What's Mine Is (Maybe) Yours: Risk-Sharing In CGT Outsourcing

By Anna Rose Welch, Editorial & Community Director, Advancing RNA

Right around this time last year, I published a three-part article series to start answering a question I’ve heard posed numerous times: How do we as ATMP innovators and CDMOs define risk-sharing in this scientifically and strategically diverse industry? In addition to delving into one innovator’s hybrid manufacturing strategy and outlining some of the biggest business decisions facing CGT CDMOs, I also compiled a few high-level examples of how I see innovators and CDMOs collaboratively approaching risk-sharing in their outsourcing partnerships. 

Over the past few weeks, I’ve been diving back into the CGT outsourcing realm with the help of Adam Haskett, head of external manufacturing for cell therapy company CARGO Therapeutics, and Joseph Graskemper, formerly head of external manufacturing & supply chain for gene therapy company, Intergalactic Therapeutics, now the director of external network strategy at Biogen. Their observations and experiences evaluating CDMO capabilities and emerging (LVV-based) cell and (AAV-based) gene therapy platforms formed the basis of two previous articles. But as our conversation evolved, we found ourselves face to face once more with the concept of risk-sharing, and specifically how the industry — and Haskett and Graskemper themselves — are employing it.

Admittedly, “risk-sharing” will mean something different to each person and company you encounter. It also runs the risk of being discussed in “highfalutin” or buzzy, marketing centric ways. Hence why, in the third installment of this series, I’d like to dig a bit deeper into several aspects that add some much-needed “meat” to the bones of this discussion. And where better to define the boundaries of what we are (or are not) willing to share than within a master service agreement (MSA) with a CDMO? 

Here, Haskett and Graskemper walk me through the different nuances of risk-sharing in the current CGT outsourcing space and how they identify the best partner, platform, and intellectual property (IP) strategy when reviewing and (re)negotiating an MSA.

Risk-Sharing In An Age Of Nascent Platform Technology

No doubt, it’s always an interesting time to be outsourcing. But I dare say we are living at a particularly influential — and valuable — outsourcing moment in the CGT industry. On the one hand, as Graskemper, Haskett, and I discussed in part 1 of this series, there’s a lot more (if not too much) outsourcing capacity for innovators post-COVID. This excess of capacity, coupled with the less favorable financial market, translates into a much more even power dynamic between innovators and CDMOs. In fact, as Graskemper emphasized throughout our conversation, transitioning from a sellers’ market enables innovators to take more “creative” approaches to deal-making.

But before we put “pen to MSA,” if you will, we must do a bit of soul searching to identify our wants and needs from a potential CDMO partner and weigh their capabilities and partnership styles in relation to our own.

In our previous article, Haskett and Graskemper bravely took on the challenge of broadly assessing the current maturity of CDMOs’ nascent cell and gene therapy platforms. But as we’re all quite aware, assessing whether a CDMO’s platform will “fit” our product is an entirely different challenge than, say, shopping for a pair of jeans for either ourselves or cranky children. Hence why Graskemper and Haskett recommend starting with feasibility assessments to determine what a CDMO and its platform can do.

“You can, for a low cost and not a lot of effort, start a ‘bake-off’ with multiple CDMOs,” Graskemper offered. “Once you’ve done your due-diligence and narrowed down your list to three or four potential CDMOs, you can have them do a “bake off” to see the range of their platforms’ outputs. This doesn’t require a full-blown MSA, either; you can work quickly under standard terms and conditions.”

Beyond providing us with all-important data, Haskett emphasized that a “bake off” approach can help us firm up our primary development objectives. Whether it be achieving higher titer, better yield, and/or lower impurity levels, having an overarching goal and a value with which to measure our needs is a must-have in identifying the ideal partner and platform for our product(s). Given the limitations in today’s technologies, such feasibility efforts also provide a clearer picture of the tradeoffs we inevitably will have to make when choosing one platform over another.

“You need to be mindful of each platform’s potential risks — particularly if it is a newer platform — and whether you are willing to accept the specific tradeoffs that will come with each choice,” Haskett added.

Conducting feasibility studies is also a great way of assessing the boundaries of each potential relationship. Though solid communication is a must in any partnership, both Graskemper and Haskett agreed that “testing the relationship waters” extends far beyond a firm’s responsiveness and ability to communicate data. These “bake-offs” can also give us a better idea of how each CDMO approaches partnership and to what extent each is willing to share risk.  

“I like to put it back on the CDMO, not only to demonstrate that their platform will work for the product, but to show their willingness to have some skin in the game by accepting some of the more modest costs up-front,” Haskett added. “For example, in the past, I have often asked prospective partners if they would be open to doing technical development and/or scale-up at cost, or cost-share 50/50.”

Sharing May Be Caring, But Mind Your IP

Given the COGS of our products today, it makes sense that the phrase “risk-sharing” would automatically be equated with cost-sharing. But as our conversation went on to reveal, this is a short-sighted and dangerously limited way of thinking about risk-sharing. Though we in CMC may not necessarily be the go-to legal brains in our organization, it still behooves us to carefully consider the many nuances of IP protection in our negotiations with CDMOs. During the pandemic when funding was plentiful, we were more than happy to proclaim our steadfast dedication to owning our destiny and keeping our technical knowledge in-house. As we now know, small biotechs with internal manufacturing facilities have become the minority. As such, most of us are navigating just how much of our IP we’re comfortable sharing with outsourcing partners.

To start, it’s important to note there are two broad types of IP. First, there’s “background IP,” which is the unique, product and/or process-specific knowledge each party brings to the table. Then, there is arising IP, which includes improvements made or learnings gleaned within an outsourcing partnership.

It’s also important to clarify that not all CDMOs are created equal in terms of IP. As both Haskett and Graskemper explained, the fee-for-service model is still very much alive in the CGT outsourcing space. In turn, some CDMOs have their own established platforms and will only be interested in your GOI and any novel capsids.

“What’s theirs is theirs on the platform and what’s yours is the capsid and/or GOI,” Graskemper added. “They don’t have any interest in tangoing over whose IP is whose.”  

But it’s not always so simple, especially in the ATMP space, which demands a much more hands-on and collaborative partnering approach. As Graskemper succinctly stated, “Even when working with CDMOs who claim to have platform processes, there are still going to be co-development efforts that result in an improved process.” The question then becomes: Who owns those improvements and to what extent — if at all — can the CDMO implement these in their platform for other clients’ benefit?

Some biotechs will choose to be strict and stipulate in their contract that such improvements are, at a minimum, owned exclusively by the client and are only to be used on their product. Others may establish joint ownership of arising IP, granting the CDMO the ability to apply these improvements to their own platform.

Haskett also pointed to what he sees as an emerging “breed” of CDMO, which he brands the “technology CDMO.” These CDMOs own the platform and/or a client-agnostic platform improvement and the IP — whether it be simple know-how or patented — and provide each client with a license. As you might imagine, this model brings with it additional contracting nuances and/or complications.

Firstly, we must note whether the CDMO’s background IP for their platform is included in the MSA, as such inclusion could cause major headaches for innovators when leaving a partnership or upon commercializing a drug. As Haskett went on to specify, the inclusion of such IP should, first and foremost, be contingent upon a transparent discussion and negotiation of each license and its scope, followed by the written approval of the sponsor.

“How these licenses are structured is very important to consider,” Haskett said. “Typically, these licenses are granted on a product-by-product basis. But you may have a pipeline of programs all utilizing the same technology. So, you need to be mindful of whether the license will be applicable to all other products and negotiate for this upfront.”

It’s also important to understand the portability of such licenses; for example, are there limitations on bringing them in-house or in taking such licenses to other CDMOs? Will there be additional renegotiation periods as the product advances through development? For example, will each license only be applicable to the clinical development of the product, or does it expand into commercial development and market launch?

Overall, if there was one learning that came through loud and clear in my discussion with Haskett and Graskemper, it’s that your outsourcing relationship will only be as strong and transparent as your contract. We may be moving beyond clear-cut fee-for-service models — a shift implying greater “intimacy” in outsourcing partnerships. But sharing risk is not so intimate that our outsourcing contracts have become any less prescriptive. In fact, if anything, they will need to be more prescriptive and clear-cut than ever before.

Stay tuned for our fourth and final installment in which Haskett and Graskemper share the specific areas in which sponsor companies should be dotting their “I’s” and crossing all their “T’s” (literally and figuratively!) in their outsourcing MSAs.

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