By Anna Rose Welch, Director, Cell & Gene Collaborative
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This article is part one of a three-part series examining how advanced therapy scientific and quality-related challenges are impacting outsourcing models today and, hopefully, how these shifts might enable the formation of more efficient, risk-sharing partnerships in the future. We start first by unpacking the considerations ATMP innovators are faced with as they evaluate the increasingly popular hybrid outsourcing model.
Since the dawn of time, people have chiseled “Get thee an outsourcing strategy ASAP” on cave walls. Though this is an often-shared best practice, the COVID- and non-COVID-related factors of the past few years have served as a strong reminder (or perhaps a painful lesson) about the urgency of prioritizing your outsourcing strategy/needs. In the ATMP industry, companies have responded in a variety of ways, including weighing a facility build much earlier in clinical development and/or investing in their own manufacturing capacity. In keeping with the idiom “the early bird gets the worm,” many companies have also begun selecting their back-up CDMOs and secondary suppliers as early as Phase 1 trials instead of waiting until late-stage trials and/or commercialization
Over the past few years, there have also been many conversations dedicated to the “hybrid” outsourcing strategy, which combines the best of both in-house and outsourced manufacturing. Of course, we can define the hybrid model as a company investing in its own manufacturing footprint and contracting with outsourcing partners to supplement clinical/commercial supply needs. However, a recent conversation I had with Paul McCormac, CTO of gene therapy biotech LEXEO Therapeutics, gave us a look at the increasingly common hybrid outsourcing model that companies — particularly smaller biotechs — are employing today. In McCormac’s experience, it is entirely possible for a company to “own its manufacturing destiny” without constructing a facility and while still relying on CDMOs for their clinical and commercial production. It all comes down to establishing a technical strategy built around the principle, “Science over steel.”
To Support Your Technical Strategy, Wear Your CMC & MBA Hats
For McCormac, coming up with the technical strategy and gaining company buy-in was one of the biggest challenges he faced in his current role — especially as he was making the leap from Big Pharma to private biotech.
Figuring out how to ensure that the company’s technical organization could one day deliver phase three programs in large indications without a Big Pharma budget was/is no mean feat. After all, a small biotech (likely) won’t have the cash on hand to course correct if something in that initial strategy goes wrong.
On the surface, your technical strategy — for example, whether you build, buy, or do both — is rooted in a well-established economic assessment of each product in the pipeline. You need to know how much commercial demand there will be and how many/which manufacturing technologies may be needed to meet that demand. (For example, if you’re using three different technologies, the economic equation quickly becomes complicated.) All of this establishes what the COGS will be for each product and the whole pipeline in a commercial environment. It may be tempting to extrapolate your overall COGS from what a CDMO(s) will charge. However, McCormac cautions against relying strictly on this data when determining a reliable COGS for a commercial product, as such figures are highly likely to evolve over time.
It’s nuances like these that reinforce the importance of bringing more technical experts into the fold of commercial strategy decisions. In McCormac’s eyes, this is an area where many companies fall short today.
“Engineers are all comfortable with numbers; they’re capable of carrying out budgets and analysis. However, they are rarely asked to do this when establishing a commercial strategy,” McCormac explained. “This is a big oversight. Manufacturing becomes an important part of your bottom-line analysis, especially as your company grows and focus turns more toward making, for example, tax-efficient manufacturing decisions.” As he went on to explain, companies should be seeking out those people who have both the CMC and MBA background to help run COGs analyses and to understand how net present value for an asset may be impacted by a certain commercial decision.
“Training in the economics of manufacturing helps a lot in terms of building out a technical strategy,” McCormac added.
Two Arguments For Prioritizing Process Development Over A Facility Build
In this day and age of supply and capacity crunches, management may be more inclined to invest in an in-house manufacturing facility. While the economics will differ based on the products, technology (e.g., HEK-293 or baculovirus), and size of a company’s overall pipeline, McCormac reminded of two important factors that can make the economic scales weigh more heavily toward outsourcing. For one, investing in a facility is a long-term, continuous expense. You will not only be employing a team of experts for years before the facility is even producing product, but you will also be paying to outsource the manufacturing for clinical development at the same time. Secondly, the better your process, the less capacity you will need in the long run.
“In the end, the science can reduce the amount of steel that you need,” said McCormac. In turn, he urges companies to set their sights and investments first on advancing their in-house process development efforts.
“I’m a big believer in insourcing the process development and analytics,” he explained. “You will still rely on a third-party for your development, but as an innovator, it’s critical to take your process destiny in your own hands. You get your process to the point where it is productive and where the analytics are predictive, and you work with your CDMO to implement it. A high-quality process development team can do some unbelievable work — if they are given the time.”
As we are all painfully aware, the compressed CMC timeline and market competition for ATMPs often pressure companies into the clinic with their first, non-commercial process. If the company faces early clinical success, the technical development team then turns back around to future-proof their process, not only for phase 3 trials, but also for the commercial market. These goals are hardly new to folks in CMC development, regardless of therapeutic class. However, it is easy to get swept up in supplying product solely for clinical trials. The work that must be done to deliver a commercial product can take the back seat.
“Don’t mortgage tomorrow for today,” McCormac added. “You’re not succeeding if you’re just supplying the clinical trial. When you get the clinical data, you have to turn around and say, ‘How are we going to make this into a commercial product and get this process approved?’”
McCormac’s advice reinforces the many eloquent arguments that have come before — such as this CTO’s perspective — urging companies to brave opportunity costs in favor of achieving long-term control over their processes.
It's not unusual in this space for a young biotech to approach a CDMO with nothing but a sequence from R&D and a desire to have the CDMO take full control of process development and scale it up. Though the one-stop shop may be appealing in this already logistically complicated industry, McCormac advises companies to license the cell line on their own and develop the manufacturing process in-house, as opposed to taking the CDMO’s potentially unportable cell line/process. This way, “If you ever have to roll up your tent and go somewhere else, you will have control of the technology that makes your product,” McCormac explained.
Owning the process development can also promote more efficient outsourcing contracts. For example, if the CDMO’s process isn’t up to par, companies will find themselves booking — and paying for — suites for the long-term because a lot of batches are necessary to supply the product.
He acknowledged that in-sourcing process development and analytics — as opposed to going with the CDMO’s — will be a heavier strategic and financial lift earlier on for small companies. You’ll need a CMC lab equipped to carry out said- process and analytical development. However, these investments will pay off if you’re capable of supplying your clinical trial in one or two batches instead of, say, six or seven. The smaller the footprint you need (i.e., the less “steel”), the better the chance you’ll have of getting a slot in an outsourcing facility.
As has been said many times throughout this industry, there is no one right answer when it comes to the build/buy dilemma — especially given the diversity of ATMP science, products, and pipelines. But for McCormac, taking the hybrid route and insourcing the process development at the start can grant companies some much-needed flexibility, regardless of whether they outsource in perpetuity or choose to invest in future manufacturing capacity.
Today, McCormac defines a true outsourced model as one in which “you as the innovator have a mirror of capability inside your organization.” Combining this capability from the start with a technically knowledgeable in-house alliance management expert/team goes a long way toward allowing a company to “lean in” while still relying on a partner to scale and get the product into the clinic.