitalization can be used to improve both product quality and yield by enabling real-time data access and process simulations, Collison continues. “Standardization is the third big lever. By replicating facility designs, equipment trains, and quality and IT systems, companies can accelerate tech transfer and improve reproducibility,” she says.

“In internal case work, this modular approach has shown large reductions in design time by up to 70%, which supports affordability without compromising compliance,” Collison specifies. “The net effect is a shift toward harmonized, automation-ready networks that lower cost of goods and broaden access while keeping innovators on a predictable regulatory footing.”

Demand to improve cost-efficiency is ever present; however, it is even more pressing during challenging times, such as when funding is challenging and industry is facing tariff issues, asserts Berger. “Many CDMOs are looking at manufacturing efficiencies to deliver [cost improvements], particularly continuous biomanufacturing, use of AI [artificial intelligence], and increasing automation,” he says. “This [effort] is offset, however, by the need to move some production from Asia to the U.S. and Europe, where it's more expensive. Western suppliers that can offer cost-efficient capacity have a great opportunity to benefit from the current environment.”

Focusing on a more segmented view of the sector, Viladesau concurs that the geopolitical uncertainty is impacting the historical trends of geographic preferences. For example, the traditional approach where suppliers of generic APIs shifted more towards the lower cost geographies, such as India and China, and biologics drug substance suppliers moved towards China as a result of increasing technical capabilities and quality performance, is changing, he explains.

“For new modalities, DS is anchored in the EU and the U.S. given the higher importance of speed and proximity, and a lower sensitivity to price. Drug product (DP) suppliers are often regionalized (i.e., EU-based for EU supply, U.S. for U.S. etc.) to provide supply chain agility and flexibility and to address quality requirements, especially in injectables, with some exceptions (e.g., EU supplying DP to Middle East),” Viladesau says. “In finished goods packaging, suppliers are almost always regionalized or even at country level to balance cost efficiency and supply chain flexibility and to take advantage of localized incentives such as tax breaks and cheaper land use.”

Sponsor companies are seeking out partners who are not only capable of improving operational efficiency and employing technical innovation but who also offer supply chain security, comments Tom Sellig, CEO, Adare Pharma Solutions. “Integrated, end-to-end solutions reduce handoffs and lower costs,” he says.

“Oral solids remain a proven, cost-effective platform, helping sponsors manage development and manufacturing expenses while delivering reliable, scalable therapies,” states Sellig. “Agile operations, early tech transfer alignment, and close customer collaboration all play a critical role in minimizing costly delays. Cost efficiency is best achieved through streamlined processes that shorten timelines while ensuring compliance, quality, and security of supply.”

However, while oral solids remain dominant for the bio/pharma industry, newer formats, a growing demand for patient-centric dosage forms, and increasingly complex therapies are reshaping outsourcing services, Sellig asserts.

A Need for Constant Innovation

“A defining trend is the growing complexity of modalities moving through development pipelines, which is changing what innovators need from their partners,” remarks Collison. “Advanced therapies resist easy standardization, so the core challenge is to build flexible digital and analytical infrastructures that still scale from clinical to commercial.”

The rising prevalence of next-generation therapies means that CROs and CDMOs are facing more technological and logistical hurdles in scaling production while maintaining quality and compliance, comments Kevin Norrett, Chief Operating Officer, Codexis. “One of the most pressing concerns is achieving sustainable scalability — ensuring that manufacturing processes can meet growing demand without compromising environmental or operational efficiency. This includes improving raw material utilization and minimizing waste,”he says.

The complexities of the value chain also need to be considered, particularly when novel drug delivery technologies are incorporated, such as tunable polymers developed by third parties, commented Ryan Swanson, director of Process Development, Lifecore Injectables CDMO. “It’s not uncommon to have an API raw material vendor, a polymer or technology vendor, an autoinjector device vendor, and a fill/finish CDMO working together to define the processes necessary to enable successful product and process development,” he says. “Compared with scaling-up products that do not require that complex network of suppliers, it can be challenging and more time-consuming to drive alignment across multiple vendors and sponsors, and to identify the quality parameters that need to be met for each process.”

In addition to scalability, another critical challenge related to next-generation therapies relates to capital expenditure (CapEx), which is particularly high for the facility builds and operational processes. Taking solid-phase oligonucleotide synthesis as an example, Norrett highlights that there is a need for large infrastructure commitments and facility builds in order to meet the current and future RNA demand that is not met by alternative manufacturing methods. Furthermore, quality control needs to be accounted for as low purity during synthesis can lead to lower resultant yields and, hence, higher ultimate production costs, he points out.

“As new modalities, such as biologics products in sterile injectable form, move forward, they will be subject to the same rising tide of quality requirements of other types of biologics and sterile injectables,” confirms Viladesau. “Moreover, new modalities bring additional challenges beyond those of classical biologics, such as smaller patient populations and correspondingly much smaller quantities/batch sizes that require smaller-scale, more flexible equipment than many CDMOs may have historically installed.”

While it may be possible to reduce the output of some pre-existing good manufacturing practice pilot plants to meet global demand for some of these new modalities, the installed base of larger-scale equipment may also end up being rendered inefficient, Viladesau continues. “New modalities also increase the need for a more diverse set of technology platforms, cold chain/ultracold chain capabilities, as well as supply chain agility, much shorter turnaround/lead times, and increased controls for supply chain integrity/traceability, especially for autologous modalities,” he says.

“As more complex molecular modalities, such as PROTACs [proteolysis targeting chimeras] and other next-generation therapies move into the mainstream, CROs and CDMOs can no longer act as just a pair of hands — they must be true innovation partners with the infrastructure, expertise, and flexibility to scale,” adds Murray. “For the few therapies that reach blockbuster status, providers will need to slot into global supply chains, where the competition will be on cost, efficiency, and reliability at scale.”

However, given the fact that the majority of emerging therapies are targeted at smaller patient populations, CDMOs will need to be able to simultaneously manage complex, multiproduct portfolios that each have their own regulatory, quality, and logistical requirements, Murray emphasizes. “Success in this environment will require constant innovation — from new drug delivery technologies to modular facilities and digital quality systems to supply chain orchestration — ensuring that next-gen therapies are both compliant and commercially viable.”

No Longer Just About Saving Money

In the near future, Mowery anticipates that an increasing number of bio/pharma companies, irrespective of size, will seek out partnerships to help them manage their drug development projects. “First and foremost, [this approach] makes so much economic sense for all aspects of the value chain. The capital and time required to stand up a new manufacturing facility are enormous,” he says. “CDMOs are also inherently better placed to balance the risk of advancing drugs still in development or subject to fluctuating demand.”

However, with the currently difficult economic environment, it will be critical for “companies to strengthen their CDMO commercial efforts, so that they can achieve their revenue targets and win in an ever-increasing competitive market,” Downie remarks.

“As scientific challenges grow more complex and market pressures intensify, CDMO partners must deliver more than just capacity — they must bring curiosity, commitment, and technical depth to every engagement,” summarizes Murray. “Outsourcing is no longer just about saving money. It has become a strategic lever, with CDMOs acting as innovation partners, helping pharma companies stay nimble in a world where political risk and scientific complexity continue to rise.”

References

1. Bommers, K.; Jones, M.; Ogilvie-Smals, J.; Pereira, J.; de Sampaio, G. Moving Beyond a Transactional to a Strategic Relationship with your Third Parties for Outsourcing Success. Baringa Insights, Jan. 30, 2025.

2. Zaidi, Q.; Schur, E. How to Accelerate Growth Through Commercial Transformation in Pharma. EY Insights, Sept. 30, 2025.

Photo by Florian Olivo on Unsplash