Editor’s (re)View: US manufacturing capacity is a challenge for small, mid-sized biotechs

Last week, contract development and manufacturing organizations (CDMOs) from around the world gathered at CPHI Frankfurt. After meeting with more than 30 companies at the conference, William Blair analysts walked away feeling more optimistic about the growth outlook for the sector. The CDMOs that the analysts spoke with “emphasized the trend of manufacturing localization, in which biopharma sponsors are increasingly seeking to manufacture products in their ultimate end-market” such as the United States.

The Trump administration’s threat of pharmaceutical tariffs and push for “Most Favored Nation” drug pricing deals have forced Big Pharma to commit to large-scale U.S. investments. The major topic at CPHI Frankfurt was the potential impact on the CDMO industry from Trump’s evolving pharma-specific tariff and drug price policies. 

This year, close to half a trillion dollars has been pledged by Big Pharma for investment in domestic R&D and manufacturing. A report last week from De Facto, released at CPHI, concluded that these buildouts will take many years and as a result CDMOs with commercial manufacturing assets in the U.S. are likely to see above market growth.

In a Thursday earnings call, Lifecore Biomedical CEO Paul Josephs told analysts that the “regionalization of manufacturing” fueled by Trump’s threat of pharma-specific tariffs and drug pricing negotiations has been a significant tailwind for U.S. CDMOs, as evidenced by what he characterized as an unprecedented increase in commercial site transfer opportunities from other regions such as Asia and Europe.

However, while large multinationals have the capacity to invest in domestic production and are well positioned to absorb these policy shifts, smaller biopharma companies — particularly those reliant on foreign CDMOs — may face greater pressure, according to a report last week from corporate site selection firm Global Location Strategies. 

It’s a concern shared by the trade group Biotechnology Innovation Organization (BIO), which has flagged a major challenge — growing U.S. manufacturing capacity to support small- to mid-size biotech companies. John Crowley, president and CEO of BIO, testified last week before the Senate Health, Education, Labor, and Pensions Committee that America’s smaller biotechs need help building domestic capacity and capabilities. 

In his testimony, Crowley pointed out that these biotech companies — which lack the resources to build and manage in-house manufacturing capabilities — increasingly rely on CDMOs for a range of critical services, from early research and clinical trials to commercial-scale production.

U.S. biotech companies “of all sizes want to take part in the Trump administration’s drive to bring research, development, and manufacturing back to America,” according to Crowley. However, for smaller biotech companies to also take part, he says there must be sufficient contract manufacturing capacity and domestic CDMOs are not well positioned to scale up without support.

“Infrastructure and supply chain investment, financial incentives, and workforce development programs are critical areas where government can assist,” Crowley told lawmakers. “Supporting contract manufacturers for biotechnology products is not just a strategic choice — it’s a national imperative.”