Can you provide an overview of funding trends affecting the CDMO sector?

Capital continues to favor quicker returns, driving interest toward later-stage assets more likely to be acquired by larger pharma companies or reach commercialization. Early-stage R&D projects face longer timelines, making them less attractive when inflation remains high. If interest rates continue to decline, there could be increased investment in earlier-stage assets, since the potential for long-term gains would improve, but the shift has not materialized yet. A lack of investment in R&D over the past two years has already created a gap, delaying projects that might have advanced if funding had been available. This lag will likely disrupt pipelines for years.

While the Inflation Reduction Act (IRA) does not directly target CDMOs, it influences how pharma companies approach R&D decisions. Under the IRA, Medicare price negotiations start on a fixed timeline post-approval, incentivizing companies to aim for broad initial approvals through large-scale trials. This shift could steer pharma companies away from developing niche drugs or conducting phased clinical trials, opting instead for potential blockbuster products with large patient populations. The long-term effect on CDMOs remains uncertain. 

What are the potential impacts of the Biosecure Act?

Since the bill has not — and may never — become law, most CDMOs seem hesitant to make major capital expenditures. Pharma sponsors sent out numerous requests for proposals (RFPs) in 2024, but it appears few made definitive moves to shift work from China-based CDMOs to those in other regions. 

How might the Trump administration impact the CDMO space?

During the previous Trump administration, tariffs targeted many sectors, but pharma ingredients were exempt. To date, this administration will not enact similar waivers, though that may change. Given the interdependence between the US and China for pharma ingredients, services, and innovation, a full decoupling would be challenging and could cause disruptions to the U.S. drug supply, especially for generic drugs, the APIs for which are predominantly sourced from China.

How have GLP-1s transformed the industry?

The rise of GLP-1 therapies created a massive market for prefilled syringes and related services like packaging and sterile fill-finish production. Following Novo Holdings' proposed acquisition of Catalent, many CDMOs in the sterile fill-finish sector announced expansions, new capacity, and increased capabilities, signaling a broader industry response. The infrastructure and equipment needed for prefilled syringe production were committed long before the current boom, leaving little room for new entrants.

However, this growth is not just about direct contracts with GLP-1 sponsors. As these products consume significant production capacity at major facilities, other therapies may get displaced, opening opportunities for smaller CDMOs to absorb that business. GLP-1 development continues, with potential monthly-dose formulations. Oral versions remain in the R&D pipeline. If GLP-1 manufacturers shift from prefilled syringes to vials, it could lower device production needs while still requiring GMP compliance. The halo effect of GLP-1 expansion creates new opportunities throughout the industry, making the prefilled syringe market especially lucrative for CDMOs ready to scale.

What is the potential of AI in the manufacturing space?

The challenge lies in the need for extensive existing data to train these systems effectively. That data exists for oral solid dosage forms more than it does for other modalities, and since many OSDs are commodity generics, where margins are too thin to justify massive AI investments, this makes AI-driven automation unfeasible.  The idea of dark factories—fully automated, human-free facilities—makes sense in reducing contamination risks for aseptic production but remains impractical for advanced therapies like cell and gene treatments. AI could play a larger role in automating manufacturing, though it will likely take years before it significantly impacts high-end pharma production.

What is PBOA’s mission and look-ahead for 2025?

A focus will be the reauthorization of major user fee acts (UFAs) like PDUFA, GDUFA, BSUFA, and MDUFA, covering pharmaceuticals, generics, biosimilars, and medical devices. Negotiations between the FDA and industry will shape the next five-year UFA agreements, determining industry commitments and funding priorities. 

We engage with Congress on supply chain policies, including onshoring, friend-shoring, and reshoring initiatives. Ensuring lawmakers have realistic expectations about the CDMO sector’s capacity will be essential. As Congress revisits the 2017 tax bill, we aim to advocate for incentives that support greater domestic investment in pharma infrastructure.