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Growing Through Innovation : The new chief exec talks about industry trends and growth plans with Contract Pharma

Gustavo Mahler, a 20-year biopharmaceutical industry vet, has just taken over the helm of CMC Biologics. From its small beginnings in 2001, the commercial manufacturer of therapeutic proteins now has more than 500 employees globally and operates facilities in Copenhagen, Denmark; Seattle, WA; and Berkeley, CA, from which it offers fully integrated biopharmaceutical process development and manufacturing services for clinical and commercially launched biological medicines.

Groomed over the course of a 15-year stay at Bayer in various manufacturing and general management positions in the U.S., Europe and Latin America, Mr. Mahler was heading up Bayer Healthcare’s biotechnology plant in Berkeley when he decided to join CMC Biologics in 2008, taking charge of the company’s Seattle facility. A couple years later in 2010 he took the post of chief operating and officer, which he held until taking over the chief executive role in January 2016.

Contract Pharma had the chance to talk with Mr. Mahler about his new position, plans for the company and the overall state of the market along with the trends and issues impacting it.    —Tim Wright, Editor, Contract Pharma

Contract Pharma: As you take over the CEO role at CMC Biologics tell us a little about your background and how you’ve prepared for this role.
Gustavo Mahler: I have 20 years experience in the biotech industry mainly working in operations functions, manufacturing and management. That has given me a good breadth of expertise and knowledge for understanding the types of problems our customers have bringing products to the market and the needs they have to manufacture and control their products.
I worked at Bayer for 15 years in Latin America, Europe and the U.S. before I joined CMC seven years ago and in that time we have grown from a very small staff to a large operation. In 2010 I took over the operation in Denmark and in 2011 the marketing and sales globally. I have been growing into this position and think it is a natural transition for us at the company.

Contract Pharma: What are your plans moving forward for the business?
Mahler: It will be a continuation of the current direction of the company. Expansion has been a key component of our strategy over the last several years. The core element of this strategy is rooted in CMC expanding our capabilities to serve commercial manufacturing customers and early manufacturing customers based on our innovative technology. What I expect to happen in the coming years is to basically consolidate our sales in the marketplace as a strong commercial manufacturer, continue to cultivate a leading role in adopting innovation in the company and continue to focus on serving our customers by providing them with solutions, not only with the service.

Contract Pharma: How does CMC differentiate itself from other service providers?
Mahler: For one, while there are similar CMOs out there that have a good footprint and technical capability for manufacturing purposes, our core elements of differentiation stem from our broad technological expertise along with the type of molecules we have that we work with.

Number two I would say that we are very proud of being technically savvy and solving complex problems from a technical perspective. This has to do with the origins of CMC, when it became part of our strategy to take on difficult projects other service providers didn’t want to get involved with. Those experiences prepared us to actually deal with complex products. And that’s our niche. Providing solutions to complex problems to ensure manufacturing takes place.

The third part of how we differentiate ourselves has to do with the collaborative nature of our relationships with customers. Obviously, when the customer comes to us they want the process developed and the product manufactured, but what we think the customer actually needs is somebody willing to crawl over glass to get their problems solved. When you develop these complex products, inevitably situations arise where things will not work the way they should, or the customer hears things they did not expect. At that point in time the customer needs to have at their side a partner they can work with collaboratively to develop the right solution for the product. Sponsors don’t just need a service provider. They need more than that. Somebody that can come and work with them side by side through the challenges, concerns, potential issues with regulatory agencies, or whatever else may come up. They need to be assured by us as their service provider that we will actually get them through registration and on to the successful launch of their product. That’s something we do really well.

Contract Pharma: What are the growth prospects for CMC specifically, and more broadly the market for outsourcing of biologics manufacturing in the U.S. and globally?
Mahler: Let me start first with the global market. There are two elements. One deals more with the developed economies and emerging markets. In the developed economies, specifically the U.S., what you see in the last 2.5 years is that there has been a significant amount of fundraising in the biotech space. Biotech has enjoyed a very strong market with around $80b of fundraising if you consider IPOs, private equity or private placements. That is actually more than the previous 6 years altogether. That has allowed a number of companies now to move forward with their plans. This is putting pressure on CMOs like CMC to get their drugs through to launch. So what we’re seeing is a very strong market pool especially in the U.S. In Europe we also see a significant demand, but absolutely not as strong as in the U.S. market.

There has also been a significant amount of M&A activity where large companies have acquired smaller companies and incorporated their products in their pipelines. Large companies have a different process to develop their products. They have large portfolios so must prioritize, which has led many of them to seek opportunities in the CMO market. As a result there are far less announcements of capacity investment from pharma and biotech companies and more announcements of expansion and capacity investment from the CMO side. Large pharma and biopharma are coming to a realization that it is better for them to invest their money in partnering and bringing products to market rather than building facilities and trying to manufacture those products in house. As a whole you see a significant trend of increased outsourcing from large companies, which also becomes a smart way for them to manage risk.

Contract Pharma: Are there any plans for expansion of facilities or service offerings?
Mahler: Yes absolutely. As part of CMC’s global manufacturing capacity expansion strategy we recently completed the expansion of our manufacturing facility in Bothell, WA, with the addition of a single-use Bioreactor 6Pack facility. The Bioreactor 6Pack configuration consists of six 2000L production bioreactors and a 2000L seed train, allowing for flexible production with scales from 2000L to 12000L in a single production suite. The bioreactors can be run in single unit operations or in groups, simultaneously, sequentially or in staggered fashion to achieve desired production needs. With this additional commercial capacity, we are realizing our long-term strategy to provide innovative solutions to our customers, from early-stage development to large-scale commercial production.

Customers will also soon have greater manufacturing flexibility in Europe as well. The Copenhagen Bioreactor 6Pack installation started initial GMP production late 2015, and consists of a Bioreactor 3Pack configuration with three 2000L single-use production bioreactors and a seed train. Three additional 2000L bioreactors will be added at a later date to complete the Bioreactor 6Pack line, thereby establishing identical Bioreactor 6Pack facilities in the U.S. and Europe.  We also are installing additional single use capacity in our facility in Berkley, CA, facility during the first or second quarter of 2016. 

Establishing this unique facility design in both the U.S. and European facilities enables us to significantly optimize the process transfer capabilities and synergies between the sites, ultimately providing customers the production scale and flexibility needed in today’s market, and the advantage of meeting aggressive regulatory and production timelines. We are changing the way CMOs operate and our novel Bioreactor 6Pack facility is a prime example of how CMC Biologics provides innovative solutions for our clients.

Contract Pharma: What are the key trends influencing the market today?
Mahler: When we completed the expansion I spoke of in Bothell, WA, creating the 6Pack concept, we didn’t only install additional reactors, but also created a new platform for developing and manufacturing products that is very well oriented to the future demands of the market. Let me explain why.

There are two forces in the market that are pushing in the same direction. One is what is called the personalized medicine approach. Today there are a number of products targeting much more narrower indications for patients and they are better suited for those narrow indications. There used to be the big blockbusters, a single drug that would treat a series of cancers for example. That’s not the case any longer. Now you will get a specific drug that treats a specific type of cancer and a specific type of marker. So that type of personalized medicine that creates products that are extremely targeted and have a better chance to succeed require less product because the patient population is smaller. That’s one trend today.

The other force, or trend, is the fact that process yield has increased significantly in the last ten years. The yield today is probably in the order of 8-10 times the yield ten years ago. So there are these two forces pushing in the same direction. One is saying you need less product because the indication is narrower. The other is saying you need less product because your yield is higher. So looking at these issues we created this concept where we can create significant amount of product and ensure that we supply all the product that is needed for a company through the entire lifecycle of the product. From the clinical development to commercial maturity all from the same facility at the same scale without changes of scale from beginning to end.

Contract Pharma: How would you describe the difference between managing client relationships based on their size?
Mahler: There are significant differences. Smaller companies will depend more on the knowledge we have gained from developing our broad portfolio of products. At the start of a relationship what they are looking for from a CMO is exactly how to develop, scale up and manufacture products. In addition they need to learn about putting together the documentation required for submission and the interaction with the regulatory agencies. So as the CMO we kind of serve a double role. On one side the CMO simply acts as a manufacturer actually, but on the other side CMOs act as consultants as well, addressing the issues mentioned earlier, among others. Most clients normally take advantage of the knowledge base that exists at the CMO.

In the case of larger companies they mostly have these capabilities in house and what they are looking for is a reliable partner that they can basically lean on to take some of the burden off their busy schedules. Normally they are developing multiple products at the same time, and they are expecting that the CMO can actually take ownership. This means have very good project management skills and understanding your part of the business so you can actually work at a certain level of independence without them looking over your shoulder all the time. I would describe it as more of a tiered relationship in that sense.

With smaller customer relationships you learn a lot from each other. In the case of large companies it is more of a peer relationship. They bring some knowledge to the table and you bring some knowledge to the table and together work more in exchanging information and adjusting sometimes to their requirements that can be different from company to company.

Contract Pharma: What are the key challenges for the business moving forward from both CMC’s perspective as well as its customers?
Mahler: It’s interesting because as a company grows one of the biggest challenges it confronts is finding the right people. This is a very competitive industry in terms of finding talent. I think this sometimes gets overlooked. The fact that CMOs are competing for talent with pharma companies and our margins are different is definitely a challenge. So as you grow fast acquiring the right talent and training that talent is a big obstacle that needs to be taken into account.

I would say that another issue that both customers and CMOs need to take into account is the profitability challenge between sponsors and CMOs. And what I mean by that is, ultimately you need to reach a customer provider relationship and be sure both companies can enjoy an extensive relationship in terms of profitability. This comes from understanding how much value each company brings to the table. If sponsors just want to squeeze value from the value chain by negotiating the lowest price, for example, they will be confronted with surprises in the quality area for one. They may also be surprised in terms of the priority they receive when issues arise within the company. It is important to ensure both customers and providers are focused on the value that each one provides to each other. Ensuring that you have a strong partner that guarantees good quality standards and a partner that guarantees you the attention you need to take care of your product needs when they emerge in the marketplace is a key ingredient for success. And that I believe is worth a bit more money than settling for the lowest price. 

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Topics: Thought Leadership
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