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CXO leaders have entered the game, and 19 companies have made a big move, but do they really need so many CGT CDMO?

 Last Update: 2022-09-21
 Source: Internet
 Author: User

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As Cell and Gene Therapy (hereinafter referred to as CGT) becomes the next decisive point for major pharmaceutical companies to compete for layout, the CGT CDMO track is also hailed as the next "ten times the golden track

The tempting market cake attracts a large number of players

As of the end of July 2022, 19 domestic companies have competed to enter the CGT CDMO track, including WuXi AppTec, Kanglong Chemical, Boteng Shares, Gloria Ying and other domestic CXO leaders

The total amount of financing in the CGT CDMO market in the first half of 2022 reached 4.

Arterial New Pharmaceutical observed that in order to enhance its own business capabilities and meet the increasingly stringent industry regulations and the production needs of customers, almost all CGT CDMO have riveted to establish large-scale GMP plant workshops to expand and re-expand

CGT CDMO companies that are undergoing rapid expansion do not seem to be aware of the "oversupply" situation that the market may face in the

The development of the CGT track is hot, triggering a shortage of CGT CDMO

In recent years, with the approval of a number of CGT products, the global enthusiasm for the research and development of CGT products has been rising, and the CGT field has become the next decisive point

The FDA predicts that 10-20 CGT drugs will be approved for marketing each year from 2020 to 2025, and the global CGT market size is expected to exceed $30 billion in 2025 (CAGR = 71% in 2020-2025).

Attracted by the broad market prospects, more and more new players are flocking to the CGT CDMO track, especially in 2022

In the past three years, the new players who have entered the CGT CDMO field include traditional CXO leaders like Kanglong Huacheng and Kai Laiying who have made cross-border layouts to the CGT CDMO field, as well as domestic leading biotechnology companies (Jinsrui Biology, Prijin Biology, Yimiao Shenzhou) who have entered the CGT CDMO track in the form of spin-off subsidiaries (Booming Biology, Spectral Biology, Xiji Biology, etc.

In the past three years, new players in the field of CGT CDMO have included both domestic leading biotechnology companies

We have observed that the number of companies (9) that have joined the CGT CDMO track in the past three years is particularly intensive, almost half

In the past three years, the number of companies that have joined the CGT CDMO track (9 companies) is particularly intensive, almost half

▲ Note: In this statistics, the financing amount of the undisclosed event of the financing amount is counted as zero; The amount of financing is tens of millions of yuan / more than 10 million yuan is calculated as 10 million yuan; The amount of financing is 100 million yuan for hundreds of millions of yuan / more than 100 million yuan / over 100 million yuan

As can be seen from the chart above, financing in the CGT CDMO field has been on the rise since 2015
.
Among them, 2020 can be seen as a turning point in the CGT CDMO market – compared with 2019, the number of financing events in 2020 is more than twice the number of financing events in 2019, and the total amount of financing is nearly 5 times
that of 2019.
(Since some corporate financings do not disclose the specific amount, there is an anomaly in which there is a financing event but the financing amount is zero
.
) ）

Judging from the situation in the past three years, 2022 has performed particularly well - the total amount of financing in the first half of 2022 is already 2.
04 times
the amount of financing in 2021.
In 2022, the reasons behind the performance of the capital market are mainly due to the listing of Heyuan Bio and the high-profile entry of Gloria Ingen in the field of
CGT CDMO.

The total amount of financing in the first half of 2022 is already 2.
04 times
the amount of financing in the whole year of 2021.

On March 22, 2022, Heyuan Bio landed on the Science and Technology Innovation Board and was called "the first share of CGT CDMO on the Science and Technology Innovation Board"
by industry insiders.
On the day of listing, the total amount of funds raised by the company was 1.
323 billion yuan
.
On March 25, 2022, Kailaiying announced that it intends to reach a cooperation agreement with Hillhouse Venture Capital and Haihe Gloria Ying Fund to increase the total capital of Kailaiying Bio by no more than 2.
534 billion yuan, thereby building Kailaiying Bio into a global leader in biologics and advanced therapy CDMO
.

Another symptom of the hot track is that some CGT CDMO companies are overwhelmed by the needs of the industry
.

Head CGT CDMO companies such as WuXi Shengji simply have no time to undertake orders
from some start-up CGT companies in China.
"The distant order schedule really makes us wait sadly, and the CGT company in the early stage of development, product development speed is particularly critical
.
" An unnamed employee of a CGT company revealed
.
In addition, Arterial New Medicine also learned that in April this year, Yiming Cell's corporate orders have been scheduled for September
.

Therefore, the establishment of GMP workshops and expansion of production capacity are the "main themes" of the CGT CDMO industry in the past two years
.

The establishment of GMP workshop and expansion of production capacity are the "main themes" of the CGT CDMO industry in the past two years
.

However, "far water" cannot solve the "near thirst", and the construction of GMP workshops and the expansion of production capacity are not things that
can be solved in a day or two.

Li Qichen, founder of Yiming Cell, told Arterial New Medicine that it takes at least 1.
5 to 2 years for an enterprise to officially accept orders from the beginning of planning to build a GMP plant
.

It takes at least 1.
5 to 2 years for an enterprise to start planning to build a GMP plant to the time it can officially accept orders
.

Li Qichen introduced that the construction of GMP plants first needs to find a site carrier that meets the standards, which takes a lot of time
.
After finding a good site, you have to start designing, "there is no 4-6 months, you can't do a good industrial design
.
" "After the design, it is also faced with clean decoration of the GMP workshop, which requires at least half a year," it is common
to use 8-12 months for decoration work.
”

In addition, during the renovation period, it is also necessary to do a good job in equipment procurement, and in the case of double-line parallel without delay, it is finally necessary to carry out the acceptance of the plant and the confirmation of the small test process
.
Overall, "the ability to go through the entire process in a year and a half is a very good team
.
" ”

However, it is precisely because the "water" is far away and the "thirst" is near, the entire industry is buried in its head, hurrying forward, and it seems that it has not noticed how many companions
are already around.

The industry began to develop in a less rational direction, similar to the "target pile-up"
in the field of innovative drugs.

In the future, there may not be so much CGT CDMO and capacity

The 19 CGT CDMO that have already entered the market are acting in unison in capacity expansion, coupled with other companies that may enter the CGT CDMO field in the future, which raises a new question, will there really be so many CGT CDMO and the huge capacity they have established in the future?

Will the previous shortage of supply and demand in the CGT CDMO industry become an oversupply or even oversupply in the future? If the domestic CGT CDMO enterprises do not participate in international competition and rely solely on the domestic CGT CDMO market, in the case of more new enterprises continuing to enter the game, the domestic CGT CDMO market cake does not seem to be enough points
.

First of all, compared with traditional drugs, the personalized demand for cell and gene drugs is high, the output is small, the demand is unstable, the technical barriers between different products are large, the high threshold of technology and the small batch of production are actually difficult to support the survival
of a large number of CGT CDMO.
And the domestic CGT field is still in the early stage of research and development, most pipelines do not use too large-scale production volume
.

A senior industry insider in the field of CGT told Arterial New Medicine that CGT products are very different
from antibody macromolecular drugs in production.
"Antibody macromolecular drugs are 'shelf-type' products that can complete intensive production and have a relatively low
technical content.
However, because of the large individual differences and small production batches of CGT products, the required production capacity is not high compared with antibody macromolecular drugs, and the front stage of the product research and development and the back-end production cooperation must be very close
.
”

Zhou Guoying, chairman and CEO of Yinuo MicroPharmaceutical, also said that the "number of ways" to do viral drug research and development is completely different from that of general antibodies, and there is no universal law to follow
.
"The threshold for viral drug research and development is very high, because the biological function, anti-tumor principle and characteristics of each virus are completely different
.
The individualized nature of CGT products makes it impossible to mass-produce
them according to the pattern of a product.
”

"The two types of products are quite different in terms of quantity and demand
.
" The core executives of a domestic CGT company gave us an example of the amount of drugs required for the clinical stage: under the same conditions, a CDMO company produces a batch of antibody products, and there may be insufficient dosage for an antibody drug company to carry out clinical phase 3 trials, but for a CGT company, the production of CGT products of the same capacity may be enough to carry out phase I-III clinical trials and even have a balance
.

Previously, Arterial New Medicine had written a special article to discuss why Heyuan Bio could become the first share of China's CGT CDMO (for details, see "Two oncolytic virus orders leverage an IPO, what enlightenment does it bring to domestic CGT CDMO?").
One of the important reasons is that the main business of Heyuan Bio is the oncolytic virus business - this company mainly relies on the development of oncolytic virus CDMO business to become bigger and stronger
.

Yinuo Micro Medicine Zhou Guoying introduced that a great feature of oncolytic virus is that it is not an individualized treatment, but similar to general treatment, so the production volume of oncolytic virus products requires relatively large, and the task undertaken by CDMO companies is heavier
.

From Heyuan's prospectus, we can also see that Heyuan has also laid out other CGT businesses, but the corresponding revenue proportion is not large - for example, Heyuan has many customers in cell therapy, but none of them are large customers
like Yinuo Micro Medicine and Funuojian.

"In addition, most of the pipelines in the domestic CGT market are still in the early stage of clinical research and development, and it still takes time
for commercial production-scale CDMO orders.
" Zhongping Capital Kong Linghe said
.

Secondly, because most of the current CGT CDMO enterprises need to be improved, and the process of CGT-like biotechnology products often involves trade secrets and cannot be disclosed to the outside world, many CGT companies will choose to build their own production capacity, further reducing the demand for
CGT CDMO.

Although the CGT industry has experienced ups and downs and has developed for nearly 30 years, China actually included CGT in drug supervision around 2017, and around 2018, domestic enterprises began to systematically lay out CGT drugs
.

Gene and cell therapy, as an emerging technology in the field of biopharmaceuticals, is still in a relatively early stage
of development from the perspective of industrialization.
There are not many international CGT talents, and Chinese CGT talents are more in demand
.
With the exception of a few scientists or industry professionals who have decades of scientific research or industrial experience in the field of CGT, there is still a lot of room
for improvement in the capabilities of most CGT teams.

Liang Junbin, CEO of Ruifeng Bio, recalled that when the company was developing gene editing therapy for thalassemia, it originally wanted to cooperate with some CGT CDMO to jointly manufacture products at the production end, but because it did not find a suitable partner, it eventually relied on the internal team to undertake the corresponding business
.

"At that time, many CGT CDMO companies were not familiar with, did not understand, or even had no concept of the new products
we were making.
Because they have no direct experience and their capabilities have not been verified, there is no way to carry out
in-depth strategic cooperation.
However, Ruifeng Bio eventually found some external partners to supply
some non-core raw materials.

"If you look at the product itself, most of the current domestic CGT CDMO companies are basically able to make products
that meet the requirements of domestic IND approval.
" However, due to the fact that the field of CGT is still relatively new, the capabilities of most CGT CDMO in China have not yet been verified, and many aspects still need to be improved
.
”

At present, Ruifeng Bio is also trying to establish further cooperative relations with domestic CGT CDMO companies, and they hope to use the existing plant and hardware facilities of these enterprises, including some general capabilities, combined with their own cognitive and R&D advantages in product development, to achieve a win-win situation
for the two teams.
"We believe that the current cooperation between CGT enterprises and CDMO is itself helping the industrial chain to continuously improve
.
" We need to work together to develop the industry better and faster
.
Liang Junbin said
.

Judging from the foreign CGT market situation, CGT companies entrust CDMO in the early stage of development, and will gradually start to build their own production plants in the later stage to the late clinical commercialization stage, and put the final product in their own hands
.
This phenomenon is very obvious, and this trend
is also manifested in China.

For CGT companies, the core process of the product is often not disclosed to the outside world because it involves trade secrets, and it needs to be "grasped" in their own hands
.
Therefore, CGT companies generally make their own final products, but only use plasmids, viral vectors, etc.
as customized raw materials to entrust CDMO production
.

In the early days of the establishment of the enterprise, the team was short of money and people
.
The construction of GMP capacity plants and supporting facilities requires funds, talents, experience, and time, and these startups are lacking
.
In addition, product approval IND also faces the risk of
failure.
Therefore, in the absence of team experience and plant facilities and the risk of uncertainty, there is a strong demand for CDMO reports from start-ups to complete the production
of CGT samples that meet the IND approval requirements using their already built GMP plants and facilities.

But once CGT companies have one or two products successfully enter the clinic (or reach a milestone), the time competition they face is not so tense, and after the company's plant and team are complete, CGT companies will generally take the products back to make their own, and only continue to entrust non-core raw materials such as plasmid viruses to CDMO
.
We have noticed that the domestic Landson Biological team has adopted such a practice
.

In July 2022, LX101 Injection, a subsidiary of Langxin Biologics, completed the first clinical dose of Phase I clinical subjects
.
According to Arterial New Medicine, in the PROCESS OF IND declaration of this product, Longxin has reached a strategic cooperation
with two domestic CGT CDMO companies, Yiming Cell and Paizhen Bio.
However, the Langxin team has actually built a R&D and production base of nearly 5,000 square meters in early 2021, which was officially put into operation in May 2021, and realized the production and release testing
of 200L AAV scale products in October of the same year.
Dr.
Wang Fenghua of Langxin Bio has introduced to us in a previous interview that The second product of Langxin, including the samples required for IIT research, has achieved independent production
.

Of course, there are also many factors that CGT companies choose to build their own production capacity, such as being able to make the project faster, higher quality, and reduce the cost of the final product; Ability to more flexibly adjust the relationship between product demand and production; In the case of CDMO facing sudden problems leading to production stagnation, CGT enterprises themselves have the ability to undertake production business in a timely manner, reduce product production risks, and ensure uninterrupted sample production from the clinical to commercial stage
.

Considering that some CGT/CGT CRO and other companies in other fields will transition to CGT CDMO in the future, the limited market for CGT CDMO is further divided
.

"At present, antibody drugs are 'rotten', and a group of companies that make antibody drugs in the future will definitely turn to this track; some CROs will also extend their 'hands' to this field; in addition, some companies that fail to do CGT drugs may also 'squeeze'
into this track.
" With the involvement of many forces, the domestic CGT CDMO market cake may not be enough points
.
An unnamed director of R&D and production at CGT expressed his concerns about
the fierce competition that the CGT CDMO market will face in the future.

Combined with industry research, we also found that the fierce competition that the domestic CGT CDMO field may face is not only a concern for the future, but also begins to appear
at the moment.
Some of the CGT CDMO companies in the middle of it feel particularly strongly
.

The fierce competition that the domestic CGT CDMO field may face is not just a concern for the future, but also begins to appear
now.

"For a while, under the impact of vicious competition, IIT orders were pressed to a particularly low price - for example, we normally quoted orders of two or three million, and some companies were depressed to 500,000
.
How else is this competing? Yiming cell Li Qichen's words revealed a hint of helplessness
.

"500,000, strictly in accordance with the GMP system to operate may not cost enough
.
" For Yiming cells, we strictly require all products produced by the company, as long as they are used for people, whether it is IIT or IND, are produced in strict accordance with GMP standards, and all reagent consumables are in accordance with the requirements of laws
and regulations.
Even if the samples used by IIT do not require three batches like IND, do not require much legal development of other parties, and do not need to build a three-level library, all other reagents, consumables, teams, environments, instruments and equipment are consistent with the IND declaration product standards, and the cost cannot be reduced so much
.
”

Fortunately, Yiming has been working in the CGT CDMO industry for many years, and has established a unique technical advantage in AAV adeno-associated viruses and has many successful delivery cases in hand, ANDD orders are its mainstream service type
.
Therefore, it will be less affected by the price competition war of IIT
.

But Li Qichen also expressed his concerns, "No matter how much the quotation is, CDMO services must be produced under the GMP system and must meet the drug standards
required by the State Food and Drug Administration.
" If a quotation that is too low has an impact on the coverage of costs, the guarantee of quality standards may be challenged.
"
Excessive price wars can hurt the development of the
industry.

What's next in the industry?

Undoubtedly, the irrational capacity expansion of the CGT CDMO industry has sown the seeds
of hidden worries.
Well, for the companies in the middle of it, what to do next is important
.

Perhaps we can glimpse some enlightenment
from the development of the global CGT CDMO market.

Looking at the global market, most of the market is occupied by several CGT CDMO leaders, and the remaining market is divided
by many small and medium-sized CGT CDMO with distinctive businesses.
According to the statistics of a secondary market securities agency, the global cell and gene therapy CDMO track has a higher concentration than the traditional CXO track, and the top four companies such as Lonza, Catalent, Thermo Fisher and WuXi, account for nearly 50%
of the global market share.

Looking at the global market, most of the market is occupied by several CGT CDMO leaders, and the remaining market is divided
by many small and medium-sized CGT CDMO with distinctive businesses.

For the domestic CGT CDMO leader with considerable strength, the strategic layout may not need to be said, and the company's brand system and capital have already played a considerable role in it
.
The most important thing for this type of enterprise is to extend the system and capabilities horizontally and lay out all fields
.

The most important thing for this type of enterprise is to extend the system and capabilities horizontally and lay out all fields
.

The CGT field contains many directions, such as CAR-T, TCR-T, TIL, AAV, adenovirus, oncolytic virus and mRNA small nucleotides, etc.
Because these subdivision tracks are very different, the biggest concern is still strictly regulated, so there is no certainty of a track, and the head CGT CDMO needs sufficient reserves to have a layout in all aspects, so that when there is an explosive track in the future, it can quickly keep up
.

For medium-sized CGT CDMO, in the case of differentiated technical advantages, the future potential of CGT segments can be judged according to market demand, and selective horizontal business expansion
can be appropriately made.
At the same time, we will improve our own business capabilities and product delivery standards, strive to be recognized by international approval bodies such as the FDA and the European Union in terms of process and compliance, participate in international competition, and open up overseas markets
.

CGT CDMO companies that have already formed differentiated technology advantages need to selectively bet on new technologies
according to their own situation.
One of the important reasons why Heyuan Bio can become the first share of CGT CDMO on the Science and Technology Innovation Board is that it has seized the business opportunity of oncolytic virus, which is inseparable from
its previous efforts and preparations in related fields.
In any industry, opportunities are always left to those who
are prepared.

At the same time, in the case of the domestic CGT CDMO track has become saturated, it is an inevitable path
for future development to take a long-term view and participate in global competition.
The domestic market prospects are very large, and the industry expectations are also very large, but at present, the CGT field is still in the early stage of research and development, and most pipelines do not use the current production volume of too large.
00.

For small CGT CDMO that are in the stage of progress, improving their own business capabilities, establishing characteristic businesses, and finding their own positioning are the first priorities of
the current layout.
Expanding the "stove" and expanding production capacity will only quickly overdraft the resources
of small CGT CDMO.
Do everything, it is not easy to build an advantage; Doing well is more important
than doing it widely.

"The big development trend of the CGT industry is to go up, but the process of going up may face ups and downs
.
In these ups and downs, every company involved needs to be prepared or risk being eliminated
.
Whether it is the use of the funds on hand or the layout of the business, the vision can go far
.
This article ends
with a paragraph from Yiming Cell Li Qichen.
The above analysis and suggestions can bring some thoughts
to the industry stakeholders.

Special thanks to the following industry professionals for their contributions to this article:

Yiming Cell co-founder Li Qichen

Liang Junbin, CEO of Ruifeng Bio

Zhou Guoying, Chairman and CEO of Yinuo Micro Pharmaceutical

Zhongping Capital Kong Linghe

Other unnamed industrial figures

(The above rankings are in no particular order)

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