Exploring CMO Strategies with Chris Preti (DCAT Week)

Chris Preti, CEO of Jubilant HollisterStier Contract Manufacturing Services, shares insight into the outsourcing industry with Grant Playter, associate editor, at the 2023 DCAT Week conference. Topics of discussion include operations and the strategic vision at Jubliant HollsterStier, the current state of contract manufacturing industry, and predictions for the future of the larger outsourcing sector.

A full transcript of the interview can be found below.

Chris, can you introduce yourself for our audience?

Chris Preti: I'm Chris Preti, I'm president of Jubilant HollisterStier Contract Manufacturing Organization.

Can you just tell me a little bit about Jubilant HollisterStier, what you do?

Preti: Jubilant HollisterStier is a mid-size CMO organization and we do everything from clinical trials, materials, to commercial products. Our core capabilities are, or I'd say our sweet spot, is in sterile fill and finish manufacturing as well as a niche ophthalmic market. Specifically, we have over 25 to 30 different companies and we have products in over 40 different countries worldwide through operations in Spokane as well as in Montreal, Canada.

Chris, how would you define your approach as president of the company? What are some key areas that you're planning on focusing on and how, if at all, does it differ for what the company has traditionally operated?

Preti: I think it all starts with what our vision is. Our vision is to be a customer focused, high quality, full service CMO. Customer focused, high quality, full service CMO. I think some elements under that is what that actually means. In the eyes of the customer, we want to make sure that we put them first and foremost. Versus an inside approach, we want to take an outside in approach. The other thing is we want to be known for excellence, excellence in sterile manufacturing, sterile fill finish manufacturing, as well as our ophthalmic niche marketplace.

Can you just talk a little bit about, you say customer focused, can you give me some examples of how the company values that?

Presti: For me, what customer focus means actually, do you have sustainable relationships with the customer? Will the customer give you repeat business actually in terms of new projects, new products. If I look at the customers that we have at Jubilant HollisterStier, we have multiple customers that have multiple products specifically that we do for them from new products to actually existing products and even generic products. Something around our stickiness with the customer tells me we're doing something right.

And I'll give you one quick example. We have multiple COVID therapeutics that we did for some of our customers over the last few years, multiple ones. And not only have we been able to adapt, but we've also been agile in terms of finding fill slots or finding capacity opportunities for these customers to actually place these products and deliver them to the market, not only in the US but outside the US as well.

Now going back to the Spokane facility, I want to talk about the recent expansion you had going on there. Can you just tell me a little bit about exactly what was done there?

Presti: Sure, so this is one of our exciting projects. We have two.

I can see that grin.

Presti: We could have two major expansions going on. The one in Spokane is actually going to take our existing capacity and double it in an around five-year plan. We just announced late last year, this partnership with the US government $300 million expansion project that allows us to expand our sterile fill and finish products, specifically lyo liquid products in Spokane, doubling our capacity.

What's really exciting about it though, is actually we're bringing on isolator technology. So, today's technology allows us to work in an aseptic environment without human interaction. The benefit at the end of the day is actually we continue to have ultimately high, high quality, but now even better batch yields and ultimately yields for the customer. So what that means is a better even more high quality product for the end user and the customer.

Can you go into a bit more detail about the government contract and all that? How you get that partnership? Because that's a very interesting thing because a lot of times it's a private company, company to company partnership's going on. But when you're working $300 million contract with the government, that's super interesting.

Presti: Yes, so part of the partnership is the government is looking for a partner, specifically in the US, a partner to actually build up capacity for a future pandemic or future issue. You think about COVID that was a recent one where we needed to have manufacturing capabilities to actually meet the needs out there should there be a pandemic or another issue. Likewise, we partnered with them, through their funding, to ultimately have the capacity available should there be another pandemic or another threat to society. This allows them to have on demand capacity should they ever need it in the future.

Building on what we've been talking about here, can you just describe the strategy behind the expansion at the Spokane facility? Like, what led to this decision at this point in time? Was it the customer demand, greater industry trends, a blend of reasons?

Presti: I think there's a few things that I can describe in terms of what led to that. One is, we knew there was a need in terms of the customer need for expanded capacity. If you look at today, customers are looking for more sterile fill and finish capacity out there, so we can meet that need.

But if you look into the future, the COVID situation over the last few years highlighted an urgent need to what CMO companies could be adaptable and could be agile, to actually meet the needs of a future pandemic. That was probably the biggest driver to enter into this partnership with the US government, and to expand and double our capacity. So now we are basically going to have double the amount of capacity we have today, but also we've shown to that we could actually be agile and adaptable, should we need to actually produce more batches for a future pandemic, etc. So, the second aspect that I'd say is actually building for the future.

And then I think the third aspect is the stickiness that we've developed with our customers, and our relationships. If you look at all of our customers out there, the multitude of them that we have, we have five to ten year long-term relationships. Point one. Point two is, each of those customers, we started with one product, or maybe one new product introduction, and now we have two, potentially three products with these customers. So there has to be something that we're doing right in that secret sauce, in terms of that sustainability and that stickiness with a customer. And I think it goes back to our vision around customer-focused, high-quality, full-service, you know.

Taking a step back, 10,000 foot level, how would you describe the state of the outsourcing industry?

Presti: Yeah, 10,000 foot level state of the outsourcing industry, we look at this all the time, because this is our business, this is what keeps the lights on. And I'd say if you look at it, it's growing approximately 9%, the market in North America and specifically in the US. So it's a robust market that's growing.

And actually, if you look at the shift between in-house versus outsource, it's actually slightly favoring outsource, so for us, I think our sweet spots are a few segments within the outsourcing space, the CMO spac. One is Big Pharma, the other one is specialty, the other one is biologics, and then the last one is generic companies. Specifically those who are looking for a partner that puts the customer first and ultimately needs sterile fill and finish, liquid and Lyo products, or ophthalmic niche products as well.

Not to quiz you or anything, but when you talk about the 9% growth in the outsourcing industry, are you seeing that that's coming from new companies, like new players in the industry? Or is it more so people switching over?

Presti: I think it's just a move of people are trying to find redundant opportunities. What I mean by redundant is mitigating the risks of single-source providers. So it's a mix of existing companies and products, and then it's some who are actually going to an outsource model.

Very generally, you could either buy or build a technology or capability. Buy it is, actually I'm going to partner with the CMO organization, like Jubilant HollisterStier. Build it is, I'm going to actually do in-house manufacturing. What you're seeing is both of those can be risky if that's your only strategy, so it's a risk mitigation strategy and that, I think that's why it's actually growing.

That's a theme I've seen going on in my interviews with DCAT. It's like a lot of people are talking about the mitigation because I do feel like there's a lot of perceived unsteady instability in markets in general. But just, you look at the SVB collapse, for example, like they failed because they put all their eggs in one basket, so I think a lot of companies are like, "We'll have some in-house, maybe license a clean room, have some CDMO." And then all that sort of stuff.

Presti: We just talked to, just to build on that, we just talked with a customer today, where they predominantly do in-house production, and essentially, I asked them, what's their strategy? Do they want to buy? Do they want to borrow? Etcetera. And what they said is, "We're looking for redundancy.” We're looking especially for their blockbuster products, you know, hundreds of millions to billions of dollars. You've got to have a supply chain mitigation strategy, for sure. And this is one way to do that.

Expanding from that, can you talk a little bit about the state of the broader biopharma market and how you perceive it to be?

Presti: That's a big question, so I'm going to actually interpret that question.

Absolutely. Take it however you want.

Presti: I see some consolidation going on in terms of the market; let's take the ophthalmic market, in particular. So you have a lot of consolidation, you have two, maybe three big, big players that are consolidating or buying up the little houses. So on the one end, that's good, if you have a partnership, or you're the CMO of choice for these big companies. But on the other end, you lose some of that leverage if you're not already part of that sandbox of those big conglomerates. That's happening in the ophthalmic space, specifically in the US.

I think on the non-ophthalmic, so sterile liquid Lyo space, what you're seeing is a mix. The big sweet spot for me is specialty biologic products, lyophilization products. There's a need for sterile fill and finish, specifically in that space, and there's lots of midsize and small specialty and pharma companies that are actually just growing, or have one product that's actually late-stage development that they're looking to actually have a manufacturer of choice. That's exploding and that's growing and I could see that only continuing to grow, as you have more of these, these folks that can actually show that capability, like us.

If you had to illuminate one technology or practice in your space that you feel is often overlooked, what would like to put a little bit of spotlight on?

Presti: So, I'll answer that question and I'll close with what I think our unique value proposition is.

Absolutely.

Presti: So I think some table stakes, or what perhaps might be overlooked, to your point, is quality. Key one; there's no black and white on that one, you've got to have high-quality product. The other thing is advanced technology. We're actually advancing our technology with the isolator technology that I spoke about earlier, that allows you to work in an aseptic environment without any human interaction. That's often overlooked. To me, that's going to become a table stakes in the future if you don't address that. So that's the second one.

I think the third one is really being clear on what your value proposition is. Rather than trying to be the jack of all trades, are you an expert, and are you a master of sterile fill and finish liquid and Lyo products, parenteral products? Yes, we are. That's our sweet spot. Versus, I think companies try to do a lot of a little and they actually aren't a master of one so they sacrifice quality or some of these other aspects. So I think those are things that are often overlooked, or sometimes diluted down.

In terms of Jubilant HollisterStier now, I think the message I would leave out there to you and to anyone is, our sweet spot is sterile fill and finish and ophthalmic. But our vision, and what stands out, I would say, for us, is that we're a customer-focused CMO. And we want to try to provide that white glove service to all of our customers. A lot of companies can say that, very few companies can say, hey, any day that if you have any company down there, they're interacting with the president, they're interacting with the head of quality, they're interacting with the head of technical services to actually transfer this product. You get the A team every single action, and that's what a white glove service actually looks like from us. And I think the testament or proof point to that is the fact that we have these sustainable long-term relationships with the customers with multiple products actually within these companies.

I really like that example of the white glove service because I do think a lot of companies use that term and then they don't really reinforce it. And they don't really show that in the practice, so that's really informative to hear.

Do you have any bold predictions for the outsourcing space over the next five, ten years?

Presti: Yes, I do have some bold predictions. I think the outsourcing space is going to consolidate. Folks are going to get actually more specialized. You're going to have the big players, you're going to have the big players, I'm not going to mention their names, but everyone knows who they are. They have 50 manufacturing plants in the US and they're going to continue to actually partner with Big Pharma and be the manufacturer of choice.

In the small to mid-sized company, there's not many companies, there's less than 100 in the US. I don't see that actually growing; I see that actually getting even better, and a few select companies owning even a bigger portion of that pie by having some of those things I mentioned earlier; high quality, customer focus, isolator technology, advances in technologies, having those things and having them really, really well, mastering those things. So that's what I see happening in the space.

So when you say that, do you mean in the sense that they're going to refine their practices and become more efficient? Or are they also going to grow at some point? Do you think they're going to stay in that mid-size range?

Presti: They're going to do both. You've got to continue to refine; I would change refine, to me, it's optimized. You've got to optimize, you've got to find efficiencies, you've got to figure out where you can remove cost to keep the lights on. But why you do that, those savings, you actually translate into your future expansions. So, our great examples on both our Montreal site and our Spokane site, we're expanding both of those and doubling our capacity on both of those sites. The only way we're going to do that is if we actually drive efficiencies with our current state as well.

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