Bio-CDMOs remain in the small molecule game despite divestments

While CDMOs continue to expand biologics and advanced therapy services recent divestments from Lonza and Catalent do not indicate the abandonment of small molecules capabilities.

For two of the largest contract development and manufacturing organizations (CDMOs), the new year really did follow the old adage ‘out with the old…’

Catalent began 2021 by agreeing to sell its Blow-Fill-Seal (BFS) sterile contract development and manufacturing business, based at a single site in Woodstock, Illinois, to SK Capital Partners.

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The CDMO said the proposed deal “will allow us to concentrate on our growing core activities of developing oral, inhaled and biologic drugs with customers, as well as rapidly extending our technological portfolio of new, emerging modalities, including cell and gene therapies.”

In 2017, biomanufacturing represented around 14% of Catalent’s revenue but through heavy inhouse investment and acquisitions, the sector now represents Catalent’s largest business division at 37%.

Fellow CDMO Lonza, meanwhile, began the year by offloading two facilities to NextPharma, effectively exiting both softgels and liquid-filled hard capsules for the pharma market.

Leaders Divest

Both sales show a trend among top CDMOs and drug companies of divesting small molecule services while retaining or investing in biologics – both protein and peptides – and cell and gene therapies, says Fiona Barry, associate editor, GlobalData PharmSource.

“This reflects the drug industry’s technological shift toward more complex drug production. We are seeing strong investment by the largest CDMOs in acquiring cell and gene therapy companies and facilities or enhancing pre-existing related facilities, as shown in the Contract Manufacturing Service Agreements: Rising Manufacturing Opportunities Driven by Pharmaceutical Pipeline Expansion (July 2020) report,” she tells BioProcess Insider.

“Facilities and expertise for cell and gene therapies are particularly costly and normally only the largest CDMOs have the funds to acquire these capabilities. In the last two years, Thermo Fisher Scientific acquired Brammer Bio (now renamed Patheon Viral Vector Services) for $1.7 billion and Catalent acquired Paragon Bioservices for $1.2 billion and later MaSTherCell Global for $315 million.”

End users, meanwhile, have followed a similar strategy, she adds. “Among the manufacturing sites sold by drug companies to [smaller] CDMOs in 2019, the facilities most commonly divested had solid dose commercial capabilities. The sale of these sites is being driven by the commoditization and resulting low profitability of solid dose manufacture.”

Little and large

For Lonza, the divestment of the two lipid oral dosage form facilities comes as the Swiss CDMO looks to sell its Specialty Ingredients business.

These sales, coupled with years of heavy investment in its biologics and advanced therapies units, follow the trend in the industry but is not indicative that Lonza is exiting the small molecule space.

“We are focusing the business on pharma, biotech, and nutrition, but this does not mean a focus just on biologics and CGT [cell and gene therapies],” Lonza spokeswoman Martina Ribar Hestericová told us.

“Small molecules and consumer health and nutrition remain a core part of the business, and we are investing in both areas. In 2019 they represented around 40% of sales for LPBN [Lonza Pharma Biotech & Nutrition].”